[Federal Register Volume 62, Number 16 (Friday, January 24, 1997)]
[Notices]
[Pages 3724-3725]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-1680]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38181; File No. SR-CSE-97-02]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the Cincinnati
Stock Exchange, Inc., Relating to Limit Order Exposure Requirements
January 16, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on
January 10, 1997, the Cincinnati Stock Exchange, Inc. (``CSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. On January 15, 1997, the Exchange submitted to the
Commission Amendment No. 1 to the proposed rule change.\1\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons and to grant accelerated
approval to the proposed rule change.
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\1\ See letter from Adam W. Gurwitz, Director of Legal Affairs,
CSE, to Ivette Lopez, Assistant Director, Division of Market
Regulation, SEC, dated January 15, 1997. Amendment No. 1 clarifies
that Interpretation .01 of Rule 12.10 applies to customer limit
orders.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange hereby proposes to amend Rule 12.10 to delete
Interpretation .01 concerning customer limit order exposure. The
Exchange believes that recently enacted Commission order handling rules
have rendered this interpretation obsolete.
The text of the proposed rule change is available at the CSE and
the Commission.
II. Self-Regulatory Organization's Statement of the Purpose of and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item III below. The self-regulatory
organization has prepared summaries, set forth in Sections A, B, and C
below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
As part of its order approving the Exchange's preferencing program,
on March 29, 1996, the Commission approved Exchange Rule 12.10,
Interpretation .01, which sets forth the Exchange's limit order
exposure policy. On September 6, 1996, the Commission approved new
order handling rules, including new Rule 11Ac1-4, the Limit Order
Display Rule.\2\ As a result, the CSE believes that its limit order
exposure requirements are now obsolete. The Exchange proposes to delete
these obsolete requirements from its Rules, and to insert a reference
to the Commission's new limit Order Display Rule. The Exchange believes
this reference will assist CSE members in complying with the
Commission's new limit order display requirements.
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\2\ See Securities Exchange Act Release No. 37619A (September 6,
1996), 61 FR 48290 (September 12, 1996) (``Order Handling Rules
Adopting Release'').
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2. Statutory Basis
The basis under the Act for the proposed rule change is the
requirement under Section 6(b)(5) that an Exchange have rules that are
designed to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change will impose no burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of the Exchange. All
submissions should refer to File No. SR-CSE-97-02 and should be
submitted by February 14, 1997.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, with the
[[Page 3725]]
requirements of Section 6(b).\3\ Specifically, the Commission believes
the proposal is consistent with the Section 6(b)(5) requirements that
the rules of an exchange be designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, and,
in general, to protect fraudulent and manipulative acts, and, in
general, to protect investors and the public interest.\4\
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\3\ 15 U.S.C. Sec. 78f(b).
\4\ In approving these rules, the Commission also has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. Sec. 78c(f).
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On September 6, 1996, the Commission adopted new Rule 11Ac1-4
(``Display Rule''), which requires OTC market makers and specialists to
display the price and full size of customer limit orders when these
orders represent buying and selling interest that is at a better price
than a specialist's or OTC market maker's public quote. Moreover, the
Display Rule requires OTC market makers and specialists to increase the
size of the quote for a particular security to reflect a limit order of
greater than de minimis size when the limit order is priced equal to
the specialist's or OTC market maker's disseminated quote and that
quote is equal to the national best bid or offer.\5\
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\5\ See supra note 2.
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Currently, the Exchange has its own limit order exposure policy,
which is set forth in Interpretation .01, Rule 12.10 of the CSE's
rules. The Exchange believes that with the adoption of the Display
Rule, the requirements in CSE's limit order exposure policy have become
obsolete. The Exchange, therefore, proposes to delete these
requirements and insert a reference to the Display Rule. The Commission
finds that eliminating the current Exchange requirements for exposure
of limit orders and referencing the Commission's rule is appropriate
and will assist CSE members to comply with the new obligations for
handling limit orders under the federal securities laws.
Based on the above, the Commission finds that there is good cause,
consistent with Section 6(b)(5) of the Act, to accelerate approval of
the proposed rule change prior to the 30th day of the publication of
this notice in the Federal Register. Moreover, the Commission believes
that it is appropriate to accelerate approval of the proposed rule
change so that the Exchange may accurately reflect in its rules by
January 20, 1997, the effective date of the Order Handling Rules, the
new obligations of its members.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\6\ that the proposed rule change (SR-CSE-97-020 is approved.
\6\ 15 U.S.C. Sec. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 97-1680 Filed 1-23-97; 8:45 am]
BILLING CODE 8010-01-M
