[Federal Register Volume 80, Number 142 (Friday, July 24, 2015)]
[Notices]
[Pages 44166-44168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18132]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75490; File No. SR-BX-2015-041]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
BX Routing Order Rule
July 20, 2015.
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 July 10, 2015, 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 and II 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 BX Rules at chapter VI (Trading
Systems) at section 11 (Order Routing) to clarify the manner in which a
SEEK Order will route again after an initial routing attempt to another
market center.
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 Exchange's rules at chapter VI, section 11 provide for the
manner in which orders submitted to the System \3\ will route to other
market centers.\4\ The System provides two routing options pursuant to
which orders are sent to other available market centers for potential
execution, per the entering firm's instructions. The routing options
are SEEK and SRCH. Routing options may be combined with all available
order types and times-in-force, with the exception of order types and
times-in-force whose terms are inconsistent with the terms of a
particular routing option. The Exchange is seeking to clarify the
manner in which a SEEK order will route again, after it is initially
routed (``re-route'').\5\
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\3\ The term ``System'' is defined in BX Rules at chapter VI,
section 1(a).
\4\ Participants can designate orders as either available for
routing or not available for routing. See chapter VI, sec. 11(a).
\5\ If an order is only partially routed the portion that was
not routed will be posted to the book.
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SEEK is a routing option pursuant to which an order will first
check the System for available contracts for execution. After checking
the System for available contracts, orders are sent to other available
market centers for potential execution, per the entering firm's
instructions. When checking the book, the System will seek to execute
at the price at which it would send the order to a destination market
center.
SRCH is a routing option pursuant to which an order will first
check the System for available contracts for execution. After checking
the System for available contracts, orders are sent to other available
market centers for potential execution, per the entering firm's
instructions. When checking the book, the System will seek to execute
at the price at which it would send the order to a destination market
center.
Both SEEK and SRCH eligible unexecuted orders will continue to be
routed utilizing a route timer. The SEEK or SRCH order will post to the
book and will be routed after a time period (``Route Timer'') not to
exceed one second as specified by the Exchange on its Web site provided
that the order's limit price would lock or cross other market
center(s).\6\ If, during the Route Timer, any new interest arrives
opposite the order that is equal to or better than the ABBO \7\ price,
the order will trade against such new interest at the ABBO price.
Eligible unexecuted orders will be routed at the end of the Route Timer
provided the order was not filled and the order's limit price would
continue to lock or cross the ABBO. If an order was routed with either
the SEEK or SRCH routing option, and has size after such routing, it
will execute against contra side interest in the book, post in the
book, and route again pursuant to the process described above, if
applicable, if the order's limit price would lock or cross another
market center(s).
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\6\ Pursuant to section 11(c) of chapter VI, orders sent by the
System pursuant to the SEEK and SRCH routing options to other
markets would not retain time priority with respect to other orders
in the System. If an order routed pursuant to SEEK or SRCH is
subsequently returned, in whole or in part, that order, or its
remainder, will receive a new time stamp reflecting the time of its
return to the System.
\7\ ABBO is the away market's best bid or offer.
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With respect to SRCH Orders, if contracts remain un-executed after
routing, they are posted on the book. Once on the book, should the
order subsequently be locked or crossed by another market center, it
will re-route. With SEEK orders, the rule currently states, if
contracts remain un-executed after routing, they are posted on the
book. Once on the book at the limit price, should the order
subsequently be locked or crossed by another market center, the System
will not route the order to the locking or crossing market center.
The Exchange seeks to amend the rule text in chapter VI, section
11(a)(1)(A) to state, while, on the book at the limit price, should the
order subsequently be locked or crossed by another market center, the
System will not route the order to the locking or crossing market
center. The purpose of this change is to make clear that the SEEK order
will not re-route as long as that order is at the limit price. The SEEK
order may re-
[[Page 44167]]
route, after it has initially routed, when such order reprices.
Example #1: By way of example, if an order is subject to Acceptable
Trade Range \8\ (``ATR'') with a price band of 0.80 and the order book
is as follows:
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\8\ 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 reference
price + (x) for buy orders). 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. See BX Rules at chapter VI, section 10(7).
[cir] Order 1: Buy SEEK order 27 (10)
[cir] Order 2: Sell SEEK order 31 (10)
[cir] Order 3: Sell DNR order 29 (10)
Further, if BX's BBO is 27(10) x 29(10) and the away market is 27(10) x
33 (10) with an NBBO of 27(20) x 29(10); then
An incoming Order 4: Buy DNR 30 (100) triggers ATR and the
following takes place within the order book:
Order 4 first executes with Order 3 at 29 (10)
ATR timer starts, with Order 4 re-priced and displayed at
29.80 (90)
Exchange BBO becomes 29.80 (90) x 31 (10), offer 31 is non-
firm
Assume, during ATR timer, away market moves such that new away
market is 31.10 (10) x 33 (10)
After ATR processing concludes, Order 2 is repriced to be
offered at 31.10 and displayed tick away at 31.20 to avoid locking/
crossing the market.
Exchange BBO becomes 30(90) x 31.20(10)
After route timer, Order 2 routes to away market at 31.10
The Exchange proposes to add the following new sentence, ``SEEK
orders will not be eligible for routing until the next time the option
series is subject to a new opening or reopening.'' The purpose of this
new sentence is to make clear that an opening and reopening will cause
an order to be eligible for routing. The SEEK order will be treated as
a new order and therefore will become subject to the routing process
anew with an opening or reopening process, provided the order locks or
crosses another market.
Example #2: By way of example, presume a halt occurred on BX with
the following order book:
[ssquf] Order 1: Buy SEEK Order is on the book at its limit price,
2.00 (15).
[ssquf] The related underlying is halted.
[ssquf] Immediately following the halt, before BX has re-opened the
issue, the away market quotes at 1.95 (100) x 1.99 (100).
[ssquf] Upon re-opening the issue on BX, the SEEK order routes at
1.99 (15). The System comes out of a halt with a new opening process
and treats all orders as if they were new orders thus the SEEK order
will re-route.
The Exchange proposes to modify the existing sentence which states,
``[o]nce on the book at the limit price, should the order subsequently
be locked or crossed by another market center, the System will not
route the order to the locking or crossing market center'' to ``[w]hile
on the book at the limit price, should the order subsequently be locked
or crossed by another market center, the System will not route the
order to the locking or crossing market center.'' The Exchange believes
that this modification reflects more accurate rule text. The Exchange
believes that market participants are aware of the manner in which the
SEEK order operates as there has been no System change with respect to
the function of the SEEK order. The proposed language serves to make
clear that a SEEK order will not re-route while at its limit price, but
once that order is re-priced, it may route again.\9\
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\9\ See Example #1.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act \10\ in general, and furthers the objectives of section
6(b)(5) of the Act \11\ in particular, in that it is designed to
promote just and equitable principles of trade, 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, by amending the rule text to clarify the existing rule text
and provide the circumstances when a SEEK order would be eligible to
route, such as (1) when the order is repriced, after it is posted to
the order book, at a price not at its limit price; and (2) when an
opening or reopening (after a halt) occurs such that the System views
these orders as new orders and they become subject to routing anew. The
Exchange believes that these amendments provide transparency and
specificity to the Rules and the corrected rule text protects investors
and the public interest by reducing the potential for investor
confusion.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the additional language benefits other market
participants who may not be currently familiar with the routing options
on BX to understand the difference between the two routing options
offered by the Exchange. While the Exchange is modifying the rule text,
it notes that the System will continue to operate as it does today.
Rather, the proposed rule text seeks to bring additional clarity to the
current rule text to clarify when a SEEK order will re-route to another
market center after it has initially routed. The Exchange believes this
language corrects the current rule text and more clearly differentiates
an order routed pursuant to the SEEK routing option as compared to the
SRCH routing option.
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. The proposed rule change does
not create an undue burden on competition as the proposed rule change
is not a substantive change in that the System will continue to operate
as it does today. The Exchange desires to amend the current rule text
to provide two circumstances when the SEEK order would re-route after
it has initially routed to an away market center. The Exchange believes
that this proposed rule text will clarify the current rule which states
that SEEK order will not re-route once it is on the book at the limit
price. The Exchange is seeking to provide greater transparency in its
rules. The amendments would apply to all market participants in the
same manner.
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
The Exchange has filed the proposed rule change pursuant to section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
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 from the date on which it was filed, or such shorter time as the
Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
[[Page 44168]]
effective pursuant to section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately. The Exchange states that
the proposal would apply to all market participants in the same manner
and believes that market participants would benefit from the additional
clarity the Exchange asserts the proposal would provide in regard to
the circumstances when a SEEK order is eligible to re-route. The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because the proposal provides further clarity regarding the routing
functionality of the Exchange's SEEK orders, which the Commission
believes will benefit investors and market participants who use such
orders to accomplish their trading objectives. For this reason, the
Commission hereby waives the 30-day operative delay and designates the
proposal operative upon filing.\18\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ 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. 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-2015-041 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-2015-041. 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 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-2015-041,
and should be submitted on or before August 14, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12), (59).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-18132 Filed 7-23-15; 8:45 am]
BILLING CODE 8011-01-P