Document ID: SEC-2008-1452-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Order Approving Minor Rule Violation Plan: BATS Exchange, Inc.
Posted Date: 2008-10-23T04:00Z

[Federal Register: October 23, 2008 (Volume 73, Number 206)]
[Notices]               
[Page 63219-63220]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23oc08-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58807; File No. 4-568]

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

October 17, 2008.
    On August 29, 2008, the BATS Exchange, Inc. (``BATS'' or the 
``Exchange'') filed with the Securities

[[Page 63220]]

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 
September 16, 2008.\3\ The Commission received no comments on the 
proposal. This order approves BATS's proposed
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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. 58485 (September 8, 
2008), 73 FR 53468.
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    BATS'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. BATS included in its proposed 
MRVP the policies and procedures currently included in BATS Exchange 
Rule 8.15 (``Imposition of Fines for Minor Violation(s) of Rules'') and 
the rule violations included in BATS Exchange Rule 8.15.01, 
Interpretations and Policies.\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 August 18, 2008, the Commission approved BATS's 
application for registration as a national securities exchange, 
including the rules governing the Exchange. See Securities Exchange 
Act Release No. 58375, 73 FR 49498 (August 21, 2008). In the 
approval order, the Commission noted that BATS 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 the Exchange, it must file a 
minor rule violation plan with the Commission. BATS represented that 
modifications may be made to Rule 8.15.01 in the future. BATS 
proposed that, when amendments to Rule 8.15.01 are made pursuant to 
a rule filing submitted pursuant to Rule 19b-4 under the Act, such 
filing would automatically be deemed a request by BATS for 
Commission approval of a modification to its MRVP.
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    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\ BATS 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 BATS'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 
BATS 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 BATS, File No. 4-568, 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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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8-25241 Filed 10-22-08; 8:45 am]

BILLING CODE 8011-01-P