Document ID: SEC-2010-0702-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2010-05-12T04:00Z

[Federal Register: May 12, 2010 (Volume 75, Number 91)]
[Notices]               
[Page 26822-26823]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12my10-123]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62036; File No. 4-594]

 
 Self-Regulatory Organizations; Order Approving Minor Rule 
Violation Plan for EDGX Exchange, Inc.

May 5, 2010.
    On March 19, 2010, EDGX Exchange, Inc. (``EDGX Exchange'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') a proposed minor rule violation plan (``MRVP'') 
pursuant to Section 19(d)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19d-1(c)(2) thereunder.\2\ The proposed MRVP was 
published for public comment on March 29, 2010.\3\ The Commission 
received no comments on the proposal. This order approves EDGX 
Exchange's proposed MRVP.
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    \1\ 15 U.S.C. 78s(d)(1).
    \2\ 17 CFR 240.19d-1(c)(2).
    \3\ See Securities Exchange Act Release No. 61752 (March 22, 
2010), 75 FR 15475.
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    EDGX Exchange's MRVP specifies those uncontested minor rule 
violations with sanctions not exceeding $2,500 which would not be 
subject to the provisions of Rule 19d-1(c)(1) under the Act \4\ 
requiring that a self-regulatory organization promptly file notice with 
the Commission of any final disciplinary action taken with respect to 
any person or organization.\5\ In accordance with Rule 19d-1(c)(2), the 
Exchange proposed to designate certain rule violations as minor rule 
violations, and requested that it be relieved of the reporting 
requirements regarding such violations, provided it gives notice of 
such violations to the Commission on a quarterly basis. EDGX Exchange 
included in its proposed MRVP the policies and procedures currently 
included in EDGX Exchange Rule 8.15 (``Imposition of Fines for Minor 
Violation(s) of Rules'') and the rule violations included in EDGX 
Exchange Rule 8.15.01.\6\
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    \4\ 17 CFR 240.19d-1(c)(1).
    \5\ The Commission adopted amendments to paragraph (c) of Rule 
19d-1 to allow self-regulatory organizations (``SROs'') to submit 
for Commission approval plans for the abbreviated reporting of minor 
disciplinary infractions. See Securities Exchange Act Release No. 
21013 (June 1, 1984), 49 FR 23828 (June 8, 1984). Any disciplinary 
action taken by an SRO against any person for violation of a rule of 
the SRO which has been designated as a minor rule violation pursuant 
to such a plan shall not be considered ``final'' for purposes of 
Section 19(d)(1) of the Act if the sanction imposed consists of a 
fine not exceeding $2,500 and the sanctioned person has not sought 
an adjudication, including a hearing, or otherwise exhausted his or 
her administrative remedies.
    \6\ On March 12, 2010, the Commission approved EDGX Exchange's 
application for registration as a national securities exchange, 
including the rules governing the EDGX Exchange. See Securities 
Exchange Act Release No. 61698, 75 FR 13151 (March 18, 2010). In the 
approval order, the Commission noted that EDGX Exchange Rule 8.15 
provides for the imposition of fines for minor rule violations 
pursuant to a minor rule violation plan. Accordingly, the Commission 
noted that, EDGX Exchange Rule 8.15 provides for the imposition of 
fines for minor rule violations pursuant to a minor rule violation 
plan. Accordingly, the Commission noted that as a condition to the 
operation of EDGX Exchange, the Exchange must file a minor rule 
violation plan with the Commission.

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[[Page 26823]]

    Pursuant to the Exchange's proposed MRVP, under Rule 8.15, the 
Exchange may impose a fine (not to exceed $2,500) on a member, an 
associated person of a member, or a registered or non-registered 
employee of a member with respect to any rule listed in Rule 8.15.01. 
The Exchange shall serve the person against whom a fine is imposed with 
a written statement setting forth the rule or rules allegedly violated, 
the act or omission constituting each such violation, the fine imposed, 
and the date by which such determination becomes final or by which such 
determination must be contested. If the person against whom the fine is 
imposed pays the fine, such payment shall be deemed to be a waiver of 
such person's right to a disciplinary proceeding and any review of the 
matter under Exchange rules. Any person against whom a fine is imposed 
may contest the Exchange's determination by filing with the Exchange a 
written response, at which point the matter shall become a disciplinary 
proceeding.
    Upon approval of the plan, the Exchange will provide the Commission 
a quarterly report of actions taken on minor rule violations under the 
plan. The quarterly report will include the Exchange's internal file 
number for the case, the name of the individual and/or organization, 
the nature of the violation, the specific rule provision violated, the 
sanction imposed, the number of times the rule violation has occurred, 
and the date of disposition.\7\
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    \7\ EDGX Exchange attached a sample form of the quarterly report 
with its submission to the Commission.
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    The Commission finds that the proposed MRVP is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange. 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 remove 
impediments and to perfect the mechanism of a free and open market and 
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 \9\ which 
require that the rules of an exchange enforce compliance with, and 
provide appropriate discipline for, violations of the Commission and 
Exchange rules. In addition, because the MRVP offers procedural rights 
to a person sanctioned under Rule 8.15, the Commission believes that 
Rule 8.15 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.\10\
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    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \10\ 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,\11\ because the MRVP strengthens EDGX 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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    \11\ 17 CFR 240.19d-1(c)(2).
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    In approving this proposal, the Commission in no way minimizes the 
importance of compliance with Exchange rules and all other rules 
subject to the imposition of sanctions under Rule 8.15. The Commission 
believes that the violation of an SRO's rules, as well as Commission 
rules, is a serious matter. However, Rule 8.15 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 expects that 
EDGX Exchange will continue to conduct surveillance with due diligence 
and make determinations based on its findings, on a case-by-case basis, 
whether a sanction under the MRVP is appropriate, or whether a 
violation requires formal disciplinary action.
    It is therefore ordered, pursuant to Rule 19d-1(c)(2) under the 
Act,\12\ that the proposed MRVP for EDGX Exchange, File No. 4-594, be, 
and hereby is, approved and declared effective.
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    \12\ Id.

    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)(44).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11259 Filed 5-11-10; 8:45 am]
BILLING CODE 8010-01-P