[Federal Register Volume 88, Number 18 (Friday, January 27, 2023)]
[Notices]
[Pages 5392-5394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01627]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96734; File No. SR-NYSECHX-2023-04]


Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of 
Filing and Order Granting Accelerated Approval of a Proposed Rule 
Change To Add Violations of Article 6, Rule 13 to the List of Minor 
Rule Violations in Rule 10.9217

January 23, 2023.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 9, 2023, NYSE Chicago, Inc. (``NYSE Chicago'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and approving the proposal 
on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to add Article 6, Rule 13 (Registration 
Requirements) to the list of minor rule violations in Rule 10.9217. The 
proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, 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 self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item III below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to add Article 6, Rule 13 (Registration 
Requirements) to the list of minor rule violations in Rule 10.9217.
    Article 6, Rule 13, which was adopted in 2018,\4\ sets forth the 
requirements for persons engaged in the investment banking or 
securities business of a Participant to be registered with the Exchange 
as a representative or principal in each category of registration 
appropriate to his or her functions and responsibilities as specified 
in Article 6, Rule 14.
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    \4\ See Securities Exchange Act Release No. 84896 (December 20, 
2018), 83 FR 67376 (December 28, 2018) (SR-CHX-2018-07) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Regarding 
Qualification, Registration and Continuing Education Requirements 
Applicable to Participants).
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    The Exchange proposes to add Article 6, Rule 13 to the list of 
rules in Rule 10.9217 eligible for disposition pursuant to a fine under 
Rule 10.9216(b). Specifically, the Exchange proposes to add Article 6, 
Rule 13 to the ``List of Rule Violations and Fines Applicable Thereto'' 
as item 25 under current subsection (e), titled ``Reporting and Record 
Retention Violations.'' The substantially similar version of Article 6, 
Rule 13 was adopted by the Exchange's affiliate New York Stock Exchange 
LLC (``NYSE'') in 2018 \5\ and is currently eligible for minor rule 
fines under the NYSE's version of Rule 10.9217.\6\ The Exchange 
believes that having the ability to issue a minor rule fine for failing 
to comply with the registration requirements of Article 6, Rule 13 
would be consistent with and complement the Exchange's current ability 
to issue minor rule fines for other registration violations (e.g., 
Registration and Approval of Participant Personnel (Article 6, Rule 
2(a) & (b), Registration of Market Makers and Market Maker Authorized 
Traders (Article 16, Rules 1 and 3)). The Exchange further believes 
that the violations of the registration requirements are particularly 
suited to minor rule fines because minor fines provide a reasonable 
means of addressing violations that do not rise to the level of 
requiring formal disciplinary proceedings, while providing greater 
flexibility in handling certain violations.
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    \5\ See Securities Exchange Act Release No. 84336 (October 2, 
2018), 83 FR 50727 (October 9, 2018) (SR-NYSE-2018-44) (Notice of 
Filing and Immediate Effectiveness of Amendments To Rules Regarding 
Qualification, Registration and Continuing Education Applicable to 
Members and Member Organizations). The Exchange's other affiliates 
also adopted substantially similar versions of Article 6, Rule 13. 
See NYSE American LLC (``NYSE American'') Rule 2.1210; NYSE Arca, 
Inc. (``NYSE Arca'') Rule 2.1210; & NYSE National, Inc. (``NYSE 
National'') Rule 2.1210.
    \6\ See NYSE Rule 9217. The substantially similar versions of 
Article 6, Rule 13 are also eligible for minor rule fines under each 
affiliate's version of Rule 10.9217. See NYSE American Rule 9217; 
NYSE Arca Rule 10.9217(g)(13); & NYSE National Rule 10.9217(f).
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    The Exchange further proposes to add fine levels for violations of 
Article 6, Rule 13. The Exchange would add proposed first, second and 
third level fines for violations of Article 6, Rule 13 to the fine 
schedule of $250 for the first violation, $750 for the second violation 
and $1,500 for the third and subsequent violations. The proposed fine 
levels would be the same as those in current Rule 10.9217(f).13 and 
(f).21 for violations of Article 6, Rule 2(a) & (b) and Article 16, 
Rules 1 and 3, respectively.
    The Exchange believes that the proposed change would strengthen the 
Exchange's ability to carry out its

[[Page 5393]]

oversight and enforcement responsibilities in cases where full 
disciplinary proceedings are unwarranted in view of the minor nature of 
the particular violation.
2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the 
Act,\7\ in general, and furthers the objectives of section 6(b)(5),\8\ 
in particular, because it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system and, in general, to protect investors and 
the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    Minor rule fines provide a meaningful sanction for minor or 
technical violations of rules when the conduct at issue does not 
warrant stronger, immediately reportable disciplinary sanctions. The 
inclusion of a rule in Rule 10.9217 does not minimize the importance of 
compliance with the rule, nor does it preclude the Exchange from 
choosing to pursue violations of eligible rules through formal 
disciplinary action if the nature of the violations or prior 
disciplinary history warrants more significant sanctions. Rather, the 
Exchange believes that the proposed rule change will strengthen the 
Exchange's ability to carry out its oversight and enforcement 
responsibilities in cases where full disciplinary proceedings are 
unwarranted in view of the minor nature of the particular violation. 
The option to impose a minor rule sanction gives the Exchange 
additional flexibility to administer its enforcement program in the 
most effective and efficient manner while still fully meeting the 
Exchange's remedial objectives in addressing violative conduct. The 
proposed rule change is thus designed to prevent fraudulent and 
manipulative acts and practices because it will provide the Exchange 
the ability to issue a minor rule fine for violations of the 
registration requirements set forth in Article 6, Rule 13 where a more 
formal disciplinary action may not be warranted or appropriate. In 
addition, the Exchange believes that adding rules based on the rules of 
its affiliate to the Exchange's minor rule plan would promote fairness 
and consistency in the marketplace by permitting the Exchange to issue 
a minor rule fine for violations of substantially similar rules that 
are already eligible for minor rule treatment, thereby harmonizing 
rules eligible for minor rule fines across affiliated exchanges.
    The Exchange further believes that the proposed amendments to Rule 
10.9217 are consistent with section 6(b)(6) of the Act,\9\ which 
provides that members and persons associated with members shall be 
appropriately disciplined for violation of the provisions of the rules 
of the Act, the rules and regulations thereunder, and the rules of the 
exchange, by expulsion, suspension, limitation of activities, 
functions, and operations, fine, censure, being suspended or barred 
from being associated with a member, or any other fitting sanction. As 
noted, the proposed rule change would provide the Exchange ability to 
sanction minor or technical violations of proposed Article 6, Rule 13 
pursuant to the Exchange's rules. Finally, the Exchange also believes 
that the proposed changes are designed to provide a fair procedure for 
the disciplining of members and persons associated with members, 
consistent with sections 6(b)(7) and 6(d) of the Act.\10\ Rule 10.9217 
does not preclude a member organization or covered person from 
contesting an alleged violation and receiving a hearing on the matter 
with procedural rights through a litigated disciplinary proceeding.
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    \9\ 15 U.S.C. 78f(b)(6).
    \10\ 15 U.S.C. 78f(b)(7) and 78f(d).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue but rather to update the 
Exchange's rules to strengthen the Exchange's ability to carry out its 
oversight and enforcement functions and deter potential violative 
conduct and to align the Exchange's rule setting forth violations 
eligible for a minor rule fine more closely with that of its 
affiliates.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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 email to [email protected]. Please include 
File Number SR-NYSECHX-2023-04 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSECHX-2023-04. This 
file number should be included on the subject line if email 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 website (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 change 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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSECHX-2023-04 and should be submitted 
on or before February 17, 2023.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with

[[Page 5394]]

the requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\11\ In particular, the 
Commission finds that the proposed rule change is consistent with 
section 6(b)(5) of the Act,\12\ which requires that the rules of an 
exchange be designed to promote just and equitable principles of trade, 
to remove impediments 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 also believes that 
the proposal is consistent with sections 6(b)(1) and 6(b)(6) of the Act 
\13\ which require that the rules of an exchange enforce compliance 
with, and provide appropriate discipline for, violations of Commission 
and Exchange rules. 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,\14\ which governs minor rule violation 
plans.
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    \11\ 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).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \14\ 17 CFR 240.19d-1(c)(2).
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    As stated above, the Exchange proposes to add Article 6, Rule 13 
(Registration Requirements), to the list of minor rule violations in 
Rule 10.9217, including in the fine schedule. The Commission believes 
that Rules 10.9216(b) and 10.9217 are an effective way to discipline a 
member for a minor violation of a rule. More specifically, the 
Commission believes that the proposed addition of Article 6, Rule 13 to 
the Exchange's list of current minor rule violations provides a 
reasonable means of addressing violations that do not rise to the level 
of requiring formal disciplinary proceedings, while providing greater 
flexibility in handling certain violations. The Commission also 
believes that amending the associated fine schedule is consistent with 
the Act because it may help the Exchange's ability to better carry out 
its oversight and enforcement responsibilities by levying appropriate 
fines for minor violations of the rules included in Rule 10.9217, 
including minor violations of Article 6, Rule 13.
    In approving the proposed rule change, the Commission in no way 
minimizes the importance of compliance with the Exchange's rules and 
all other rules subject to fines under Rules 10.9216(b) and 10.9217. 
The Commission believes that a violation of any self-regulatory 
organization's rules, as well as Commission rules, is a serious matter. 
However, Rules 10.9216(b) and 10.9217 provide a reasonable means of 
addressing rule violations that may not rise to the level of requiring 
formal disciplinary proceedings, while providing greater flexibility in 
handling certain violations. The Commission expects that the Exchange 
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 Rules 10.9216(b) and 10.9217 or whether a violation 
requires formal disciplinary action.
    For the same reasons as discussed above, the Commission finds good 
cause, pursuant to section 19(b)(2) of the Act,\15\ for approving the 
proposed rule change prior to the thirtieth day after the date of 
publication of the notice of the filing thereof in the Federal 
Register. The proposal will assist the Exchange in preventing 
fraudulent and manipulative practices by allowing the Exchange to 
adequately enforce compliance with, and provide appropriate discipline 
for, violations of Exchange rules. Moreover, the proposed changes raise 
no new or novel issues. Accordingly, the Commission believes that a 
full notice-and-comment period is not necessary before approving the 
proposal.
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    \15\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act 
\16\ and Rule 19d-1(c)(2) thereunder,\17\ that the proposed rule change 
(SR-NYSECHX-2023-04) be, and hereby is, approved on an accelerated 
basis.
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    \16\ 15 U.S.C. 78s(b)(2).
    \17\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-01627 Filed 1-26-23; 8:45 am]
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