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Notice

Self-Regulatory Organizations; Notice of Filing of Proposed Rules Change by the Chicago Stock Exchange, Inc., To Amend Its Minor Rule Violation Plan

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Information about this document as published in the Federal Register.

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Start Preamble October 2, 2001.

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 April 23, 2001, the Chicago Stock Exchange, Inc. (“CHX” or “Exchange”) 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 the Exchange. 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 amend CHX Article XII, Rule 9(h) (Minor Rule Violations) to include CHX Article XX, Rule 43(d) (Training in Nasdaq/NM Securities/Manual Executions) into the Exchange's Minor Rule Violation Plan (“Plan”). The text of the proposed rule change is below. Proposed additions are in italic.

ARTICLE XII, Rule 9

Minor Rule Violations

Rule 9(h) Exchange Rules and Policies subject to the Minor Rule Violation Plan:

(i) no change in text

(ii) Floor Decorum and Minor Trading Rule Violations

(1)-(18) no change in text

(19) Failure to manually execute a Nasdaq/NM market or marketable limit order at the NBBO or better at the time of its receipt or at the best available price in another marketplace (Article XX, Rule 43(b)).

* * * * *

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 Exchange 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 these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Section A, B, and C below, of the most significant aspects of such statements.

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

1. Purpose

The Exchange proposes to add Article XX, Rule 43(d) to the Plan under Article XII, Rule 9. Under CHX Rule 43(d), CHX Nasdaq specialists, if they are not quoting at the national best bid and offer (“NBBO”) at the time a market or marketable limit order is received over the Exchange's Midwest Automated Execution System (the “MAX” system), are permitted to remove such orders that would otherwise receive an automatic execution at the NBBO and to manually execute them. The resulting manual execution must occur at the NBBO existence at the time the order was Start Printed Page 51695received, or better, or at the best available price in another marketplace. The Exchange believes that violations of this rule are objective in nature and easily verifiable. Therefore, the Exchange believes that violations of this rule in inadvertent or isolated circumstances should be handled under the Plan and not pursuant to the Exchange's formal disciplinary procedures. The Exchange proposes that the recommended fines for the above violations be $100, $500 and $1,000 for first, second and third and subsequent violations, respectively.[3]

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange. In particular, the Exchange believes the proposed rule is consistent with Sections 6(b)(1),[4] 6(b)(6),[5] 6(b)(7),[6] and 19(d) [7] of the Act. The CHX believes the proposal is consistent with the Section 6(b)(6) [8] requirement that the rules of an Exchange provide that its members and persons associated with its members shall be disciplined appropriately for violations of the rules of the exchange. The CHX believes the proposal provides an efficient procedure for the appropriate disciplining of members for a rule violation that is objective in nature. In addition, because CHX Article XII, Rule 9 provides procedural rights to a person fined under the Plan to contest the fine and permit a hearing on the matter, the Exchange believes the proposal 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.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will impose any inappropriate burden on competition.

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

No written comments were either solicited or received.

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 CHX 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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 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. Copies of such filing will also be available for inspection and copying at the principal office of the CHX. All submissions should refer to File No. SR-CHX-2001-08 and should be submitted by October 31, 2001.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[9]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  The Exchange staff would not recommend that a violation of this rule proceed under the Plan if a specialist had not already adjusted the execution price of an order that was the basis of the rule violation.

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[FR Doc. 01-25381 Filed 10-9-01; 8:45 am]

BILLING CODE 8010-01-M