

[Federal Register: September 1, 2006 (Volume 71, Number 170)]
[Notices]               
[Page 52183-52185]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01se06-92]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 54374; File No. SR-BSE-2005-09]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 
Thereto Relating to Its Minor Rule Violation Plan

 August 28, 2006.
    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 February 7, 2005, the Boston Stock Exchange, Inc. (``BSE'' 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 
Exchange filed Amendment No. 1 to the proposed rule change on July 7, 
2006, and Amendment No. 2 on August 18, 2006.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing, 
and Amendment No. 2 superseded and replaced Amendment No. 1.
---------------------------------------------------------------------------

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

    The Exchange seeks to amend and make additions to its minor rule 
violation plan (``MRVP''). The text of the proposed rule change is 
available on the Exchange's Web site (http://www.bostonstock.com/legal/index.html
), at the Exchange's principal office, and at the 

Commission's Public Reference Room.

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 proposal, and discussed 
any comments it received on the proposed rule change. The text of these 
statements

[[Page 52184]]

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

    The proposal modifies BSE Rule Chapter XXX (``Disciplining of 
Members--Denial of Membership'') and BSE Rule Chapter XXXIV (``Minor 
Rule Violations'') in several areas. Most notably, the Exchange 
proposes adding to BSE Rule Chapter XXX new language setting forth 
``Principal Considerations in Determining Sanctions.'' In addition, the 
Exchange proposes moving its Acceptance Waiver and Consent Procedures 
(``AWC'') from BSE Rule Chapter XXXIV to BSE Rule Chapter XXX. The 
Exchange also proposes adding to BSE Rule Chapter XXX a ``late charge'' 
where a member fails to pay a fine on a timely basis. Also, BSE 
proposes clarifying language and restructuring of the fine levels of 
several existing rule violations listed in the MRVP, as well as the 
addition of a new paragraph addressing violations of the Exchange's 
rules governing the Intermarket Trading System (``ITS''). Each of these 
changes is discussed below.
    The Exchange proposes three changes to BSE Rule Chapter XXX. First, 
the Exchange proposes new language setting forth ``Principal 
Considerations in Determining Sanctions'' by providing a list of 
factors to be considered when determining whether sanctions should be 
imposed. The purpose is to provide factors that should be considered in 
conjunction with the imposition of sanctions. The Exchange recognizes, 
as other exchanges have, that mitigating factors may exist in certain 
instances, and those circumstances should be considered when 
determining whether sanctions should be imposed. Second, the Exchange 
proposes moving the AWC currently provided in the MRVP to the 
Exchange's formal disciplinary procedures (BSE Rule Chapter XXX).\4\ 
When the AWC was initially proposed, the intent and application was for 
the AWC to apply to all disciplinary matters, not just minor rule 
violations. Therefore, the current placement has caused some confusion. 
In addition, the Exchange proposes to change the references to the 
``Chief Regulatory Officer'' found in the original AWC to the ``General 
Counsel or his/her delegatee.'' \5\ Third, the Exchange proposes to 
provide a late charge where a member fails to pay a fine or fee on a 
timely basis.\6\
    Furthermore, the Exchange proposes a number of changes to its MRVP. 
In Section 2(c) of BSE Rule Chapter XXXIV (Failure to Display Limit 
Orders), Section 2(f) (Floor Order Facilitation), Section 2(n) (Failure 
to Designate an Order (PPS)), and Section 2(o) (Dealings Outside of 
Exchange Operating Hours), the Exchange proposes to restructure the 
fine levels resulting from violations. The Exchange proposes to 
increase some of the fine amounts and provide for their application 
through a defined number of violations. Also, because existing Section 
1 of BSE Rule Chapter XXXIV provides for formal disciplinary action at 
the discretion of the Exchange at any level of offense, the Exchange is 
not precluded from proceeding with more stringent action at any point, 
regardless of the listed fine levels. The Exchange represents that it 
is structuring its fines to address repeat offenses, so that fine 
levels increase as the number of offenses increase.
---------------------------------------------------------------------------

    \4\ See proposed BSE Rule Chapter XXX, Section 10.
    \5\ The Exchange has recently undergone a restructuring. The 
General Counsel is now a member of the BSE Regulatory Department.
    \6\ See proposed BSE Rule Chapter XXX, Section 11.
---------------------------------------------------------------------------

    In Section 2(j) of BSE Rule Chapter XXXIV, the Exchange proposes 
adjusting the fine levels for short sale violations to increase as the 
number of violations increase and providing that offenses in excess of 
ten, over a 12-month rolling period, would result in formal 
disciplinary action. In so doing, the Exchange believes that the 
proposed change provides progressively significant punitive measures 
for short sale rule violations.
    The Exchange also proposes the addition of a new MRVP provision 
establishing sanctions for violations of the Exchange's rules governing 
ITS. In the past, the Exchange has levied fines on its member 
specialists under Section 2(f) of BSE Rule Chapter XXXIV for the 
failure to execute valid ITS commitments. Now, in proposed Section 2(p) 
of BSE Rule Chapter XXXIV, the Exchange seeks to identify the failure 
to execute valid ITS commitments as its own specific offense, rather 
than continuing to enforce compliance through a broader ``catch-all'' 
provision of its MRVP. The Exchange believes that this new provision 
would impose liability for each violation, with progressively 
significant penalties as the number of violations increases.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b)(5) of the Act \7\ in that it is 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change, as 
amended, would impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act.

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 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 proposal, as 
amended, is consistent with the Act. Comments may be submitted by any 
of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-BSE-2005-09 on the subject line.

[[Page 52185]]

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-BSE-2005-09. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 changes 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 comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File No. SR-BSE-2005-09 and should be submitted on or before September 
22, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E6-14530 Filed 8-31-06; 8:45 am]

BILLING CODE 8010-01-P
