[Federal Register Volume 77, Number 75 (Wednesday, April 18, 2012)]
[Notices]
[Pages 23316-23317]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9284]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66792; File No. SR-BX-2012-025]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Chapter V, Section 16 of the BOX Trading Rules
April 12, 2012.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of
1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on April 3, 2012, NASDAQ OMX BX, Inc. (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 Exchange has designated
the proposed rule change as constituting a non-controversial rule
change under Rule 19b-4(f)(6) under the Act,\3\ which renders the
proposal effective upon filing with the Commission. The Commission is
publishing this notice to solicit 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.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ OMX BX, Inc. (the ``Exchange'') proposes to amend Chapter V,
Section 16 of the rules of the Boston Options Exchange (``BOX'') to
address how BOX processes inbound orders when the BOX best price on the
same side of the market locks, or is locked by the opposite side
national best bid or offer (``NBBO''). The text of the proposed rule
change is available from the principal office of the Exchange, at the
Commission's Public Reference Room and also on the Exchange's Internet
Web site at http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/,
and on the Commission's Web site at http://www.sec.gov.
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
The purpose of the proposed rule change is to amend Chapter V,
Section 16 of the BOX Rules to address how inbound orders are processed
when the BOX best price on the same side of the market locks, or is
locked by the opposite side national best bid or offer (``NBBO'').
Currently, Chapter V, Section 16(b) sets forth that inbound orders on
BOX are filtered prior to their entry on the BOX Book to ensure such
orders will not Trade-Through the NBBO in accordance with the Options
Order Protection and Locked/Crossed Market Plan (the ``Plan''). The
rule provides that all of the filtering rules described are independent
of whether the NBBO is locked or crossed, except where the BOX best
price on the same side of the market as the inbound order has crossed,
or is crossed by the opposite side NBBO, the order will be routed, if
eligible, or rejected immediately. The Exchange proposes to amend the
rule so that, in addition, where the BOX best price on the same side of
the market as the inbound order has locked, or is locked by, the
opposite side NBBO, the order will also be routed, if eligible, or
rejected immediately. As such, the BOX trading engine is systemically
either routing to an Away Exchange \4\ or immediately rejecting such an
order. Immediately rejecting such an order, which is not eligible for
routing, prevents that order from being exposed,\5\ and thereby removes
the potential that such order could join the pre-existing locked
market.
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\4\ See BOX Trading Rules, Chapter XII, Section 5(a), providing
in pertinent part, ``[o]nly orders that are specifically designated
by Options Participants as eligible for routing will be routed to an
Away Exchange (``Eligible Orders).
\5\ See Chapter V, Section 16(b)(iii), providing that where an
order is received which is executable against the NBBO and there is
not a quote on BOX that is equal to the NBBO, that the order is
exposed on the BOX Book at the NBBO for a period of one second. If
the order is not executed during the one second exposure period,
then the order is either routed or cancelled.
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The following two examples illustrate how the proposed rule change
would apply to inbound orders when the BOX best price on the same side
of the market locks the opposite side NBBO and the orders are not
designated as Eligible Orders: Example 1: When the NBBO is $6.65 x
$6.60 and the BOX best price is $6.60 x $6.80, BOX receives a public
customer order to buy at $6.60. Such an order is rejected by the
trading engine back to the order sender. Example 2: When the NBBO is x
$4.00 x $4.00 and the BOX best price is $4.00 x$4.05, BOX receives a
public customer order to buy at $4.00. Such an order is rejected by the
trading engine. In the above examples, if the order was an Eligible
Order, then the order will be routed to an Away Exchange.
The BOX NBBO filtering process set forth in Chapter V, Section 16
continues to be designed in a manner to prevent a sell order from being
executed on BOX at a price inferior to the best bid available at any
Away Exchange; similarly, any order to buy would not be executed on BOX
at a price worse than the best offer available at any Away Exchange.
Finally, Section (b)(i) is being amended to reflect that the term ISO
is defined in subsection (h) of Chapter XII
[[Page 23317]]
and not (g) as currently reflected in Section 16(b)(i).
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \6\ in general, and furthers the objectives of Section
6(b)(5) of the Act \7\ in particular, in that it is designed to perfect
the mechanisms of a free and open market and the national market
system, protect investors and the public interest and promote just and
equitable principles of trade by proposing the rule change to address
how BOX processes inbound orders when the BOX best price on the same
side of the market locks, or is locked by the opposite side national
best bid or offer (``NBBO'').
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\6\ 15 U.S.C 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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The Plan provides a framework for order protection and addressing
locked and crossed markets. As discussed above, the proposed rule
change provides that where the BOX best price on the same side of the
market as an inbound order has crossed or locked, or is crossed by, or
locked by the opposite side NBBO, the order will be routed, if
eligible, or rejected immediately. The Exchange believes handling the
order as described above is consistent with the objectives of the Plan
and assists BOX Options Participant in that it systemically removes the
potential that such an order could join a pre-existing locked market.
As such, the Exchange believes the proposed rule change is consistent
with the Plan, necessary and appropriate in the public interest, for
the protection of investors and the maintenance of fair and orderly
markets, to remove impediments to, and perfect the mechanisms of, a
national market system.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe 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 proposed rule change does not: (i) Significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days after the date of the filing, or such shorter time as the
Commission may designate, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6)
thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii)
under the Act, the Exchange is required to give the Commission
written notice of its 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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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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
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 email to [email protected]. Please include
File Number SR-BX-2012-025 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-2012-025. 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 Web site (PREAMB). 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-2012-025 and should be submitted on or before May 9,
2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-9284 Filed 4-17-12; 8:45 am]
BILLING CODE 8011-01-P