[Federal Register Volume 64, Number 92 (Thursday, May 13, 1999)]
[Notices]
[Pages 25939-25940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12065]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41366; File No. SR-CSE-99-04]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the Cincinnati
Stock Exchange, Inc. Amending the Minor Rule Violation Program To
Include Violations of Limit Order Display Obligations
May 4, 1999.
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 April 15, 1999, the Cincinnati Stock Exchange, Inc. (``CSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the CSE. The
Commission is publishing this notice and order to solicit comments on
the proposed rule change from interested persons and to approve the
proposal on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The CSE proposes to amend Exchange Rule 8.15, Imposition of Fines
for Minor Violation(s) of Rules, to include Rule 12.10 and
Interpretation .01 under that rule, which requires Members to display
customer limit orders by complying with Rule 11Ac1-4 under the Act. The
text of the proposed rule change is available at the Office of the
Secretary, the CSE, and at the Commission.
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 CSE 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 III below. The CSE 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 proposal would amend CSE Rule 8.15, Imposition of Fines for
Minor Violation(s) of Rules (``Minor Rule Violation Program'' or
``Program''), which provides for an alternative disciplinary regimen
involving violations of Exchange rules that the Exchange determines are
minor in nature. In lieu of commencing a disciplinary proceeding
pursuant to Rule 8.1 through 8.14, the Minor Rule Violation Program
permits the Exchange to impose a fine, not to exceed $2500, on any
member, member organization, or registered or non-registered employee
of a member or member organization (``Member'') that the Exchange
determines has violated a rule included in the Program. Adding a
particular rule violation to the Minor Rule Violation Program does not
circumscribe the Exchange's ability to treat violations of those rules
through more formal disciplinary measures or deprive a Member of the
procedural rights embedded in the disciplinary rules. The Minor Rule
Violation Program simply provides the Exchange with greater flexibility
in addressing rule violations that warrant a stronger regulatory
response after the issuance of cautionary letters and yet, given the
nature of the violations, do not rise to the level of requiring formal
disciplinary proceedings.
The Exchange is now proposing to add the failure to properly
display customer limit orders contained in Interpretation .01 to Rule
12.10 to the list of rule violations and fines included in the Minor
Rule Violation Program. The Exchange believes that limit order display
violations often are technical in nature and, in most cases, are best
addressed in a summary fashion. However, because Interpretation .01 to
Rule 12.10 is predicated on compliance with SEC Rule 11Ac1-4, which
provides important customer protections, violations of this
Interpretation require sanctions more rigorous than a series of
cautionary letters prior to formal proceedings.
Therefore, the Exchange is proposing to use a recommended fine
schedule of $100 per violation of the Interpretation. Exchange
regulatory staff will review the facts and circumstances related to a
purported violation and determine the appropriateness of a fine or
other sanction. The Exchange notes that the minor violation fine
schedule is merely a recommended fine schedule and that fines of more
or less than the recommended fines can be imposed (up to $2,500
maximum) in appropriate circumstances. Also, as indicated above the
Exchange retains the ability to proceed with formal disciplinary action
if the violations, in the Exchange's view, involve circumstances where
more severe sanctions would be warranted.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the Act
\3\ in general, and furthers the objectives of Sections 6(b)(5),\4\
6(b)(6),\5\ 6(b)(7),\6\ and 6(d)(1) \7\ in particular. The proposed
rule change is consistent with Section 6(b)(5) in that it is designed
to promote just and equitable principles of trade and to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and to protect investors and the public
interest. Specifically, the proposed rule change will augment the
Exchange's ability to police its market and will increase the
Exchange's flexibility in responding to minor violations of Exchange
rules.
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\3\ 15 U.S.C. 78f(b).
\4\ 15 U.S.C. 78f(b)(5).
\5\ 15 U.S.C. 78f(b)(6).
\6\ 15 U.S.C. 78f(b)(7).
\7\ 15 U.S.C. 78f(b)(1).
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The proposal also is consistent with the Section 6(b)(6)
requirement that the rules of an exchange provide appropriate
discipline for violations of SEC and Exchange rules. The proposed rule
change will provide a procedure to appropriately discipline those
Members whose violations are minor in nature. In addition, because Rule
8.15 provides procedural safeguards 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
consistent with Sections 6(b)(7) and 6(d)(1) of the Act.
[[Page 25940]]
B. Self-Regulatory Organization's Statement on Burden on Competition
The CSE does not believe that the proposed rule change will impose
any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange did not solicit or receive written comments on the
proposed rule change.
III. 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 written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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 in the
Commission's Public Reference Room. Copies of such filings will also be
available for inspection and copying at the principal office of the
CSE. All submissions should refer to File No. SR-CSE-99-04 and should
be submitted by June 3, 1999.
IV. Discussion
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 and, in
particular, the requirements of Section 6 of the Act \8\ and the rules
and regulations thereunder.\9\ Section 6(b)(5) of the Act \10\ states
that the rules of an exchange must be designed to a facilitate
securities transactions and to remove implements to and perfect the
mechanism of a free and open market. The Commission believes that the
proposed rule change will augment the Exchange's ability to police its
market and will increase the Exchange's flexibility in responding to
minor violations of limit order display obligations.
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\8\ 15 U.S.C. 78f.
\9\ In approving this rule change, the Commission has considered
the proposal's impact on efficiency, competition, and capital
formation, consistent with Section 3 of the Act. 15 U.S.C. 78c(f)
\10\ 15 U.S.C. 78f(b)(5).
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Pursuant to Section 19(b)(2) of the Act,\11\ the Commission finds
good cause for approving the proposed rule change prior to the 30th day
after the date of publication of notice of filing of the proposal in
the Federal Register in that the proposed rule change will further the
Exchange's ability to provide effective oversight of SEC and Exchange
rules in an expeditious manner. The Commission also believes the
proposed rule change will provide the Exchange greater flexibility in
punishing violations of these rules.
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\11\ 15 U.S.C. 78s(b)(2).
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It is therefore ordered, pursuant to Section 19(b)(2) \12\ of the
Act, that the proposed rule change (file No. SR-CSE-99-04) be, and
hereby is, approved.
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\12\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 7 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-12065 Filed 5-12-99; 8:45 am]
BILLING CODE 8010-01-M
