[Federal Register Volume 67, Number 209 (Tuesday, October 29, 2002)]
[Notices]
[Pages 66029-66031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27485]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46705; File No. SR-BSE-2002-04]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1 and 2 by the Boston Stock Exchange, Inc. to 
Amend its Minor Rule Violation Plan

October 22, 2002.
    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 May 17, 2002, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. On August 23, 2002, the BSE amended the proposed rule 
change.\3\ The BSE again amended the proposal on October 9, 2002.\4\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See August 21, 2002 letter from John A. Boese, Assistant 
Vice President, Legal and Regulatory, BSE, to Nancy Sanow, Assistant 
Director, Division of Market Regulation (``Division''), SEC, and 
attachments (``Amendment No. 1''). Amendment No. 1 completely 
replaces and supersedes the original filing.
    \4\ See October 8, 2002 letter from John A. Boese, Assistant 
Vice President, Legal and Regulatory, BSE, to Nancy Sanow, Assistant 
Director, Division, SEC (``Amendment No. 2''). In Amendment No. 2, 
the BSE added language to set a standard by which violations of 
certain provisions of the Minor Rule Violation Plan will be 
determined.
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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 its Minor Rule Violation Plan 
(``Plan''). The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.

Chapter XXXIV

Minor Rule Violations

Rule Violations

    Sec. 1 No change.
    Sec. 2(a) No change.
    (b) [Failure to Confirm Open Orders (Ch. II, Sec. 15). Initial 
Offense--Written Warning; Second Offense--$100; Subsequent Offenses--
$250.]
    Failure to Maintain Proper Records (Ch. II, Sec. 15; Ch. XV, Sec. 
8; Ch. XXII, Sec. 1):
    Failure to maintain required records for annual examinations, 
surveillance, and other purposes. Initial offense--$500; Subsequent 
Offenses--$1,000
    (c)--(e) No change
    (f) Floor Order Facilitation (Ch. II, Sec. 3; Ch. XV, Sec. 2; Ch. 
XV, Sec. 3; Ch. XVIII, Sec. 1):
    Conduct which may cause delays or interruptions in the orderly 
facilitation and/or confirmation of orders received on the Floor such 
as failure to record proper post locations or dilatory practices in 
handling orders received on the Floor[.], as measured by the Exchange 
and in excess of three (3) instances over the preceding rolling thirty-
day period.
Initial Offense--Written Warning; Second Offense--$100; Subsequent 
Offenses--$250.
    (g)--(j) No change.
    (k) Trading in an Inactive Alternate and/or Trading Account (Ch. 
XXII, Sec. 2(m)):
    Patterns of trading indicating abuse of inactive accounts, as 
measured by the Exchange, and in excess of three (3) instances over the 
preceding thirty-day period.
Initial Offense--$500; Subsequent Offenses--$2,500
    (l)--(n) No change.
    (o) Dealings Outside of Exchange Operating Hours (Ch. I-B, Sec. 2):

First offense--Written Warning; Second Offense--$50; Subsequent 
Offenses--$100

Policy Violations
    Sec. 3 (a)--(g) No change.
    (h) Floor Conduct:
    Unprofessional or Disruptive Behavior.
Initial Offense--$100; Subsequent Offenses--$500

Extremely unprofessional or disruptive behavior, as determined by two 
floor officials.

All offenses--$1,000

    (i)--(o) No change.
* * * * *

[[Page 66030]]

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 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Plan, which 
is located in Chapter XXXIV, ``Minor Rule Violations'' of the Rules of 
the Board of Governors of the Exchange.
    The first proposed change is to delete Section 2, Rule Violations, 
Paragraph (b), Failure to Confirm Open Orders. This Rule was originally 
intended to address the manual obligations of specialists to confirm 
their open orders at the end of the day. This has become an automated 
process, and the Rule is therefore unnecessary.
    The second proposed change is to replace Section 2, Rule 
Violations, Paragraph (b), Failure to Confirm Open Orders, with a new 
Paragraph (b) entitled ``Failure to Maintain Proper Records (Chapter 
II, Dealings on the Exchange, Section 15, Records of Orders from 
Offices to Floor; Chapter XV, Dealer Specialists, Section 8, Records; 
Chapter XXII, Financial Reports and Requirements, Section 1, Member and 
Member-Organization's Statement of Financial Condition)''. The 
explanatory sentence for this rule violation will read: ``Failure to 
maintain required records for annual examinations, surveillance, and 
other purposes.'' Due to the potentially serious nature of record 
keeping violations, the Exchange seeks to prescribe a $500 fine for 
initial offenses, and a $1,000 fine for subsequent violations of this 
paragraph. Furthermore, as to form, inserting this rule into this 
paragraph will obviate the need to renumber subsequent paragraphs.
    The third proposed change is to alter Section 2, Rule Violations, 
Paragraph (f), Floor Order Facilitation (Ch. XVIII, Sec. 1), so that it 
more fully addresses practices of specialists that may have a dilatory 
effect on the handling of orders submitted to the floor for execution. 
The wording of the Section will not be changed, but several rule 
references will be added to the title of the section, to enable the BSE 
to more accurately identify which section(s) of its rules are the focus 
of the violation. The following rule references will be added into the 
title of the paragraph: Chapter II, Dealings on the Exchange, Sec. 3, 
Execution Guarantee; Chapter XV, Dealer Specialists, Sec. 2, 
Responsibilities, and Sec. 3, Code of Acceptable Business Practices for 
Specialists.
    The fourth proposed change is to add an explanatory sentence to 
Section 2, Rule Violations, Paragraph (k) Trading in an Inactive 
Alternate and/or Trading Account, to address a change in focus to 
identify patterns in trading in these accounts, as opposed to 
individual trades. Due to volume increases in the marketplace, the BSE 
feels that trading patterns are a more efficient way to identify abuses 
of inactive accounts. Accordingly, an explanatory sentence will read: 
``Patterns of trading indicating abuse of inactive accounts.'' The fine 
structure will remain the same.
    The fifth proposed change is to add a new paragraph to Section 2, 
Rule Violations. New paragraph (o) will be entitled ``Dealings Outside 
of Exchange Operating Hours (Chapter I-B, Business Hours, Section 2, 
Dealings on the Floor, Hours)''. No explanatory sentence is needed. A 
written warning will be given for first offenses. Second offenses will 
result in a $50 fine, and subsequent offenses will result in $100 
fines.
    The final proposed change is to Section 3, Policy Violations, 
Paragraph (h), Floor Conduct, and is designed to address egregious 
behavior. A third fine category will be added, with a brief 
explanation, which will read: ``Extremely unprofessional or disruptive 
behavior, as determined by two floor officials.'' The fine will be 
$1,000 per offense.
2. Statutory Basis
    The BSE believes that 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 foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities; to remove impediments to and perfect the mechanism of a 
free and open market and a national market system; and in general to 
protect investors and the public interest; and is not designed to 
permit unfair discrimination between customers, issuers, brokers or 
dealers.
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    \5\ 15 U.S.C. 78f(b)(5).
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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 burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received comments on 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 BSE 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 BSE. All submissions should 
refer to file number SR-BSE-2002-04 and should be submitted by November 
19, 2002.


[[Page 66031]]


    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. 02-27485 Filed 10-28-02; 8:45 am]
BILLING CODE 8010-01-P