[Federal Register Volume 79, Number 86 (Monday, May 5, 2014)]
[Notices]
[Pages 25633-25635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-10170]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72041; File No. SR-BX-2014-022]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule Text Related to Acceptable Trade Range in Chapter VI, Section 10
of the BX Options Rules
April 29, 2014.
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 April 23, 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.
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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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend rule text related to Acceptable
Trade Range in Chapter VI, Section 10 of the BX Options rules. 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 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 rule text in
Chapter VI, Section 10 entitled ``Book Processing'' to add additional
rule text regarding Acceptable Trade Range. The Acceptable Trade Range
is a mechanism to prevent the system \3\ from experiencing dramatic
price swings by creating a level of protection that prevents the market
from moving beyond set thresholds. The thresholds consist of a
Reference Price plus (minus) set dollar amounts based on the nature of
the option and the premium of the option.
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\3\ The term ``System'' means the automated system for order
execution and trade reporting owned and operated by BX. See BX Rules
at Chapter VI, Section 1(a).
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Currently, the rule provides that the System will calculate an
Acceptable Trade Range to limit the range of prices at which an order
will be allowed to execute. The Acceptable Trade Range is calculated by
taking the reference price, plus or minus a value to be determined by
the Exchange, (i.e., the reference price--(x) for sell orders and the
[[Page 25634]]
reference price + (x) for buy orders).\4\ Upon receipt of a new order,
the reference price is the National Best Bid (NBB) for sell orders and
the National Best Offer (NBO) for buy orders or the last price at which
the order is posted whichever is higher for a buy order or lower for a
sell order. If an order reaches the outer limit of the Acceptable Trade
Range (the ``Threshold Price'') without being fully executed, it will
be posted at the Threshold Price for a brief period, not to exceed one
second (``Posting Period''), to allow more liquidity to be collected.
Upon posting, either the current Threshold Price of the order or an
updated NBB for buy orders or the NBO for sell orders (whichever is
higher for a buy order/lower for a sell order) then becomes the
reference price for calculating a new Acceptable Trade Range. If the
order remains unexecuted, a New Acceptable Trade Range will be
calculated and the order will execute, route, or post up to the new
Acceptable Trade Range Threshold Price. Today, this process will repeat
until the order is executed, cancelled, or posted at its limit price.
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\4\ The Acceptable Trade Range settings are tied to the option
premium.
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The Exchange proposes to amend this rule to provide that this
process will repeat until either (i) the order/quote is executed,
cancelled, or posted at its limit price or (ii) the order has been
subject to a configurable number of instances of the Acceptable Trade
Range as determined by the Exchange.\5\ Once the maximum number of
instances has been reached, the order is returned. The Exchange will
establish a maximum number of Acceptable Trade Range iterations, until
the order is cancelled. The Exchange will update the Trading System
Settings page located on the NASDAQTrader.com Web site to display the
maximum number of Acceptable Trade Range iterations and will provide
updates to the table via an Options Trader Alert, generally the prior
day, to its membership via Options Trader Alerts. The Exchange will
provide sufficient advanced notice of changes. This is the same process
which currently exists on the NASDAQ Options Market (``NOM'') and
NASDAQ OMX PHLX LLC (``Phlx'').\6\
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\5\ BX Options Participants may elect to have their orders
cancelled by the System after the first iteration.
\6\ See Phlx Rule 1080(p).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \7\ in general, and furthers the objectives of Section
6(b)(5) of the Act \8\ in particular, in that it 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 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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The proposed rule change is consistent with these requirements in
that it will continue to reduce the negative impacts of sudden,
unanticipated volatility in individual options, and serve to preserve
an orderly market in a transparent and uniform manner, enhance the
price-discovery process, increase overall market confidence, and
promote fair and orderly markets and the protection of investors. This
functionality should continue to result in greater continuity in prices
as it is designed to prevent immediate or rapid executions at far away
prices; thereby protecting investors and the public interest. The
Exchange believes that the addition of configurable number of
iterations when the Acceptable Trade Range would apply will provide BX
Participants with more certainty as to the application of the Rule.
Overall the Acceptable Trade Range Rule should reduce the negative
impacts of sudden, unanticipated volatility in and enhance the price-
discovery process.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. The Exchange believes this proposed rule change would provide
BX Participants greater certainty when transacting orders on the
Exchange and continue to reduce the negative impacts of sudden,
unanticipated volatility in and enhance the price-discovery process.
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)(ii) [sic] of the Act \9\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(a)(ii).
\10\ 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.
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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: (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-2014-022 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2014-022. 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 (http://www.sec.gov/
[[Page 25635]]
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 such filing also will be
available for inspection and copying at the principal offices 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-
2014-022, and should be submitted on or before May 27, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Kevin M. O'Neill,
Deputy Secretary.
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\11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2014-10170 Filed 5-2-14; 8:45 am]
BILLING CODE 8011-01-P