[Federal Register Volume 69, Number 29 (Thursday, February 12, 2004)]
[Notices]
[Page 7060]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-3110]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49203; File No. SR-CHX-2002-09]


Self-Regulatory Organizations; Order Granting Approval of 
Proposed Rule Change and Amendment Nos. 1 and 2 by the Chicago Stock 
Exchange, Incorporated, Adding Certain Rules to the CHX Minor Rule 
Violation Plan

February 6, 2004.
    On April 11, 2002, the Chicago Stock Exchange, Incorporated 
(``CHX'' or ``Exchange'') filed with 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 
thereunder,\2\ a proposed rule change that would add to the CHX Minor 
Rule Violation Plan (``Plan'') certain violations of Rule 11Ac1-1 under 
the Act \3\ (``Firm Quote Rule''), as well as violations of CHX Article 
XX, Rule 37(a) (``BEST Rule'') and CHX Article XX, Rule 37, 
Interpretation and Policy .04 (``Ability to Switch MAX to Manual 
Execution'' procedures). The CHX amended the proposed rule change on 
December 17, 2003, and again on December 22, 2003.\4\ Notice of the 
proposed rule change, as amended, was published for comment in the 
Federal Register on January 6, 2004.\5\ The Commission received no 
comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.11Ac1-1.
    \4\ Each amendment completely replaced and superseded the 
previous filing.
    \5\ Securities Exchange Act Release No. 49004 (December 29, 
2003), 69 FR 00709.
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    The Commission has reviewed the proposed rule change, as amended, 
and finds that it is consistent with the Act and the rules and 
regulations promulgated thereunder applicable to a national securities 
exchange and, in particular, with the requirements of section 6(b).\6\ 
Specifically, the Commission finds that approval of the proposed rule 
change is consistent with section 6(b)(5)\7\ 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. Additionally, the Commission finds the proposal is consistent 
with Rule 19d-1(c)(2) under the Act,\8\ which governs minor rule 
violation plans. For these reasons, the Commission finds that the 
proposed rule change is consistent with the provisions of the Act, in 
general, and with section 6(b)(5)\9\ in particular.
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    \6\ 15 U.S.C. 78f(b). In approving this proposal, the Commission 
has considered the proposed rule's impact on efficiency, competition 
and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 17 CFR 19d-1(c)(2).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change should enable 
the Exchange to appropriately discipline its members and others 
associated with its members for violation of these rules. In approving 
this proposed rule change, the Commission in no way minimizes the 
importance of compliance with these rules, and all other rules subject 
to the imposition of fines under the Plan. The violation of any self-
regulatory organization's rules, as well as Commission rules, is a 
serious matter. However, in an effort to provide the Exchange with 
greater flexibility in addressing certain violations, the Plan provides 
a reasonable means to address rule violations that do not rise to the 
level of requiring formal disciplinary proceedings. The Commission 
expects that the Exchange will continue to conduct surveillance with 
due diligence, and make a determination based on its findings whether 
fines of more or less than the recommended amount are appropriate for 
violations of rules under the Plan on a case by case basis, or if a 
violation requires formal disciplinary action.
    In addition, the Commission notes that the rules that the CHX is 
adding to the Plan through the proposed rule change relate to 
specialists' market making obligations. The Commission believes that 
only the most technical and non-substantive violations of a 
specialist's market making obligations should be handled pursuant to 
the Plan.\10\
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    \10\ See, e.g., Securities Exchange Act Release No. 27878 (April 
14, 1990), 55 FR 13345 (April 10, 1990)(SR-NYSE-89-44).
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-CHX-2002-09), as amended, be 
and hereby is approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-3110 Filed 2-11-04; 8:45 am]
BILLING CODE 8010-01-P