[Federal Register Volume 66, Number 196 (Wednesday, October 10, 2001)]
[Notices]
[Pages 51694-51695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-25381]


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SECURITIES AND EXCHANGE COMMISSION

(Release No. 34-44900; File No. SR-CHX-2001-08)


Self-Regulatory Organizations; Notice of Filing of Proposed Rules 
Change by the Chicago Stock Exchange, Inc., To Amend Its Minor Rule 
Violation Plan

October 2, 2001.
    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 April 23, 2001, the Chicago Stock Exchange, Inc. (``CHX'' or 
``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 Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend CHX Article XII, Rule 9(h) (Minor 
Rule Violations) to include CHX Article XX, Rule 43(d) (Training in 
Nasdaq/NM Securities/Manual Executions) into the Exchange's Minor Rule 
Violation Plan (``Plan''). The text of the proposed rule change is 
below. Proposed additions are in italic.
ARTICLE XII, Rule 9
Minor Rule Violations
    Rule 9(h) Exchange Rules and Policies subject to the Minor Rule 
Violation Plan:
    (i) no change in text
    (ii) Floor Decorum and Minor Trading Rule Violations
    (1)-(18) no change in text
    (19) Failure to manually execute a Nasdaq/NM market or marketable 
limit order at the NBBO or better at the time of its receipt or at the 
best available price in another marketplace (Article XX, Rule 43(b)).
* * * * *

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 Exchange 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 Exchange has prepared summaries, set forth in 
Section 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
    The Exchange proposes to add Article XX, Rule 43(d) to the Plan 
under Article XII, Rule 9. Under CHX Rule 43(d), CHX Nasdaq 
specialists, if they are not quoting at the national best bid and offer 
(``NBBO'') at the time a market or marketable limit order is received 
over the Exchange's Midwest Automated Execution System (the ``MAX'' 
system), are permitted to remove such orders that would otherwise 
receive an automatic execution at the NBBO and to manually execute 
them. The resulting manual execution must occur at the NBBO existence 
at the time the order was

[[Page 51695]]

received, or better, or at the best available price in another 
marketplace. The Exchange believes that violations of this rule are 
objective in nature and easily verifiable. Therefore, the Exchange 
believes that violations of this rule in inadvertent or isolated 
circumstances should be handled under the Plan and not pursuant to the 
Exchange's formal disciplinary procedures. The Exchange proposes that 
the recommended fines for the above violations be $100, $500 and $1,000 
for first, second and third and subsequent violations, respectively.\3\
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    \3\ The Exchange staff would not recommend that a violation of 
this rule proceed under the Plan if a specialist had not already 
adjusted the execution price of an order that was the basis of the 
rule violation.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange. In 
particular, the Exchange believes the proposed rule is consistent with 
Sections 6(b)(1),\4\ 6(b)(6),\5\ 6(b)(7),\6\ and 19(d) \7\ of the Act. 
The CHX believes the proposal is consistent with the Section 6(b)(6) 
\8\ 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. The CHX 
believes the proposal provides an efficient procedure for the 
appropriate disciplining of members for a rule violation that is 
objective in nature. In addition, because CHX Article XII, Rule 9 
provides procedural rights to a person fined under the Plan to contest 
the fine and permit a hearing on the matter, the Exchange believes the 
proposal provides a fair procedure for the disciplining of members and 
persons associated with members, consistent with Sections 6(b)(7) and 
6(d)(1) of the Act.
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    \4\ 15 U.S.C. 78f(b)(1).
    \5\ 15 U.S.C. 78f(b)(6).
    \6\ 15 U.S.C. 78f(b)(7).
    \7\ 15 U.S.C. 78s(d).
    \8\ 15 U.S.C. 78f(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate 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 either solicited or received.

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 CHX 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-2001-08 and should 
be submitted by October 31, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-25381 Filed 10-9-01; 8:45 am]
BILLING CODE 8010-01-M