Federal Register / Vol. 74, No. 127 / Monday, July 6, 2009 / Notices 32015 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

provide the Commission with written notice of its 

intent to file the proposed rule change, along with 

a brief description and text of the proposed rule 

change, at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. The 

Exchange has fulfilled this requirement. 

10For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

11 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Amendment No. 1 is a partial amendment that 

makes four non-substantive, technical changes to 

the rule text submitted as Exhibit 5 to SR–CBOE– 

2009–037. 

4Amendment No. 2 is a partial amendment that 

makes corrections to the description of the changes 

submitted in Amendment No. 1. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments on the proposed 

rule change were neither solicited nor 

received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change: (1) Does not significantly affect 

the protection of investors or the public 

interest; (2) does not impose any 

significant burden on competition; and 

(3) by its terms does not become 

operative for 30 days after the date of 

this filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest, the proposed rule 

change has become effective pursuant to 

Section 19(b)(3)(A) of the Act 8 and Rule 

19b–4(f)(6) thereunder.9

A proposed rule change filed under 

Rule 19b–4(f)(6) normally does not 

become operative for 30 days after the 

date of filing. However, Rule 19b– 

4(f)(6)(iii) permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange requests that the Commission 

waive the 30-day operative delay so that 

the benefits of this functionality to 

NASDAQ market participants expected 

from the rule change will not be 

delayed. The Commission believes that 

waiving the 30-day operative delay to 

make this functionality available 

without delay is consistent with the 

protection of investors and the public 

interest. Therefore, the Commission 

designates the proposal operative upon 

filing.10

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. 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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2009–057 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2009–057. 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 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 inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of the NASDAQ. 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 

Number SR–NASDAQ–2009–057 and 

should be submitted on or before July 

27, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–15740 Filed 7–2–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60177; File No. SR–CBOE– 

2009–037] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing of 

Proposed Rule Change, as Modified by 

Amendment Nos. 1 and 2 Thereto, To 

Amend Its Minor Rule Violation Plan 

June 25, 2009. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on June 4, 

2009, the Chicago Board Options 

Exchange, Incorporated (‘‘Exchange’’ or 

‘‘CBOE’’) filed with the Securities and 

Exchange Commission (the 

‘‘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 June 17, 2009.3

Subsequently, on June 23, 2009, the 

Exchange filed Amendment No. 2.4 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Chicago Board Options Exchange, 

Incorporated (‘‘CBOE’’ or ‘‘Exchange’’) 

proposes to amend CBOE Rule 17.50— 

Imposition of Fines for Minor Rule 

Violations to (i) increase and strengthen 

the sanctions imposed under CBOE’s 

Minor Rule Violation Plan; (ii) 

incorporate additional violations into 

CBOE’s Minor Rule Violation Plan; (iii) 

delete obsolete or duplicative sections 

of the rule; and (iv) make various nonsubstantive technical changes to the 

rule. The text of the proposed rule 

change is available on the Exchange’s 

mstockstill on PROD1PC66 with NOTICES

32016 Federal Register / Vol. 74, No. 127 / Monday, July 6, 2009 / Notices 

5See AMEX Rule 590 Section (g) of Part 1 and 

ARCA Rule 10.12(k)(i)(21). 

6See Securities Exchange Act Release No. 34– 

52798 (November 18, 2005), 70 FR 71344 

(November 28, 2005) (SR–CBOE–2005–46). 

Web site (http://www.cboe.com/Legal), 

at the Exchange’s Office of the 

Secretary, and at the Commission. 

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 IV below 

and is set forth in sections (A), (B), and 

(C) below. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

CBOE has recently conducted a 

comprehensive review of its Minor Rule 

Violation Plan. As a result of this 

review, CBOE is proposing to (i) 

increase and strengthen the sanctions 

imposed for various violations; (ii) 

incorporate additional violations into 

the Exchange’s Minor Rule Violation 

Plan; (iii) delete obsolete or duplicative 

sections of the rule; and (iv) make 

various non-substantive changes to the 

rule. 

The Exchange believes that increasing 

the fine levels specified and lengthening 

the surveillance period from a twelve 

month period to a rolling twenty-four 

month period will serve as an effective 

deterrent to future violative conduct. 

Where the Exchange is proposing to 

increase the look-back period to twentyfour months, the Exchange will consider 

any violations that resulted in formal 

disciplinary action within the previous 

twenty-four months for purposes of 

calculating the summary fine. Similarly, 

where the Exchange is proposing to 

incorporate new violations into its 

Minor Rule Violation Plan, the 

Exchange will consider violations 

resulting in formal disciplinary action 

within the previous twenty-four month 

period when determining whether 

previous violations have occurred for 

purposes of calculating a summary fine. 

CBOE believes that the proposed 

changes will allow for consistency 

throughout Rule 17.50. CBOE is also 

proposing to delete obsolete or 

duplicative provisions from its Minor 

Rule Violation Program to diminish any 

confusion in the application of the Rule. 

CBOE is proposing to incorporate 

additional violations into its Minor Rule 

Violation Plan. These violations include 

(i) exercise limits; (ii) trading in 

restricted classes; (iii) Linkage 

violations (including order protection 

violations and locked or crossed 

violations); (iv) Market-Maker quoting 

obligations; (v) failure to report position 

and account information; and failure to 

designate and identify to the Exchange 

a person or persons responsible for 

implementing and monitoring the AntiMoney Laundering (‘‘AML’’) 

compliance program. CBOE believes 

that these violations are suitable for 

incorporation into the Minor Rule 

Violation Plan because these violations 

are generally technical in nature. 

Further, CBOE will be able to carry out 

its regulatory responsibility more 

quickly and efficiently by incorporating 

these violations into its Minor Rule 

Violation Plan. As with all of the 

violations incorporated into CBOE’s 

Minor Rule Violation Plan, CBOE 

retains the ability to refer any violation 

to its Business Conduct Committee 

under Rule 17.50 should the 

circumstances warrant such referral. 

CBOE is specifically proposing the 

following modifications to Rule 17.50: 

Exercise Limit Violations 

CBOE is proposing to modify its 

Minor Rule Violation Plan to 

incorporate exercise limit violations. 

Specifically, CBOE is proposing to 

modify Rule 17(g)(1) to add exercise 

limits to the section that currently 

addresses position limits. The fine 

levels for exercise limit violations will 

match the fine levels for position limits. 

In particular, a first offense will be 

subject to a $500 fine. A second offense 

will be subject to a $1,000 fine and a 

third offense will be subject to a $2,500 

fine. A fourth offense and any 

subsequent offenses will be subject to a 

$5,000 fine. The number of offenses will 

be calculated on a rolling twenty-four 

month period. 

CBOE believes these changes will 

serve as an effective deterrent to future 

violative conduct. CBOE notes that this 

proposal is consistent with the minor 

rule violation plans in place at the 

NYSE AMEX LLC (‘‘AMEX’’) and NYSE 

Arca, Inc. (‘‘ARCA’’).5 As with other 

violations covered under the Exchange’s 

Minor Rule Violation Plan, any 

egregious activity may be referred to the 

Exchange’s Business Conduct 

Committee. 

Failure To File FOCUS Reports in a 

Timely Manner 

CBOE is proposing to make a 

technical change to clarify that FOCUS 

Reports that are received by the 

Exchange more than ninety days late 

will be referred to the Exchange’s 

Business Conduct Committee. The 

existing schedule does not clearly 

reflect how a FOCUS Report that is 

received on the ninetieth day would be 

handled for purposes of assessing a 

summary fine. Therefore, CBOE is 

proposing to change the reference to 

‘‘90+’’ days in the sanction schedule to 

‘‘91+’’ days. 

Late Submission of Trading Data 

CBOE is proposing to modify its 

Minor Rule Violation Plan as it applies 

to the failure to respond in a timely 

manner to a request for automated 

submission of trading data (‘‘Blue 

Sheets’’) as set forth in Rule 17(g)(3). 

First, CBOE is proposing to increase the 

look-back period from twelve months to 

twenty-four months. CBOE is also 

proposing to delete the provision that 

enabled the Exchange to issue a 

summary fine based on the number of 

days Blue Sheets were submitted late. 

With the increased ease of automation 

for the purpose of submitting trading 

information in the securities industry, 

CBOE believes that this breakdown is no 

longer necessary. Therefore, CBOE is 

proposing to modify Rule 17.50(g)(3) to 

enable the Exchange to issue a summary 

fine when the Exchange does not 

receive a response to a Blue Sheet 

request within ten (10) days. In 

conjunction with these changes, CBOE 

is proposing to assess a $2,500 fine for 

a first offense. Any subsequent offenses 

within a rolling twenty-four (24) month 

period would be subject to a $5,000 fine 

or referral to the Exchange’s Business 

Conduct Committee. CBOE believes 

these changes will serve as an effective 

deterrent to future violative conduct. 

Failure To Book and Display Limit 

Orders That Would Improve the 

Disseminated Quote 

The Securities and Exchange 

Commission approved a CBOE filing in 

November 2005 6 removing the agency 

function from Designated Primary 

Market-Makers (‘‘DPM’’). Upon removal 

of this function, CBOE established PAR 

Officials who have since been required 

to comply with the limit order display 

obligations as set forth in Rule 7.12. 

CBOE Rule 7.12 defines a PAR Official 

as ‘‘an Exchange employee or 

independent contractor whom the 

Exchange may designate as being 

responsible for (i) operating the PAR 

workstation in a DPM trading crowd 

mstockstill on PROD1PC66 with NOTICES

Federal Register / Vol. 74, No. 127 / Monday, July 6, 2009 / Notices 32017 

7See AMEX Rule 590 Section (g) of Part 1, BOX 

Rule Chapter X Section 2(j) and ARCA Rule 

10.12(k)(i)(29). 

with respect to the classes of options 

assigned to him/her; (ii) when 

applicable, maintaining the book with 

respect to the classes of options 

assigned to him/her; and (iii) effecting 

proper executions of orders placed with 

him/her.’’ Pursuant to Rule 7.12, PAR 

Officials may not maintain any 

affiliation with a member that is 

authorized to act as a Market-Maker. As 

the obligation to display limit orders is 

now a function of CBOE Staff (or a 

designated independent contractor), 

CBOE is proposing to delete this 

violation type from Rule 17.50(g)(5). 

CBOE is also proposing several 

technical changes to this provision. 

First, the Exchange is proposing to 

modify the rule references in the bullets 

relating to book priority and due 

diligence. These provisions 

inappropriately reference ‘‘Rules 6.45’’ 

and ‘‘Rules 6.73.’’ CBOE is proposing to 

modify these references to reflect ‘‘Rule 

6.45’’ and ‘‘Rule 6.73.’’ In addition, 

CBOE is proposing to modify the fine 

schedule in a manner that is consistent 

with the form of other fine schedules 

under the Exchange’s Minor Rule 

Violation Plan. In particular, CBOE is 

proposing to replace the existing 

reference to ‘‘Subsequent Offenses’’ 

with a reference to ‘‘4th and 5th 

Offenses.’’ The fine allocated to fourth 

and fifth offenses for violations of this 

provision would range from $3,500 to 

$5,000. CBOE is also proposing to 

replace the note referencing the 

disposition of 6th and subsequent 

offenses with a separate entry for 

‘‘Subsequent Offenses.’’ Any violations 

falling under the ‘‘Subsequent Offenses’’ 

category would be referred to the 

Exchange’s Business Conduct 

Committee. As with other violations 

covered under the Exchange’s Minor 

Rule Violation Plan, any egregious 

activity may be referred to the 

Exchange’s Business Conduct 

Committee. 

Failure To Submit Trade Data on Trade 

Date 

CBOE is proposing to increase the 

look-back period in Exchange Rule 

17.50(g)(7) from twelve months to 

twenty-four months. CBOE believes that 

the increased look-back period will 

serve as a deterrent to repetitive 

conduct. 

Violations of Exercise and Exercise 

Advice Rules for American-Style, CashSettled Index Options 

CBOE is proposing to increase the 

look-back period in Exchange Rule 

17.50(g)(9) from twelve months to 

twenty-four months. CBOE is also 

proposing to establish a fixed sanction 

level for each offense. Under this 

proposal, the sanction levels for first 

and second offenses will increase from 

a Letter of Caution to $500 and $1,000 

respectively. The Exchange is proposing 

to implement a $2,500 fine for a third 

offense. Any subsequent violations 

would either incur a $5,000 fine or be 

referred to the Business Conduct 

Committee for review. In addition, 

CBOE is proposing to eliminate the 

reference to fifth and sixth offenses. 

CBOE believes that the increased lookback period as well as the modified 

sanction levels will serve as an effective 

deterrent to future violative conduct. 

CBOE is also proposing a technical 

change to update the references to the 

numbered offenses to conform to other 

references within Exchange Rule 17.50. 

Communications to the Exchange or the 

Clearing Corporation 

CBOE is proposing to increase the 

look-back period in Exchange Rule 

17.50(g)(10) from twelve months to 

twenty-four months. CBOE believes that 

the increased look-back period will 

serve as a deterrent to repetitive 

conduct. 

CBOE is also proposing a technical 

change to Exchange Rule 17.50(g)(10) to 

correct the language in the reference to 

the third offense. This section currently 

references the ‘‘3nd Offense.’’ CBOE is 

proposing to correct this language to 

provide ‘‘3rd Offense.’’ 

Trading in Restricted Classes 

Exchange Rule 5.4 provides, with 

limited exceptions, that CBOE ‘‘* * * 

may prohibit any opening purchase or 

sale transactions in series of options 

* * * previously opened...to the extent 

it deems such action necessary or 

appropriate.’’ CBOE is proposing to 

incorporate violations related to trading 

in restricted classes into the Minor Rule 

Violation Plan under Exchange Rule 

17.50(g)(11). CBOE believes that these 

violations may be handled more 

efficiently through the summary fine 

process, particularly where the activity 

is the result of a technical or inadvertent 

error. 

CBOE is proposing to implement a 

fine of $500 for the first violation in a 

rolling twenty-four month period. A 

second violation within the same period 

would be allocated a $2,500 fine and a 

third violation would be allocated a 

$5,000 fine. Any subsequent violations 

within a rolling twenty-four month 

period would be referred to the 

Exchange’s Business Conduct 

Committee. The Exchange believes that 

these violations should be subject to the 

escalating fine schedule as proposed 

because this fine schedule will serve as 

a deterrent to future violative conduct. 

Firms are strongly encouraged to 

implement systems that will 

automatically prohibit opening 

transactions in restricted classes. As 

with other violations, any egregious 

activity or activity that is believed to be 

manipulative may be referred to CBOE’s 

Business Conduct Committee. 

Violations of the Order Protection Rule 

Exchange Rule 6.83(d) provides, with 

limited exceptions, that ‘‘members may 

not engage in a pattern or practice of 

trading through better prices available 

on other exchanges.’’ CBOE is proposing 

to incorporate violations of the trade 

through provision into CBOE Rule 

17.50(g)(12). CBOE is proposing to 

adopt ranges for the sanction levels to 

be imposed according to the degree of 

the violation(s). Specifically, the fine for 

a first offense would range between 

$500 to $1,000. A second offense would 

be assessed a fine between $1,000 to 

$2,000 and a third offense would 

include a fine ranging between $2,500 to 

$5,000. In addition to the fine for a third 

offense, CBOE is proposing to also 

conduct a Staff Interview, a nondisciplinary regulatory action, to 

discuss the violations with the member 

and the member’s plan for complying 

with the requirement in the future. Any 

subsequent violations will be assessed a 

$5,000 fine or will be referred to the 

Exchange’s Business Conduct 

Committee. CBOE will maintain internal 

guidelines that will dictate the degree of 

conduct for which a specific sanction 

will be imposed. CBOE believes that 

these violations may be handled more 

efficiently under its Minor Rule 

Violation Plan, particularly where the 

violation is the result of a technical 

problem or inadvertent error. As with 

other violations, any egregious activity 

may be referred to CBOE’s Business 

Conduct Committee. 

CBOE notes that this provision is 

consistent with the minor rule violation 

plans in place at the AMEX, ARCA and 

the Boston Options Exchange Group 

LLC (‘‘BOX’’).7

Locked or Crossed Market Violations 

Exchange Rule 6.84 requires MarketMakers to unlock or uncross a locked or 

crossed market. A Market-Maker that 

fails to unlock or uncross a locked or 

crossed market within a reasonable 

amount of time is deemed to be in 

violation of Exchange Rule 6.84. CBOE 

is proposing to incorporate violations of 

Exchange Rule 6.84 into CBOE’s Minor 

mstockstill on PROD1PC66 with NOTICES

32018 Federal Register / Vol. 74, No. 127 / Monday, July 6, 2009 / Notices 

8See AMEX Rule 590 Section (g) of Part 1, BOX 

Rule Chapter X Section 2(g) and ARCA Rule 

10.12(k)(i)(35). 

9Exchange Rule 1.1(ccc) provides: ‘‘With respect 

to a Market-Maker who is obligated to provide 

continuous electronic quotes on the Hybrid Trading 

System (‘‘Hybrid Market-Maker’’), the Hybrid 

Market-Maker shall be deemed to have provided 

‘‘continuous electronic quotes’’ if the Hybrid 

Market-Maker provides electronic two-sided quotes 

for 99% of the time that the Hybrid Market-Maker 

is required to provide electronic quotes in an 

appointed option class on a given trading day. If a 

technical failure or limitation of a system of the 

Exchange prevents the Hybrid Market-Maker from 

maintaining, or prevents the Hybrid Market-Maker 

from communicating to the Exchange, timely and 

accurate electronic quotes in a class, the duration 

of such failure shall not be considered in 

determining whether the Hybrid Market-Maker has 

satisfied the 99% quoting standard with respect to 

that option class. The Exchange may consider other 

exceptions to this continuous electronic quote 

obligation based on demonstrated legal or 

regulatory requirements or other mitigating 

circumstances.’’ 

10Exchange Rule 8.7 requires Market-Makers to 

continuously quote in 60% of the series in their 

appointed classes for those series with a time to 

expiration of less than nine months. Exchange Rule 

8.15A requires Lead Market-Makers to provide 

continuous quotes in 90% of the series in their 

appointed classes. Exchange Rule 8.85 requires 

Designated Primary Market-Makers to provide 

continuous quotes in 90% of the series in multiplylisted, appointed classes and 100% of the series in 

singly-listed, appointed classes. Lastly, Exchange 

Rule 8.93 requires Electronic Designated Primary 

Market-Makers to provide continuous quotes in 

90% of their appointed classes (or, alternatively 

respond to 98% of Request for Quotes if such 

functionality is available in an allocated class). 

11Exchange Rule 8.15A requires Lead MarketMakers to ensure that a trading rotation is initiated 

in accordance with Rule 6.2B in 100% of the series 

in their appointed classes. Exchange Rule 8.85 

requires Designated Primary Market-Makers to 

ensure that a trading rotation is initiated in 

accordance with Rule 6.2B in 100% of the series in 

their appointed classes. Exchange Rule 8.93 

requires Electronic Designated Primary MarketMakers to ensure that a trading rotation is initiated 

in accordance with Rule 6.2B in 100% of the series 

in their appointed classes. 

12See Securities Exchange Act Release No. 34– 

56941 (December 11, 2007). 

Rule Violation Plan under Exchange 

Rule 17.50(g)(13). CBOE is proposing to 

adopt ranges for the sanction levels to 

be imposed according to the degree of 

the violation(s). Specifically, the fine for 

a first offense would range between 

$500 and $1,000. A second offense 

would be assessed a fine between 

$1,000 to $2,000 and a third offense 

would include a fine ranging between 

$2,500 and $5,000. In addition to the 

fine for a third offense, CBOE is 

proposing to also conduct a Staff 

Interview, a non-disciplinary regulatory 

action, to discuss the violations with the 

member and the member’s plan for 

complying with the requirement in the 

future. Any subsequent violations will 

be assessed a $5,000 fine or will be 

referred to the Exchange’s Business 

Conduct Committee. CBOE will 

maintain internal guidelines that will 

dictate what specific sanction will be 

imposed for a particular violation. 

CBOE believes that these violations may 

be handled more efficiently under its 

Minor Rule Violation Plan, particularly 

where the violation is the result of a 

systematic or inadvertent error. As with 

other violations, any egregious activity 

may be referred to CBOE’s Business 

Conduct Committee. 

CBOE notes that this provision is 

consistent with the minor rule violation 

plans in place at the AMEX, BOX and 

ARCA.8

Failure To Meet Market-Maker 

Obligations 

CBOE Market-Makers are required to 

meet certain obligations, including, but 

not limited to, the following: (i) 

Maintaining continuous electronic 

quotes 9 in an applicable percentage of 

the series in each of a Market-Maker’s10

appointed classes; (ii) quote within the 

maximum bid/ask differential in each of 

a Market-Maker’s appointed classes as 

set forth in Exchange Rule 8.7(b)(iv); 

(iii) comply with the initial quote 

volume requirements set forth in 

Exchange Rule 8.7; and (iv) ensure that 

a trading rotation is initiated promptly 

following the opening of the underlying 

security (as applicable).11

CBOE is proposing to incorporate 

violations relating to Market-Maker 

Obligations into the Exchange’s Minor 

Rule Violation Plan under Exchange 

Rule 17.50(g)(14). CBOE believes that 

these violations may be handled more 

efficiently under the Minor Rule 

Violation Plan. CBOE is proposing to 

adopt ranges for the sanction levels to 

be imposed according to the degree of 

the violation(s). Specifically, CBOE is 

proposing to assess fines ranging from 

$2,000–$4,000 for a first offense and 

$4,000–$5,000 for a second offense. Any 

subsequent violations will be referred to 

the Exchange’s Business Conduct 

Committee. CBOE will maintain internal 

guidelines that will dictate the sanction 

that will be imposed for a particular 

violation (based on the degree of the 

violation). As with other violations, any 

egregious activity may be referred to 

CBOE’s Business Conduct Committee. 

Several other self-regulatory 

organizations have incorporated fines 

related to quoting obligation violations 

into a minor rule violation plan. For 

example, Chapter X, Sections 2(c) and 

2(d) of the BOX rules set forth the fine 

schedule for violations of required 

quotation parameters and continuous 

quoting requirements. In addition, the 

International Securities Exchange, LLC 

(‘‘ISE’’) Rule 1614(d)(6) sets forth the 

fine schedule for violations of required 

quoting parameters. AMEX Rule 590 

Section (g) of Part 1, ARCA Rule 

10.12(k)(i)(39) and ARCA Rule 

10.12(k)(i)(41) provide fine schedules 

for various types of quoting obligation 

violations. 

Failure to Accurately Report Position 

and Account Information 

CBOE is proposing to incorporate 

violations for failing to accurately report 

position and account information in 

accordance with CBOE Rule 4.13 into 

the Minor Rule Violation Plan. The 

Exchange believes most of these 

violations are inadvertent and technical 

in nature. Processing routine violations 

under the Minor Rule Violation Plan 

would decrease the administrative 

burden of regulatory and enforcement 

staff as well as that of the Business 

Conduct Committee. In addition, staff 

would be able to more expeditiously 

process routine violations under the 

Minor Rule Violation Plan. 

CBOE is proposing to assess a $500 

fine for a first offense, a $1,000 fine for 

a second offense and a $2,500 fine for 

a third offense. Any subsequent offenses 

would be assessed a $5,000 fine or 

would be referred to the Business 

Conduct Committee. The number of 

offenses will be calculated on a rolling 

twenty-four month period. CBOE 

believes that establishing a rolling 

twenty-four month period for 

cumulative violations will serve as an 

effective deterrent to future violative 

conduct. As with other violations 

covered under the Exchange’s Minor 

Rule Violation Plan, any egregious 

activity may be referred to the 

Exchange’s Business Conduct 

Committee. 

Among other things, CBOE Rule 4.13 

requires each member to report to the 

Exchange the account and position 

information of any customer who, acting 

alone, or in concert with others, on the 

previous business day maintained 

aggregate long or short positions on the 

same side of the market of 200 or more 

contracts of any single class of option 

contracts dealt in on the Exchange. 

Members report this information on the 

Large Option Position Report. CBOE, as 

a member of the Intermarket 

Surveillance Group (the ‘‘ISG’’), as well 

as certain other self-regulatory 

organizations (‘‘SROs’’) executed and 

filed on October 29, 2007 with the 

Securities and Exchange Commission, a 

final version of the Agreement pursuant 

to Section 17(d) of the Securities 

Exchange Act of 1934 (as amended) (the 

‘‘Agreement’’) 12 and as amended on 

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13See Securities Exchange Act Release No. 34– 

57649 (April 11, 2008). 

14See Securities Exchange Act Release No. 34– 

58765 (October 9, 2008). 

15 17 CFR 240.15c3–1(e)(1). 

16 17 CFR 240.15c3–1(e)(1)(i). 

17Supra at note 8. 18 17 CFR 240.15c3–1(e)(1)(ii). 

19See ARCA Rule 10.12(k)(iii)(12) and FINRA 

Rule 9217 (as it applies to New York Stock 

Exchange Rule 445(4)). 

20See Securities Exchange Act Release No. 34– 

58119 (July 8, 2008), 73 FR 40646 (July 15, 2008) 

(SR–CBOE–2008–053). 

April 11, 2008 13 and October 9, 2008.14

The participants to the Agreement 

incorporated the surveillance and 

sanctions of large options position 

reporting violations into the Agreement 

as of November 1, 2008. As such, the 

SROs have agreed that their respective 

rules concerning the reporting of large 

options positions, are common rules. As 

a result, this amendment to the Minor 

Rule Violation Plan will further result in 

the consistency of the sanctions among 

the SROs who are signatories to the 

Agreement with respect to regulatory 

actions arising from large option 

position reporting surveillance. 

Failure To Provide Prior Capital 

Withdrawal Notice 

With limited exceptions, Rule 15c3– 

1(e)(1) under the Act 15 requires brokers 

or dealers to provide notice to the 

Commission (in Washington, DC and 

the applicable regional office), the 

broker or dealer’s Designated Examining 

Authority and, as applicable, the 

Commodity Futures Trading 

Commission at least ‘‘two business days 

prior to any withdrawals, advances or 

loans if those withdrawals, advances or 

loans on a net basis exceed in the 

aggregate in any 30 day period, 30 

percent of the broker or dealer’s net 

capital.’’ CBOE is proposing to 

incorporate violations of Rule 15c3– 

1(e)(1) under the Act 16 into the 

Exchange’s Minor Rule Violation Plan 

under Exchange Rule 17.50(g)(16). 

CBOE believes that these violations may 

be handled more efficiently under the 

Minor Rule Violation Plan. 

CBOE is proposing to assess a $2,500 

fine for a first offense and a $5,000 fine 

for a second offense. Any subsequent 

offenses would be referred to the 

Business Conduct Committee. The 

number of offenses shall be calculated 

on a rolling twenty-four month period. 

CBOE believes that establishing a rolling 

twenty-four month period for 

cumulative violations will serve as an 

effective deterrent to future violative 

conduct. As with other violations 

covered under the Exchange’s Minor 

Rule Violation Plan, any egregious 

activity may be referred to the 

Exchange’s Business Conduct 

Committee. 

Failure To Provide Post Capital 

Withdrawal Notice 

With limited exceptions, Rule 15c3– 

1(e)(1) under the Act17 requires brokers 

or dealers to provide notice to the 

Commission (in Washington, DC and 

the applicable regional office), the 

broker or dealer’s Designated Examining 

Authority and, as applicable, the 

Commodity Futures Trading 

Commission within ‘‘two business days 

after any withdrawals, advances or 

loans if those withdrawals, advances or 

loans on a net basis exceed in the 

aggregate in any 30 calendar day period, 

20 percent of the broker or dealer’s 

excess net capital.’’ CBOE is proposing 

to incorporate violations of Rule 15c3– 

1(e)(1)(ii) under the Act18 into the 

Exchange’s Minor Rule Violation Plan 

under Exchange Rule 17.50(g)(17). 

CBOE believes that these violations may 

be handled more efficiently under the 

Exchange’s Minor Rule Violation Plan. 

CBOE is proposing to assess a $1,000 

fine for a first offense and a $2,500 fine 

for a second offense. Any subsequent 

offenses would be referred to the 

Business Conduct Committee. The 

number of offenses shall be calculated 

on a rolling twenty-four month period. 

CBOE believes that establishing a rolling 

twenty-four month period for 

cumulative violations will serve as an 

effective deterrent to future violative 

conduct. As with other violations 

covered under the Exchange’s Minor 

Rule Violation Plan, any egregious 

activity may be referred to the 

Exchange’s Business Conduct 

Committee. 

Failure To Designate and Identify AML 

Compliance Contact 

Exchange Rule 4.20 requires each 

member organization (and each member 

not associated with a member 

organization) to develop and implement 

a written AML compliance program. 

This rule requires a member or member 

organization (as applicable) to designate 

and identify to the Exchange a person or 

persons responsible for implementing 

and monitoring the day-to-day 

operations and internal controls of the 

AML compliance program. Members 

and member organizations (as 

applicable) are also required to provide 

prompt notification to the Exchange 

regarding any change in such 

designation. CBOE believes that 

violations arising from a member or 

member organization’s failure to 

provide such designation or notification 

of any change in such designation 

would be handled more efficiently 

under the Exchange’s Minor Rule 

Violation Plan. CBOE is proposing to 

incorporate violations related to the 

failure to designate and identify the 

AML compliance program contact into 

the Minor Rule Violation Plan under 

Exchange Rule 17.50(g)(18). 

CBOE is proposing to assess a $1,000 

fine for a first offense and a $2,500 fine 

for a second offense. Any subsequent 

offenses would be referred to the 

Business Conduct Committee. The 

number of offenses shall be calculated 

on a rolling twenty-four month period. 

CBOE believes that establishing a rolling 

twenty-four month period for 

cumulative violations will serve as an 

effective deterrent to future violative 

conduct. As with other violations 

covered under the Exchange’s Minor 

Rule Violation Plan, any egregious 

activity may be referred to the 

Exchange’s Business Conduct 

Committee. 

CBOE notes that this provision is 

consistent with the minor rule violation 

plans in place at the ARCA and the 

Financial Industry Regulatory Authority 

(‘‘FINRA’’).19

Amendments to Exchange Rule 17.50 

Interpretations and Policies 

CBOE is proposing to delete 

Interpretation and Policy .01(a) from 

Exchange Rule 17.50. Exchange Rule 

17.50(g)(1) currently sets forth the 

sanction levels under the Minor Rule 

Violation Plan for position limit 

violations. Prior to July 2008, Exchange 

Rule 17.50(g)(1)(a) set forth the sanction 

levels under the Minor Rule Violation 

Plan for position limit violations of nonmember customers and Exchange Rule 

17.50(g)(1)(b) set forth the sanction 

levels for position limit violations for all 

other accounts. The Commission 

approved a rule filing eliminating the 

distinction between non-member 

customers and all other accounts in 

Exchange Rules 17.50(g)(1)(a) and 

17.50(g)(1)(b) in July 2008 and 

incorporating the sanction levels for 

position limit violations under 

Exchange Rule 17.50(g)(1).20

Interpretation and Policy .01(a) 

specifically references and provides 

clarification for Rule 17.50(g)(1)(a). 

Since this provision no longer exists, 

this Interpretation and Policy is 

obsolete. Therefore, CBOE is proposing 

to delete Interpretation and Policy 

.01(a). As a result of this change, CBOE 

is also proposing to delete the section 

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32020 Federal Register / Vol. 74, No. 127 / Monday, July 6, 2009 / Notices 

21See Illinois Public Act 095–0017. 

22 15 U.S.C. 78f(b). 

23 15 U.S.C. 78f(b)(6). 

designation of Interpretation and Policy 

.01(b) as this distinction is no longer 

necessary under Interpretation and 

Policy .01. 

Violations of Trading Conduct and 

Decorum Policies 

CBOE is proposing to issue a new 

Regulatory Circular to update and 

replace Regulatory Circular RG09–26. 

CBOE is proposing to modify the 

Circular to (i) establish a rolling twentyfour month look-back period for all 

offenses; (ii) establish fixed fine levels 

for Class A and Class B Offenses; (iii) 

change the classification of certain 

offenses; and (iv) remove obsolete or 

duplicative violations from the list of 

Class A and Class B Offenses. CBOE has 

attached the proposed changes to the 

revised circular in Exhibit 5. 

CBOE is proposing to increase the 

look-back period from twelve months to 

twenty-four months for Class A Offenses 

and Class B Offenses. CBOE believes 

that the increased look-back period will 

serve as a deterrent for future similar 

conduct. 

CBOE is also proposing to adopt fixed 

fine levels for trading conduct and 

decorum violations to promote 

consistency in the application of these 

fines. For Class A Offenses, CBOE will 

assess a fine of $1,000 for the first 

violation, $2,500 for the second 

violation and $5,000 for the third 

violation. CBOE is also proposing to 

remove the reference to ‘‘Subsequent 

Offenses’’ for Class A Offenses. CBOE 

believes that any member or member 

organization that is cited for more than 

three Class A Offenses within a rolling 

twenty-four month period should be 

referred to the Business Conduct 

Committee for formal disciplinary 

action. The nature of these violations 

warrants formal disciplinary action 

where recidivist behavior is involved. 

For Class B Offenses, CBOE is proposing 

to assess a fine of $250 for a first 

offense, $500 for a second offense, 

$1,000 for a third offense and $2,500 for 

any subsequent offenses. 

CBOE is proposing to move one 

violation from a Class B Offense to a 

Class A Offense. Market-Makers are 

obligated to respond to a request for a 

market by an Order Book Official or 

PAR Official. Failure to respond to such 

a request has historically been 

considered a Class B Offense. Due to the 

nature of this violation, CBOE believes 

that it is more appropriate for this 

violation to be classified as a Class A 

Offense. In addition, CBOE is proposing 

to remove the qualification that a 

response must be provided to an Order 

Book Official since the obligation to 

respond to a market is not limited to 

requests for quotes from Order Book 

Officials. For example, Exchange Rule 

8.7(d) sets forth the requirements for 

Market-Makers to respond to a request 

for quote from members, including floor 

brokers and PAR Officials. 

CBOE is proposing to remove quote 

width violations from the Class A 

Offense list as CBOE is proposing that 

this violation be covered under 

Exchange Rule 17.50(g)(14). CBOE is 

also proposing to delete the Class A 

Offense relating to Violations of Rule 

8.51 (Firm Quote) as this provision is 

duplicative. Firm quote violations are 

generally addressed under Exchange 

Rule 17.50(g)(5). 

CBOE is proposing to clarify that the 

Class B Offense related to smoking 

applies to the use of any tobacco 

products in unauthorized areas. CBOE 

does not permit the use of any tobacco 

products inside the Exchange building. 

Further, the State of Illinois prohibits 

smoking in any public building and 

within fifteen feet of any public 

entrance.21

CBOE is proposing to delete a Class A 

Offense for Enabling/Assisting a 

Suspended Member or Associated 

Person to Gain Improper Access to the 

Floor. CBOE is also proposing to delete 

a Class B Offense for Gaining/Enabling 

Improper Access to the Floor. CBOE has 

significantly increased its physical 

security restrictions in recent years. 

Access to the trading floor requires use 

of a valid badge and a fingerprint scan 

associated with that badge. Further, 

CBOE believes that any attempt to 

enable improper access compromises 

the security of the Exchange. Such 

violations are considered very serious in 

nature and should be reviewed by the 

Business Conduct Committee. 

CBOE is proposing to delete the Class 

A Offense for Effecting or Attempting to 

Effect a Transaction with No Public 

Outcry. CBOE no longer believes that 

this conduct is minor in nature. CBOE 

is also proposing to delete the Class B 

Offenses relating to Improper Use of 

Runners’ Aisle, Trading in the Aisle and 

Impermissible Use of Member Phones. 

CBOE no longer sees these types of 

violations. CBOE is proposing to remove 

the Class B Offense of a Visitor Badge 

Returned Late or Not Returned. In 

addition, CBOE is proposing to delete a 

Class B Offense relating to a DPM 

Failure to Activate or Deactivate RAES. 

Since RAES is no longer available at 

CBOE, this provision is obsolete. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,22 in general, and 

furthers the objectives of Section 6(b)(5) 

of the Act,23 in particular, in that it 

would promote just and equitable 

principles of trade and protect investors 

and the public interest. The Exchange 

believes that the proposed rule changes 

will strengthen its ability to carry out its 

oversight responsibilities as a selfregulatory organization and reinforce its 

surveillance and enforcement functions. 

Additionally, this proposed rule change 

will promote consistency in minor rule 

violations and respective SRO reporting 

obligations as set forth pursuant to 

Regulation 240.19d–1(c)(2) of the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE does not believe that the 

proposed rule change will impose any 

burden on competition 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 

The Exchange neither solicited nor 

received comments on the proposal. 

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 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 e-mail to rulecomments@sec.gov. Please include File 

mstockstill on PROD1PC66 with NOTICES

Federal Register / Vol. 74, No. 127 / Monday, July 6, 2009 / Notices 32021 

24 17 CFR 200.30–3(a)(12) and 200.30–3(a)(44). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Exchange Act Release 59045 (December 3, 

2008), 73 FR 75151 (December 10, 2008) (SR– 

NYSEALTR–2008–09). 

4See Exchange Act Release 59170 (December 29, 

2008), 74 FR 486 (January 6, 2009) (SR– 

NYSEALTR–2008–19). 

Number SR–CBOE–2009–037 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–CBOE–2009–037. 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 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 inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 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; 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 

Number SR–CBOE–2009–037 and 

should be submitted on or before July 

27, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.24

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–15775 Filed 7–2–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60176; File No. SR– 

NYSEAmex–2009–30] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Amex LLC To Extend Through 

September 30, 2009, Its Waiver of 

Registered Representative Fees for 

New York Stock Exchange Member 

Organizations 

June 25, 2009. 

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 June 23, 

2009, NYSE Amex LLC (the ‘‘Exchange’’ 

or ‘‘NYSE Amex’’) 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 NYSE Amex. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to extend 

through September 30, 2009, its waiver 

of registered representative fees for New 

York Stock Exchange (‘‘NYSE’’) member 

organizations. The text of the proposed 

rule change is available at the Exchange, 

the Commission’s Public Reference 

Room, and http://www.nyse.com. 

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 IV 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

In connection with the acquisition of 

the American Stock Exchange (renamed 

NYSE Amex after the acquisition) by 

NYSE Euronext, all equities trading 

conducted on or through the American 

Stock Exchange legacy trading systems 

and facilities located at 86 Trinity Place, 

New York, New York, was moved on 

December 1, 2008, to the NYSE trading 

facilities and systems located at 11 Wall 

Street, New York, New York (the ‘‘NYSE 

Amex Trading Systems’’), which are 

operated by the NYSE on behalf of 

NYSE Amex (the ‘‘Equities Relocation’’). 

At the time of the Equities Relocation, 

by operation of NYSE Amex Equities 

Rule 2, all NYSE member organizations 

automatically became NYSE Amex 

member organizations. By acquiring 

NYSE Amex membership, the NYSE 

member organizations that were not 

previously NYSE Amex members would 

become subject to the NYSE Amex 

registration fees for all of their 

employees who serve as registered 

representatives. As these NYSE member 

organizations that had no NYSE Amex 

business prior to the Equities Relocation 

became NYSE Amex members without 

any action on their own part, NYSE 

Amex waived the application of its 

registered representative fees to those 

firms for the month of December. At that 

time, NYSE Amex stated that it 

expected to submit a filing to adopt a 

revised registered representative fee 

commencing January 1, 2009.3 The 

waiver was subsequently extended until 

June 30, 2009.4 NYSE Amex has not yet 

determined how best to revise its 

registration fees in light of the accession 

to NYSE Amex membership of these 

NYSE member organizations. As such, 

NYSE Amex believes that it is 

appropriate to continue for the present 

its waiver of registered representative 

fees payable by member organizations 

which acquired their membership 

automatically in connection with the 

Equities Relocation. NYSE Amex will 

submit an amended filing to the 

Commission at such time as it wishes to 

end this waiver. In any event, the 

waiver as extended by this filing will 

expire on September 30, 2009. 

Consequently, NYSE Amex must submit 

a filing on or prior to that date to either 

adopt a new fee approach or to further 

extend the term of the waiver. 

References to the Exchange in 

Footnote 2 of the NYSE Amex Options 

Price List are being changed in this 

filing from ‘‘NYSE Alternext US’’ and 

‘‘NYSE Alternext’’ to ‘‘NYSE Amex,’’ to 

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