[Federal Register Volume 75, Number 202 (Wednesday, October 20, 2010)]
[Notices]
[Pages 64771-64772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26359]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63113; File No. 4-616]
Self-Regulatory Organizations; Order Approving Minor Rule
Violation Plan for BATS Y-Exchange, Inc.
October 15, 2010.
On September 10, 2010, BATS Y-Exchange, Inc. (``BATS Y-Exchange''
or ``Exchange'') filed with the Securities 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
(the ``Act'') \1\ and Rule 19d-1(c)(2) thereunder.\2\ The proposed MRVP
was published for public comment on September 23, 2010.\3\ The
Commission received no comments on the proposal. This order approves
BATS Y-Exchange's proposed MRVP.
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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. 62924 (September 16,
2010), 75 FR 58011. The notice was published under File No. 10-198
used for BATS Y-Exchange's Form 1 application, however the order
will be published under File No. 4-616.
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BATS Y-Exchange'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) of 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) under
the Act, the Exchange proposed to designate certain specified 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 Y-Exchange included in its proposed MRVP the policies and
procedures currently included in BATS Y-Exchange Rule 8.15
(``Imposition of Fines for Minor Violation(s) of Rules'') and the rule
violations included in BATS Y-Exchange Rule 8.15.01.\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 filed with the Commission 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 administrative remedies.
\6\ On August 13, 2010, the Exchange's application for
registration as a national securities exchange, including the rules
governing the BATS Y-Exchange, was approved. See Securities Exchange
Act Release No. 62716 (August 13, 2010), 75 FR 51295 (August 19,
2010) (File No. 10-198). In the approval order, the Commission noted
that BATS Y-Exchange 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 BATS Y-Exchange, the Exchange must file a minor rule
violation plan with the Commission. BATS Y-Exchange represented that
modifications may be made to Rule 8.15.01 in the future. BATS Y-
Exchange 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 Y-
Exchange 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 or 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 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
[[Page 64772]]
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 Y-Exchange 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 Y-Exchange'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 Y-Exchange 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 Y-Exchange, File No. 4-616,
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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26359 Filed 10-19-10; 8:45 am]
BILLING CODE 8011-01-P