Skip to Content

Notice

Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange LLC Relating to the Elimination of the Minor Floor Violation Disciplinary Committee

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble August 20, 2003.

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 July 25, 2003, the American Stock Exchange LLC (“Amex” 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 Amex proposes to amend Amex Rule 590 to eliminate its Minor Floor Violation Disciplinary Committee (“MFVDC” or “Committee”) and to transfer the MFVDC's responsibilities to the Exchange's Enforcement Department. The text of the proposed rule change is available at the Office of the Secretary, the Amex and at the Commission.

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 Sections 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 has had a Minor Rule Violation Fine Plan since 1976 that provides a simplified procedure for the resolution of specified rule violations. Codified in Amex Rule 590, the Minor Rule Violation Fine Plan has three distinct sections: Part 1 (“General Rule Violations”), which covers more substantive matters; Part 2 (“Floor Decorum”), which covers Floor Decorum and operational matters; and Part 3 (“Reporting Violations”), which covers the late submission of routine reports.

The Exchange's Enforcement Department and MFVDC [3] currently divide responsibility for administering Part 1 of Amex Rule 590. The Enforcement Department enforces those rules enumerated in paragraph (g) of Part 1 of Amex Rule 590, and the MFVDC enforces the rules enumerated in paragraph (h) of Part 1 of Amex Rule 590. The rules that currently may be enforced by the MFVDC follow:

Failure to comply with the Exchange's Auto-Ex Policy relating to signing on and off the Auto-Ex system

Failure to comply with the Exchange's rules regarding openings. (Amex Rules 108(a) and (b) and 950(b))Start Printed Page 51819

Failure to comply with the Exchange's delayed opening policy. (Amex Floor Transaction Handbook, Part IV, B.3.(g))

Failure to comply with the Exchange's procedures for stopping orders. (Amex Rule 109 and 950(o))

Failure to properly mark or identify and represent Floor orders as required under Exchange rules:

1. Amex Rule 111, Commentary .04; Amex Rule 114, Commentary .09; and Amex Rule 153(g) (which are made applicable to options by Amex Rule 950(a)).

2. Amex Rule 950(c) & (d); 957(d); Amex Rule 958, Commentary .09; and Amex Rule 958A(b)).

Failure to comply with requirements relating to block sized cross transactions. (Amex Rule 126(g), Commentaries .01 and .02)

Failure to comply with the Exchange's procedures for executing “cross” transactions. (Amex Rule 151 which is made applicable to options by Amex Rule 950(a))

Failure to comply with Exchange procedures regarding stop orders. (Amex Rules 154, Commentary .04 and 950(f))

Violation of the Exchange's rules regarding orders left with specialists. (Amex Rules 154 and 950(f))

Failure to comply with the “2, 1, 1/2 Point Rule”. (Amex Rules 154, Commentary .08 and 950(f), Commentary .04)

Failure to comply with the Exchange's rules regarding the execution of orders. (Amex Rules 156 and 950(g))

Failure by specialists to obtain Floor Official approval when establishing, increasing or liquidating a position. (Amex Rule 170, Commentaries .01 and .02)

Failure to obtain Exchange approval, or failure to comply with the terms of approval, for member or member firm proprietary electronic devices or systems used on the Exchange Floor. (Amex Rule 220)

Violation of Intermarket Trading System (ITS) rules relating to Pre-Opening Applications (Amex Rule 232) and Trade Throughs, Locked Markets, and the Block Trade Policy (Amex Rule 236).

Failure to comply with the Exchange's “facilitation” policy. (Amex Rule 950(d), Commentary .02)

Failure to comply with the Exchange's “solicitation” policy. (Amex Rule 950(d), Commentary .03)

Failure to quote options markets within the maximum quote spread differentials. (Amex Rules 950(n), Commentary .10; 958(c)(i); and 958(c)(ii))

Failure to comply with the Exchange's rules regarding the announcement of trader orders. (Amex Rule 958, Commentary .09)

Failure to comply with the Exchange's modified firm quote rule. (Amex Rule 958A)

Part 1 of Amex Rule 590 allows the Enforcement Department and the Committee to issue abbreviated “written statements” to persons who may have violated the specified rules identifying the rules violated, the act or omission constituting the violation, and the amount of the fine. The issuance of a “written statement” by the Enforcement Department or MFVDC does not constitute a finding of guilt. Persons receiving a written statement may plead “no contest” and return the statement to the Exchange with the specified fine. In the alternative, persons who are charged under the Plan may contest the fine and receive a hearing before an Exchange Disciplinary Panel. The Exchange is not required to use Amex Rule 590 to impose a fine for a violation of the rules enumerated in the rule and is free to pursue disciplinary action under Article V of the Amex Constitution or Amex Rule 345.

In this filing, the Exchange is proposing to eliminate the MFVDC and to transfer its responsibilities to the Exchange's Enforcement Department so that responsibility for initiating disciplinary action under Part 1 of the Minor Rule Violation Fine Plan will rest exclusively with the Amex enforcement staff. The Exchange currently has one rule filing pending with the Commission that would add a violation to paragraph (h) of Part 1 of Amex Rule 590.[4] This filing is being amended to transfer this violation to the list of rules that may be the subject of Enforcement Department action under paragraph (g) of Part 1 of Amex Rule 590. In connection with the elimination of the MFVDC, the Amex also is proposing to eliminate reference to the Committee wherever it appears in the Exchange's rules.[5]

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act [6] in general and furthers the objectives of Section 6(b)(1),[7] 6(b)(6),[8] and 6(b)(7) [9] in particular in that it will enhance the ability of the Exchange to enforce compliance by its members and persons associated with its members with the provisions of the Act, the rules and regulations thereunder, and the rules of the Exchange; it will help ensure that members and persons associated with members are appropriately disciplined for violations of the Act, the rules and regulations thereunder, and the rules of the Exchange; and it will provide a fair procedure for the disciplining of members and persons associated with members.

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

The proposed rule change will impose no burden on competition not necessary or appropriate in furtherance of the purposes of the Act.

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

No written comments were solicited or received with respect to the proposed rule change.

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 Amex 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 Start Printed Page 51820Commission, 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 Amex. All submissions should refer to file number SR-Amex-2003-71 and should be submitted by September 18, 2003.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[10]

J. Lynn Taylor,

Assistant Secretary.

End Signature End Preamble

Footnotes

3.  The Exchange established the MFVDC in 1993. See Securities Exchange Act Release No. 32989 (September 29, 1993), 58 FR 52122 (October 6, 1993) (SR-Amex-92-11). The structure of the Committee recently changed to include two floor members, two members of the Amex staff and one representative of an upstairs member firm.

Back to Citation

4.  SR-Amex-2002-09 would add to the list of violations that may be sanctioned by the MFVDC, “Failure to use best efforts to attempt to ensure that the next Auto-Ex execution is appropriately allocated to the price improving registered options trader. (Amex Rule 933, Commentary .04(d).” See Amendment No. 9 to Amex-2002-09. Amex proposes to transfer this rule to the list of rules enforced by the Enforcement Department under paragraph (g) of Part 1 of Amex Rule 590.

Back to Citation

5.  The MFVDC is mentioned in Commentaries .04 and .06 to Amex Rule 26. These Commentaries concern the calculation of performance ratings for option and ETF specialists.

Back to Citation

[FR Doc. 03-22032 Filed 8-27-03; 8:45 am]

BILLING CODE 8010-01-P