[Federal Register Volume 65, Number 167 (Monday, August 28, 2000)]
[Notices]
[Page 52155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-21844]



[[Page 52155]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43168; File No. SR-BSE-99-07]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Boston Stock Exchange, Inc. Amending its Minor Rule 
Violation Plan

August 17, 2000.

I. Introduction

    On June 1, 1999, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 \2\ thereunder, a 
proposed rule change. In its proposal, the BSE seeks to amend its Minor 
Rule Violation Plan (``Plan'') and to incorporate this plan into the 
Boston Stock Exchange Guide, which is its rulebook. The proposed rule 
change was published for comment in the Federal Register on June 23, 
2000.\3\ The Commission received no comments on the proposal and this 
order approves the filing as amended.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. (June 16, 2000), 65 
FR 39215.
    \4\ The BSE submitted two amendments to the proposed rule 
change, Amendment No. 1 on March 24, 2000, which was published in 
the notice, and Amendment No. 2 on May 30, 2000. See footnote 4.
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II. Description of the Proposal

    The BSE proposes to amend the Exchange's Plan to include the 
failure to attend Market Performance Committee BEACON training sessions 
in the Plan and to change the prohibition titled ``Violation of the 
Exchange Smoking Policy'' to prohibit all forms of tobacco use on the 
equity trading floor. The Plan provides an alternative method for the 
Exchange to use to discipline members who commit minor rule violations. 
The proposed addition to the Plan will enable the Exchange to ensure 
that all floor members are fully trained on the BEACON system following 
enhancements for the handling of orders or the release of new versions 
of BEACON software. The Exchange believes that this will ensure that 
all customer orders are accorded the same professional attention by all 
specialists. The Exchange proposes a written warning for an initial 
offense, a $50 fine for the second offense, and a $100 fine for 
subsequent offenses.
    In addition, the Exchange proposes to prohibit all forms of tobacco 
use on the Equity Trading Floor. Currently, only smoking is prohibited. 
The proposal also includes a fine for failing to designate an order 
``PPS.'' \5\ This abbreviation indicates that the order was executed 
during the Post Primary Session, which is from 4:00 pm to 4:15 pm. The 
Exchange also proposes to incorporate the BSE's Plan into the Boston 
Stock Exchange Guide, which is its rulebook.
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    \5\ The Commission notes that this proposed violation was 
included in Amendment No. 2 to the filing, but was not described in 
the Purpose section of the filing. Specifically, this proposed 
violation was included in Exhibit 2 of Amendment No. 2, which listed 
the existing and proposed Minor Rule Violations. The Commission 
deems this a technical amendment to the proposed rule change, which 
is not subject to notice and comment. As mentioned in the notice of 
the filing, copies of the filing and all subsequent amendments are 
available in the Commission's Public Reference Room and at the BSE.
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III. Discussion

    The Commission finds that the BSE proposal to include in its Plan 
failure to attend BEACON training sessions, failure to designate an 
order PPS, and tobacco use on the equity trading floor 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 sections 6(b)(1) and (6) of the Act.\6\ 
The Commission believes that the proposal is a reasonable means by 
which the Exchange may ensure the orderly conduct of business on its 
floor and in its administrative areas. Because the proposal defines the 
scope of the prohibited conduct, provides notice to members and staff, 
and its tailored to serve a legitimate Exchange regulatory interest, 
the proposal establishes a fair and reasonable policy for the 
regulation of BEACON training, order designation, and tobacco use at 
the BSE.
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    \6\ 15 U.S.C. 78f(b)(1) and (6).
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    For the reasons set forth below, the Commission also finds that the 
BSE proposal to amend its Plan is consistent with the Act. In adopting 
Rule 19d-1, the Commission noted that the Rule was an attempt to 
balance the informational needs of the Commission against the reporting 
burdens of the SROs.\7\ In promulgating paragraph (c) of the Rule, the 
Commission was attempting further to reduce those reporting burdens by 
permitting, where immediate reporting was unnecessary, quarterly 
reporting of minor rule violations. The Rule is intended to be limited 
to violations of rules which can be adjudicated quickly and 
objectively.
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    \7\ See Securities Exchange Act Release No. 13726 (July 8, 
1977), 42 FR 36411 (July 14, 1977).
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    The Commission believes that the BSE's training, order designation, 
and tobacco use policies meet this criterion and should be added to the 
list of violations. In particular, the Commission believes that the BSE 
proposal regarding violations of the training, order designation, and 
tobacco use policies are easily determined and amendable to quick, 
objective determinations of compliance. Efficient and equitable 
enforcement of the policy should not entail the complicate factual and 
interpretive inquires associated with more sophisticated Exchange 
disciplinary actions.
    Further, the proposal is consistent with the section 6(b)(6) 
requirement that the rules of an exchange provides that its members and 
persons associated with its members be appropriately disciplined for 
violations of rules of the exchange. In this regard, the proposal will 
provide an efficient procedure for appropriate disciplining of members 
in those instances when a rule or policy violation is either technical 
and objective or minor in nature. Moreover, because the Plan provides 
procedural rights to the person fined and permits a discipline person 
to request a full hearing on the matter, the proposal provides a fair 
procedure for the disciplining of members and persons asssociated with 
members which is consistent with the requirements of sections 6(b)(7) 
and 6(d)(1) of the Act.\8\
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    \8\ 15 U.S.C. 78f(b)(7) and (d)(1).
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    The Commission also believes that the proposal is consistent with 
section 6(b)(6) of the Act in that it incorporates the Plan into the 
Exchange's rulebook. Specifically, the inclusion of the Plan in the 
rulebook should help increase member awareness of the prohibitions 
contained in the Plan and provide the BSE another method for enforcing 
its rules.

IV. Conclusion

    It Is Therefore Ordered, pursuant to section 19(b)(2) of the Act 
\9\ and Rule 19d-1(c)(2) under the Act, \10\ that the proposed rule 
change (SR-BSE-99-07) is approved.
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ 17 CFR 240.19b-4.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-21844 Filed 8-25-00; 8:45 am]
BILLING CODE 8010-01-M