[Federal Register Volume 79, Number 33 (Wednesday, February 19, 2014)]
[Notices]
[Pages 9543-9545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03567]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71538; File No. SR-BX-2014-011]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Modify
BX's Optional Anti-Internalization Functionality
February 12, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on February 4, 2014, NASDAQ OMX BX, Inc. (``BX'' 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 proposes to modify BX's optional anti-internalization
functionality. The text of the proposed rule change is available on the
Exchange's Web site at http://nasdaqomxbx.cchwallstreet.com, 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 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
[[Page 9544]]
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
BX is proposing to modify its voluntary anti-internalization
functionality to provide an additional option under that functionality.
In addition, the proposed rule change contains certain clarifications
to the text of the rule. Anti-internalization functionality is designed
to assist market participants in complying with certain rules and
regulations of the Employee Retirement Income Security Act (``ERISA'')
that preclude and/or limit broker-dealers managing accounts governed by
ERISA from trading as principal with orders generated for those
accounts. The functionality can also assist market participants in
avoiding execution fees that may result from the interaction of
executable buy and sell trading interest from the same firm. BX notes
that use of the functionality does not relieve or otherwise modify the
duty of best execution owed to orders received from public customers.
As such, market participants using anti-internalization functionality
will need to take appropriate steps to ensure that public customer
orders that do not execute because of the use of anti-internalization
functionality ultimately receive the same execution price (or better)
they would have originally obtained if execution of the order was not
inhibited by the functionality.
Currently, market participants may apply anti-internalization logic
to all quotes/orders entered through a particular MPID, or to all
orders entered through a particular order entry port, to which a unique
group identification modifier is then appended. In other words, the
logic may be applied on an MPID-by-MPID, or on a port-by-port basis.
Currently, two forms of anti-internalization logic may be applied: (i)
If quotes/orders are equivalent in size, both quotes/orders will be
cancelled, or if they are not equivalent in size, the smaller will be
cancelled and the size of the larger will be reduced by the size of the
smaller; or (ii) regardless of the size of the quotes/orders, the
oldest quote/order will be cancelled in full. The applicable logic may
be applied to an entire MPID, or alternatively, different logic may be
applied to different order entry ports under a particular MPID.
In response to member input, the proposed rule change will add an
additional form of anti-internalization logic that a market participant
could choose to apply, under which the most recent quote/order would be
cancelled. As with the two existing forms of anti-internalization
logic, the logic could be applied to an entire MPID, or to selected
order entry ports under a particular MPID. BX believes that the change
will provide members with an additional tool for managing the book of
orders that they submit to BX and the associated execution costs.
2. Statutory Basis
BX believes that the proposed rule change is consistent with the
provisions of Section 6 of the Act, in general, and with Section
6(b)(5) of the Act 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, BX believes
that the change, which is responsive to member input, will facilitate
transactions in securities and perfect the mechanism of a free and open
market by providing members with additional optional functionality that
may assist them with managing the book of orders that they submit to BX
and the associated execution costs.
B. Self-Regulatory Organization's Statement on Burden on Competition
BX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. Specifically, by
offering market participants additional options with regard to
preventing inadvertent internalization of orders submitted to BX, the
change has the potential to enhance BX's competitiveness with respect
to other trading venues, thereby promoting greater competition.
Moreover, the change does not burden competition in that its use is
optional and provided at no additional cost to members.
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: (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 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 \3\ and Rule 19b-
4(f)(6) thereunder.\4\
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
---------------------------------------------------------------------------
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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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 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-2014-011 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-2014-011. This file
[[Page 9545]]
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 (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
10:00 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; 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-2014-011 and should be
submitted on or before March 12, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\5\
---------------------------------------------------------------------------
\5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03567 Filed 2-18-14; 8:45 am]
BILLING CODE 8011-01-P