[Federal Register Volume 80, Number 245 (Tuesday, December 22, 2015)]
[Notices]
[Pages 79640-79642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32044]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76663; File No. SR-BX-2015-078]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Order Exposure
December 16, 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 December 2, 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, 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 amend BX Rules at Chapter VII, Section 12,
entitled ``Order Exposure Requirements,'' to make clear that BX PRISM
is an exception to this rule.
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 proposes to amend BX Rules at Chapter VII, Section 12,
entitled ``Order Exposure Requirements'' to specifically state that
orders entered into BX PRISM are not subject to the rule at Section 12.
Recently, the Exchange's BX PRISM rule was approved by the
Commission.\3\ BX PRISM is a price-improvement mechanism on the
Exchange's options platform, in which a BX Participant (an ``Initiating
Participant'') may electronically submit for execution a two-sided
paired order, where one side is an order it represents as agent on
behalf of a Public Customer, Professional customer, broker-dealer, or
any other entity (``PRISM Order'') and the other side is principal
interest or any other order it represents as agent (an ``Initiating
Order'') provided that the member first exposes the PRISM Order in the
PRISM Auction (``Auction'') pursuant to the Rule. This mechanism is
[[Page 79641]]
an exception to the general rule in Chapter VII, Section 12, which
requires BX Options Participants to expose principal orders they
represent as agent for at least one (1) second prior to receiving an
agency order that is executable against such bid or offer. The Exchange
notes that other options exchanges have similar order exposure
exceptions.\4\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 76301 (October 29,
2015), 80 FR 68347 (November 4, 2015) (SR-BX-2015-032) (Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified
by Amendment Nos. 1 and 2, To Adopt a New Price Improvement Auction,
BX PRISM).
\4\ See International Securities Exchange LLC (``ISE'') Rule
717(d) and BOX Options Exchange LLC (``BOX'') Rule 7140.
---------------------------------------------------------------------------
The Exchange is also proposing certain minor technical amendments
to the rule to remove the word ``Commentary'' and re-letter the
remainder of the rule. The Exchange is also deleting a reserved
section. The Exchange believes amending Chapter VII, Section 12 will
highlight this exception concerning BX PRISM and also conform BX Rules
for internal consistency.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \5\ in general, and furthers the objectives of Section
6(b)(5) of the Act \6\ 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 explicitly stating an exception to the general rule regarding the
requirements to expose certain principal orders which are represented
as agent.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange's proposal will make clear that BX PRISM is an
exception to the general rule, which requires BX Participants to expose
principal orders they represent as agent for at least one (1) second
prior to receiving an agency order that is executable against such bid
or offer. BX PRISM permits Participants to enter paired orders without
first exposing those orders for one second. The Exchange believes that
providing an exception to the order exposure rule for orders entered
into BX PRISM is consistent with the Act, because BX PRISM's auction
has an auction period which is no less than one hundred milliseconds
and no more than one second. Only one Auction may be conducted at a
time in any given series. Once commenced, an Auction may not be
cancelled. To initiate the Auction, the Initiating Participant entering
the order into BX PRISM must mark the PRISM Order for Auction
processing, and specify either: (a) A single price at which it seeks to
execute the PRISM Order (a ``stop price''); (b) that it is willing to
automatically match as principal or as agent on behalf of an Initiating
Order the price and size of all PRISM Auction Notifications (``PAN'')
responses, and trading interest (``auto-match'') in which case the
PRISM Order will be stopped at the NBBO on the Initiating Order side;
or (c) that it is willing to either: (i) Stop the entire order at a
single stop price and auto-match PAN responses and trading interest at
a price or prices that improve the stop price to a specified price (a
``No Worse Than'' or ``NWT'' price); (ii) stop the entire order at a
single stop price and auto-match all PAN responses and trading interest
at or better than the stop price; or (iii) stop the entire order at the
NBBO on the Initiating Order side, and auto-match PAN responses and
trading interest at a price or prices that improve the stop price up to
the NWT price.\7\ Initiating Participants entering orders into BX PRISM
are required to guarantee an execution at the NBBO or at a better
price, and are subject to market risk while their BX PRISM Order is
exposed to other BX Participants in this competitive auction.
---------------------------------------------------------------------------
\7\ See BX Rules at Chapter VI, Section 9(ii)(A)(1).
---------------------------------------------------------------------------
The proposed amendment will amend the current order exposure rule
to except orders entered into BX PRISM from the rule. The Exchange
believes that this amendment will protect investors and the public
interest by providing additional information in the Rules concerning
exceptions.
B. Self-Regulatory Organization's Statement on Burden on Competition
BX does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed changes do not
impose any burden on competition, rather, the amendment provides an
exception to the order exposure rule for orders entered into BX PRISM
for all Participants. The Exchange believes that this exception will
further inform BX Participants of their obligations with respect to
order exposure. Initiating Participants entering orders into BX PRISM
are subject to market risk while their PRISM Order is exposed to other
BX Participants in this competitive auction.
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 significantly
affect the protection of investors or the public interest; does not
impose any significant burden on competition; and by its terms does not
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) \8\ of the Act and Rule 19b-
4(f)(6) thereunder.\9\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 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.
---------------------------------------------------------------------------
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 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-2015-078 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-2015-078. 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 79642]]
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-
2015-078 and should be submitted on or before January 12, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-32044 Filed 12-21-15; 8:45 am]
BILLING CODE 8011-01-P