[Federal Register Volume 67, Number 97 (Monday, May 20, 2002)]
[Notices]
[Pages 35602-35604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-12568]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45921; File No. SR-CHX-2002-12]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Stock Exchange, Incorporated to Amend the Rules 
Relating to the Composition of the CHX's Minor Rule Violation Panel

May 14, 2002.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 26, 2002, the Chicago Stock Exchange, Incorporated 
(``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The CHX proposes to amend the rules relating to the composition of 
the CHX's Minor Rule Violation Panel (``Panel''). The text of the 
proposed rule change is below. Proposed additions are in italics; 
proposed deletions are in brackets.

[[Page 35603]]

Article XII

Discipline and Trial Proceedings
* * * * *
Minor Rule Violations
    RULE 9.(a) No change in text.
    (b) Procedure for Imposing Fines. In the event that the staff of 
the Exchange determines that a member, member organization, associated 
person or registered or non-registered employee of a member or member 
organization has violated a rule of the Exchange set forth in paragraph 
(h) of this Rule, and the Exchange staff desires to take action under 
this Rule 9, the staff shall present the facts supporting the violative 
conduct to [the] a Minor Rule Violation Panel. The accused shall not 
have the right to attend such presentation nor shall the accused have 
the right to present any evidence or testimony at such presentation. 
[The] A Minor Rule Violation Panel may (i) accept the staff's 
recommendation and impose sanctions on behalf of the Exchange in 
accordance with this Rule 9, (ii) reject the staff's recommendation, or 
(iii) recommend that the Exchange commence a formal disciplinary 
proceeding. [The] A Minor Rule Violation Panel shall have no authority, 
however, to authorize the initiation of a formal disciplinary 
proceeding. In the event [the] a Minor Rule Violation Panel recommends 
that the Exchange commence a formal disciplinary proceeding, the staff 
shall either (i) issue a report to the Chief Executive Officer in 
accordance with Article XII, Rule 1(a), recommending that formal 
charges be brought or (ii) advise the Minor Rule Violation Panel that 
the staff will not recommend that the Exchange commence a formal 
disciplinary proceeding. In the event that the staff chooses 
alternative (ii) from the preceding sentence, the matter shall be 
returned to the Minor Rule Violation Panel that recommended the 
commencement of the formal disciplinary proceeding, which shall then 
impose a fine in accordance with the provisions of this Rule 9.
    [The] One or more Minor Rule Violation Panels shall be appointed, 
from time to time, by the Chief Executive Officer and shall each 
consist of three persons--one member of the Rules Subcommittee of the 
Committee on Floor Procedure, one member of the Committee on Floor 
Procedure [who is not a member of the Rules Subcommittee], and one 
floor member who is not a member of the Committee on Floor Procedure or 
the Rules Subcommittee [any of its subcommittees].
    Notwithstanding anything in this paragraph (b) to the contrary, the 
Committee on Floor Procedure shall have jurisdiction to impose a fine 
pursuant to this Rule for violations of (h)(ii)(7) and (8) of this Rule 
relating to decorum on the trading floor. However, the Committee on 
Floor Procedure and [the] a Minor Rule Violation Panel shall not, 
collectively, impose more than one fine pursuant to this Rule 9 
relating to the same underlying violation and incident.
    (c)-(h) No change in text.
* * * * *

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 its proposal and discussed any 
comments it received regarding the proposal. The text of these 
statements may be examined at the places specified in Item IV below. 
The Exchange 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
    The Exchange proposes to amend the rules relating to the 
composition of the Panel. The Panel is a three-person group charged 
with evaluating rule violations that fall under the Exchange's Minor 
Rule Violation Plan and assessing fines in response to that conduct.
    The proposed rule change would allow the appointment of additional 
Panels. In recent months, it has become increasingly difficult for 
Panel members to balance their responsibilities as Panel members with 
their responsibilities as active members of the trading floor 
community. The ability to appoint additional Panels would relieve some 
of the workload of the current Panel members and ensure that potential 
minor rule violations are heard by a Panel as soon as possible. The 
Exchange's Market Regulation staff will work with each Panel to ensure 
that their decisions provide consistent sanctions for similar offenses.
    The proposed rule change also would remove a current restriction on 
the composition of the Panel that makes it difficult to find a 
sufficient number of persons to serve as a member of this group. Under 
the current rules, the Panel consists of: (1) One member of the Rules 
Subcommittee; (2) one member of the Committee on Floor Procedure who is 
not on the Rules Subcommittee; and (3) one floor member who is not on 
the Committee on Floor Procedure or on any of its subcommittees (such 
as the Rules Subcommittee).\3\
---------------------------------------------------------------------------

    \3\ The Committee on Floor Procedure has several subcommittees, 
including the Rules Subcommittee, the Floor Broker Technical 
Subcommittee, the Specialist Technical Subcommittee and the Space 
Allocation Subcommittee.
---------------------------------------------------------------------------

    The proposed rule change would modify this composition so that the 
Panel would consist of: (1) One member of the Rules Subcommittee; (2) 
one member of the Committee on Floor Procedure (whether or not he or 
she is on the Rules Subcommittee); and (3) one floor member who is not 
on the Committee on Floor Procedure, but could be on one or more of its 
subcommittees (but not the Rules Subcommittee).
    In recent years, the Exchange's floor members have become more 
active on various Exchange committees, including on the various 
subcommittees of the Committee on Floor Procedure. As a result, they 
often are not eligible to fill the second or third positions on the 
Panel. The proposed rule change would help ensure that a sufficient 
number of members are eligible to be selected to serve on the Panel.
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 and, 
in particular, with the requirements of Section 6(b).\4\ In particular, 
the CHX believes the proposed rule change is consistent with Section 
6(b)(5) of the Act \5\ in that it is designed to promote just and 
equitable principles of trade, to remove impediments and to perfect the 
mechanism of a free and open market and a national market system and, 
in general, to protect investors and the public interest by ensuring 
that potential minor rule violations are addressed as soon as possible.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78(f)(b).
    \5\ 15 U.S.C. 78(f)(b)(5).
---------------------------------------------------------------------------

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.

[[Page 35604]]

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 the 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 proposal 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 at the Commission's 
Public Reference Room. Copies of such filings will also be available 
for inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-CHX-2002-12 and should be 
submitted by June 10, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-12568 Filed 5-17-02; 8:45 am]
BILLING CODE 8010-01-U