Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 1614, 30672-30674 [2014-12222]
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30672
Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–12220 Filed 5–27–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72214; File No. SR–
NYSEArca–2014–30]
which would allow the listing of a new
exchange-traded product.
Accordingly, the Commission,
pursuant to Section 19(b)(2) of the Act,5
designates July 10, 2014 as the date by
which the Commission should either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–NYSEArca–2014–30).
proposed rule change is available on the
Exchange’s Web site www.ise.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Kevin M. O’Neill,
Deputy Secretary.
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–NYSEMKT–2014–12).
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
self-regulatory organization has
prepared summaries, set forth in
Sections A, B and C below, of the most
significant aspects of such statements.
[FR Doc. 2014–12228 Filed 5–27–14; 8:45 am]
BILLING CODE 8011–01–P
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Designation of a
Longer Period for Commission Action
on Proposed Rule Change Relating to
Listing and Trading Shares of Hull
Tactical US ETF Under NYSE Arca
Equities Rule 8.600
emcdonald on DSK67QTVN1PROD with NOTICES
May 21, 2014.
On March 24, 2014, NYSE Arca, Inc.
(‘‘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
list and trade shares of Hull Tactical US
ETF (‘‘Fund’’) under NYSE Arca
Equities Rule 8.600. The proposed rule
change was published for comment in
the Federal Register on April 11, 2014.3
The Commission has received no
comments on this proposal.
Section 19(b)(2) of the Act 4 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day for this filing
is May 26, 2014. The Commission is
extending this 45-day time period.
The Commission finds it appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider this proposed rule change,
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72204; File No. SR–ISE–
2014–12]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Amending Rule 1614
May 21, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that, on May 8,
2014, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘ISE’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which items
have been prepared by the Exchange.
The Exchange has filed the proposal as
a ‘‘non-controversial’’ proposed rule
change pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(6) thereunder.4 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 Exchange proposes to amend ISE
Rule 1614 (Imposition of Fines for
Minor Rule Violations) to incorporate
violations of ISE Rules 803 (Obligations
of Market Makers) and 804 (Market
Maker Quotations) into the Minor Rule
Violation Plan (‘‘MRVP’’) and to delete
obsolete rule text. The text of the
6 17
5 15
1 15
6 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 71894
(April 7, 2014), 79 FR 20273.
4 15 U.S.C. 78s(b)(2).
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U.S.C. 78s(b)(2).
CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend ISE Rule 1614 to: (1)
Separate violations of the quotation
spread parameters from one violation
into two: One for pre-opening quotation
spread parameters and one for postopening quotation parameters, as set
forth in ISE Rule 803 (Obligations of
Market Makers); (2) incorporate
violations for failing to meet the
Exchange’s continuous quoting
obligations, as set forth in ISE Rule 804
(Market Maker Quotations); and (3) to
delete obsolete rule text.
The Exchange believes most of these
violations are inadvertent and technical
in nature. Processing these routine
violations under the MRVP would
decrease the administrative burden of
regulatory and enforcement staff, as well
as, that of the Business Conduct
Committee. In addition, staff would be
able to more expeditiously process
routine violations under the MRVP.
Quote Spread Obligations (Rule 803).
The MRVP currently combines preopening and post-opening quote spreads
into one MRVP violation and defines an
instance as one quote violation. Under
the current plan, if a member has over
forty (40) instances of quote spread
violations, the matter must be handled
outside of the MRVP and a formal action
must be brought. Given these
limitations, the Exchange has never
been able to use the MRVP for quote
spread violations since Members
average millions of quotes per day.
Therefore, the Exchange is now
proposing to split the quote spread
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violations into two categories. One
category would apply to pre-opening
quote spread violations, and one
category would apply to post-opening
quote spread violations. Additionally,
we are proposing to change the
application of the MRVP from applying
to each ‘‘instance’’ of a quote spread
violation to each ‘‘offense.’’ For
purposes of the MRVP, an ‘‘offense’’
will apply to any given month within a
24-month rolling period.
Given the proposal to split the quote
spread violations into two categories,
e.g., pre-opening quote spreads and
post-opening quote spreads, the
Exchange is proposing to move
violations of Rule 805(b)(1)(i), which
addresses order spreads, from Rule
1614(d)(5) to both 1614(d)(6)(a) and
1614(d)(6)(b). This proposed change
ensures that violations of both quote
spreads and order spreads that occur
either pre-open or post-open will be
aggregated for the purposes of
determining the number violations
under the MRVP.
Continuous Quote Obligations (Rule
804). The Exchange is proposing to add
violations of the continuous quotation
rule to the MRVP. These are routine
types of violations and the added
flexibility of including these matters in
the MRVP will help streamline our
surveillance and enforcement program.
For violations of Rule 1614(d)(6)(a)
and (b) and proposed 1614(d)(11) the
Exchange is proposing to consider
violations that occur in any given month
within a 24-month rolling period as an
‘‘offense.’’ The Exchange is also
proposing to change the applicability of
the MRVP for violations of Rule
1614(d)(6)(a) and (b) from violations
occurring within one calendar year to
violations that occur within a rolling
twenty-four month period. Since the
Exchange is proposing to aggregate the
violations that occur within a month
and sanction the violations as a single
offense, the Exchange believes it is
appropriate to consider offenses that
have occurred within the past twentyfour month rolling period, as opposed to
a calendar year, to determine the
amount to fine a firm and when to
proceed with formal disciplinary action.
The Exchange is proposing that the
first offense would result in a letter of
caution, the second offense would result
in a $1,000 fine, the third offense would
result in a $2,500 fine, the fourth offense
would result in a $5,000 fine and a fifth
offense would result in formal
disciplinary action. With respect to
violations of Rule 1614(d)(6)(a) and (b),
the Exchange is proposing to change the
fine amounts to those discussed above
from a letter of caution for the first 1 to
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10 violations, $200 fine for 11 to 20
violations, $400 fine for 21 to 30
violations, $800 fine for 31 to 40
violations and formal disciplinary
actions for more than 40 violations. The
Exchange believes it is appropriate to
charge a higher fine amount because the
Exchange is aggregating violations that
occur in a month and sanction the
violations as a single offense. Given that
the Exchange believes that the proposed
fine amounts are appropriate for
violations of quote spread parameters
(proposed Rule 1614(d)(6)(a) and (b)),
the Exchange also believes that these
same fine amounts should apply to
violations of the continuous quote
spread parameters (proposed Rule
1614(d)(11)).
As with other violations covered
under the Exchange’s Minor Rule
Violation Plan, any egregious activity
may be referred to the Exchange’s
Business Conduct Committee.
Additionally, the Exchange is
proposing to delete the reference to Rule
717(a) and (f) in Rule 1614(d)(5) as those
sections were rescinded and to delete
the sentence stating that each paragraph
of Rule 717 subject to this Rule shall be
treated separately for purposes of
determining the number of cumulative
violations because this Rule now only
applies to sections (d) and (e) of Rule
717. Violations of Sections (d) and (e) of
Rule 717 will be aggregated for the
purposes of determining the number of
violations under the MRVP because
both sections of the rule address order
exposure requirements. The Exchange is
also proposing to rescind (d)(4)
(Conduct and Decorum Policies) of Rule
1614 as it is inapplicable to ISE’s market
structure as ISE is an electronic
exchange and this provision seems to
relate to conduct and decorum on floorbased exchanges.
By promptly imposing a meaningful
financial penalty for such violations, the
MRVP focuses on correcting conduct
before it gives rise to more serious
enforcement action. The MRVP provides
a reasonable means of addressing rule
violations that do not necessarily rise to
the level of requiring formal
disciplinary proceedings, while also
providing a greater flexibility in
handling certain violations. Adopting a
provision that would allow the
Exchange to sanction violators under
the MRVP by no means minimizes the
importance of compliance with these
rules. The Exchange believes that the
violation of any of its rules is a serious
matter. The addition of a sanction under
the MRVP simply serves to add an
additional method for disciplining
violators of the additional rules. The
Exchange will continue to conduct
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30673
surveillance with due diligence and
make its determination, on a case by
case basis, whether a violation of these
additional rules should be subject to
formal disciplinary proceedings.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act 5 in general, and
furthers the objectives of Section 6(b)(5)
of the Act 6 in particular, because it is
designed to prevent fraudulent and
manipulative acts and practices, and to
promote just and equitable principles of
trade, 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,
allowing the Exchange to have
consistency between its Minor Rule
Violation Plan and the Minor Rule
Violation Plan of other SROs. Many
other options exchanges administer
violations for their quotation spread
rules and continuous quoting rules
under their MRVP.7 The Exchange
believes that the proposed such change
furthers the objectives of Section
6(b)(1) 8 of the Act to enforce
compliance by its Members of the
Exchange’s Rules, Section 6(b)(6) 9 of
the Act to appropriately discipline
Members for violations of Exchange
Rules, and Section 6(b)(7) 10 of the Act
to provide a fair procedure of
disciplining Members as the proposal
will strengthen its ability to carry out its
oversight responsibilities as a selfregulatory organization and reinforce its
surveillance and enforcement functions.
Processing these routine violations
under the MRVP would decrease the
administrative burden of regulatory and
enforcement staff, as well as, that of the
Business Conduct Committee. In
addition, staff would be able to more
expeditiously process routine violations
under the MRVP.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Since this rule change is merely
allowing the Exchange to process
certain rule violations through its MRVP
that other exchanges already process
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
7 See Chicago Board Options Exchange Rule
17.50, C2 Rule 17.50, NYSE Arca Rule 10.12, BATS
Exchange Rule 8.15, Nasdaq Options Market rule,
Chapter 10, Section 7, Boston Options Exchange
Rule 12140 and Miami International Securities
Exchange Rule 1014.
8 15 U.S.C. 78f(b)(1).
9 15 U.S.C. 78f(b)(6).
10 15 U.S.C. 78f(b)(7).
6 15
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Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Notices
through their MRVP, this filing does not
implicate the burden analysis.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not become operative for 30
days from the date on which it was
filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) 11 of the Act and Rule 19b–
4(f)(6) 12 thereunder. The Exchange
provided the Commission with written
notice of its intent to file the proposed
rule change, along with a brief
description and text of the proposed
rule change, at least five business days
prior to the date of filing the proposed
rule change.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or 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.
Comments may be submitted by any of
the following methods:
Paper Comments
• Send paper comments in triplicate
to the Secretary, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISE–2014–12. This file
number should be included on the
subject line if email 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
10:00 a.m. and 3:00 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–ISE–
2014–12 and should be submitted on or
before June 18, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–12222 Filed 5–27–14; 8:45 am]
BILLING CODE 8011–01–P
emcdonald on DSK67QTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISE–2014–12 on the subject line.
11 15
12 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
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13 17
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CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72206; File No. SR–OCC–
2014–07]
Self-Regulatory Organizations; the
Options Clearing Corporation; Order
Approving Proposed Rule Change To
Eliminate Preferred Stock and
Corporate Bonds as Acceptable Forms
of Margin Assets
May 21, 2014.
I. Introduction
On March 28, 2014, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2014–07
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder.2
The proposed rule change was
published for comment in the Federal
Register on April 15, 2014.3 The
Commission received no comment
letters. For the reasons discussed below,
the Commission is granting approval of
the proposed rule change.
II. Description
A. Elimination of Preferred Stock &
Corporate Bonds as Acceptable Margin
Assets
Pursuant to the proposed rule change,
as approved, OCC is amending Rule
604(b)(4)4 to eliminate preferred stock
and corporate bonds as acceptable forms
of margin assets.
OCC has accepted preferred stock and
corporate bonds as margin since 1988.5
However, in more recent times,
preferred stock and corporate bonds (on
a combined basis) consistently have
accounted for less than one percent of
the margin assets on deposit at OCC. No
corporate bonds have been deposited
since March 2012.
OCC presently uses a manual process
to review the valuation methodology for
preferred stocks and corporate bonds.6
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 71910
(April 9, 2014), 79 FR 21319 (April 15, 2014).
4 OCC Rule 604 sets forth the forms of assets
eligible to be deposited as margin and conditions
that must be satisfied in order for margin credit to
be given to such deposits. Eligible forms of margin
assets presently are: cash, government securities,
GSE debt securities, money market fund shares,
letters of credit, common stock (including fund
shares and index linked securities), corporate
bonds, and preferred stock.
5 See Securities Exchange Act Release No. 29576
(August 16, 1991), 56 FR 41873 (August 23, 1991),
(SR–OCC–88–03).
6 Such review process occurs monthly and
contemplates: (1) adequacy of haircuts, (2) volume,
and (3) price transparency.
2 17
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]]>Agencies
[Federal Register Volume 79, Number 102 (Wednesday, May 28, 2014)]
[Notices]
[Pages 30672-30674]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-12222]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72204; File No. SR-ISE-2014-12]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Amending Rule 1614
May 21, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on May 8, 2014, the International Securities Exchange, LLC (the
``Exchange'' or the ``ISE'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which items have been prepared by the
Exchange. The Exchange has filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend ISE Rule 1614 (Imposition of Fines
for Minor Rule Violations) to incorporate violations of ISE Rules 803
(Obligations of Market Makers) and 804 (Market Maker Quotations) into
the Minor Rule Violation Plan (``MRVP'') and to delete obsolete rule
text. The text of the proposed rule change is available on the
Exchange's Web site www.ise.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
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 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
The purpose of the proposed rule change is to amend ISE Rule 1614
to: (1) Separate violations of the quotation spread parameters from one
violation into two: One for pre-opening quotation spread parameters and
one for post-opening quotation parameters, as set forth in ISE Rule 803
(Obligations of Market Makers); (2) incorporate violations for failing
to meet the Exchange's continuous quoting obligations, as set forth in
ISE Rule 804 (Market Maker Quotations); and (3) to delete obsolete rule
text.
The Exchange believes most of these violations are inadvertent and
technical in nature. Processing these routine violations under the MRVP
would decrease the administrative burden of regulatory and enforcement
staff, as well as, that of the Business Conduct Committee. In addition,
staff would be able to more expeditiously process routine violations
under the MRVP.
Quote Spread Obligations (Rule 803). The MRVP currently combines
pre-opening and post-opening quote spreads into one MRVP violation and
defines an instance as one quote violation. Under the current plan, if
a member has over forty (40) instances of quote spread violations, the
matter must be handled outside of the MRVP and a formal action must be
brought. Given these limitations, the Exchange has never been able to
use the MRVP for quote spread violations since Members average millions
of quotes per day. Therefore, the Exchange is now proposing to split
the quote spread
[[Page 30673]]
violations into two categories. One category would apply to pre-opening
quote spread violations, and one category would apply to post-opening
quote spread violations. Additionally, we are proposing to change the
application of the MRVP from applying to each ``instance'' of a quote
spread violation to each ``offense.'' For purposes of the MRVP, an
``offense'' will apply to any given month within a 24-month rolling
period.
Given the proposal to split the quote spread violations into two
categories, e.g., pre-opening quote spreads and post-opening quote
spreads, the Exchange is proposing to move violations of Rule
805(b)(1)(i), which addresses order spreads, from Rule 1614(d)(5) to
both 1614(d)(6)(a) and 1614(d)(6)(b). This proposed change ensures that
violations of both quote spreads and order spreads that occur either
pre-open or post-open will be aggregated for the purposes of
determining the number violations under the MRVP.
Continuous Quote Obligations (Rule 804). The Exchange is proposing
to add violations of the continuous quotation rule to the MRVP. These
are routine types of violations and the added flexibility of including
these matters in the MRVP will help streamline our surveillance and
enforcement program.
For violations of Rule 1614(d)(6)(a) and (b) and proposed
1614(d)(11) the Exchange is proposing to consider violations that occur
in any given month within a 24-month rolling period as an ``offense.''
The Exchange is also proposing to change the applicability of the MRVP
for violations of Rule 1614(d)(6)(a) and (b) from violations occurring
within one calendar year to violations that occur within a rolling
twenty-four month period. Since the Exchange is proposing to aggregate
the violations that occur within a month and sanction the violations as
a single offense, the Exchange believes it is appropriate to consider
offenses that have occurred within the past twenty-four month rolling
period, as opposed to a calendar year, to determine the amount to fine
a firm and when to proceed with formal disciplinary action.
The Exchange is proposing that the first offense would result in a
letter of caution, the second offense would result in a $1,000 fine,
the third offense would result in a $2,500 fine, the fourth offense
would result in a $5,000 fine and a fifth offense would result in
formal disciplinary action. With respect to violations of Rule
1614(d)(6)(a) and (b), the Exchange is proposing to change the fine
amounts to those discussed above from a letter of caution for the first
1 to 10 violations, $200 fine for 11 to 20 violations, $400 fine for 21
to 30 violations, $800 fine for 31 to 40 violations and formal
disciplinary actions for more than 40 violations. The Exchange believes
it is appropriate to charge a higher fine amount because the Exchange
is aggregating violations that occur in a month and sanction the
violations as a single offense. Given that the Exchange believes that
the proposed fine amounts are appropriate for violations of quote
spread parameters (proposed Rule 1614(d)(6)(a) and (b)), the Exchange
also believes that these same fine amounts should apply to violations
of the continuous quote spread parameters (proposed Rule 1614(d)(11)).
As with other violations covered under the Exchange's Minor Rule
Violation Plan, any egregious activity may be referred to the
Exchange's Business Conduct Committee.
Additionally, the Exchange is proposing to delete the reference to
Rule 717(a) and (f) in Rule 1614(d)(5) as those sections were rescinded
and to delete the sentence stating that each paragraph of Rule 717
subject to this Rule shall be treated separately for purposes of
determining the number of cumulative violations because this Rule now
only applies to sections (d) and (e) of Rule 717. Violations of
Sections (d) and (e) of Rule 717 will be aggregated for the purposes of
determining the number of violations under the MRVP because both
sections of the rule address order exposure requirements. The Exchange
is also proposing to rescind (d)(4) (Conduct and Decorum Policies) of
Rule 1614 as it is inapplicable to ISE's market structure as ISE is an
electronic exchange and this provision seems to relate to conduct and
decorum on floor-based exchanges.
By promptly imposing a meaningful financial penalty for such
violations, the MRVP focuses on correcting conduct before it gives rise
to more serious enforcement action. The MRVP provides a reasonable
means of addressing rule violations that do not necessarily rise to the
level of requiring formal disciplinary proceedings, while also
providing a greater flexibility in handling certain violations.
Adopting a provision that would allow the Exchange to sanction
violators under the MRVP by no means minimizes the importance of
compliance with these rules. The Exchange believes that the violation
of any of its rules is a serious matter. The addition of a sanction
under the MRVP simply serves to add an additional method for
disciplining violators of the additional rules. The Exchange will
continue to conduct surveillance with due diligence and make its
determination, on a case by case basis, whether a violation of these
additional rules should be subject to formal disciplinary proceedings.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \5\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \6\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
and to promote just and equitable principles of trade, 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, allowing the Exchange to have consistency between its
Minor Rule Violation Plan and the Minor Rule Violation Plan of other
SROs. Many other options exchanges administer violations for their
quotation spread rules and continuous quoting rules under their
MRVP.\7\ The Exchange believes that the proposed such change furthers
the objectives of Section 6(b)(1) \8\ of the Act to enforce compliance
by its Members of the Exchange's Rules, Section 6(b)(6) \9\ of the Act
to appropriately discipline Members for violations of Exchange Rules,
and Section 6(b)(7) \10\ of the Act to provide a fair procedure of
disciplining Members as the proposal will strengthen its ability to
carry out its oversight responsibilities as a self-regulatory
organization and reinforce its surveillance and enforcement functions.
Processing these routine violations under the MRVP would decrease the
administrative burden of regulatory and enforcement staff, as well as,
that of the Business Conduct Committee. In addition, staff would be
able to more expeditiously process routine violations under the MRVP.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ See Chicago Board Options Exchange Rule 17.50, C2 Rule
17.50, NYSE Arca Rule 10.12, BATS Exchange Rule 8.15, Nasdaq Options
Market rule, Chapter 10, Section 7, Boston Options Exchange Rule
12140 and Miami International Securities Exchange Rule 1014.
\8\ 15 U.S.C. 78f(b)(1).
\9\ 15 U.S.C. 78f(b)(6).
\10\ 15 U.S.C. 78f(b)(7).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Since this rule change is merely allowing the Exchange to process
certain rule violations through its MRVP that other exchanges already
process
[[Page 30674]]
through their MRVP, this filing does not implicate the burden analysis.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) \11\ of the Act and Rule 19b-
4(f)(6) \12\ thereunder. The Exchange provided the Commission with
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at least
five business days prior to the date of filing the proposed rule
change.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or 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. 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 email to rule-comments@sec.gov. Please include
File Number SR-ISE-2014-12 on the subject line.
Paper Comments
Send paper comments in triplicate to the Secretary,
Securities and Exchange Commission, 100 F Street NE., Washington, DC
20549-1090.
All submissions should refer to File Number SR-ISE-2014-12. This
file number should be included on the subject line if email 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 10:00 a.m. and
3:00 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-ISE-2014-12 and should be
submitted on or before June 18, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12222 Filed 5-27-14; 8:45 am]
BILLING CODE 8011-01-P
