[Federal Register Volume 64, Number 154 (Wednesday, August 11, 1999)]
[Notices]
[Page 43793]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20634]
[[Page 43793]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41700; File No. SR-BSE-99-04]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the Boston Stock Exchange, Inc. Relating to Its Minor Rule
Violation Plan
August 3, 1999.
I. Introduction
On March 26, 1999, the Boston Stock Exchange, Inc. (``BSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') 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 the Summary Fine
Schedule of the Minor Rule Violation Plan through the addition of
violations of Rule 11Ac1-4 under the Act (``Display Rule'').\3\ Notice
of the proposed rule change appeared in the Federal Register on May 20,
1999.\4\ The Commission received no comment letters about the proposed
rule change. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.11Ac1-4.
\4\ Securities Exchange Act Release No. 41396 (May 13, 1999) 64
FR 27609.
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II. Description of the Proposal
The Exchange proposes to amend its Minor Rule Violation Plan
(``Plan'') to include violations of the Display Rule which are
inadvertent or unintentional. The amendment will allow the assessment
of fines, rather than a full disciplinary procedure in such situations.
The proposal provides that failure to display a customer limit
order immediately (no later than 30 seconds) after receipt will result
in a written warning for the initial offense. A second offense will
result in a $50 fine. Subsequent offenses will be fined at $100. The
proposal allows for calculation of subsequent violations on the basis
of a rolling 12 month period. Where violations of the Display Rule are
found to be intentional, however, the Exchange is not precluded under
the proposal from initiating formal Disciplinary Proceedings under
Chapter XXX or imposing sanctions of more or less than the recommended
fines (not to exceed $2,500 in any event).
III. Discussion
The Commission has reviewed carefully the Exchange's proposal, and
finds, for the reasons set forth below, that the proposed rule change
is consistent with the Act and the rules and regulations under the Act
applicable to a national securities exchange.\5\ In particular, the
Commission finds that the proposed rule change is consistent with
Sections 6(b)(5), 6(b)(6), 11A(a)(1)(C)(iii) and (iv) of the Act and
Rule 11Ac1-4 under the Act.\6\ Section 6(b)(5) of the Act requires that
the rules of an exchange be designed to promote just and equitable
principles of trade, to remove impediments to and to perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Section
6(b)(6) of the Act provides that the rules of an exchange provide that
its members and associated persons be appropriately disciplined for
violations of the Act and the rules of the exchange.
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\5\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition and capital
formation. 15 U.S.C. 78c(f).
\6\ 15 U.S.C. 78f(b)(5), 15 U.S.C. 78f(b)(6), 15 U.S.C. 78k-
1(a)(1)(C)(iii) and (iv), and 17 CFR 240.11Ac1-4.
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In Section 11A of the Act, Congress found that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for and transactions in securities, and to assure the
practicability of brokers executing investors' orders in the best
market. The proposed rule change should help to ensure the timely
availability of information with respect to quotations.
The Display Rule, which the Commission adopted under Section 11A of
the Act, requires specialists to display immediately, i.e., as soon as
practicable (which under normal market conditions means no later than
30 seconds from the time of receipt) \7\ the price and full size of
customer limit orders that would improve the bid or offer in a security
or add to the size of the best bid or offer. The Commission believes
that displaying customer limit orders benefits investors by providing
enhanced execution opportunities and improved transparency.\8\ The
Commission finds that the proposal reinforces the obligations of an
exchange specialist to display immediately certain customer limit
orders in accordance with Sections 6 and 11A of the Act and the Display
Rule.
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\7\ See Securities Exchange Act Release No. 37619A (September 6,
1996), 61 FR 48290 (September 12, 1996) (``Adopting Release''). A
specialist is not displaying customer limit orders immediately if
the specialist regularly executes customer limit orders at, for
example, the 27th second after receipt. The requirement that a limit
order be displayed ``immediately'' means that the limit order must
be displayed as soon as practicable, but no later than 30 seconds
after receipt under normal market conditions. This 30 seconds is an
outer limit under normal market conditions and is not to be
interpreted as a 30-second safe harbor.
\8\ Id.
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Although the Commission believes that certain violations of the
Display Rule are amenable to efficient and equitable enforcement and
therefore are appropriate for inclusion in the Exchange's Plan, because
a violation of the Display Rule amounts to a violation of federal
securities law, the Commission expects that the Exchange will err on
the side of caution in disposing of such violations under the Plan. The
Commission expects the Exchange will continue to resolve intentional
violations of the Display Rule through formal disciplinary proceedings.
IV. Conclusion
For the above reasons, the Commission finds that the proposed rule
change, as amended, is consistent with the provisions of the Act, and
in particular with Sections 6(b)(5), 6(b)(6), 11A(a)(1)(C)(iii) and
(iv) of the Act, and rule 11Ac1-4 under the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the
act,\9\ that the proposed rule change (SR-BSE-99-04), be and hereby is
approved.
\9\ 15 U.S.C. 78s(b)(2).
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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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-20634 Filed 8-10-99; 8:45 am]
BILLING CODE 8010-01-M
