[Federal Register Volume 59, Number 29 (Friday, February 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3194]
[[Page Unknown]]
[Federal Register: February 11, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33581; File No. SR-CSE-93-02]
Self-Regulatory Organizations; Cincinnati Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change and Notice of Filing
and Order Granting Accelerated Approval to Amendment No. 1 to Proposed
Rule Change Relating to an Amendment to CSE Rule 11.9(a)(8) Defining
``Professional Agency Orders'' To Include Futures Commission Merchants
and Members of Contract Markets
February 4, 1994.
I. Introduction
On May 24, 1993, the Cincinnati Stock Exchange, Inc. (``CSE'' or
``Exchange'') submitted to the Securities and Exchange Commission
(``Commission''), pursuant to section 19(b)(1) of the Securities
exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend CSE Rule 11.9(a)(8) to include in the
definition of ``Professional Agency Orders'' futures commission
merchants and members of contract markets. Pursuant to this proposed
rule change and a separate agreement reached by the CSE and the Chicago
Board of Trade (``CBOT''), the CSE and the CBOT will include the CSE
National Securities Trading System (``NSTS'') order entry screen on
CBOT BOTWS work station computers belonging to joint members of the CSE
and CBOT. On February 2, 1994, the CSE submitted Amendment No. 1 to the
proposed rule change.\3\
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1991). -
\3\See letter from Robert Ackerman, CSE, to Elizabeth Prout,
Commission, dated February 2, 1994. Amendment No. 1 states that CSE
and the CBOT joint members will not have access to CSE NSTS screens
on BOTWS terminals located on the CBOT trading floor, and clarifies
that because of this prohibition, CBOT members that make markets in
futures on a stock index will be allowed to make NSTS markets in
stocks that comprise that index.
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The proposed rule change was published for comment in Securities
Exchange Act Release No. 32649 (July 16, 1993), 58 FR 39841. No
comments were received on the proposal.\4\
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\4\The Commission notes that, at their most recent meeting, the
Intermarket Trading System (``ITS'') participants (i.e., the
American, Boston, Chicago, Cincinnati, New York, Pacific, and
Philadelphia Stock Exchanges, the Chicago Board Options Exchange,
and the National Association of Securities Dealers) discussed the
present proposal pursuant to their authority under section 8(e)(iii)
of the ITs Plan respecting any filing affecting CSE Rule 11.9. The
ITS participants determined that they have no comment to make on
this filing. See letter from Allan A. Bretzer, Chairman, ITS, to
Elizabeth L. Prout, Staff Attorney, Commission, dated November 15,
1993.
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II. Description of the Proposal
The CSE is modifying the definition of professional agency orders
to include orders entered for the account of futures commission
merchants and members of a contract market. The inclusion coincides
with the agreement reached between the CSE and CBOT whereby joint
members will be able to include their CSE NSTS order entry screen on
their CBOT BOTWS work station terminals. The CSE entered into the
agreement for the purpose of reducing the burden on joint members that
multiple terminals and telecommunication linkages would impose if the
member was required to maintain separate NSTS and BOTWS terminals. The
agreement provides joint members with the flexibility to choose to
include the NSTS system used by the CSE within the CBOT's BOTWS system,
and thus save desk space and associated costs that would be present if
two separate terminals were required.
The CSE believes that the agreement will provide members with an
efficient computerized telecommunications linkage to the markets where
they are members. While joint CSE/CBOT members currently can enter
stock orders from the CBOT floor via phone or other telecommunication
network already in place, the NSTS screen will give the CSE member more
direct access for his or her stock orders.
The proposal, as amended, states that the CSE and the CBOT agree
not to allow access to CSE's NSTS on CBOT BOTWS terminals located on
the CBOT floor.\5\ As amended, the proposal also states that the
exchanges may pursue BOTWS on-floor NSTS displays in the future after
trading has begun by joint members. Amendment No. 1 notes that this
prohibition of NSTS on-floor access makes moot certain language in the
original proposal which stated that a CBOT member that makes markets in
futures on a stock index will not be allowed to make markets in stocks
that comprise that index via CSE NSTS screens located on the floor of
the CBOT.
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\5\See supra note 3.
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III. Discussion and Commission's Findings
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 requirements of Sections 6(b) and
11A(a)(1)(C)(iii).\6\ Section 6(b) requires, among other things, that
the rules of an exchange be designed to promote just and equitable
principles of trade and to protect investors and the public. Section
11A(a)(1)(C)(iii) states, among other things, that it is in the public
interest and appropriate for the protection of investors to assure the
availability to brokers, dealers, and investors of information with
respect to quotations for and transactions in securities.
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\6\15 U.S.C. 78f(b) and 78k-1(a)(1)(C)(iii) (1988).
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The Commission believes that the proposed rule change is consistent
with sections 6(b) and 11A(a)(1)(C)(iii) because joint CSE/CBOT members
now will be able to access both CBOT futures information and CSE NSTS
screens on one terminal, thereby using what should be a more efficient
means to access market information. The Commission notes that since the
only firms who will have access to the terminals will be joint CSE/CBOT
members, both CBOT data and NSTS screens currently are available
individually to those firms. Thus, the proposal should merely serve to
reduce the number of terminals required to retrieve market information
and execution screens, thereby enhancing the availability of
information with respect to quotations for and transactions in
securities to those joint members.
The Commission emphasizes that, while the proposal should serve to
provide beneficial efficiencies to joint CSE/CBOT members, the CSE must
ensure adequate market surveillance of the transactions that are
effected on the BOTWS NSTS screens. The Commission notes that joint
securities and commodities exchange membership, coupled with readily
available market information and transaction execution screens may give
rise to particular types of trading patterns that may require specially
formulated market surveillance methods. The Commission expects the CSE
to act accordingly with respect to its market surveillance.
With respect to Amendment No. 1 to the proposal, the Commission
believes that the CSE and CBOT's agreement to limit NSTS BOTWS access
to off-floor terminals should serve generally to avoid on-floor side-
by-side trading issues that otherwise would be raised. The Commission
notes, however, that the CSE has only agreed to a temporary prohibition
of on-floor BOTWS access to NSTS data. The Commission is requiring
that, prior to making any NSTS data available to on-floor CBOT
terminals, the CSE must file a new proposed rule change with the
Commission so that side-by-side trading issues and other issues that
may arise can be addressed.
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register. The Commission finds
that granting accelerated approval to the amendment is consistent with
the Act, as the amendment removes concerns related to side-by-side
trading, and accelerated approval is appropriate in order to allow the
CSE and CBOT to begin making the NSTS screens available as soon as
possible. Further, as originally filed and published in the Federal
Register for the full statutory period, the proposal provided that
BOTWS terminals located both on the CBOT floor and at off-floor
locations would have received NSTS screen capabilities. Amendment No. 1
provides that only off-floor terminals will receive NSTS screens. The
Commission did not receive comments on the proposal with respect to
either on-floor or off-floor BOTWS terminals.
IV. 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, NW., Washington, DC 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. 552, will be available for inspection and copying at the
Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of the CSE. All
submissions should refer to File No. SR-CSE-93-02 and should be
submitted March 4, 1994.
V. Conclusion
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the Act and the rules and regulations
thereunder.
It is Therefore Ordered, pursuant to section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-CSE-93-02) is approved.
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\7\15 U.S.C. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-3194 Filed 2-10-94; 8:45 am]
BILLING CODE 8010-01-M
