[Federal Register: January 13, 2004 (Volume 69, Number 8)]
[Notices]
[Page 2026-2027]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ja04-114]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-49026; File No. SR-BSE-2002-06]
Self-Regulatory Organizations; Boston Stock Exchange; Notice of
Filing of Proposed Rule Change to Clarify Exchange Liability
January 6, 2004.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on September 26, 2002, the
Boston Stock Exchange (``BSE'') filed with the Securities and Exchange
Commission (``Commission'') and on November 4, 2002, May 29, 2003, and
July 21, 2003, amended the proposed rule change described in Items I,
II, and III below, which items have been prepared primarily by BSE. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested parties.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
BSE is seeking to amend various Articles of its Constitution and
Sections of its Rules to clarify the liability of BSE in relation to
its members' contractual obligations.\2\
---------------------------------------------------------------------------
\2\ The Boston Stock Exchange Clearing Corporation (``BSECC'')
has filed a proposed rule change to amend various Sections of its
Rules as they pertain to BSECC's liability in order to maintain a
consistent approach with the BSE's proposed rule changes. Securities
Exchange Act Release No. 49027 (January 6, 2004), [File No. SR-
BSECC-2003-01].
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, BSE 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. BSE has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\3\
---------------------------------------------------------------------------
\3\ The Commission has modified the text of the summaries
prepared by BSE.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to amend certain
sections of the BSE Constitution and Rules to clarify BSE's liability
in relation to its members' contractual obligations.
In particular, BSE is seeking to modify Articles XII and XIII of
its Constitution to insure that any BSE member who is a party to a
transaction remains solely liable for the transaction. This language is
consistent with similar language and approaches of other exchanges in
limiting the liability of an exchange with respect to contracts entered
into by members.\4\ In Article XIII of its Constitution, the BSE is
also seeking to add certain language from the BSECC Participant
Hypothecation Agreement. The provision to be inserted into the
Constitution would prevent BSE from becoming a de facto guarantor of an
insolvent member's contractual obligations.
---------------------------------------------------------------------------
\4\ See, e.g., New York Stock Exchange Rules 137 and 142;
Chicago Stock Exchange Rules, Article XXV, Rule 11; and Philadelphia
Stock Exchange Rule 254.
---------------------------------------------------------------------------
Likewise, BSE is seeking to amend other sections of its rules
consistent with this theme. In Chapter III, ``Comparisons--Liability on
Contracts,'' Section 4, ``Failures to Compare,'' the proposed language
would state that BSE shall have no liability to any of the original
parties to a contract entered into by a member. Also, in Chapter VI,
``Failure to Fulfill Contracts,'' Section 1, ``Closing Contracts,'' the
proposed language would make clear that no action taken by BSE in
closing or assisting to close a contract entered into by a BSE member
shall have the effect of transferring any liability related to that
contract to BSE. Chapter VI, Section 2, ``Notice of Closing
Contracts,'' would echo this approach for instances in which BSE takes
action to attempt to close a contract on behalf of a member in default.
None of these changes are in response to any recent circumstance. They
are only aimed at clarifying BSE's unique position in relation to
assisting its members in other contractual matters exclusively linked
to conducting transactions in the buying and selling of equity
securities.
BSE believes that the proposal is consistent with the requirements
of Section 6(b) of the Act and furthers the objectives of Section
6(b)(5), in particular, in that it is designed to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, and
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, in that it is designed to protect investors
and the public interest and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
(B) Self-Regulatory Organization's Statement on Burden on Competition
BSE does not believe that the proposed rule change will impose any
burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
BSE has neither solicited nor received comments on the proposed
change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within thirty-five 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 ninety days of such date if it finds
such
[[Page 2027]]
longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which the self-regulatory organization 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 Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
Comments may also be submitted electronically at the following e-mail
address: rule-comments@sec.gov. All comment letters should refer to
File No. SR-BSE-2002-06. This file number should be included on the
subject line if e-mail is used. To help us process and review comments
more efficiently, comments should be sent in hardcopy or by e-mail but
not by both methods. 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 Section, 450 Fifth Street, NW., Washington, DC 20549. Copies
of such filing also will be available for inspection and copying at the
principal office of BSE.
All submissions should refer to File No. SR-BSE-2002-06 and should
be submitted by February 3, 2004.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
---------------------------------------------------------------------------
\5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-611 Filed 1-12-04; 8:45 am]
BILLING CODE 8010-01-U