[Federal Register: November 30, 2004 (Volume 69, Number 229)]
[Notices]
[Page 69650-69653]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30no04-98]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 50715; File No. SR-BSE-2004-24]
Self-Regulatory Organizations; Notice of Filing of a Proposed
Rule Change by the Boston Stock Exchange, Inc. To Permit Remote Brokers
November 22, 2004.
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 June 28, 2004, the Boston Stock Exchange, Inc.
[[Page 69651]]
(``BSE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``SEC'' or ``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange seeks to include brokers in its remote trading rules.
The text of the proposed rule change appears below. Proposed new
language is in italics; proposed deletions are in [brackets].
Chapter XXXIII
BEACON Remote
Sec. 9. BEACON terminals and related equipment will be provided to
remote member firm locations for [specialist] trading and floor broker
access. The remote terminals will be linked to the BEACON Trading
System and will provide the same functionality as is available to on-
floor specialists and floor brokers. All orders directed to remote
specialists and orders input by brokers, including ITS commitments and
administrative messages, will be from the Woburn data center through
BEACON as occurs with on-floor specialists and floor brokers. Floor
broker orders (including remote floor broker orders) will be routed to
remote specialists under the same criteria by which they are routed to
on-floor specialists. [There will be no remote floor brokerage
services]. The following shall apply to specialists and, where
applicable, brokers participating in the BEACON Remote program:
(a)-(b) No changes.
(c) Any eligible firm may apply to the Market Performance Committee
to participate in the program. All applicants must meet the current
minimum requirements for specialists or brokers set forth in the Rules
of the Exchange, including, but not limited to their background,
experience, staffing, training procedures, adequacy of applicant's
proposed confidentiality policy, adequacy of applicant's contingency
plans for communication or technology failures, adequacy of applicant's
offsite facilities, performance standards, and the minimum margin,
capital and equity requirements as set forth in Chapters VIII and XXII
of the Rules of the Exchange, and conform to all other performance
requirements and standards set forth in the Rules of the Exchange.
(d) Unless the Market Performance Committee specifically authorizes
otherwise, participating member firms shall be prohibited from trading
remotely any securities which are currently being traded on-floor by
that individual member firm. In evaluating a member firm's petition for
changing the location of where a particular security is traded, the
Market Performance Committee shall consider the application in light of
the requirements set forth in paragraph (c) above. Individual
securities, however, may not be traded by one [specialist] firm in more
than one location under any circumstances.
(e)-(f) No changes.
(f) All layoff orders must be included in BEACON drop copy.
(g) All rule references pertaining to the trading floor of the
Exchange, including:
Chapter I-B, Section 2 (``Dealings on Floor--Hours'');
Chapter I-B, Section 3 (``Dealings on Floor--Persons'');
Chapter II, Section 2 (``Recording of Sales'');
Chapter II, Section 6 (``Bids and Offers for Stocks'');
Chapter II, Section 9 (``Trading for Joint Account'');
Chapter II, Section 10 (``Discretionary Transactions'');
Chapter II, Section 13 (``Trading Against Privileges'');
Chapter II, Section 15 (``Record of Orders from Offices to
Floor'');
Chapter II, Section 23 (``Dealing on Other Exchanges, or Publicly
Outside the Exchange'');
Chapter II, Section 31 (``Offering Publicly on the Floor'');
Chapter VIII, Section 2 (``Member Organization Account'');
Chapter XIV, ``Floor Brokers;
Chapter XV, Section 1 (``Registration'');
Chapter XV, Section 2 (``Responsibilities'');
Chapter XV, Section 3 (``Code of Acceptable Business Practices for
Specialists'');
Chapter XV, Section 5 (``Preference on Competitive Basis'');
Chapter XV, Section 6 (``The Specialist's Book'');
Chapter XV, Section 9 (``Opening Listed Stock'');
Chapter XV, Section 10 (``Hours'');
Chapter XV, Section 16 (``Status of Orders When Primary Market
Closed'');
Chapter XV, Section 18 (``Procedures for Competing Specialists'');
Chapter XV (``Special Offerings'');
Chapter XVIII, Section 1 (``Penalties'');
Chapter XVIII, Section 4 (``Imposition of Fines for Minor
Violation(s) of Rules and Floor Decorum Policies'');
Chapter XX, Section 6 (``Gratuities'');
Chapter XXII, Section 2 (``Capital and Equity Requirements'');
Chapter XXXI, Section 2 (``Intermarket Trading System'');
Chapter XXXI, Section 3 (``Pre-Opening Application'');
Chapter XXXI, Section 4 (``Trade-Throughs and Locked Markets'');
Clearing Corporation Rule 3, Section 2 (``Dual Member Broker/Dealer
Accounts'');
Clearing Corporation Rule 3, Section 3 (``Boston Representative
Broker/Dealer Accounts'');
Clearing Corporation Rule 3, Section 4 (``Specialist Member''); and
Clearing Corporation Rule 4, Section 4 (``Bills Rendered'')
shall be deemed to include any trading done remotely through BEACON,
and all such trades shall be deemed to be Boston executions on the
Exchange.
(h) A written confidentiality policy regarding the location of
equipment and access to information, terminals and equipment must be
adopted by the firm and filed with and approved by the Exchange prior
to the commencement of remote trading. Moreover, this policy must
conform to all of the requirements set forth in the Rules of the
Exchange, including, but not limited to Chapter XV, Section 6 (The
Specialist Book), Chapter II, Section 36 (Specialist Member
Organizations Affiliated with an Approved Person), and Section 37
(ITSFEA Procedures). In accordance therewith, reasonable principles
must be applied to limit access by non-specialists to Remote Specialist
facilities and information, and to limit Remote Specialists and Brokers
access to and from other proprietary trading venues, including access
from outcry or visible communication, intentional or otherwise.
(i) Floor policies regarding dress code, and smoking,
identification and visitors shall not apply. Access to the area
designated as that of the Remote Specialist's or Remote Broker's shall
be restricted to the specialist or broker, backup specialist, clerks,
designated management of the specialist or broker, and Exchange
authorized personnel, consistent with the Rules of the Exchange,
including, but not limited to, ``Chinese Wall'' procedures set forth in
Chapter II, Section 36, (Specialist Member Organizations Affiliated
with an Approved Person), and procedures set forth in Chapter XV,
Section 6 (The Specialist's Book).
(j) All Exchange correspondence, memoranda, bulletins and other
[[Page 69652]]
publications shall be sent to BEACON Remote Specialists and Brokers via
electronic mail through BEACON and via U.S. mail or overnight delivery.
(k) All BEACON Remote specialists and brokers will have stentofon,
(or a similarly operational speakerphone), as well as dedicated
telephone access, to the physical trading floor. Any regulatory
requirements including trading halts, trading practices, policies,
procedures or rules requiring floor official involvement will be
coordinated by Exchange personnel with the remote specialists and
brokers through the dedicated telephone line.
(l) No changes.
(m) The Exchange's examination program of non-DEA floor members
would include the remote specialist and broker operations. Every firm
must submit specific supervisory procedures relating to the Remote
Specialist and/or Broker operations and appropriate identification of
all individuals who will have access to the Remote Specialist and/or
Broker operation, including all supervisory personnel.
(n) No changes.
(o) Each remote BEACON terminal assigned and registered by the
Exchange will require an ETP, and will be subject to the following:
(1) Each approved Specialist unit may be authorized to trade up to
200 issues.
(2) Each Specialist and/or Broker unit must have at least one
registered Exchange seat assigned to the approved specialist or broker.
(a) A specialist may be authorized to obtain additional ETP's for
qualified registered clerks to access BEACON in support of the
Specialist unit.
(b) All specialists, brokers, and registered clerk ETP holders must
be approved by the Market Performance Committee and must meet the
following:
(i) file an ETP application form with the BSE Surveillance
Department;
(ii) completion of the required floor training program;
(iii) successful completion of the BSE floor examination within 90
days of application;
(iv) successful completion of the Series 63 (NASAA Uniform State
Law Exam), and registration with the Commonwealth of Massachusetts,
and;
(v) submission of fingerprint records to the BSE.
(3) Each Specialist unit identified by the member firm will be
assigned an account (``give up'') and will be evaluated under the
Exchange's Specialist Performance Evaluation Program (``SPEP'') which
currently measures performance in several separate categories
comprising a relative overall performance ranking.
Commentary
During the initial stages of this program (rollout), the Exchange
will permit only current floor member firms to participate. The
rationale for this is that current floor member firms have already been
evaluated as to, among other things, their familiarity with the Rules
of the Exchange, capital, equity and margin requirements, experience,
staffing and training procedures, and performance standards. As soon as
is practicable following the rollout of the program, the Market
Performance Committee of the Exchange will consider other firm
applicants based on a variety of criteria, as identified in Section
9(c), above, including, but not limited to, adequate off-site
facilities to ensure compliance with the referenced portions of the
Exchange's rules, and adequate capital to manage the risks associated
with this program. For every applicant specialist or broker who is not
an existing on-floor specialist or broker, a two week on-floor training
period will be required, among the purposes of which will be to benefit
the relationship between the Boston floor and the remote specialist or
broker.
* * * * *
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 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. The BSE 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 proposes to amend its rules regarding remote trading
to permit remote brokers. The BSE has been operating its remote
specialist system since December 2000. At the time it was originally
proposed, remote specialists were a novel concept, and the Exchange
decided not to extend remote trading capabilities to its floor brokers
until the remote specialist idea had been launched and tested. The
Exchange is now seeking to open remote trading capabilities to its
floor brokers.
The remote brokers would be governed by the same general rules that
govern the remote specialists, including the various rules set forth
throughout the BSE rules regarding informational barriers and other
such safeguards. Additionally, the remote brokers would be governed by
all of the rules that currently apply to floor brokers, including those
set forth in Chapter XIV, ``Floor Brokers,'' of the BSE rules. The
Exchange would also conduct periodic examinations of all remote
brokerage operations, as it does under a compliance program developed
for its remote specialists. The duties and obligations a BSE floor
broker would not be altered in any way, with the only change being the
ability of the floor brokers to conduct their business from locations
other than the Exchange floor.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\3\ in general, and furthers the
objectives of section 6(b)(5),\4\ in particular, in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanisms of a free and open market and the national
market system, and, in general, to protect investors and the public
interest.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78f(b).
\4\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 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
[[Page 69653]]
(ii) as to which the Exchange 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. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form http://www.sec.gov/rules/sro.shtml.
; or Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-BSE-2004-24 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File No. SR-BSE-2004-24. This file
number should be included on the subject line if e-mail 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 Web site (http://www.sec.gov/rules/sro.shtml
). 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. Copies of such
filing also will be available for inspection and copying at the
principal office of the BSE. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File No. SR-BSE-2004-24 and should be submitted on or before December
21, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
---------------------------------------------------------------------------
\5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-3381 Filed 11-29-04; 8:45 am]
BILLING CODE 8010-01-P