Document ID: SEC-2008-0293-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange, Inc.
Posted Date: 2008-02-25T05:00Z

[Federal Register: February 25, 2008 (Volume 73, Number 37)]
[Notices]               
[Page 10075-10076]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25fe08-129]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57340; File No. SR-BSE-2007-54]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order 
Approving Proposed Rule Change, as Modified by Amendment No. 2 Thereto, 
Relating to the Imposition of Fines for Minor Rule Violations

February 15, 2008.
    On December 20, 2007, 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 the Boston Options Exchange (``BOX'') 
rules related to Contrary Exercise Advice violations. On January 7, 
2008, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ On January 10, 2008, the Exchange withdrew Amendment No. 1 
and simultaneously filed Amendment No. 2 to the proposed rule 
change.\4\ The proposed rule change, as modified by Amendment No. 1, 
was published for comment in the Federal Register on January 14, 
2008.\5\ The Commission received no comments regarding the proposal. 
This order approves the proposed rule change as modified by Amendment 
No. 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 revised the proposed rule text to clarify 
how fines for third and subsequent offenses are imposed.
    \4\ Amendment No. 2 retained the clarification (submitted in 
Amendment No. 1) regarding how fines for third and subsequent 
offenses are imposed and corrected a page numbering error. 
Therefore, Amendment No. 2 was technical in nature and therefore 
does not need to be published for comment.
    \5\ See Securities Exchange Act Release No. 57108 (January 7, 
2008), 73 FR 2294.
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    The Exchange proposes to increase and strengthen the sanctions 
imposed under its Minor Rule Violation Plan (``MRVP'') on any member 
who fails to submit to the Exchange in a timely manner pursuant to BOX 
Rule Chapter X, Section 2(f), ``Contrary Exercise Advice Violations'' 
or exercise

[[Page 10076]]

instructions relating to the exercise or nonexercise of a noncash-
settled equity option. The Exchange believes that increasing the fine 
levels specified with respect to both individual members and member 
organizations and lengthening the surveillance period from a 12-month 
period to a rolling 24-month period will serve as an effective 
deterrent to such violative conduct.\6\
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    \6\ In addition, as a member of the Intermarket Surveillance 
Group, the Exchange, as well as certain other self-regulatory 
organizations (``SROs''), executed and filed on October 29, 2007 
with the Commission, a final version of an Agreement pursuant to 
Section 17(d) of the Act (the ``17d-2 Agreement''). As set forth in 
the 17d-2 Agreement, the SROs have agreed that their respective 
rules concerning the filing of Expiring Exercise Declarations, also 
referred to as Contrary Exercise Advices, are common rules. As a 
result, the proposal to amend the MRVP will result in further 
consistency in sanctions among the SROs that are signatories to the 
17d-2 Agreement concerning Contrary Exercise Advice violations.
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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.\7\ In 
particular, the Commission believes that the proposal is consistent 
with Section 6(b)(5) of the Act,\8\ which requires that the rules of an 
exchange be designed to promote just and equitable principles of trade, 
to facilitate 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. 
The Commission further believes that the Exchange's proposal to 
increase the fine levels imposed on individuals and member 
organizations who fail to submit Advice Cancel or exercise instructions 
in a timely manner is consistent with Sections 6(b)(1) and 6(b)(6) of 
the Act,\9\ which require that the rules of an exchange enforce 
compliance with, and provide appropriate discipline for, violations of 
Commission and Exchange rules. In addition, 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,\10\ which governs minor 
rule violation plans. The Commission believes that the proposed rule 
change should strengthen the Exchange's ability to carry out its 
oversight and enforcement responsibilities as an SRO in cases where 
full disciplinary proceedings are unsuitable in view of the minor 
nature of the particular violation.
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    \7\ 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).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \10\ 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 the Exchange's rules and 
all other rules subject to the imposition of fines under the MRVP. The 
Commission believes that the violation of any SRO 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 the Exchange 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 MRVP or whether a 
violation requires formal disciplinary action.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\11\ and Rule 19d-1(c)(2) under the Act,\12\ that the proposed rule 
change (SR-BSE-2007-54), as modified by Amendment No. 2, e, and hereby 
is, approved and declared effective.
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    \11\ 15 U.S.C. 78s(b)(2).
    \12\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 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. E8-3444 Filed 2-22-08; 8:45 am]

BILLING CODE 8011-01-P