[Federal Register Volume 64, Number 205 (Monday, October 25, 1999)]
[Notices]
[Pages 57504-57505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27714]


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SECURITIES AND EXCHANGE COMMISSION

[(Release No. 34-42025; File No. SR-CHX-99-12)]


Self-Regulatory Organizations; Notice of Filing Proposed Rule 
Change by the Chicago Stock Exchange, Inc. To Modify the Recommended 
Fine Schedule for the Submission of Late Financial and Operational 
Reports

October 18, 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 August 30, 1999, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the CHX. 
On October 5, 1999, the CHX submitted Amendment No. 1 to the proposed 
rule change.\3\ 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. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Angelo Evangelo, Senior Attorney, Market 
Regulation, CHX, to John Roeser, Attorney, Division of Market 
Regulation, Commission, dated October 1, 1999 (``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to eliminate the fixed fine schedule in 
Exchange Article XI, Rule 4,
    Interpretation and Policy .02 (``IP.02''), regarding the submission 
of late financial and operational reports and subject violations under 
the rule to the CHX Minor Rule Violation Plan's standard recommended 
fine schedule. The text of the proposed rule change is available at the 
Office of the Secretary, the CHX 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 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 plates specified in 
Item IV below. The 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 (``MRVP'' or ``Plan'').\4\ 
Under the Plan, the failure to file required financial and operational 
reports in a timely manner subjects members to a sanction. However, for 
such violations, the Plan's recommended fine schedule mirrors the fine 
schedule contained in IP .02. That fine schedule subjects members to 
late filing charges as follows:
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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 (June 8, 1984) (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 (June 6, 1996) (approving File No. SR-
CHX-95-25).
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Days Late/Amount

1-30--$100
31-60--$200
61-90--$400

    The Exchange is now proposing to eliminate the fixed fine schedule 
in IP .02, and to subject violations under the rule to the recommended 
fine schedule applicable to most other violations handled under the 
Plan. The recommended fine schedule provides that a $100 fine be 
imposed for the first violation within a rolling twelve month period 
and a $500 fine and $1000 fine be imposed for the second and third such 
violations. The Exchange believes that the proposed change would allow 
the MRVP panel to levy higher fines for the late submission of 
financial and operational reports.\5\
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    \5\ With respect to the issue of how the MRVP panel would handle 
violations that differ in terms of the length of time submissions 
are overdue, the Exchange believes that the MRVP panel, in such 
instances, would use its discretion in determining appropriate fine 
amounts. Although the proposed new fine schedule would not expressly 
state that higher fine amounts are appropriate for overly late 
submissions, the Exchange indicates that the MRVP panel likely would 
exercise its discretion to sanction members in accordance with the 
number of days a report was late. See Amendment No. 1, supra note 3.
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2. Statutory Basis
    The proposed rule change is consistent with the requirements of the 
Act and the rules and regulations under that Act which are applicable 
to a national securities exchange, and, in particular, with the 
requirements of Sections 6(b)(1), 6(b)(6), 6(b)(7), 6(d)(1) and 19(d) 
of the Act. The proposal is consistent with the Section 6(b)(6) 
requirement that the rules of an exchange provide that its members and 
persons associated with its members shall be disciplined appropriately 
for violations of the rules of the exchange.

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

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

[[Page 57505]]

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, 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 filing will also be 
available for inspection and copying at the principal office of the 
CHX. All submissions should refer to File No. SR-CHX-99-12 and should 
be submitted November 15, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-27714 Filed 10-22-99; 8:45 am]
BILLING CODE 8010-01-M