[Federal Register Volume 63, Number 48 (Thursday, March 12, 1998)]
[Notices]
[Pages 12123-12124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6339]
[[Page 12123]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39723; File No. SR-CHX-97-25]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change, and Amendments Nos. 1 and 2 by the Chicago Stock Exchange,
Incorporated, Amending the Minor Rule Violation Plan
March 5, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 1, 1997, the
Chicago Stock Exchange, Incorporated (``CHX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change. The Exchange subsequently filed Amendment No. 1 clarifying
the statutory basis of the rule change.\2\ On February 12, 1998, the
Exchange filed Amendment No. 2 to the proposed rule change modifying
the recommended fine schedule. The proposed rule change, as amended, is
described in Items I, II, and III below, which Items have been prepared
by the self-regulatory organization. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. Sec. 78s(b)(1).
\2\ See Letter from David T. Russof, Foley & Lardner, to
Katherine A. England, Division of Market Regulation, Commission,
dated October 31, 1998.
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I. Self-Regulatory Organizations Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to amend Article XII, Rule 9, its Minor Rule
Violation Plan to include Article XX, Rule 7, interpretation and policy
.05, which requires limit orders to be reflected in the specialist's
quotation.\3\ Proposed new language is italicized.
\3\ See Securities Exchange Act Release No. 39540 (January 12,
1998), 63 FR 2708.
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Article XII
Rule 9.
(h)(ii)(18) Failure to display a limit order in the quotation (Article
XX, Rule 7, interpretation and policy .05)
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, CHX 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. CHX has prepared summaries, set forth in Sections A, B
and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On May 30, 1996 the Commission approved a proposed rule change that
established a CHX Minor Rule Violation Plan (the ``Plan'').\4\ The
Exchange is now proposing to add the failure to display a limit order
in the quotation \5\ to the section of the Plan relating to Floor
Decorum and Minor Trading Rule Violations. The Exchange believes that
it is appropriate to add the Limit Order Display Rule to the Plan
because violations of the rule are either objective and technical in
nature or are easily verifiable. Moreover, the Exchange believes that
because the Limit Order Display Rule is built upon a comparable
Commission Rule,\6\ violations of such rule require sanctions that are
more severe than a warning or cautionary letter.
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\4\ Rule 19d-1(c)(2) under the Act authorizes national
securities exchanges to adopt minor rule violation plans for the
summary discipline and abbreviated reporting of minor rule
violations by exchange members and member organizations. See
Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR
23828 (approving amendments to paragraph (c)(2) of Rule 19d-1 under
the Act). The CHX's Plan was approved by the Commission in 1996. See
Securities Exchange Act Release No. 37255 (May 30, 1996), 61 FR
28918 (approving File No. SR-CHX-95-25).
\5\ CHX Article XX, Rule 7 (``Limit Order Display Rule'').
\6\ See 17 CFR 240.11Ac1-4 (``Limit Order Display Rule'').
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The Exchange is also proposing recommended fines for failure to
display a limit order in the quotation (Article XX, Rule 7,
interpretation and policy .05) to be $1,000 for the first violation and
all subsequent violations. Because of the time and effort expended by
the Commission in adopting the Limit Order Display Rule, together with
the Commission's and the industry's recent focus on the display of
limit orders, the Exchange believes that it is appropriate to adopt the
$1000 recommended fine for violations of this rule (rather than the
$100 recommended fine for violations of other rules that are part of
the minor rule violation plan). The Exchange notes that the minor rule
plan violation schedule is merely a recommended fine schedule and that
fines of more or less than the recommended fines can be imposed (up to
a $2500 maximum) in appropriate circumstances. Moreover, the Exchange
may proceed with formal disciplinary action, rather than procedures
under the Plan, whenever it finds that a violation of the Limit Order
Display rules was more than inadvertent.
2. Statutory Basis
The proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to a national
securities exchange, and, in particular, with the requirements of
Section 6(b)(1),\7\ 6(b)(6),\8\ 6(b)(7) \9\ and 19(d) of the Act. The
proposal is consistent with the Section 6(b)(6) requirement that the
rules of an exchange provide appropriate discipline for violations of
Commission and Exchange rules. The proposal provides an efficient
procedure for appropriate disciplining of the members for rule
violations that are objective in nature. Moreover, because CHX Article
XII, Rule 9 provides procedural rights to the person fined and permits
a disciplined person to request a full hearing on the matter, the
proposal 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. The proposal provides an alternative means by which
to deter violations of CHX rules included in the Plan, thus furthering
the purposes of Section 6(b)(1) of the Act.
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\7\ 15 U.S.C. Sec. 78f(b)(1).
\8\ 15 U.S.C. Sec. 78f(b)(6).
\9\ 15 U.S.C. Sec. 78f(b)(7).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose a burden on competition.
C. Self-Regulatory Organization's Statement of Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) As the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reason for so finding or (ii) as to
which the self-regulatory
[[Page 12124]]
organization consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making a written submission
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying at the
Commission's Public Reference Room. Copies will also be available for
inspection and copying at the principal office of CHX. All submissions
should refer to file number SR-CHX-97-25 and should be submitted by
April 2, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-6339 Filed 3-11-98; 8:45 am]
BILLING CODE 8010-01-M
