

[Federal Register: April 17, 2007 (Volume 72, Number 73)]
[Notices]               
[Page 19221-19222]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ap07-85]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55606; File No. SR-BSE-2006-11]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order 
Approving Proposed Rule Change and Amendments No. 1 and 2 Relating to 
the Boston Options Exchange's Minor Rule Violation Plan

April 10, 2007.
    On March 6, 2006, the Boston Stock Exchange, Inc. (``BSE'' 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 Chapter X of the Boston Options Exchange 
(``BOX'') Rules, BOX's minor rule violation plan (``BOX MRVP''). The 
Exchange filed Amendments No. 1 and 2 to the proposed rule change on 
June 28, 2006, and July 14, 2006, respectively. The proposed rule 
change, as amended, was published for comment in the Federal Register 
on March 7, 2007.\3\ The Commission received no comments regarding the 
proposal. This order approves the proposed rule change, as modified by 
Amendments No. 1 and 2.
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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. 55373 (February 28, 
2007), 72 FR 10276.
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    The Exchange proposed to make the following actions subject to the 
BOX MRVP:
     contrary exercise advice infractions (in violation of BOX 
Rule Chapter VII, Section 1(c), (d), (f), and (g));
     locked and crossed market infringements (in violation of 
BOX Rule Chapter XII, Section 4);
     Market Maker assigned activity violations (in violation of 
BOX Rule Chapter VI, Section 4(e));
     Market Maker's failure to respond to a request for a quote 
within the designated time limit (in violation of BOX Rule Chapter VI, 
Section 6(b)(ii)-(iii)); and
     trade-through violations (in violation of BOX Rule Chapter 
XII, Section 3(a)).
    The sanctions imposed would include the application of a fine for 
each violation and an increased fine amount for repeat violations. In 
the instance of a trade-through violation, the rule proposal would also 
allow BOX Regulation to require the Options Participant \4\ to disgorge 
any gains from transactions in violation of the trade-through rules.
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    \4\ See BOX Rule Chapter I, Section 1(a)(40) for definition of 
``Options Participants.''
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\5\ In 
particular, the Commission believes that the proposal is consistent 
with Section 6(b)(5) of the Act,\6\ which requires that the rules of an 
exchange be designed to promote just and equitable principles of trade, 
to remove impediments to 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. The Commission further believes that 
the proposal is consistent with Sections 6(b)(1) and 6(b)(6) of the 
Act,\7\ 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 BSE Rule Chapter

[[Page 19222]]

XVIII provides procedural rights to contest the fine imposed pursuant 
to the BOX MRVP and permits disciplinary proceedings on the matter, the 
Commission believes that BOX Rule Chapter X, 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.\8\
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    \5\ 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).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \8\ 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 \9\ which governs minor rule violation plans. The 
Commission believes that the proposed rule change would 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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    \9\ 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 BOX rules and all other 
rules subject to the imposition of fines under the BOX 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 BOX 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 BSE would 
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 BOX MRVP or whether a violation requires formal 
disciplinary action under BSE Rule Chapter XXX.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\10\ and Rule 19d-1(c)(2) under the Act,\11\ that the proposed rule 
change (SR-BSE-2006-11), as modified by Amendments No. 1 and 2, be, and 
hereby is, approved and declared effective.
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    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 240.19d-1(c)(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); 17 CFR 200.30-3(a)(44).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-7225 Filed 4-16-07; 8:45 am]

BILLING CODE 8010-01-P
