[Federal Register Volume 61, Number 148 (Wednesday, July 31, 1996)]
[Notices]
[Pages 40053-40054]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19471]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37456; File No. SR-CBOE-96-48]


Self-Regulatory Organization; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Incorporated Relating to 
the Consolidation of Minor Rule Violation Cases Involving the Same or a 
Related Transaction or Occurrence

July 19, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on July 10, 
1996, the Chicago Board Options Exchange, Incorporated (``CBOE'' or the 
``Exchange'') 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 CBOE, the 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested parties.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Chicago Board Options Exchange, Incorporated (``CBOE'' or the 
``Exchange'') proposes to amend its Minor Rule Violation rule to permit 
the consolidation of, into one hearing, the review of certain conduct 
involving trading conduct or decorum fines levied against different 
members and involving the same or related transaction or occurrence. 
The text of the proposed rule change is available at the Office of the 
Secretary, CBOE 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, CBOE 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 CBOE 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, Proposed Rule Change

    The purpose of the proposed rule change is to amend the Exchange's 
Minor Rule Violation rule to permit the Exchange's Business Conduct 
Committee (``BCC'') to consolidate in a single hearing the review of 
trading conduct or decorum fine exceeding $2500 and the review of such 
fines not exceeding $2500 where the alleged violations involve the same 
or a related transaction or occurrence.\1\ If the review of a fine is 
to be based upon written submissions, then that review may not be 
consolidated. Currently, subsection (c)(1) of Rule 17.50 permits any 
person against whom a fine exceeding $2500 has been imposed pursuant to 
subsection (g)(6) (Violations of Trading Conduct and Decorum Policies) 
of the Rule to contest the determination by filing a written answer 
pursuant to Exchange Rule 17.5, at which point the matter becomes 
subject to review by the BCC. On the other hand, subsection (d)(1) of 
Rule 17.50 requires a person contesting a fine not exceeding $2500 
imposed pursuant to subsection (g)(6) to make a written application 
pursuant to Rule 19.2(a), at which point the matter becomes subject to 
review by the Appeals Committee. In short, matters involving violations 
of the trading conduct and decorum policies pursuant to subsection 
(g)(6) are subject to review by different Exchange Committees depending 
upon whether the fine is (i) above $2500 (Business Conduct Committee) 
or (ii) $2500 or below (Appeals Committee).
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    \1\ Examples of conduct that are considered to be violations of 
the Exchange's trading conduct and decorum policy are: use of 
abusive language, abusing Exchange property, violation of the 
Exchange's book priority, physical violence, food or drink on the 
floor, and unbusinesslike conduct. The Exchange periodically 
distributes to its membership a list of the conduct considered to be 
violative of the policy and a fine schedule for the various types of 
conduct. Currently, the fine schedule permits Exchange Floor 
Officials to fine a member more than $2,500 under the trading 
conduct and decorum policy only when the conduct involves fighting 
on the floor.
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    The Exchange has been faced with at least one situation where a 
trading conduct and decorum policy incident on the floor resulted in 
fines of varying amounts for the participants involved, which 
subsequently lead to separate hearings for the different individuals 
before different Exchange Committees. The Exchange believes that 
granting the BCC the authority to conduct a consolidated hearing 
covering all violations resulting from the same or a related 
transaction or occurrence would

[[Page 40054]]

save time and staff resources. In addition, this proposal generally 
would be less burdensome on the individuals involved, who under the 
current rules must often appear at two hearings either as the subject 
or as a witness.
    A request to consolidate Minor Rule Violation cases under Rule 
17.50(g)(6) could be made to the BCC by any of the persons who were 
fined or by the Exchange before the start of either of the hearings. In 
addition, the BCC could decide to consolidate hearings involving the 
same or a related transaction or occurrence on its own without a 
request from the parties involved. After receiving a request to 
consolidate or after deciding to consolidate on its own, the BCC would 
grant all parties to the hearings a reasonable opportunity to submit a 
written statement in support of or in opposition to the decision to 
consolidate a final decision to consolidate would be made by the BCC 
which would consider all factors deems relevant, including the staff 
resources and time that may be saved by the consolidation and whether 
the consolidation could potentially be prejudicial to the parties 
involved.
    By establishing a procedure to consolidate certain cases involving 
Minor Rule Violations, the Exchange would be able to save staff 
resources and time, thereby improving the efficiency with which the 
Exchange performs its regulatory functions. For these reasons, this 
policy furthers the objectives of Section 6(b)(7) of the Act in that it 
is designed to provide a fair procedure for the disciplining of members 
and persons associated with members. This policy also furthers the 
objectives of Section 6(b)(5) of the Act in that it is designed 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 to protect investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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 reasons for so finding or (ii) as to 
which the self-regulatory 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. Persons making written submissions 
should fix copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 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 in the Commission's 
Public Reference Room. Copies of the filing will also be available for 
inspection and copying at the principal office of CBOE. All submissions 
should refer to the file number of the caption above and should be 
submitted by August 21, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-19471 Filed 7-30-96; 8:45 am]
BILLING CODE 8010-01-M