Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of Proposed Rule Change Related to Obvious Error Rules, 1737-1738 [E9-461]
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Federal Register / Vol. 74, No. 8 / Tuesday, January 13, 2009 / Notices
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 in
the Commission’s Public Reference
Room, on official business days between
the hours of 10 a.m. and 3 p.m. Copies
of the filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2008–132 and should be submitted on
or before February 3, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–391 Filed 1–12–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59210; File No. SR–CBOE–
2008–118]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Granting Approval
of Proposed Rule Change Related to
Obvious Error Rules
January 7, 2009.
On November 26, 2008, the Chicago
Board Options Exchange, Incorporated
(‘‘CBOE’’ or ‘‘Exchange’’) filed with 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 CBOE Rules 6.25 and 24.16
(collectively, the ‘‘Obvious Error Rules’’)
to adopt procedures that would allow
CBOE to review transactions on its own
motion. The proposed rule change was
published for comment in the Federal
Register on December 8, 2008.3 The
Commission received no comment
7 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 59038
(December 2, 2008), 73 FR 74543.
1 15
VerDate Nov<24>2008
19:54 Jan 12, 2009
Jkt 217001
letters on the proposal. This order
approves the proposed rule change.
The proposed rule change would
provide that, in the interest of
maintaining a fair and orderly market
and for the protection of investors, the
President of CBOE or his/her designee,
who shall be an officer of CBOE but may
not be a member (collectively ‘‘CBOE
officer’’), may, on his or her own motion
or upon request, determine to review
any transaction occurring on CBOE that
is believed to be erroneous.4 CBOE
would nullify or adjust a transaction
reviewed pursuant to this new provision
only if it is determined that the
transaction is erroneous as provided in
CBOE Rule 6.25(a)(1)–(6) or Rule
24.16(a)(1)–(6), as applicable.5 Trading
Officials (or the senior official in the
control room, in the case of opening
trades in CBOE Rule 5.4 restricted series
being reviewed under CBOE Rule
6.25(a)(6) or Rule 24.16(a)(6)) may assist
the CBOE officer in reviewing a
transaction.
Under the proposed rule change, the
CBOE officer would be required to act
as soon as possible after receiving
notification of the transaction, and
ordinarily would be expected to act on
the same day as the transaction.
However, because a transaction under
review may have occurred near the
close of trading or due to unusual
circumstances, the rule provides that
the CBOE officer would be required to
act no later than 8:30 a.m. (CT) on the
next trading day following the date of
the transaction at issue. A member
affected by a determination to nullify or
adjust a transaction pursuant to this
new provision would be permitted to
appeal such determination in
accordance with Rule 6.25(d) or Rule
24.16(d); however, a determination by a
CBOE officer not to review a
transaction, or a determination not to
nullify or adjust a transaction for which
a review was requested or conducted, is
not appealable. Transactions adjusted or
nullified pursuant to this new provision
cannot be reviewed by an Obvious Error
Panel under paragraph (c) of Rule 6.25.
4 In the event a party to a transaction requests that
the President or his/her designee review a
transaction, the CBOE officer nonetheless would
need to determine, on his or her own motion,
whether to review the transaction. In addition, if a
transaction is reviewed and a determination is
rendered pursuant to paragraphs (b)(1) and (b)(2) of
CBOE Rule 6.25 or Rule 24.16, relief shall not be
granted under the new provision of the applicable
Obvious Error Rule.
5 The transaction would be adjusted or nullified
in accordance with the provision under which it is
deemed an erroneous transaction, including
consideration of whether the parties involved are
CBOE market-makers, non-CBOE market makers, or
customers pursuant to CBOE Rule 6.25(a)(1)(i)–(iv)
and CBOE Rule 24.16(c).
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
1737
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 6 and, in particular, the
requirements of Section 6(b) of the Act 7
and the rules and regulations
thereunder. Specifically, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,8 in that the proposal is designed to
promote just and equitable principles of
trade, to prevent fraudulent and
manipulative acts, to remove
impediments to and to perfect the
mechanism for a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The Commission notes that, in
approving proposals relating to
adjustment or nullification of trades
involving obvious errors, it has stated
that the determination of whether an
obvious error has occurred and the
process for reviewing such a
determination should be based on
specific and objective criteria and
subject to specific and objective
procedures.9 The Commission notes that
the new provisions in the Obvious Error
Rules also have specific and objective
procedures for determining whether a
trade should be adjusted or nullified.
The purpose of the new provisions is
only to enable a CBOE officer on his/her
own motion or upon request, to provide
relief in instances where parties failed
to meet the established time reporting
requirements in CBOE’s Obvious Error
Rules. The new provisions still require
that the transaction be erroneous as
provided in CBOE Rules 6.25 or 24.16,
as applicable, and the new provisions
set forth specific time frames and
procedures. Therefore, the Commission
believes that that proposed rule change
is appropriate.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,10 that the
proposed rule change (SR–CBOE–2008–
118) is hereby approved.
6 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
9 See, e.g., Securities Exchange Act Release Nos.
58778 (October 14, 2008), 73 FR 62577 (October 21,
2008) and 54228 (July 27, 2006), 71 FR 44066
(August 3, 2006) (SR–CBOE–2006–14) (approving
revisions to CBOE’s Obvious Error Rules).
10 15 U.S.C. 78s(b)(2).
E:\FR\FM\13JAN1.SGM
13JAN1
1738
Federal Register / Vol. 74, No. 8 / Tuesday, January 13, 2009 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–461 Filed 1–12–09; 8:45 am]
1 replaces and supersedes the proposed
rule change filed on September 8, 2008,
in its entirety, except with regard to
Exhibit 2, a proposed Regulatory Notice
that details the proposed related
eligibility procedures.5
BILLING CODE 8011–01–P
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA 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. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59208; File No. SR–FINRA–
2008–045]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Proposed Rule Change and
Amendment No. 1 Thereto, To Amend
the FINRA Rule 9520 Series Regarding
Eligibility Procedures for Persons
Subject to Certain Disqualifications
January 6, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 8, 2008, Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’) (f/
k/a National Association of Securities
Dealers, Inc. (‘‘NASD’’)) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) and amended
on December 11, 2008,3 the proposed
rule change as described in Items I, II,
and III below, which Items have been
substantially prepared by FINRA. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend the
FINRA Rule 9520 Series, which governs
the eligibility procedures for persons
subject to certain disqualifications, to
comport with the amended definition of
disqualification in the FINRA By-Laws.
This Amendment No. 1 to SR–
FINRA–2008–045 makes technical
changes to the original filing filed on
September 8, 2008. The text of the
proposed rule change is attached as
Exhibit 5 to this filing.4 Amendment No.
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment No. 1 to SR–FINRA–2008–045
replaced and superseded the original rule filing
submitted to the Commission on September 8, 2008.
4 The text of the proposed rule change to the
FINRA Rule 9520 Series as set forth in Exhibit 5
reflects amendments adopted pursuant to proposed
rule change SR–FINRA–2008–021, which was
approved by the Commission. See Securities
Exchange Act Release No. 58643 (September 25,
2008), 73 FR 57174 (October 1, 2008) (SR–FINRA–
1 15
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19:54 Jan 12, 2009
Jkt 217001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
In light of FINRA’s obligation to
enforce the federal securities laws, and
as part of the consolidation of the
member firm regulatory functions of
NASD and NYSE Regulation, Inc., and
the formation of FINRA, FINRA adopted
by Board and membership vote a
revised By-Law definition of
disqualification that is consistent with
the federal securities laws, such that any
person subject to a statutory
disqualification under Section 3(a)(39)
of the Act also is subject to
disqualification under Article III,
Section 4 of the FINRA By-Laws.6
Consequently, as further detailed in the
proposed Regulatory Notice (see Exhibit
2), FINRA’s revised definition of
disqualification incorporates three
additional categories of statutory
disqualification, including willful
violations of the federal securities or
commodities laws, grounds for statutory
disqualification that were enacted in the
Sarbanes-Oxley Act, and associations
2008–021) (approval order). The FINRA Rule 9520
Series, as set forth in SR–FINRA–2008–021, became
effective on December 15, 2008. See FINRA
Regulatory Notice 08–57 (SEC Approves New
Consolidated FINRA Rules) (October 2008).
5 FINRA would issue the proposed Regulatory
Notice upon the Commission’s approval of the
proposed rule change; the Regulatory Notice is
written in a manner that assumes such approval.
6 See Securities Exchange Act Release No. 55495
(March 20, 2007), 72 FR 14149 (March 26, 2007)
(SR–NASD–2007–023) (notice). See also Securities
Exchange Act Release No. 56145 (July 26, 2007), 72
FR 42169 (August 1, 2007) (SR–NASD–2007–023)
(approval order), as amended by Securities
Exchange Act Release No. 56145A (May 30, 2008),
73 FR 32377 (June 6, 2008). See also NASD, SEC
No-Action Letter, 2007 SEC No-Act. LEXIS 540
(July 27, 2007).
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
with certain other persons subject to
disqualification.
Absent the proposed rule change, all
persons subject to any of the added
categories of disqualification would be
required to obtain approval from FINRA
to enter or remain in the securities
industry. The proposed rule change
would both amend the text of the
FINRA Rule 9520 Series generally to
reflect the amended definition of
disqualification in the By-Laws, as well
as include the proposed Regulatory
Notice that outlines in detail the
applicable eligibility procedures. The
amended FINRA Rule 9520 Series
would incorporate by reference the
procedures set forth in the Regulatory
Notice. As further detailed in the
Regulatory Notice, the need for a
member to file an application with
FINRA for approval notwithstanding the
disqualification would depend on (1)
The type of the disqualification; (2) the
date of the disqualification; and (3)
whether the firm or individual is
seeking admission, readmission or
continuation in the securities industry.
The proposed rule change would
amend FINRA Rule 9522 to address the
initiation of eligibility proceedings and
the authority of FINRA’s Department of
Member Regulation (‘‘Member
Regulation’’) to approve applications
relating to a disqualification, where the
disqualification arises from findings or
orders specified in Section 15(b)(4)(D),
(E) or (H) of the Act or arises under
Section 3(a)(39)(E) of the Act (i.e., the
added categories of disqualification).
Currently, FINRA Rule 9522(a)(1)
provides, among other things, that if
FINRA staff has reason to believe that a
disqualification exists, FINRA staff will
issue a written notice to the member or
applicant for membership under NASD
Rule 1013, specifying the grounds for
such disqualification. The proposed
amendments to FINRA Rule 9522(a)(1)
provide that FINRA staff would issue
such written notice with respect to the
added categories of disqualification only
when the member or applicant is
required to file an application pursuant
to the Regulatory Notice. Similarly, the
proposed rule change would amend
FINRA Rule 9522(b) to require a
member to file an application with
FINRA with respect to the added
categories of disqualification only when
instructed to submit one by the
Regulatory Notice.
Moreover, under the current rules,
Member Regulation is responsible for
evaluating applications for relief from a
disqualification filed by a disqualified
member or sponsoring member. In
certain circumstances, Member
E:\FR\FM\13JAN1.SGM
13JAN1
]]>Agencies
[Federal Register Volume 74, Number 8 (Tuesday, January 13, 2009)]
[Notices]
[Pages 1737-1738]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-461]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59210; File No. SR-CBOE-2008-118]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Granting Approval of Proposed Rule Change Related
to Obvious Error Rules
January 7, 2009.
On November 26, 2008, the Chicago Board Options Exchange,
Incorporated (``CBOE'' or ``Exchange'') filed with 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 CBOE Rules 6.25 and
24.16 (collectively, the ``Obvious Error Rules'') to adopt procedures
that would allow CBOE to review transactions on its own motion. The
proposed rule change was published for comment in the Federal Register
on December 8, 2008.\3\ The Commission received no comment letters on
the proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 59038 (December 2,
2008), 73 FR 74543.
---------------------------------------------------------------------------
The proposed rule change would provide that, in the interest of
maintaining a fair and orderly market and for the protection of
investors, the President of CBOE or his/her designee, who shall be an
officer of CBOE but may not be a member (collectively ``CBOE
officer''), may, on his or her own motion or upon request, determine to
review any transaction occurring on CBOE that is believed to be
erroneous.\4\ CBOE would nullify or adjust a transaction reviewed
pursuant to this new provision only if it is determined that the
transaction is erroneous as provided in CBOE Rule 6.25(a)(1)-(6) or
Rule 24.16(a)(1)-(6), as applicable.\5\ Trading Officials (or the
senior official in the control room, in the case of opening trades in
CBOE Rule 5.4 restricted series being reviewed under CBOE Rule
6.25(a)(6) or Rule 24.16(a)(6)) may assist the CBOE officer in
reviewing a transaction.
---------------------------------------------------------------------------
\4\ In the event a party to a transaction requests that the
President or his/her designee review a transaction, the CBOE officer
nonetheless would need to determine, on his or her own motion,
whether to review the transaction. In addition, if a transaction is
reviewed and a determination is rendered pursuant to paragraphs
(b)(1) and (b)(2) of CBOE Rule 6.25 or Rule 24.16, relief shall not
be granted under the new provision of the applicable Obvious Error
Rule.
\5\ The transaction would be adjusted or nullified in accordance
with the provision under which it is deemed an erroneous
transaction, including consideration of whether the parties involved
are CBOE market-makers, non-CBOE market makers, or customers
pursuant to CBOE Rule 6.25(a)(1)(i)-(iv) and CBOE Rule 24.16(c).
---------------------------------------------------------------------------
Under the proposed rule change, the CBOE officer would be required
to act as soon as possible after receiving notification of the
transaction, and ordinarily would be expected to act on the same day as
the transaction. However, because a transaction under review may have
occurred near the close of trading or due to unusual circumstances, the
rule provides that the CBOE officer would be required to act no later
than 8:30 a.m. (CT) on the next trading day following the date of the
transaction at issue. A member affected by a determination to nullify
or adjust a transaction pursuant to this new provision would be
permitted to appeal such determination in accordance with Rule 6.25(d)
or Rule 24.16(d); however, a determination by a CBOE officer not to
review a transaction, or a determination not to nullify or adjust a
transaction for which a review was requested or conducted, is not
appealable. Transactions adjusted or nullified pursuant to this new
provision cannot be reviewed by an Obvious Error Panel under paragraph
(c) of Rule 6.25.
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 \6\ and, in
particular, the requirements of Section 6(b) of the Act \7\ and the
rules and regulations thereunder. Specifically, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\8\ in
that the proposal is designed to promote just and equitable principles
of trade, to prevent fraudulent and manipulative acts, to remove
impediments to and to perfect the mechanism for a free and open market
and a national market system, and, in general, to protect investors and
the public interest.
---------------------------------------------------------------------------
\6\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission notes that, in approving proposals relating to
adjustment or nullification of trades involving obvious errors, it has
stated that the determination of whether an obvious error has occurred
and the process for reviewing such a determination should be based on
specific and objective criteria and subject to specific and objective
procedures.\9\ The Commission notes that the new provisions in the
Obvious Error Rules also have specific and objective procedures for
determining whether a trade should be adjusted or nullified. The
purpose of the new provisions is only to enable a CBOE officer on his/
her own motion or upon request, to provide relief in instances where
parties failed to meet the established time reporting requirements in
CBOE's Obvious Error Rules. The new provisions still require that the
transaction be erroneous as provided in CBOE Rules 6.25 or 24.16, as
applicable, and the new provisions set forth specific time frames and
procedures. Therefore, the Commission believes that that proposed rule
change is appropriate.
---------------------------------------------------------------------------
\9\ See, e.g., Securities Exchange Act Release Nos. 58778
(October 14, 2008), 73 FR 62577 (October 21, 2008) and 54228 (July
27, 2006), 71 FR 44066 (August 3, 2006) (SR-CBOE-2006-14) (approving
revisions to CBOE's Obvious Error Rules).
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-CBOE-2008-118) is hereby
approved.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(2).
[[Page 1738]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-461 Filed 1-12-09; 8:45 am]
BILLING CODE 8011-01-P
