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Self-Regulatory Organizations; Order Granting Approval of Proposed Rule Change by the Chicago Stock Exchange, Incorporated, Amending Its Minor Rule Violation Plan

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Start Preamble November 29, 2001.

On April 23, 2001, the Chicago Stock Exchange, Incorporated (“CHX” 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 that would amend CHX Article XII, Rule 9(h), Minor Rule Violations, to include CHX Article XX, Rule 43(d), Trading in Nasdaq/NM Securities/Manual Executions, in the Exchange's Minor Rule Violation Plan (“Plan”). Specifically, a member who fails to manually execute a Nasdaq/NM market or marketable limit order at the national best bid or offer or better at the time of its receipt or at the best price available in another market place may be fined under the Plan. Notice of the proposed rule change was published for comment in the Federal Register on October 10, 2001.[3] The Commission received no comments on the proposal. This order grants approval of the proposed rule change.

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[4] and, in particular, the requirements of section 6 of the Act[5] and the rules and regulations thereunder. The Commission finds specifically that the proposed rule change is consistent with section 6(b)(5) of the Act[6] because it will help prevent fraudulent and manipulative acts and practices, as well as promote just and equitable principles of trade. The Commission finds the proposal is consistent with section 6(b)(6) of the Act,[7] because the proposal provides a mechanism for the appropriate discipline for violations of certain rules and regulations.

In addition, the Commission finds the proposal is consistent with section 6(b)(7) of the Act[8] because the proposal provides a fair procedure for the disciplining of members and persons associated with members. Finally, the Commission finds the proposal is consistent with Securities Exchange Act Rule 19d-1(c)(2)[9] that governs minor rule violation plans.

In approving this proposal, the Commission in no way minimizes the importance of compliance with this rule, and all other rules subject to the imposition of fines under the Plan. The Commission believes that the violation Start Printed Page 63271of any self-regulatory organization's rules, as well as Commission rules, is a serious matter. However, in an effort to provide the Exchange with greater flexibility in addressing certain violations, the Plan provides a reasonable means to address rule violations that do not rise to the level of requiring formal disciplinary proceedings. The Commission expects that the CHX will continue to conduct surveillance with due diligence, and make a determination based on its findings whether fines of more or less than the recommended amount are appropriate for violations of rules under the Plan, on a case by case basis, or if a violation requires formal disciplinary action.

It is therefore ordered, pursuant to section 19(b)(2) of the Act[10] , that the proposed rule change (SR-CHX-2001-08), be, and it hereby is, approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[11]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  Securities Exchange Act Release No. 44900 (October 2, 2001), 66 FR 51694.

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4.  In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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[FR Doc. 01-30142 Filed 12-4-01; 8:45 am]