
[Federal Register Volume 77, Number 31 (Wednesday, February 15, 2012)]
[Notices]
[Pages 8927-8928]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-3472]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66366; File No. SR-CHX-2011-34]


 Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Approving a Proposed Rule Change Regarding Suspension of a 
Participant's Trading Privileges on the Exchange

February 9, 2012.

I. Introduction

    On December 16, 2011, the Chicago Stock Exchange, Inc. (``CHX'' or 
the ``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 permit any officer of the Exchange designated 
by the Chief Regulatory Officer (``CRO'') to suspend the trading 
privileges of a Participant on the Exchange's facilities in certain 
circumstances. The proposed rule change was published for comment in 
the Federal Register on January 4, 2012.\3\ The Commission received no 
comment letters on the proposal. 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\ Securities Exchange Act Release No. 66061 (December 28, 
2011), 77 FR 312 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to add Interpretation and Policy .01 to 
Article 13, Rule 2 (Emergency Suspension) to modify the Exchange's 
ability to suspend a Participant's trading privileges on the Exchange. 
Currently, Rule 2 authorizes the Exchange's CRO to suspend a 
Participant's membership with the Exchange or place other limitations 
on its activities if various circumstances occur, such as insolvency, 
failure to perform its contracts or obligations, expulsion or 
suspension by another self-regulatory organization, or where it 
reasonably appears that the Participant is violating and will continue 
to violate any provision of the Exchange's rules or the federal 
securities laws. The Exchange proposes to permit any officer of the 
Exchange designated by the CRO to suspend the trading privileges of a 
Participant on the Exchange's facilities pursuant to the provisions of 
Rule 2 if a Qualified Clearing Agency refuses to act to clear and 
settle the trades of that Participant. The CRO must approve any such 
suspensions within two (2) days of the action. If the CRO does not 
approve the action taken, the suspension shall be immediately lifted as 
of the time of his or her decision or after the expiration of two days, 
whichever is earlier. Suspensions pursuant to these provisions, 
including the appeal thereof, otherwise would be governed by the 
provisions of Rule 2.
    The Exchange also proposes to correct an oversight by eliminating a 
reference to the Chief Executive Officer in Section (c) of Rule 2 and 
replacing it with a reference to the CRO regarding appeals of 
suspensions under Rule 2.\4\
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    \4\ The Exchange stated that it believes that the continued 
reference to the Chief Executive Officer in Rule 2(c) represents an 
oversight in a 2006 amendment to the rule. See Securities Exchange 
Act Release No. 54437 (September 13, 2006), 71 FR 55037 (September 
20, 2006) (SR-CHX-2005-06).
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III. Discussion

    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\ 
Specifically, the Commission finds that the proposal is consistent with 
Section 6(b)(5) of the Act,\6\ in that it is designed to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transaction in 
securities, to remove impediments and perfect the mechanisms of a free 
and open market, and, in general, to protect investors and the public 
interest. Specifically, the Commission believes that new Interpretation 
and Policy .01 to Rule 2 will help perfect the mechanisms of a free and 
open market by providing the Exchange with more flexibility regarding 
who can suspend the trading privileges of a Participant when a 
Qualified Clearing Agency refuses to clear and settle the trades of 
that Participant. Such flexibility should enable the Exchange to take 
timely action to prevent the execution of trades on the Exchange's 
facilities by a Participant when a Qualified Clearing

[[Page 8928]]

Agency refuses to clear and settle the trades of that Participant.
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    \5\ In approving this proposed rule change, the Commission 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).
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    Additionally, the Commission believes that Article 13, Rule 2(c) 
and Interpretation and Policy .01 to Article 13, Rule 2 provide fair 
suspension appeal procedures, and therefore is consistent with Section 
6(b)(7) of the Act,\7\ which requires that the rules of a national 
securities exchange provide a fair procedure for the disciplining of 
members and persons associated with members. The Commission notes that, 
where an officer of the Exchange suspends a Participant's trading 
privileges under the narrow circumstances described in Interpretation 
and Policy .01, the suspension will be lifted automatically within two 
days of the action unless the CRO approves it, and the CRO may decide 
to lift the suspension earlier.
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    \7\ 15 U.S.C. 78f(b)(7).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-CHX-2011-34) be, and it 
hereby is, approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-3472 Filed 2-14-12; 8:45 am]
BILLING CODE 8011-01-P


