Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Order Approving a Proposed Rule Change To Amend Minor Rule Plan, 36596-36598 [2011-15553]
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36596
Federal Register / Vol. 76, No. 120 / Wednesday, June 22, 2011 / Notices
importance of the services provided by
the back-office personnel, the
Commission believes that FINRA’s
proposal to license and register
Operations Professionals and to require
members to provide Operations
Professionals with continuing
education, as amended by Amendment
No. 1, will help to address regulatory
gaps in this area.
The Commission believes that FINRA
carefully considered all the comments
on the proposal and has responded
appropriately. FINRA’s Amendment No
1 changes the proposed rule change in
response to certain requests by
commenters to clarify the categories of
covered persons, accept certain
alternative qualification examinations in
lieu of the Operations Professional
examination, and to extend the 120-day
grace period for registration of non-DayOne Professionals to those who will be
associated with a clearing member.
FINRA has suitably explained its
reasons for declining to amend the
proposed rule in response to the
remainder of the comments it received.
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IV. Accelerated Approval
The Commission finds good cause,
pursuant to Section 19(b)(2) of the
Exchange Act,195 for approving the
proposed rule change, as modified by
Amendment No. 1 thereto, prior to the
30th day after publication of notice of
the filing of Amendment No. 1 in the
Federal Register. The proposed rule
change was informed by FINRA’s
consideration of, and the incorporation
of many suggestions made in, extensive
comments on FINRA’s proposal to
require the registration of Operations
Professionals, and Amendment No. 1’s
modifications to the proposed rule
change add clarity to the proposed rule
and provide additional guidance to
members and their associated persons.
Accordingly, the Commission finds
that good cause exists to approve the
proposal, as modified by Amendment
No. 1, on an accelerated basis.
V. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change, as modified by Amendment No.
1, is consistent with the Act. Comments
may be submitted by any of the
following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–FINRA–2011–013 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–FINRA–2011–013. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of
FINRA. 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–FINRA–2011–013 and
should be submitted on or before July
13, 2011.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,196 that the
proposed rule change (SR–FINRA–
2011–013), as modified by Amendment
No. 1, be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.197
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–15450 Filed 6–21–11; 8:45 am]
BILLING CODE 8011–01–P
U.S.C. 78s(b)(2).
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[Release No. 34–64686; File No. SR–CHX–
2011–07]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Order
Approving a Proposed Rule Change To
Amend Minor Rule Plan
June 16, 2011.
I. Introduction
On April 20, 2011, the Chicago Stock
Exchange, Inc. (‘‘CHX’’ or the
‘‘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
amending CHX Article 12, Rule 8
(Minor Rule Plan) (‘‘MRP’’) to
incorporate additional violations into
the MRP, increase the sanctions for
certain violations, add censure authority
to the MRP, eliminate the Minor Rule
Violation Panel, clarify pleading
requirements of a Respondent seeking to
challenge a sanction by instituting a
formal disciplinary proceeding, and
make other minor changes. The
proposed rule change was published for
comment in the Federal Register on
May 5, 2011.3 The Commission received
no comment letters on the proposed rule
change. This order approves the
proposed rule change.
II. Description
The Exchange proposed to make
additional rules subject to punishment
under its MRP. These rules relate to: (1)
Failure to notify the Exchange of a
request to withdraw capital contribution
(Article 3, Rule 6(b)); (2) failure to
request Exchange approval of the
transfer of equity securities of a
participant firm (Article 3, Rule 11); (3)
reporting of loans (Article 3, Rule 12);
(4) failure to provide the Exchange with
information (Article 6, Rule 7); (5)
impeding or delaying an Exchange
examination, inquiry, or investigation
(Article 6, Rule 9); (6) designation of
e-mail addresses (Article 3, Rule 13); (7)
registration and approval of personnel
(Article 6, Rule 2(a)); (8) written
supervisory procedures (Article 6, Rule
5(b)); (9) failure to report short positions
(Article 7, Rule 9); (10) furnishing of
records (Article 11, Rule 1); (11)
maintenance of books and records
(Article 11, Rule 2); (12) participant
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 64370
(April 29, 2011); 76 FR 25727 (‘‘Notice’’).
2 17
196 15
195 15
SECURITIES AND EXCHANGE
COMMISSION
PO 00000
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
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Federal Register / Vol. 76, No. 120 / Wednesday, June 22, 2011 / Notices
communications (Article 11, Rule 4);
(13) market maker registration and
appointment (Article 16, Rule 1); (14)
market maker reporting of position
information (Article 16, Rule 10); (15)
institutional broker registration and
appointment (Article 17, Rule 1); (16)
reporting of transactions (Article 9, Rule
13); (17) institutional broker obligations
for entry of orders into an automated
system (Article 17, Rule 3(a)); and (18)
institutional broker responsibilities for
handling orders within an integrated
system (Article 17, Rule 3(b)). The
Exchange believes that it will be able to
carry out its regulatory responsibility
more quickly and efficiently by
incorporating these violations into its
MRP.
The Exchange also proposed to
increase the fine levels for certain
violations. The Exchange proposed to
increase the maximum fine pursuant to
the MRP from $2,500 to $5,000 and to
increase the fines in the Fine Schedule
in order to better deter violative activity
and more closely adhere to the fine
schedules of other self-regulatory
organizations. For most reporting and
recordkeeping rule violations and
certain trading rule violations, the
recommended fines were increased from
$100/$500/$1000 for first, second, and
third tier fines, respectively, to $250/
$750/$1500. The Exchange also
proposed recommended fines of $500/
$1000/$2500 for other, more serious
trading rule violations (i.e., ones which
involve the potential for customer
harm), as well as violations of the
obligation to establish, maintain, and
enforce written supervisory procedures,
and to provide information to the
Exchange in connection with regulatory
inquiries or other matters. The Exchange
recommended fines of $1000/$2500/
$5000 for the most serious violations
contained within the Plan (Trading
Ahead). Finally, the Exchange proposed
to expand the rolling time period in
which violations would result in
escalation to the next highest tier from
12 to 24 months, which is consistent
with the minor rule plans of other
exchanges.
In conjunction with altering the fine
levels, the Exchange proposed to add a
censure authority to the MRP to provide
additional flexibility in imposing
sanctions in particular cases. A censure
could be used in the initial findings of
a violation where the Exchange wants to
put the Respondent on notice that
certain conduct violates CHX rules or in
other circumstances in which a
monetary fine is not appropriate or
necessary.
The Exchange proposed to eliminate
the role of the Minor Rule Violation
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Panel in issuing sanctions pursuant to
the MRP, and to authorize certain
members of the Exchange’s Market
Regulation staff to issue MRP sanctions.
Specifically, MRP sanctions would be
imposed either by the Exchange’s Chief
Enforcement Counsel or Chief
Regulatory Officer. The Exchange noted
that allowing members of its staff to
issue MRP fines was consistent with the
practice at other exchanges regarding
MRPs and was also similar to the
method by which formal disciplinary
actions are instituted by the CHX under
Article 12, Rule 1.4 The Exchange stated
that the proposed change would help to
expedite the process of issuing MRP
sanctions and would eliminate an
inherent source of potential conflicts (or
appearance thereof) whenever
Participants determine disciplinary
sanctions.
The Exchange also proposed to clarify
the pleading requirements of a
Respondent who seeks to challenge a
sanction by instituting a formal
disciplinary proceeding. The proposed
changes would require a Respondent
challenging an MRP sanction to file an
answer that meets the standards for an
answer under Article 12, Rule 5(b). The
proposal would authorize the Secretary
of the Exchange (the person to whom
such responses are directed) to deny the
answer for a failure to meet these
standards. Under the proposal, the
denial of the answer by the Secretary
without leave to amend and refile
would be considered the final action of
the Exchange, and the MRP fine would
become due and payable and/or a
censure would be imposed. The
Exchange also added language
incorporating the requirement of
Exchange Act Rule 19d–1 relating to the
reporting of Exchange disciplinary
actions to the Commission.5
Finally, the Exchange proposed to
make certain non-substantive, clarifying
changes to some of the current rules
referenced in the MRP. For example, the
filing proposed to clarify that the short
sale rule (Article 9, Rule 23) applied to
all sell orders and not just those of a
4 See, e.g., Chicago Board Options Exchange
(‘‘CBOE’’) Rule 17.50(a), Imposition of Fines for
Minor Rule Violations (provides for fines to be
issued by ‘‘the Exchange’’); BATS Exchange Rule
8.15(a), Imposition of Fines for Minor Violation(s)
of Rules, (provides for fines to be issued by ‘‘the
Exchange’’); International Stock Exchange Rule
1614(a), Imposition of Fines for Minor Rule
Violations (provides for fines to be issued by ‘‘the
Exchange’’). Formal disciplinary actions under CHX
Article 12, Rule 1 are authorized by the Exchange’s
Chief Regulatory Officer.
5 The Exchange’s proposed language is based
upon language in the Minor Rule Violation Plan of
the CBOE. See CBOE Rule 17.50(a).
PO 00000
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36597
proprietary nature.6 In addition, the
filing proposed to make changes to
address proper rule cites and/or
description of rules. For example, the
filing proposed to clarify that an
institutional broker’s best execution
obligations under Article 17, Rule 3
specifically fall under paragraph (d) of
such rule. In addition, rather than
describing the rule as ‘‘Failure to meet
best execution obligations’’, the rule
will be titled ‘‘Institutional Broker
obligations in handling orders (best
execution).’’
III. Discussion and Commission’s
Findings
The Commission finds that the
proposal is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.7 In
particular, the Commission believes that
the proposal is consistent with Section
6(b)(5) of the Act,8 which requires that
the rules of an exchange be designed to,
among other things, protect investors
and the public interest. The
Commission also believes that the
proposal is consistent with Sections
6(b)(1) and 6(b)(6) of the Act,9 which
require that the rules of an exchange
enforce compliance with, and provide
appropriate discipline for, violations of
Commission and Exchange rules. The
Commission notes that because CHX
Article 12 provides procedural rights to
a person fined under the MRP to contest
the fine and permits a hearing on the
matter, the Commission believes that
the MRP provides a fair procedure for
the disciplining of members and
persons associated with members,
consistent with Sections 6(b)(7) and
6(d)(1) of the Act.10 Furthermore, the
Commission believes that the proposed
changes to the MRP should strengthen
the Exchange’s ability to carry out its
oversight and enforcement
responsibilities as a self-regulatory
organization in cases where full
disciplinary proceedings are unsuitable
in view of the minor nature of the
particular violation. Therefore, the
Commission finds that the proposal is
consistent with the public interest, the
protection of investors, or otherwise in
furtherance of the purposes of the Act,
6 Currently, the Plan only addresses a
Participant’s duty to comply with the short sale rule
when selling short for its own account (e.g.,
proprietarily). See Article 12, Rule 8(h)(ii)(5).
7 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
8 15 U.S.C. 78f(b)(5).
9 15 U.S.C. 78f(b)(1) and 78f(b)(6).
10 15 U.S.C. 78f(b)(7) and 78f(d)(1).
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Federal Register / Vol. 76, No. 120 / Wednesday, June 22, 2011 / Notices
as required by Rule 19d–1(c)(2) under
the Act,11 which governs minor rule
violation plans.
In approving this proposed rule
change, the Commission in no way
minimizes the importance of
compliance with CHX rules and all
other rules subject to the imposition of
fines under the MRP. The Commission
believes that the violation of any selfregulatory organization’s rules, as well
as Commission rules, is a serious matter.
However, the MRP provides a
reasonable means of addressing rule
violations that do not rise to the level of
requiring formal disciplinary
proceedings, while providing greater
flexibility in handling certain violations.
The Commission expects that CHX will
continue to conduct surveillance with
due diligence and make a determination
based on its findings, on a case-by-case
basis, whether a fine of more or less
than the recommended amount is
appropriate for a violation under the
MRP or whether a violation requires
formal disciplinary action under CHX
Article 12.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 12 and Rule
19d–1(c)(2) under the Act,13 that the
proposed rule change (SR–CHX–2011–
07) be, and hereby is, approved and
declared effective.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–15553 Filed 6–21–11; 8:45 am]
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BILLING CODE 8011–01–P
11 17
CFR 240.19d–1(c)(2).
12 15 U.S.C. 78s(b)(2).
13 17 CFR 240.19d–1(c)(2).
14 17 CFR 200.30–3(a)(12); 17 CFR 200.30–
3(a)(44).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64693; File No. SR–
NYSEAmex–2011–38]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Rule 903G To
Permit the Exchange To List Flexible
Exchange Options on Index and Equity
Securities That Are Eligible for NonFLEX Options Trading, and That Have
Non-FLEX Options on Such Index and
Equity Securities Listed and Traded on
at Least One National Securities
Exchange, Even if the Exchange Does
Not List Such Non-FLEX Options
June 16, 2011.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b-4 thereunder,3
notice is hereby given that on June 3,
2011, NYSE Amex LLC (the ‘‘Exchange’’
or ‘‘NYSE Amex’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Rule 903G (Terms of FLEX Options) to
permit the Exchange to list Flexible
Exchange Options (‘‘FLEX Options’’) on
index and equity securities that are
eligible for Non-FLEX Options trading,
and that have Non-FLEX Options on
such index and equity securities listed
and traded on at least one national
securities exchange, even if the
Exchange does not list such Non-FLEX
Options. The text of the proposed rule
change is available at the Exchange, the
Commission’s Public Reference Room,
and https://www.nyse.com.
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 those statements may be examined at
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
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 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 to amend
Rule 903G (Terms of FLEX Options) to
permit trading of FLEX Options series in
securities whose Non-FLEX Options are
listed and traded on a national
securities exchange(s), based on a
recently adopted rule change of the
Chicago Board Options Exchange
(‘‘CBOE’’).4
Rule 903G currently permits the
Exchange to approve and open for
trading FLEX Options only after the
particular index or equity security has
been approved for Non-FLEX Options
trading.
The Exchange proposes to adopt a
rule change similar to a rule change
recently adopted by the CBOE to allow
FLEX Equity Options on any security
that meets the standards of NYSE Amex
Rule 915, and that has Non-FLEX
Options on such security listed and
traded on at least one options exchange,
regardless of whether the Exchange
trades such Non-FLEX Options.
Similarly, the CBOE rule change also
adopted a provision to allow FLEX
Index Options on any index that meets
its listing standards. NYSE Amex
proposes to adopt a similar provision
that would permit FLEX Index Options
on any index that meets the standards
of Rule 901C, and that has Non-FLEX
Options on such index listed and traded
on at least one options exchange, even
if the Exchange does not list and trade
such Non-FLEX Options.
The Exchange also proposes to
designate 903G(c)(1) as ‘‘reserved’’
because the text in that provision stating
that FLEX Equity Option transactions
are limited to transactions in options on
underlying securities that have been
approved by the Exchange in
accordance with Rule 915 would no
longer be applicable.
As an alternative to the over-thecounter marketplace and other national
security exchanges, the Exchange
proposes to increase the spectrum of
indexes and equity securities that are
4 See Securities Exchange Act Release No. 60585
(August 28, 2009), 74 FR 46257 (September 8,
2009). Unlike CBOE’s rule, we have clarified that
our proposed rule would only permit the trading of
FLEX Options on securities whose Non-Flex
Options are listed and traded on at least one options
exchange.
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]]>Agencies
[Federal Register Volume 76, Number 120 (Wednesday, June 22, 2011)]
[Notices]
[Pages 36596-36598]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15553]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64686; File No. SR-CHX-2011-07]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Order Approving a Proposed Rule Change To Amend Minor Rule Plan
June 16, 2011.
I. Introduction
On April 20, 2011, the Chicago Stock Exchange, Inc. (``CHX'' or the
``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 amending CHX Article 12, Rule 8 (Minor Rule Plan)
(``MRP'') to incorporate additional violations into the MRP, increase
the sanctions for certain violations, add censure authority to the MRP,
eliminate the Minor Rule Violation Panel, clarify pleading requirements
of a Respondent seeking to challenge a sanction by instituting a formal
disciplinary proceeding, and make other minor changes. The proposed
rule change was published for comment in the Federal Register on May 5,
2011.\3\ The Commission received no comment letters on the proposed
rule change. This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 64370 (April 29,
2011); 76 FR 25727 (``Notice'').
---------------------------------------------------------------------------
II. Description
The Exchange proposed to make additional rules subject to
punishment under its MRP. These rules relate to: (1) Failure to notify
the Exchange of a request to withdraw capital contribution (Article 3,
Rule 6(b)); (2) failure to request Exchange approval of the transfer of
equity securities of a participant firm (Article 3, Rule 11); (3)
reporting of loans (Article 3, Rule 12); (4) failure to provide the
Exchange with information (Article 6, Rule 7); (5) impeding or delaying
an Exchange examination, inquiry, or investigation (Article 6, Rule 9);
(6) designation of e-mail addresses (Article 3, Rule 13); (7)
registration and approval of personnel (Article 6, Rule 2(a)); (8)
written supervisory procedures (Article 6, Rule 5(b)); (9) failure to
report short positions (Article 7, Rule 9); (10) furnishing of records
(Article 11, Rule 1); (11) maintenance of books and records (Article
11, Rule 2); (12) participant
[[Page 36597]]
communications (Article 11, Rule 4); (13) market maker registration and
appointment (Article 16, Rule 1); (14) market maker reporting of
position information (Article 16, Rule 10); (15) institutional broker
registration and appointment (Article 17, Rule 1); (16) reporting of
transactions (Article 9, Rule 13); (17) institutional broker
obligations for entry of orders into an automated system (Article 17,
Rule 3(a)); and (18) institutional broker responsibilities for handling
orders within an integrated system (Article 17, Rule 3(b)). The
Exchange believes that it will be able to carry out its regulatory
responsibility more quickly and efficiently by incorporating these
violations into its MRP.
The Exchange also proposed to increase the fine levels for certain
violations. The Exchange proposed to increase the maximum fine pursuant
to the MRP from $2,500 to $5,000 and to increase the fines in the Fine
Schedule in order to better deter violative activity and more closely
adhere to the fine schedules of other self-regulatory organizations.
For most reporting and recordkeeping rule violations and certain
trading rule violations, the recommended fines were increased from
$100/$500/$1000 for first, second, and third tier fines, respectively,
to $250/$750/$1500. The Exchange also proposed recommended fines of
$500/$1000/$2500 for other, more serious trading rule violations (i.e.,
ones which involve the potential for customer harm), as well as
violations of the obligation to establish, maintain, and enforce
written supervisory procedures, and to provide information to the
Exchange in connection with regulatory inquiries or other matters. The
Exchange recommended fines of $1000/$2500/$5000 for the most serious
violations contained within the Plan (Trading Ahead). Finally, the
Exchange proposed to expand the rolling time period in which violations
would result in escalation to the next highest tier from 12 to 24
months, which is consistent with the minor rule plans of other
exchanges.
In conjunction with altering the fine levels, the Exchange proposed
to add a censure authority to the MRP to provide additional flexibility
in imposing sanctions in particular cases. A censure could be used in
the initial findings of a violation where the Exchange wants to put the
Respondent on notice that certain conduct violates CHX rules or in
other circumstances in which a monetary fine is not appropriate or
necessary.
The Exchange proposed to eliminate the role of the Minor Rule
Violation Panel in issuing sanctions pursuant to the MRP, and to
authorize certain members of the Exchange's Market Regulation staff to
issue MRP sanctions. Specifically, MRP sanctions would be imposed
either by the Exchange's Chief Enforcement Counsel or Chief Regulatory
Officer. The Exchange noted that allowing members of its staff to issue
MRP fines was consistent with the practice at other exchanges regarding
MRPs and was also similar to the method by which formal disciplinary
actions are instituted by the CHX under Article 12, Rule 1.\4\ The
Exchange stated that the proposed change would help to expedite the
process of issuing MRP sanctions and would eliminate an inherent source
of potential conflicts (or appearance thereof) whenever Participants
determine disciplinary sanctions.
---------------------------------------------------------------------------
\4\ See, e.g., Chicago Board Options Exchange (``CBOE'') Rule
17.50(a), Imposition of Fines for Minor Rule Violations (provides
for fines to be issued by ``the Exchange''); BATS Exchange Rule
8.15(a), Imposition of Fines for Minor Violation(s) of Rules,
(provides for fines to be issued by ``the Exchange''); International
Stock Exchange Rule 1614(a), Imposition of Fines for Minor Rule
Violations (provides for fines to be issued by ``the Exchange'').
Formal disciplinary actions under CHX Article 12, Rule 1 are
authorized by the Exchange's Chief Regulatory Officer.
---------------------------------------------------------------------------
The Exchange also proposed to clarify the pleading requirements of
a Respondent who seeks to challenge a sanction by instituting a formal
disciplinary proceeding. The proposed changes would require a
Respondent challenging an MRP sanction to file an answer that meets the
standards for an answer under Article 12, Rule 5(b). The proposal would
authorize the Secretary of the Exchange (the person to whom such
responses are directed) to deny the answer for a failure to meet these
standards. Under the proposal, the denial of the answer by the
Secretary without leave to amend and refile would be considered the
final action of the Exchange, and the MRP fine would become due and
payable and/or a censure would be imposed. The Exchange also added
language incorporating the requirement of Exchange Act Rule 19d-1
relating to the reporting of Exchange disciplinary actions to the
Commission.\5\
---------------------------------------------------------------------------
\5\ The Exchange's proposed language is based upon language in
the Minor Rule Violation Plan of the CBOE. See CBOE Rule 17.50(a).
---------------------------------------------------------------------------
Finally, the Exchange proposed to make certain non-substantive,
clarifying changes to some of the current rules referenced in the MRP.
For example, the filing proposed to clarify that the short sale rule
(Article 9, Rule 23) applied to all sell orders and not just those of a
proprietary nature.\6\ In addition, the filing proposed to make changes
to address proper rule cites and/or description of rules. For example,
the filing proposed to clarify that an institutional broker's best
execution obligations under Article 17, Rule 3 specifically fall under
paragraph (d) of such rule. In addition, rather than describing the
rule as ``Failure to meet best execution obligations'', the rule will
be titled ``Institutional Broker obligations in handling orders (best
execution).''
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\6\ Currently, the Plan only addresses a Participant's duty to
comply with the short sale rule when selling short for its own
account (e.g., proprietarily). See Article 12, Rule 8(h)(ii)(5).
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III. Discussion and Commission's Findings
The Commission finds that the proposal is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\7\ In particular, the
Commission believes that the proposal is consistent with Section
6(b)(5) of the Act,\8\ which requires that the rules of an exchange be
designed to, among other things, protect investors and the public
interest. The Commission also believes that the proposal is consistent
with Sections 6(b)(1) and 6(b)(6) of the Act,\9\ which require that the
rules of an exchange enforce compliance with, and provide appropriate
discipline for, violations of Commission and Exchange rules. The
Commission notes that because CHX Article 12 provides procedural rights
to a person fined under the MRP to contest the fine and permits a
hearing on the matter, the Commission believes that the MRP provides a
fair procedure for the disciplining of members and persons associated
with members, consistent with Sections 6(b)(7) and 6(d)(1) of the
Act.\10\ Furthermore, the Commission believes that the proposed changes
to the MRP should strengthen the Exchange's ability to carry out its
oversight and enforcement responsibilities as a self-regulatory
organization in cases where full disciplinary proceedings are
unsuitable in view of the minor nature of the particular violation.
Therefore, the Commission finds that the proposal is consistent with
the public interest, the protection of investors, or otherwise in
furtherance of the purposes of the Act,
[[Page 36598]]
as required by Rule 19d-1(c)(2) under the Act,\11\ which governs minor
rule violation plans.
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\7\ In approving this proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
\10\ 15 U.S.C. 78f(b)(7) and 78f(d)(1).
\11\ 17 CFR 240.19d-1(c)(2).
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In approving this proposed rule change, the Commission in no way
minimizes the importance of compliance with CHX rules and all other
rules subject to the imposition of fines under the MRP. The Commission
believes that the violation of any self-regulatory organization's
rules, as well as Commission rules, is a serious matter. However, the
MRP provides a reasonable means of addressing rule violations that do
not rise to the level of requiring formal disciplinary proceedings,
while providing greater flexibility in handling certain violations. The
Commission expects that CHX will continue to conduct surveillance with
due diligence and make a determination based on its findings, on a
case-by-case basis, whether a fine of more or less than the recommended
amount is appropriate for a violation under the MRP or whether a
violation requires formal disciplinary action under CHX Article 12.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\12\ and Rule 19d-1(c)(2) under the Act,\13\ that the proposed rule
change (SR-CHX-2011-07) be, and hereby is, approved and declared
effective.
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\12\ 15 U.S.C. 78s(b)(2).
\13\ 17 CFR 240.19d-1(c)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(44).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-15553 Filed 6-21-11; 8:45 am]
BILLING CODE 8011-01-P
