Self-Regulatory Organizations; Notice of Filing of Amendment No. 1 to Proposed Rule Change by Cincinnati Stock Exchange, Inc. Relating to the Exchange's Quality of Markets Policy

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34555; File No. SR-CSE-94-01]

August 19, 1994.

Self-Regulatory Organizations; Notice of Filing of Amendment No.

1 to Proposed Rule Change by Cincinnati Stock Exchange, Inc. Relating

to the Exchange's Quality of Markets Policy

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on August

1, 1994, the Cincinnati Stock Exchange, Inc. (``CSE'' or ``Exchange'')

filed with the Securities and Exchange Commission (``Commission'')

Amendment No. 1 to the proposed rule change as described in Items I, II

and III below, which Items have been prepared by the self-regulatory

organization. The Commission is publishing this notice to solicit

comments 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 CSE hereby proposes to amend its prior filing regarding the

CSE's policy governing Quality of Markets. The following is the text of

the proposed rule change, with italics representing new language to be

added and brackets representing deleted language:

D. Non-Preferencing Designated Dealers

(a) ITS Inbound Activity

[The percentage of a non-preferencing member firm's total monthly

CSE trade activity which consists of ITS inbound executions shall equal

at least 5%]

The percentage of a non-preferencing member firm's total monthly

CSE trade activity which consists of ITS inbound executions shall equal

or exceed the average percentage achieved by preferencing Designated

Dealers that manually enter quotations. If there exist no preferencing

Dealers on CSE that are manually entering quotations, then the

percentage of a non-preferencing member firm's total monthly CSE trade

activity which consists of ITS inbound executions shall equal at least

5%. For the purpose of comparing ITS inbound activity, a rolling three-

month average will be used to derive the percentage for the DDs

entering manual quotations and these will be compared to the next

month's percentages achieved by those member firms using computer-

generated quotations.

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 IV 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

On February 25, 1994, the CSE filed proposed changes to its quality

of markets policy.\1\ The proposal calls for the elimination of

autoquoting and the adoption of objective standards to ensure that CSE

specialists are contributing to the national market system. In response

to comments on the filing, the Exchange proposes to amend one component

of its new policy, the Intermarket Trading System (``ITS'') inbound

execution requirement. Specifically, the requirement, as amended, would

require that all Designated Dealers who computer-generate their

quotations, whether or not they preference order flow, generate the

same percentage of ITS inbound activity as preferencing Designated

Dealers who manually generate quotes. The Exchange believes that such

an approach would more fairly allocate the burden of improved

performance across all of its specialists.

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\1\The rule change was published for public comment in

Securities Exchange Act Release No. 33849 (April 1, 1994), 59 FR

16870 (April 8, 1994).

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2. Statutory Basis

The proposed rule change is consistent with Section 6(b) of the Act

in general and furthers the objectives of Section 6(b)(5) in particular

in that it is intended to promote just and equitable principles of

trade.

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 either solicited or received with respect

to Amendment No. 1 to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing

for Commission Action

Within 35 days of the publication of this notice in the Federal

Register or within such other 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. Persons making written submissions

should file size 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 CSE. All

submissions should refer to File No. SR-CSE-94-01 and should be

submitted by September 16, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-21008 Filed 8-25-94; 8:45 am]

BILLING CODE 8010-01-M