Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that on December 10, 1999, the Cincinnati Stock Exchange, Inc, (“CSE” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
1. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend its rules to enable members to trade NASDAQ National Market (“NASDAQ/NM”) securities on the Exchange pursuant to unlisted trading privileges (“UTP”) under Section 12(f) of the Act. The text of the proposed rule change is available at the Office of the Secretary, the Exchange, and at 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 Exchange 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 Exchange 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
The purpose of the proposed rule change is to amend the CSE Rules to permit members to trade NASDAQ/NM Start Printed Page 4456securities on an UTP basis. This filing is made in conjunction with the Exchange joining the Unlisted Trading Privileges Plan (“UTP Plan”) governing the collection, consolidation and dissemination of quotation and transaction information for NASDAQ/NM securities. The majority of the proposed rule change relates to amendments to CSE Rules to accommodate the trading of NASDAQ securities, however, certain rule changes are housekeeping in nature.
The following is a list of the substantive rule changes to Chapter XI, “Trading Rules,” along with a statement of the purpose for the proposed change:
1. Rule 11.1, “Hours of Trading” The changes to Rule 11.1 convert the hours of trading on the Exchange from Cincinnati local time to Chicago local time and provide in subparagraphs (b) and (c) for the inclusion of securities traded on a national securities association in the determination of trading hours for dually or multiply-traded securities.
2. Rule 11.2. “Unit of Trading” The changes to Rule 11.2 reflect the inclusion of securities trading on a national securities association in determining the appropriate unit of trading.
3. Rule 11.3. “Price Variations” The changes amend the stated minimum variation to reflect the current primary market practice, i.e., 1/16 of $1.00 per share in stocks trading at or above $.50 per share and 1/32 of $1.00 per share in stocks trading below $.50 per share. These variations will be revisited in any proposed rule changes to accommodate decimal pricing. The changes also include securities traded on a national securities association in determining the appropriate variation.
4. Rule 11.4. “Trading Ex-Dividend, Etc.” The changes include securities traded on a national securities association in the exception language of the rule.
5. Rule 11.5. “Orders to be Reduced and Increased on Ex-Date” The changes include securities traded on a national securities association in the exception language of the rule.
6. Rule 11.7. “Cabinet Trading” The change amends the rule to reflect that the facilities are now located in Chicago, Illinois.
7. Rule 11.9. “National Securities Trading System” (“System”)
(a) The amendments to this subparagraph define the terms “NASDAQ/NM Security,” “NASDAQ System,” and “NASDAQ System BBO” and include the term “national securities association” in the definition of “Approved Dealer.”
(c) The changes to this subparagraph add the term “NASDAQ System BBO” to the definition of marketable limit order, except NASDAQ/NM securities from the opening guarantee of 1099 shares, and implement a NASDAQ/NM opening guarantee up to 1099 shares at an opening price that is on or between the first unlocked/uncrossed NASDAQ System BBO.
(e) The changes to this subparagraph add specialists or market makers on other national securities associations to the entities that may submit bids or offers to the System.
(h) The changes to this subparagraph ensure that the System displays the NASDAQ System BBO and permits NASDAQ System market makers telephonic, or other such access to the System as may be established between the Exchange and the NASDAQ System, and conversely, permits Designated Dealers to send orders from the Exchange via telephone, or by other such access as may be established between the Exchange and the NASDAQ System, to NASDAQ market makers.
(j) This subparagraph is amended to include the NASDAQ System and the NASDAQ System BBO in the prohibition of executing a limit order only after a regular way transaction occurs in another market at a price equal or inferior to the limit price of the order.
(n) The amendment to this subparagraph clarify that the public agency guarantee for 1099 shares at the opening price applies to securities other than NASDAQ/NM securities. However, the public agency guarantee applies to those market and marketable limit orders priced better than the first unlocked/uncrossed NASDAQ System BBO. In addition, the amendments add the NASDAQ System BBO to the obligations to execute on the basis of the ITS BBO. Finally, the amendments to this subparagraph clarify that the execution guarantees and requirements of CSE Rule 12.6, Customer Priority, apply only during the hours of trading on the Exchange (8:30 a.m. to 3:05 p.m. local Chicago time) during normal business days.
Interpretations and Policies
.01 The amendment to the Market Order Exposure Requirement clarifies that the obligations of the interpretation apply to securities other than NASDAQ/NM securities.
.02 The amendment to the Limit Order Protection Requirement clarifies that obligations of the interpretation apply to securities other than NASDAQ/NM securities.
2. Statutory Basis
The Exchange believes 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 Exchange 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
The Exchange has neither solicited nor received any written comments with respect to the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will:
A. by order approve the proposed rule change, or
B. institute proceedings to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change 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, D.C. 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 Start Printed Page 4457Commission 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-99-05 and should be submitted by February 17, 2000.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.Start Signature
Margaret H. McFarland,
3. See Securities Exchange Act Release No. 42269 (December 23, 1999), 65 FR 799 (January 6, 2000).Back to Citation
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