[Federal Register Volume 79, Number 169 (Tuesday, September 2, 2014)]
[Notices]
[Pages 52092-52094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20700]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72918; File No. SR-BX-2014-042]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
BX Options Lead Market Maker Rules
August 26, 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 August 21, 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 Substance
of the Proposed Rule Change
The Exchange proposes to amend certain rule text related to an
options rule at Chapter VI, Section 10, pertaining to system order
executions on BX.
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
the BX Options Rules at Chapter VI, Section 10 to clarify certain
language. A proposed rule change amending Chapter VI, Section 10 was
recently approved by the Commission.\3\ As part of that rule change,
Chapter VI, Section 10, entitled ``Book Processing'' was amended to
afford a Lead Market Maker (``LMM'') a participation entitlement if the
LMM's bid/offer is at the Exchange's disseminated price and all Public
Customer \4\ orders have been fully executed.\5\ In that proposal the
Exchange explained the manner in which orders will be allocated in both
a Size Pro-Rata and Price/Time scenario and provided examples. The text
of the rule change specified that prior to remaining interest being
allocated, an LMM would receive an allocation based on the allocation
methods noted in Chapter VI, Section 10.
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\3\ See Securities Exchange Act Release No. 72883 (August 20,
2014), 79 FR 50971 (August 26, 2014) (SR-BX-2014-035).
\4\ See Chapter I, Section 1(50). The term ``Public Customer''
means a person that is not a broker or dealer in securities.
\5\ The LMM participation entitlement is as follows with respect
to Size Pro Rata executions: A BX Options LMM shall receive the
greater of: The LMM's Size Pro-Rata share pursuant to proposed rule
BX Options Rule at Chapter VI, Section 10(1)(C)(2)(iii); 50% of
remaining interest if there is one or no other Market Maker at that
price; 40% of remaining interest if there are two other Market
Makers at that price; or 30% of remaining interest if there are more
than two other Market Makers at that price; or if rounding would
result in an allocation of less than one contract, a BX Options LMM
shall receive one contract. The LMM participation entitlement is as
follows is as follows with respect to Price/Time executions: A BX
Options LMM shall receive the greater of: (a) Contracts the LMM
would receive if the allocation was based on time priority with
Public Customer priority pursuant to proposed BX Options Rule at
Chapter VI, Section 10(1)(a); (b) 50% of remaining interest if there
is one or no other Market Maker at that price; (c) 40% of remaining
interest if there are two other Market Makers at that price; or (d)
30% of remaining interest if there are more than two other Market
Makers at that price or if rounding would result in an allocation of
less than one contract, a BX Options LMM shall receive one contract.
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While the Exchange believes that the rule text is clear on the
allocations that the LMM shall be afforded, the Exchange is seeking to
further amend Chapter VI, Section 10(1)(C)(1)(b)(2) to
[[Page 52093]]
amend the sentence that currently states, ``If there are contracts
remaining after all LMM interest has been fully executed, such
contracts shall be executed based on the Price/Time execution
algorithm.'' The Exchange proposes to amend the sentence to state, ``If
there are contracts remaining, such contracts shall be executed based
on the Price/Time execution algorithm.'' The Exchange believes that
removing the words ``after all LMM interest has been fully executed''
will avoid any confusion such as that an LMM would not be entitled to a
portion of the remainder. The Exchange intended those words to apply to
the remaining contracts, which would be allocated after the LMM was
afforded their allocation. The Exchange believes the proposed text
would avoid any confusion as to its interpretation. The Exchange's
proposed change would also be added to Chapter VI, Section
10(2)(ii)(2). The Exchange would add the corresponding sentence to the
Size Pro-Rata allocation as follows, ``If there are contracts
remaining, such contracts shall be executed based on the Size Pro-Rata
execution algorithm.'' The Exchange believes that adding the
aforementioned sentence to Chapter VI, Section 10(2)(ii)(2) clarifies
that the remaining contracts would be treated in a similar manner
within the Size Pro-Rata allocation method.
The amendments proposed herein are in accordance with the text of
the proposed rule change and the examples provided in the prior
filing.\6\ The Exchange does not believe that the amendments are
substantive, but rather are clarifying because the text adds
specificity to allocation of remainder contracts. The allocation of
remainder contracts is not impacted by this rule change. The amendments
provide consistency to BX Rules to clarify that remainder contracts are
treated in the same general manner under both allocation models.
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\6\ See note 3.
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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 Exchange believes that the non-substantive amendments to the
rule text of Chapter VI, Section 10 will conform the wording in the
rule text and add clarity. The Exchange believes that while the rule
text does reflect the current allocation method, which will remain in
place unaffected by this filing, by adding clarifying language the
Exchange's text will be clear and concise.
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 proposed rule change seeks to correct an error in rule
text and make other clarifying changes to conform rule text to avoid
confusion.
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 \9\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6).
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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. The Exchange has
provided 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.
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-2014-042 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-2014-042. 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/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-2014-042 and
should be submitted on or before September 23, 2014.
[[Page 52094]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20700 Filed 8-29-14; 8:45 am]
BILLING CODE 8011-01-P