[Federal Register Volume 70, Number 84 (Tuesday, May 3, 2005)]
[Notices]
[Pages 22934-22935]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2120]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51612; File No. SR-BSE-2004-24]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change By the Boston Stock Exchange, Inc. Relating to Remote Floor 
Brokers

April 26, 2005.

Introduction

    On June 28, 2004, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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 to permit Remote Floor Brokers to 
conduct their business from remote locations off of the Exchange floor. 
The proposed rule change was published in the Federal Register on 
November 30, 2004.\3\ No comments were received on the proposed rule 
change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 50715 (November 22, 
2004), 69 FR 69650.
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    The Commission finds that the proposed rule change is consistent 
with the Act and the rules and regulations thereunder applicable to a 
national securities exchange,\4\ particularly

[[Page 22935]]

Section 6(b)(5) of the Act which, among other things, requires that the 
rules of a national securities exchange be designed to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating securities transactions, to remove 
impediments 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.\5\ The Commission believes that the proposed rule 
change could promote efficiency at the BSE by reducing the costs 
associated with transactions on the Exchange by allowing brokers to 
choose the most efficient and cost-effective way of conducting their 
business.
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    \4\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact of efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \5\ See 15 U.S.C. 78f(b)(5).
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    Under the proposed rule change, Remote Floor Brokers will be 
governed by the same general rules that govern Remote Specialists.\6\ 
Specifically, Remote Floor Brokers will be required to meet certain 
minimum requirements including, but not limited to, their background, 
experience, staffing, training procedures, adequacy of the floor 
broker's confidentiality policies, its contingency plans for 
communication or technology failures, the adequacy of the floor 
broker's off-site facility, performance standards and minimum capital 
requirements. Further, Remote Floor Brokers must comply with the 
trading rules that apply to trading on the BSE floor, including but not 
limited to: Chapter II, Section 2, Recording of Sales; Chapter III, 
Section 6, Floor Broker's Responsibility; Chapter XIV, Independent 
Floor Brokers; Chapter XVII, Members Dealing for Own Account; and, 
Chapter XXXIII, Section 2, Order Entry.\7\ All BSE brokered orders, 
including those which would be handled by a BSE Remote Broker, must be 
entered into the BEACON trading system before being executed by a BSE 
specialist.\8\ Further, the BSE will maintain communication with its 
proposed Remote Brokers via Stentofon, and dedicated telephone lines so 
as to ensure the fulfillment of its regulatory oversight of remote 
brokerage units.\9\ Moreover, as it does with its current Remote 
Specialist firms, the Exchange will conduct both scheduled and 
unscheduled compliance inspections of remote brokerage firms. Any 
regulatory requirements including trading halts, trading practices, 
policies, procedures or rules requiring floor official involvement will 
be coordinated by Exchange personnel with the remote brokers through 
the dedicated telephone line.\10\
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    \6\ See BSE Rules, Chapter XXXIII, BEACON Remote; see also 
Securities Exchange Act Release No. 43127 (August 8, 2000), 65 FR 
49617 (August 14, 2000) (Commission Order approving Remote 
Specialists at BSE) (``Remote Specialist Order'').
    \7\ Letter from John Boese, Vice President, Chief Regulatory 
Officer, Exchange, to Kelly M. Riley, Assistant Director, Division 
of Market Regulation, Commission, dated April 11, 2005.
    \8\ Id.
    \9\ Id.
    \10\ Id.
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    The proposed rule change should not alter the duties and 
obligations of a BSE Floor Broker in any way, other than the ability of 
the Floor Brokers to conduct their business from locations other than 
the BSE floor. In fact, the Commission notes that the Exchange has 
represented that the instant proposed rule change should have little, 
if any, impact on the way that Exchange Floor Brokers operate since the 
trading activity on the BSE floor is conducted exclusively in an 
electronic manner.
    In the order approving Remote Specialists, the Commission noted the 
ability of the BSE to conduct its regulatory responsibilities over 
remote members, such as conducting market surveillance, enforcing 
members' compliance with BSE rules and the Act, and coordinating 
regulatory actions both on and off the floor. The ability of BSE to 
conduct these regulatory activities over remote floor brokers is 
critical. While the Commission is satisfied that the proposed rule 
provides an adequate framework to address these issues,\11\ BSE must 
establish and implement a rigorous surveillance program to ensure BSE 
remote members comply with the federal securities laws and BSE rules 
and to ensure BSE's ability to enforce such compliance.
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    \11\ See generally Remote Specialist Order, supra note 6, for a 
complete discussion of this framework.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-BSE-2004-24) is approved.
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    \12\ See 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2120 Filed 5-2-05; 8:45 am]
BILLING CODE 8010-01-P