Notice2023-01627
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Add Violations of Article 6, Rule 13 to the List of Minor Rule Violations in Rule 10.9217
Primary source
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Published
January 27, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 18 (Friday, January 27, 2023)</title>
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[Federal Register Volume 88, Number 18 (Friday, January 27, 2023)]
[Notices]
[Pages 5392-5394]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-01627]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96734; File No. SR-NYSECHX-2023-04]
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of
Filing and Order Granting Accelerated Approval of a Proposed Rule
Change To Add Violations of Article 6, Rule 13 to the List of Minor
Rule Violations in Rule 10.9217
January 23, 2023.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on January 9, 2023, NYSE Chicago, Inc. (``NYSE Chicago'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II 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 and approving the proposal
on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to add Article 6, Rule 13 (Registration
Requirements) to the list of minor rule violations in Rule 10.9217. The
proposed rule change is available on the Exchange's website at
<a href="http://www.nyse.com">www.nyse.com</a>, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
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 self-regulatory organization
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 those statements may be examined at
the places specified in Item III below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to add Article 6, Rule 13 (Registration
Requirements) to the list of minor rule violations in Rule 10.9217.
Article 6, Rule 13, which was adopted in 2018,\4\ sets forth the
requirements for persons engaged in the investment banking or
securities business of a Participant to be registered with the Exchange
as a representative or principal in each category of registration
appropriate to his or her functions and responsibilities as specified
in Article 6, Rule 14.
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\4\ See Securities Exchange Act Release No. 84896 (December 20,
2018), 83 FR 67376 (December 28, 2018) (SR-CHX-2018-07) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Regarding
Qualification, Registration and Continuing Education Requirements
Applicable to Participants).
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The Exchange proposes to add Article 6, Rule 13 to the list of
rules in Rule 10.9217 eligible for disposition pursuant to a fine under
Rule 10.9216(b). Specifically, the Exchange proposes to add Article 6,
Rule 13 to the ``List of Rule Violations and Fines Applicable Thereto''
as item 25 under current subsection (e), titled ``Reporting and Record
Retention Violations.'' The substantially similar version of Article 6,
Rule 13 was adopted by the Exchange's affiliate New York Stock Exchange
LLC (``NYSE'') in 2018 \5\ and is currently eligible for minor rule
fines under the NYSE's version of Rule 10.9217.\6\ The Exchange
believes that having the ability to issue a minor rule fine for failing
to comply with the registration requirements of Article 6, Rule 13
would be consistent with and complement the Exchange's current ability
to issue minor rule fines for other registration violations (e.g.,
Registration and Approval of Participant Personnel (Article 6, Rule
2(a) & (b), Registration of Market Makers and Market Maker Authorized
Traders (Article 16, Rules 1 and 3)). The Exchange further believes
that the violations of the registration requirements are particularly
suited to minor rule fines because minor fines provide 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.
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\5\ See Securities Exchange Act Release No. 84336 (October 2,
2018), 83 FR 50727 (October 9, 2018) (SR-NYSE-2018-44) (Notice of
Filing and Immediate Effectiveness of Amendments To Rules Regarding
Qualification, Registration and Continuing Education Applicable to
Members and Member Organizations). The Exchange's other affiliates
also adopted substantially similar versions of Article 6, Rule 13.
See NYSE American LLC (``NYSE American'') Rule 2.1210; NYSE Arca,
Inc. (``NYSE Arca'') Rule 2.1210; & NYSE National, Inc. (``NYSE
National'') Rule 2.1210.
\6\ See NYSE Rule 9217. The substantially similar versions of
Article 6, Rule 13 are also eligible for minor rule fines under each
affiliate's version of Rule 10.9217. See NYSE American Rule 9217;
NYSE Arca Rule 10.9217(g)(13); & NYSE National Rule 10.9217(f).
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The Exchange further proposes to add fine levels for violations of
Article 6, Rule 13. The Exchange would add proposed first, second and
third level fines for violations of Article 6, Rule 13 to the fine
schedule of $250 for the first violation, $750 for the second violation
and $1,500 for the third and subsequent violations. The proposed fine
levels would be the same as those in current Rule 10.9217(f).13 and
(f).21 for violations of Article 6, Rule 2(a) & (b) and Article 16,
Rules 1 and 3, respectively.
The Exchange believes that the proposed change would strengthen the
Exchange's ability to carry out its
[[Page 5393]]
oversight and enforcement responsibilities in cases where full
disciplinary proceedings are unwarranted in view of the minor nature of
the particular violation.
2. Statutory Basis
The proposed rule change is consistent with section 6(b) of the
Act,\7\ in general, and furthers the objectives of section 6(b)(5),\8\
in particular, because it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system and, in general, to protect investors and
the public interest.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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Minor rule fines provide a meaningful sanction for minor or
technical violations of rules when the conduct at issue does not
warrant stronger, immediately reportable disciplinary sanctions. The
inclusion of a rule in Rule 10.9217 does not minimize the importance of
compliance with the rule, nor does it preclude the Exchange from
choosing to pursue violations of eligible rules through formal
disciplinary action if the nature of the violations or prior
disciplinary history warrants more significant sanctions. Rather, the
Exchange believes that the proposed rule change will strengthen the
Exchange's ability to carry out its oversight and enforcement
responsibilities in cases where full disciplinary proceedings are
unwarranted in view of the minor nature of the particular violation.
The option to impose a minor rule sanction gives the Exchange
additional flexibility to administer its enforcement program in the
most effective and efficient manner while still fully meeting the
Exchange's remedial objectives in addressing violative conduct. The
proposed rule change is thus designed to prevent fraudulent and
manipulative acts and practices because it will provide the Exchange
the ability to issue a minor rule fine for violations of the
registration requirements set forth in Article 6, Rule 13 where a more
formal disciplinary action may not be warranted or appropriate. In
addition, the Exchange believes that adding rules based on the rules of
its affiliate to the Exchange's minor rule plan would promote fairness
and consistency in the marketplace by permitting the Exchange to issue
a minor rule fine for violations of substantially similar rules that
are already eligible for minor rule treatment, thereby harmonizing
rules eligible for minor rule fines across affiliated exchanges.
The Exchange further believes that the proposed amendments to Rule
10.9217 are consistent with section 6(b)(6) of the Act,\9\ which
provides that members and persons associated with members shall be
appropriately disciplined for violation of the provisions of the rules
of the Act, the rules and regulations thereunder, and the rules of the
exchange, by expulsion, suspension, limitation of activities,
functions, and operations, fine, censure, being suspended or barred
from being associated with a member, or any other fitting sanction. As
noted, the proposed rule change would provide the Exchange ability to
sanction minor or technical violations of proposed Article 6, Rule 13
pursuant to the Exchange's rules. Finally, the Exchange also believes
that the proposed changes are designed to provide a fair procedure for
the disciplining of members and persons associated with members,
consistent with sections 6(b)(7) and 6(d) of the Act.\10\ Rule 10.9217
does not preclude a member organization or covered person from
contesting an alleged violation and receiving a hearing on the matter
with procedural rights through a litigated disciplinary proceeding.
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\9\ 15 U.S.C. 78f(b)(6).
\10\ 15 U.S.C. 78f(b)(7) and 78f(d).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed change is not
designed to address any competitive issue but rather to update the
Exchange's rules to strengthen the Exchange's ability to carry out its
oversight and enforcement functions and deter potential violative
conduct and to align the Exchange's rule setting forth violations
eligible for a minor rule fine more closely with that of its
affiliates.
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. 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. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#9ae8eff6ffb7f9f5f7f7fff4eee9dae9fff9b4fdf5ec"><span class="__cf_email__" data-cfemail="4634332a236b25292b2b232832350635232568212930">[email protected]</span></a>. Please include
File Number SR-NYSECHX-2023-04 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSECHX-2023-04. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSECHX-2023-04 and should be submitted
on or before February 17, 2023.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with
[[Page 5394]]
the requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\11\ In particular, the
Commission finds that the proposed rule change is consistent with
section 6(b)(5) of the Act,\12\ 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 a 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
\13\ which require that the rules of an exchange enforce compliance
with, and provide appropriate discipline for, violations of Commission
and Exchange rules. 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,\14\ which governs minor rule violation
plans.
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\11\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\12\ 15 U.S.C. 78f(b)(5).
\13\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
\14\ 17 CFR 240.19d-1(c)(2).
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As stated above, the Exchange proposes to add Article 6, Rule 13
(Registration Requirements), to the list of minor rule violations in
Rule 10.9217, including in the fine schedule. The Commission believes
that Rules 10.9216(b) and 10.9217 are an effective way to discipline a
member for a minor violation of a rule. More specifically, the
Commission believes that the proposed addition of Article 6, Rule 13 to
the Exchange's list of current minor rule violations 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 also
believes that amending the associated fine schedule is consistent with
the Act because it may help the Exchange's ability to better carry out
its oversight and enforcement responsibilities by levying appropriate
fines for minor violations of the rules included in Rule 10.9217,
including minor violations of Article 6, Rule 13.
In approving the proposed rule change, the Commission in no way
minimizes the importance of compliance with the Exchange's rules and
all other rules subject to fines under Rules 10.9216(b) and 10.9217.
The Commission believes that a violation of any self-regulatory
organization's rules, as well as Commission rules, is a serious matter.
However, Rules 10.9216(b) and 10.9217 provide a reasonable means of
addressing rule violations that may not rise to the level of requiring
formal disciplinary proceedings, while providing greater flexibility in
handling certain violations. The Commission expects that the Exchange
will continue to conduct surveillance with due diligence and make a
determination based on its findings, on a case-by-case basis, whether a
fine of more or less than the recommended amount is appropriate for a
violation under Rules 10.9216(b) and 10.9217 or whether a violation
requires formal disciplinary action.
For the same reasons as discussed above, the Commission finds good
cause, pursuant to section 19(b)(2) of the Act,\15\ for approving the
proposed rule change prior to the thirtieth day after the date of
publication of the notice of the filing thereof in the Federal
Register. The proposal will assist the Exchange in preventing
fraudulent and manipulative practices by allowing the Exchange to
adequately enforce compliance with, and provide appropriate discipline
for, violations of Exchange rules. Moreover, the proposed changes raise
no new or novel issues. Accordingly, the Commission believes that a
full notice-and-comment period is not necessary before approving the
proposal.
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\15\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the Act
\16\ and Rule 19d-1(c)(2) thereunder,\17\ that the proposed rule change
(SR-NYSECHX-2023-04) be, and hereby is, approved on an accelerated
basis.
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\16\ 15 U.S.C. 78s(b)(2).
\17\ 17 CFR 240.19d-1(c)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-01627 Filed 1-26-23; 8:45 am]
BILLING CODE P
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