[Federal Register Volume 76, Number 166 (Friday, August 26, 2011)]
[Notices]
[Pages 53507-53509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21857]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65177; File No. SR-BX-2011-058]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Extending
the Pilot Period for BOX To Receive Inbound Routes of Orders From NOS
August 19, 2011.
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 August 15, 2011, NASDAQ OMX BX, Inc. (the ``Exchange'') filed
with the Securities and Exchange Commission (``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
[[Page 53508]]
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 submits this proposed rule change to extend the pilot
period of the Exchange's prior approval for the Boston Options Exchange
(``BOX'') to accept inbound routes by NASDAQ Options Services, LLC
(``NOS'') of Nasdaq Options Market (``NOM'') Exchange Direct Orders
without checking the NOM book and 2) [sic] NOM non-System securities,
including Exchange Direct Orders.\3\
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\3\ Pursuant to chapter VI, Section 1(b) of the NOM Rules,
``System Securities'' are all options that are currently trading on
NOM pursuant to chapter IV of the NOM rules. All other options are
``Non-System Securities.'' Pursuant to chapter VI, Section (1)(e)(7)
of the NOM Rules, Exchange Direct Orders are orders that route
directly to other Options Markets on an immediate-or-cancel basis
without checking the NOM book for liquidity.
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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 Exchange 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 Exchange 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
Currently, NOS is the approved outbound routing facility of the
NASDAQ Stock Market (the ``NASDAQ Exchange'') for NOM, providing
outbound routing from NOM to other market centers.\4\ The Exchange and
the NASDAQ Exchange have previously adopted rules to permit BOX to
receive inbound routes of certain option orders, specifically (1)
Exchange Direct Orders without checking the NOM book prior to routing,
and (2) NOM non-system securities, by NOS on a pilot basis.\5\ The
Exchange specifically has adopted a rule to prevent potential
information advantages resulting from the affiliation between BOX and
NOS, as related to NOS's authority to route orders from NOM to BOX.\6\
NOS's authority to route these orders to BOX is subject to a pilot
period ending on August 16, 2011.\7\ The Exchange hereby seeks to
extend the previously approved pilot period (with the attendant
obligations and conditions) to permit BOX to accept inbound routes of
(1) exchange Direct Orders without checking the NOM book and (2) NOM
non-System securities, including Exchange Direct Orders that NOS routes
from NOM for an additional 30 days, through September 15, 2011. The
Exchange is also seeking permanent approval of the BOX and NOS inbound
routing relationship.\8\
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\4\ NOM Rule chapter VI, Section 11(c). Under NOM Rule chapter
VI, Section 11(c): (1) NOM routes orders in options via NOS, which
serves as the sole ``routing facility'' of NOM; (2) the sole
function of the routing facility is to route orders in options to
away markets pursuant to NOM rules, solely on behalf of NOM; (3) NOS
is a member of an unaffiliated self-regulatory organization, which
is the designated examining authority for the broker-dealer; (4) the
routing facility is subject to regulation as a facility of the
NASDAQ Exchange, including the requirement to file proposed rule
changes under Section 19 of the Act; (5) use of NOS to route order
to other market centers is optional; (6) NOM must establish and
maintain procedures and internal controls reasonably designed to
adequately restrict the flow of confidential and proprietary
information between the NASDAQ Exchange and its facilities
(including the routing facility), and any other entity; and (7) the
books, records, premises, officers, directors, agents, and employees
of the routing facility, as a facility of the NASDAQ Exchange, shall
be subject at all times to inspection and copying by the NASDAQ
Exchange and the Commission.
\5\ See Securities Exchange Act Release Nos. 60349 (July 20,
2009), 74 FR 37071 (July 27, 2009) (SR-BX-2009-035); 60354 (July 21,
2009), 74 FR 37074 (July 27, 2009) (SR-NASDAQ-2009-065); 62555 (July
22, 2010), 75 FR 44835 (July 29, 2010) (SR-BX-2010-051); 63364
(November 23, 2010), 75 FR 74121 (November 30, 2010) (SR-BX-2010-
078); 64530 (May 20, 2011), 76 FR 30746 (May 26, 2011) (SR-BX-2011-
027).
\6\ See chapter XXXIX, Section 2(c) of the Grandfathered Rules
of the Exchange.
\7\ See Securities Exchange Act Release No. 64530 (May 20,
2011), 76 FR 30746 (May 26,
2011) (SR-BX-2011-027).
\8\ See Securities Exchange Act Release No. 64896 (July 15,
2011), 76 FR 30476 (July 21,
2011) (SR-BX-2011-045).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\9\ in general, and with
Section 6(b)(5) of the Act,\10\ in particular, in that the proposal 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 regulating, clearing,
settling, processing information with respect to, 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, to protect investors and the public interest. Specifically,
the proposed rule change would permit inbound routing of certain orders
from NOM to BOX through NOS in a manner consistent with prior approvals
and established protections. The Exchange believes that extending the
previously approved pilot period for thirty days is a sufficient length
to permit both the Exchange and the Commission to assess the impact of
the Exchange's authority to permit BOX to receive direct inbound routes
of certain option orders via NOS (including the attendant obligations
and conditions), while the Commission evaluates the pending proposal to
make the pilot permanent.\11\
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
\11\ See supra at note 8.
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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 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 either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act\12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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The Exchange has requested that the Commission waive the 30-day
operative delay. The Exchange believes that the proposed rule change
does not significantly affect the protection of investors or the public
interest because it seeks to extend for a limited period a currently
operating pilot program so as
[[Page 53509]]
to allow the Exchange and Commission to assess whether to make the
pilot permanent in accordance with its attendant obligations and
conditions.\14\ The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because such waiver would allow the pilot period to be
extended without undue delay through September 15, 2011 while the
Exchange's proposal to make the pilot permanent is under consideration.
Therefore, the Commission designates the proposal operative upon
filing.\15\
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\14\ See SR-BX-2011-058, Item 7.
\15\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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 [email protected]. Please include
File Number SR-BX-2011-058 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2011-058. 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 Web site 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
a.m. and 3 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; 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 Number SR-BX-2011-058 and should be
submitted on or before September 16, 2011.
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-21857 Filed 8-25-11; 8:45 am]
BILLING CODE 8011-01-P