[Federal Register Volume 69, Number 8 (Tuesday, January 13, 2004)]
[Notices]
[Pages 2026-2027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-611]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49026; File No. SR-BSE-2002-06]


Self-Regulatory Organizations; Boston Stock Exchange; Notice of 
Filing of Proposed Rule Change to Clarify Exchange Liability

January 6, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 26, 2002, the 
Boston Stock Exchange (``BSE'') filed with the Securities and Exchange 
Commission (``Commission'') and on November 4, 2002, May 29, 2003, and 
July 21, 2003, amended the proposed rule change described in Items I, 
II, and III below, which items have been prepared primarily by BSE. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    BSE is seeking to amend various Articles of its Constitution and 
Sections of its Rules to clarify the liability of BSE in relation to 
its members' contractual obligations.\2\
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    \2\ The Boston Stock Exchange Clearing Corporation (``BSECC'') 
has filed a proposed rule change to amend various Sections of its 
Rules as they pertain to BSECC's liability in order to maintain a 
consistent approach with the BSE's proposed rule changes. Securities 
Exchange Act Release No. 49027 (January 6, 2004), [File No. SR-
BSECC-2003-01].
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, BSE 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. BSE has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.\3\
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    \3\ The Commission has modified the text of the summaries 
prepared by BSE.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to amend certain 
sections of the BSE Constitution and Rules to clarify BSE's liability 
in relation to its members' contractual obligations.
    In particular, BSE is seeking to modify Articles XII and XIII of 
its Constitution to insure that any BSE member who is a party to a 
transaction remains solely liable for the transaction. This language is 
consistent with similar language and approaches of other exchanges in 
limiting the liability of an exchange with respect to contracts entered 
into by members.\4\ In Article XIII of its Constitution, the BSE is 
also seeking to add certain language from the BSECC Participant 
Hypothecation Agreement. The provision to be inserted into the 
Constitution would prevent BSE from becoming a de facto guarantor of an 
insolvent member's contractual obligations.
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    \4\ See, e.g., New York Stock Exchange Rules 137 and 142; 
Chicago Stock Exchange Rules, Article XXV, Rule 11; and Philadelphia 
Stock Exchange Rule 254.
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    Likewise, BSE is seeking to amend other sections of its rules 
consistent with this theme. In Chapter III, ``Comparisons--Liability on 
Contracts,'' Section 4, ``Failures to Compare,'' the proposed language 
would state that BSE shall have no liability to any of the original 
parties to a contract entered into by a member. Also, in Chapter VI, 
``Failure to Fulfill Contracts,'' Section 1, ``Closing Contracts,'' the 
proposed language would make clear that no action taken by BSE in 
closing or assisting to close a contract entered into by a BSE member 
shall have the effect of transferring any liability related to that 
contract to BSE. Chapter VI, Section 2, ``Notice of Closing 
Contracts,'' would echo this approach for instances in which BSE takes 
action to attempt to close a contract on behalf of a member in default. 
None of these changes are in response to any recent circumstance. They 
are only aimed at clarifying BSE's unique position in relation to 
assisting its members in other contractual matters exclusively linked 
to conducting transactions in the buying and selling of equity 
securities.
    BSE believes that the proposal is consistent with the requirements 
of Section 6(b) of the Act and furthers the objectives of Section 
6(b)(5), in particular, 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, 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, in that it is designed to protect investors 
and the public interest and is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    BSE 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

    BSE has neither solicited nor received comments on the proposed 
change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within thirty-five 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 ninety days of such date if it finds 
such

[[Page 2027]]

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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-BSE-2002-06. This file number should be included on the 
subject line if e-mail is used. To help us process and review comments 
more efficiently, comments should be sent in hardcopy or by e-mail but 
not by both methods. 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 Section, 450 Fifth Street, NW., Washington, DC 20549. Copies 
of such filing also will be available for inspection and copying at the 
principal office of BSE.
    All submissions should refer to File No. SR-BSE-2002-06 and should 
be submitted by February 3, 2004.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-611 Filed 1-12-04; 8:45 am]
BILLING CODE 8010-01-U