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Self-Regulatory Organizations; American Stock Exchange LLC; Order Approving Proposed Rule Change Relating to Minor Rule Violations and the Bunching of Odd-Lot Orders

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Start Preamble June 12, 2006.

On April 12, 2006, the American Stock Exchange LLC (“Amex” 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 to include violations of its rule governing the bunching of odd-lot orders (Amex Rule 208) in Amex Rule 590, its Minor Rule Violation Plan (“Plan”). The proposed rule change was published for comment in the Federal Register on May 10, 2006.[3] The Commission received no comments regarding the proposal.

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] In particular, the Commission believes that the proposal is consistent with Section 6(b)(5) of the Act,[5] because handling violations of Amex Rule 208 pursuant to the Plan would enable prompt resolution of such violations in the interest of protecting 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,[6] which require that the rules of an exchange enforce compliance with, and provide appropriate discipline for, violations of Commission and Exchange rules. In addition, because existing Amex Rule 590 provides procedural rights to a person fined under the Plan to contest the fine and permits a hearing on the matter, the Commission believes the Plan, as amended by this 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.[7]

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 [8] which governs minor rule violation plans. The Commission believes that the change to the Plan will strengthen the Exchange's ability to carry out its oversight and enforcement responsibilities as a self-regulatory organization in cases where full disciplinary proceedings are unsuitable in view of the minor nature of the particular violation.

In approving this proposed rule change, the Commission in no way minimizes the importance of compliance with Amex rules and all other rules subject to the imposition of fines under the Plan. The Commission believes that the violation of any self-regulatory organization's rules, as well as Commission rules, is a serious matter. However, the Plan provides a reasonable means of addressing rule 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 Amex will continue to conduct surveillance with due diligence and make determinations based on its findings, on a case-by-case basis, as to whether a fine of more or less than the recommended amount is appropriate for a violation of Amex Rule 208 under the Plan or whether such a violation requires formal disciplinary action.

It is therefore ordered, pursuant to Section 19(b)(2) of the Act [9] and Rule 19d-1(c)(2) under the Act,[10] that the proposed rule change (SR-Amex-2006-34) be, and hereby is, approved and declared effective.

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

Nancy M. Morris,


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3.  See Securities Exchange Act Release No. 53749 (May 2, 2006), 71 FR 27298.

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

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15 U.S.C. 78f(b)(1) and 78f(b)(6). Back to Citation


15 U.S.C. 78f(b)(7) and 78f(d)(1). Back to Citation

[FR Doc. E6-9579 Filed 6-16-06; 8:45 am]