Self-Regulatory Organizations; The Cincinnati Stock Exchange, Inc.; Order Granting Approval of Proposed Rule Change by The Cincinnati Stock Exchange, Inc. To Eliminate Market Order Exposure Requirements

I. Introduction

On August 7, 2003, The Cincinnati Stock Exchange, Inc. (“CSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) and Rule 19b-4 thereunder, a proposed rule change to amend CSE Rule 11.9(u) to eliminate Interpretation .01, concerning market order exposure requirements (“Market Order Exposure Requirement”). The proposed rule change would also amend CSE Rule 8.15 to remove a reference to Interpretation .01 of Rule 11.9(u). The proposed rule change was published for comment in the Federal Register on September 19, 2003.

The Commission received no comments on the proposal. This order approves the proposed rule change.

II. Discussion and Commission 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. In particular, the Commission believes that 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 designed to prevent fraudulent and manipulative acts and practices, 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 Commission finds that the proposed rule change is reasonably designed to accomplish these ends because the elimination of the CSE's Market Order Exposure Requirement is consistent with the narrowing of spreads since the advent of decimal pricing. The Commission notes, and the CSE acknowledges, that the best execution responsibilities of preferencing designated dealers will continue to apply. Moreover, the proposed rule change is the second of two filings intended by the CSE to codify existing CSE practices set forth in various regulatory circulars and conform its rules to industry standards. The Commission notes that, while it is approving the proposed rule change at the present time, the Commission makes no determination as to whether it would have approved the proposed rule change had it been filed at the time that the regulatory circulars setting forth the CSE's practices with respect to the Market Order Exposure Requirement were issued.

III. Conclusion

It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR-CSE-2003-10), be, and it hereby is, approved.