

[Federal Register: December 6, 2006 (Volume 71, Number 234)]
[Notices]               
[Page 70810]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de06-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54827; File No. SR-CBOE-2006-81]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving Proposed Rule Change, as Modified by 
Amendment No. 1 Thereto, Relating to Minor Rule Violations in 
Connection With Trade Reporting

November 29, 2006.
    On October 4, 2006, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' 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 to amend CBOE Rule 17.50, 
``Imposition of Fines for Minor Rule Violations,'' (the ``MRVP''), 
particularly the provisions of CBOE Rule 17.50(g)(4), in order to: (a) 
Increase the fines for failures to submit trade information in 
accordance with CBOE Rule 6.51, and (b) extend the ``look-back'' period 
for assessing such rule violations. On October 17, 2006, the Exchange 
filed Amendment No. 1 to the proposed rule change. The proposed rule 
change, as amended, was published for comment in the Federal Register 
on October 27, 2006.\3\ The Commission received no comments regarding 
the proposal.
    The Commission finds that the proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\4\ In particular, the 
Commission believes that the proposal is consistent with Section 
6(b)(5) of the Act,\5\ because a proposed rule change that is 
reasonably designed to require Exchange members to comply with its 
trade reporting rules should help protect investors and the public 
interest.
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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. 54631 (October 20, 
2006), 71 FR 63057.
    \4\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b)(5).
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    The Commission also believes that handling violations of trade 
reporting rules pursuant to the MRVP is consistent with Sections 
6(b)(1) and 6(b)(6) of the Act,\6\ which require that the rules of an 
exchange enforce compliance with, and provide appropriate discipline 
for, violations of Commission and Exchange rules. In addition, because 
existing CBOE Rule 17.50 provides procedural rights to a person fined 
under the MRVP to contest the fine and permits a hearing on the matter, 
the Commission believes that the MRVP, as amended by this proposal, 
provides a fair procedure for the disciplining of members and persons 
associated with members, consistent with Sections 6(b)(7) and 6(d)(1) 
of the Act.\7\
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    \6\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \7\ 15 U.S.C. 78f(b)(7) and 78f(d)(1).
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    Finally, the Commission finds that the proposal is consistent with 
the public interest, the protection of investors, or otherwise in 
furtherance of the purposes of the Act, as required by Rule 19d-1(c)(2) 
under the Act,\8\ which governs minor rule violation plans. The 
Commission believes that the proposed change to the MRVP should 
strengthen the Exchange's ability to carry out its oversight and 
enforcement responsibilities as a self-regulatory organization in cases 
where full disciplinary proceedings are unsuitable in view of the minor 
nature of the particular violation.
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    \8\ 17 CFR 240.19d-1(c)(2).
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    In approving this proposed rule change, the Commission in no way 
minimizes the importance of compliance with CBOE rules and all other 
rules subject to the imposition of fines under the MRVP. The Commission 
believes that the violation of any self-regulatory organization's 
rules, as well as Commission rules, is a serious matter. However, the 
MRVP provides a reasonable means of addressing rule violations that do 
not rise to the level of requiring formal disciplinary proceedings, 
while providing greater flexibility in handling certain violations. The 
Commission expects that CBOE will continue to conduct surveillance with 
due diligence and make a determination based on its findings, on a 
case-by-case basis, whether a fine of more or less than the recommended 
amount is appropriate for a violation under the MRVP or whether a 
violation requires formal disciplinary action under CBOE Rules 17.1-
17.10.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\9\ and Rule 19d-1(c)(2) under the Act,\10\ that the proposed rule 
change (SR-CBOE-2006-81), as amended, be, and hereby is, approved and 
declared effective.
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
 Nancy M. Morris,
Secretary.
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    \11\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(44).
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[FR Doc. 06-9544 Filed 12-5-06; 8:45am]

BILLING CODE 8011-01-P
