02-7782. Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Cincinnati Stock Exchange, Inc. Relating to Changes in Transaction Fees and Establishing a Pilot Revenue Sharing Program for Trading ...

March 26, 2002.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),^[1] notice is hereby given that on March 25, 2002, the Cincinnati Stock Exchange, Incorporated (“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 CSE. The Commission is publishing this notice to solicit comment on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange hereby proposes to amend the Exchange's schedule of transaction fees and to establish a pilot revenue sharing program to reflect recent developments in competitive business strategy. The text of the proposed rule change is below. Additions are in italics, and deletions are in brackets.

The Cincinnati Stock Exchange, Incorporated

* * * * *

Chapter XI

Trading Rules

Rule 11.10 National Securities Trading System Fees

A. Trading Fees (No Change to Text)

(e) (1) (No Change to Text)

(2) Tape “C” Transactions. Tape “C” Transactions are defined as transactions conducted in Nasdaq securities pursuant to unlisted trading privileges (“UTP”). Members will be charged a per share fee for Nasdaq securities based upon the following schedule:

Number of shares traded (In a single day)	Fee per share
0-5 million	$0.001
5 million one+	0.000025

(1) [Tape “C” Transactions. Tape “C” Transactions are defined as transactions conducted in Nasdaq securities pursuant to unlisted trading privileges (“UTP”). Members will be charged $.001 per share per side ($1.00/1000 shares), with a maximum charge of $37.50 per firm per side, for Tape C Transactions.]

Tape “C” Transaction Credit. Members will receive a 75 percent pro rata credit on revenue generated by transactions in Tape “C” securities.

[(l)] (m) (No Change in Text)

[(m)] (n) (No Change in Text)

[(n)] (o) (No change in Text)

[(o)] (p) (No change to text)

[(p)] (q) (No change to text)

* * * * *

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 CSE 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 IV below. The CSE has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

1. Purpose

The Exchange is proposing two amendments to its Rules governing transaction fees and market data revenue credits in keeping with recent trends in the securities industry. The first amendment adds subsection (2) to Rule 11.10(A)(e), (“Crosses and Meets”). Subsection (2) establishes a fee schedule for transactions in The Nasdaq Stock Market, Inc. (“Nasdaq”) National Market (“NNM”) securities.

The second change filed by the Exchange creates a pilot program as an incentive to Members to trade NNM securities on the Exchange and will be codified as Rule 11.10(A)(l) (Tape “C” Transaction Credit). The Exchange believes the credit is a logical next step in its efforts to provide competitive exchange services to members trading NNM securities. Under the program,^[2] member firms will receive a 75 percent (75%) pro rata transaction credit on all Nasdaq Tape C market data revenue generated by member trading activity. The pilot program runs for 90 days and is set to expire June 28, 2002, if not renewed.

2. Statutory Basis

The proposed rule change is generally consistent with section 6(b) ^[3] of the Act. The proposed rule change also furthers the objectives of Section 6(b)(5),^[4] particularly, in that the proposed rule change is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system; and in general, to protect investors and the public interest. The proposal also is consistent with section 6(b)(4) ^[5] in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among Exchange members by crediting members on a pro rata basis.

B. Self-Regulatory Organization's Statement on Burden on Competition

The CSE does not believe that the proposed rule change will impose any inappropriate 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 in connection with the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

The foregoing rule change has become effective pursuant to section 19(b)(3)(A) ^[6] of the Act and paragraph (e) of Rule 19b-4 ^[7] thereunder. At any time within sixty days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 Room. 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-2002-03 and should be submitted by April 22, 2002.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[8]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  Nasdaq securities will be traded on CSE pursuant to Section 12(f) of the Act, 15 U.S.C. 78 l (f), as well as the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation, and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privilege Basis (“Nasdaq-UTP Plan”).

3.  15 U.S.C. 78f(b).

4.  15 U.S.C. 78f(b)(5).

5.  15 U.S.C. 78f(b)(4).

6.  15 U.S.C. 78s(b)(3)(A).

7.  17 CFR 240.19b-4(e).

8.  17 CFR 200.30-3(a)(12).