[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