8304 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Notices 

1Based on statistics compiled by Commission 

staff, we estimate that there are approximately 3479 

funds that must comply with the collections of 

information under rule 17g–1 and have made a 

filing within the last 12 months. 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 66035 

(December 22, 2011), 76 FR 82017 (‘‘Notice’’). 

4Amendment No. 1 amended the proposed rule 

change to provide an implementation plan of the 

proposed rule changes. The Exchange intends to 

begin implementation by no later than March 30, 

2012, with the specific implementation schedule to 

be announced via Regulatory Circular. Since 

Amendment No. 1 does not alter the substance of 

the proposal, it is not subject to notice and 

comment. 

5See letter from Todd Weingart, Spot On 

Brokerage Services, Division of Trading Block, 

William O’Keefe, Spot On Brokerage Services, 

Division of Trading Block, and Steve Stepanek, The 

SJS Group, Inc., to Elizabeth M. Murphy, Secretary, 

Commission, dated January 20, 2012. 

Rule 17g–1’s independent directors’ 

annual review requirements, fidelity 

bond content requirements, joint bond 

agreement requirement and the required 

notices to directors seek to ensure the 

safety of fund assets against losses due 

to the conduct of persons who may 

obtain access to those assets. These 

requirements also seek to facilitate 

oversight of a fund’s fidelity bond. The 

rule’s required filings with the 

Commission are designed to assist the 

Commission in monitoring funds’ 

compliance with the fidelity bond 

requirements. 

Based on conversations with 

representatives in the fund industry, the 

Commission staff estimates that for each 

of the estimated 3479 active funds,1 the 

average annual paperwork burden 

associated with rule 17g–1’s 

requirements is two hours, one hour 

each for a compliance attorney and the 

board of directors as a whole. The time 

spent by compliance attorney includes 

time spent filing reports with the 

Commission for any fidelity losses (if 

any) as well as paperwork associated 

with any notices to directors, and 

managing any updates to the bond and 

the joint agreement (if one exists). The 

time spent by the board of directors as 

a whole includes any time spent 

initially establishing the bond, as well 

as time spent on annual updates and 

approvals. The Commission staff 

therefore estimates the total ongoing 

paperwork burden hours per year for all 

funds required by rule 17g–1 to be 6958 

hours (3479 funds × 2 hours = 6958 

hours). 

These estimates of average burden 

hours are made solely for the purposes 

of the Paperwork Reduction Act. These 

estimates are not derived from a 

comprehensive or even a representative 

survey or study of Commission rules. 

The collection of information required 

by rule 17g–1 is mandatory and will not 

be kept confidential. An agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless it displays a 

currently valid control number. 

Written comments are requested on: 

(a) Whether the collection of 

information is necessary for the proper 

performance of the functions of the 

Commission, including whether the 

information has practical utility; (b) the 

accuracy of the Commission’s estimate 

of the burden of the collection of 

information; (c) ways to enhance the 

quality, utility and clarity of the 

information collected; and (d) ways to 

minimize the burden of the collection of 

information on respondents, including 

through the use of automated collection 

techniques or other forms of information 

technology. Consideration will be given 

to comments and suggestions submitted 

in writing within 60 days of this 

publication. 

Please direct your written comments 

to Thomas Bayer, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o Remi PavlikSimon, 6432 General Green Way, 

Alexandria, VA 22312; or send an email 

to: PRA_Mailbox@sec.gov. 

February 8, 2012. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3337 Filed 2–13–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting Notice 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Thursday, February 16, 2012 at 2:00 

p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) 

and 17 CFR 200.402(a)(3), (5), (7), 9(ii) 

and (10), permit consideration of the 

scheduled matters at the Closed 

Meeting. 

Commissioner Aguilar, as duty 

officer, voted to consider the items 

listed for the Closed Meeting in a closed 

session. 

The subject matter of the Closed 

Meeting scheduled for Thursday, 

February 16, 2012 will be: 

Formal order of investigation; 

Institution and settlement of 

injunctive actions; 

Institution and settlement of 

administrative proceedings; and 

Other matters relating to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: The Office of the Secretary at 

(202) 551–5400. 

Dated: February 9, 2012. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3478 Filed 2–10–12; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66348; File No. SR–CBOE– 

2011–122] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Approving 

Proposed Rule Change, as Modified by 

Amendment No. 1, Related to Trading 

of FLEX Options 

February 7, 2012. 

I. Introduction 

On December 12, 2011, the Chicago 

Board Options Exchange, Incorporated 

(‘‘Exchange’’ or ‘‘CBOE’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend rules pertaining to the electronic 

trading of Flexible Exchange Options 

(‘‘FLEX Options’’) and to eliminate 

certain European-Capped style 

settlement and currency provisions with 

the FLEX rules that pertain to both 

electronic and open outcry trading. The 

proposed rule change was published for 

comment in the Federal Register on 

December 29, 2011.3 On February 7, 

2012, the Exchange filed an Amendment 

No. 1 to the proposed rule change.4 The 

Commission received one comment 

letter regarding the proposal.5 This 

order approves the proposed rule 

change, as modified by Amendment No. 

1. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Notices 8305 

6See Rule 24B.3. 

7See Rule 24B.1(j). 

8Resting FLEX Orders may only be entered in the 

electronic book as ‘‘day orders’’ and are cancelled 

at the close of each trade day if unexecuted. 

Therefore, there would be no orders resting in the 

book from the prior day. 

9See Rule 24B.1(t). 

10See Rule 24B.1(y)(1)–(6). 

11The Exchange may establish from time to time 

a participation entitlement formula that is 

applicable to FLEX Appointed Market Makers on a 

class-by-class basis with respect to open outcry 

RFQs, electronic RFQs and/or electronic book 

transactions. See Rule 24B.5(d)(2)(ii). 12See Rule 24B.1(k). 

II. Description of the Proposal 

The Exchange is in the process of 

enhancing the FLEX Hybrid Trading 

System platform (‘‘FLEX System’’) to 

further integrate it with the Exchange’s 

existing technology platform for nonFLEX trading. Accordingly, the 

Exchange proposes to make certain 

modifications to the existing electronic 

trading processes utilized on the FLEX 

System platform. The Exchange does 

not propose any changes to the open 

outcry trading processes for FLEX 

Options, except for proposed changes 

pertaining to foreign currencies as 

described below. 

A. Opening Trading in Existing Series 

The Exchange proposes to revise the 

procedure for opening FLEX Option 

series with existing open interest. 

Currently there are no trading rotations 

conducted at the opening of trading.6

Instead, an initial FLEX Request for 

Quote (‘‘RFQ’’) process is required to 

open a particular series for trading each 

day. Once an RFQ is completed, the 

series is established in the FLEX System 

for the day and FLEX Orders 7 may be 

entered directly into the FLEX 

electronic book throughout the day.8

Under the proposal, FLEX Option 

series with existing open interest will be 

automatically opened by the Exchange 

at a randomly selected time within a 

number of seconds after 8:30 a.m. 

(Central Time), at which point in time 

FLEX Orders may be entered directly 

into the electronic book (if available) 

and/or FLEX RFQ auctions may be 

initiated pursuant to Rule 24B.5. New 

FLEX Option series will continue to be 

subject to the existing requirement that 

there be an initial RFQ to initiate 

trading in the FLEX series on a given 

trading day. 

B. Trade Conditions 

Under Rule 24B.1, a ‘‘Trade 

Condition’’ means a contingency that 

has been placed on an RFQ, RFQ Order 9

or FLEX Order. There are currently six 

Trade Conditions available in the FLEX 

System.10 The Exchange proposes to 

eliminate the Fill-or-Kill, Minimum Fill, 

Lots Of, and Intent to Cross Trade 

Conditions, as their functions will not 

be supported under the FLEX System 

enhancements. In addition, the 

Exchange represents that these Trade 

Conditions have generally not been 

actively used by FLEX Traders. The 

Exchange also proposes to adopt a new 

Immediate-or-Cancel Trade Condition. 

‘‘Immediate-or-Cancel’’ will be defined 

as a condition to execute an RFQ Order 

or FLEX Order in its entirety or in part 

as soon as it is represented or cancel it. 

Thus, under the proposal, there will 

only be three Trade Conditions: 

Immediate-or-Cancel, All-or-None, and 

Hedge. 

C. Foreign Currency Provisions 

The Exchange also proposes to 

eliminate the provisions in the FLEX 

Rules that permit (i) FLEX Options to be 

designated with a European-Capped 

style exercise and (ii) FLEX Index 

Options to be designated for settlement 

in foreign currencies. In addition, 

related index multiplier provisions for 

foreign currencies will also be 

eliminated. The changes will apply to 

all FLEX trading on the Exchange, 

whether electronic or open outcry. 

According to the Exchange, these 

European-Capped style and foreign 

currency provisions have generally not 

been actively utilized, and the Exchange 

no longer plans to support foreign 

currency settlements in the enhanced 

FLEX System. 

D. Electronic Allocation Algorithms 

Further, the Exchange proposes to 

modify and simplify the allocation 

algorithms applicable to the FLEX 

electronic book and to the FLEX 

electronic RFQ process. Generally, the 

algorithms will be based on price-time 

priority, subject to public customer and 

non-Trading Permit Holder brokerdealer (‘‘non-TPH broker-dealer’’) 

priority and, if applicable, any 

applicable entitlement priority. The 

specific allocation algorithms for the 

FLEX electronic book and the FLEX 

electronic RFQ process are described 

below. 

1. FLEX Electronic Book 

Currently, for the FLEX electronic 

book, all FLEX Orders are ranked and 

matched based on price-time priority, 

unless a FLEX Appointed Market-Maker 

is quoting at the best bid (offer) and a 

FLEX Appointed Market-Maker 

participation entitlement has been 

established.11 If a FLEX Appointed 

Market-Maker participation entitlement 

has been established, priority among 

multiple bids (offers) at the same price 

is as follows: (i) All FLEX Orders for the 

account of a public customer ranked 

ahead of the FLEX Appointed MarketMaker, based on time priority; (ii) any 

FLEX Orders that are subject to the 

FLEX Appointed Market-Maker 

participation entitlement, based on a 

participation entitlement formula 

specified in Rule 24B.5(d)(2)(ii); then 

(iii) all other FLEX Orders, based on 

time priority. 

As proposed, priority for the FLEX 

electronic book with multiple bids 

(offers) at the same price would be: (i) 

Public customer and non-TPH brokerdealers will participate in the execution 

based on time priority; (ii) any FLEX 

Orders that are subject to the FLEX 

Appointed Market-Maker participation 

entitlement, based on a participation 

entitlement formula specified in Rule 

24B.5(d)(2)(ii); then (iii) all other FLEX 

Orders will participate in the execution, 

based on time priority. 

2. FLEX Electronic RFQs 

Pursuant to the current electronic 

RFQ process, executions of RFQ Orders 

occur at a single price that will leave 

bids and offers which cannot trade with 

each other (referred to as the ‘‘BBO 

clearing price’’). In determining the 

priority of bids and offers, the FLEX 

System gives priority to FLEX Quotes 12

and FLEX Orders whose price is better 

than the BBO clearing price, then to 

FLEX Quotes and FLEX Orders at the 

BBO clearing price. Priority among 

multiple FLEX Quotes and FLEX Orders 

priced at the BBO clearing price is 

generally as follows: (i) Any FLEX 

Quotes subject to a FLEX Appointed 

Market-Maker participation entitlement; 

(ii) FLEX Orders resting in the 

electronic book, based on the current 

book priority algorithm; (iii) FLEX 

Quotes for the account of public 

customers and non-TPH broker-dealers, 

based on time priority; and then (iv) all 

other FLEX Quotes, based on time 

priority. 

The Exchange proposes to eliminate 

the concept of a ‘‘BBO clearing price’’ 

except in the limited scenario where the 

RFQ Market is locked or crossed. Thus, 

an incoming FLEX electronic RFQ Order 

would be eligible to trade with FLEX 

Quotes and FLEX Orders at the best 

price(s) (i.e., an incoming RFQ Order 

could trade at multiple price points). In 

general, priority among multiple FLEX 

Quotes and FLEX Orders at the same 

price would be: (i) FLEX Quotes and 

FLEX Orders for the account of public 

customers and non-TPH broker-dealers, 

based on time priority; (ii) any FLEX 

Quotes and FLEX Orders subject to a 

mstockstill on DSK4VPTVN1PROD with NOTICES

8306 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Notices 

13The ‘‘RFQ Market’’ means the bids or offers, or 

both, as applicable, entered in response to an 

electronic Request for Quotes and FLEX Orders 

resting in the electronic book. See Rule 24B.1(s). 

14See proposed changes to Rule 

24B.5(a)(1)(iii)(D) and (d)(2)(i). 

15 In approving the proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 16 15 U.S.C. 78f. 17 15 U.S.C. 78f(b)(5). 

FLEX Appointed Market-Maker 

participation entitlement; and then (iii) 

all other FLEX Quotes and FLEX Orders, 

based on time priority. 

a. Lock/Crossed Markets 

Currently, in the event the RFQ 

Market 13 is locked or crossed (e.g., 

$1.25–$1.20), priority among multiple 

FLEX Quotes and FLEX Orders that are 

priced at the BBO clearing price and are 

on the same side of the market as the 

RFQ Order is as follows: (i) FLEX 

Orders resting in the electronic book, 

based on the current book priority 

algorithm; (ii) if applicable, an RFQ 

Order for the account of a public 

customer or non-TPH broker-dealer, 

then any FLEX Quotes subject to a FLEX 

Appointed Market-Maker participation 

entitlement; (iii) FLEX Quotes for the 

account of public customers and nonTPH broker-dealers, based on time 

priority; (iv) if applicable, an RFQ Order 

for the account of a Trading Permit 

Holder, then any FLEX Quotes that are 

subject to a FLEX Appointed MarketMaker participation entitlement; and 

then (v) all other FLEX Quotes, based on 

time priority. 

As noted above, the Exchange 

proposes to eliminate the concept of a 

‘‘BBO clearing price’’ except in the 

limited scenario where the RFQ Market 

is locked or crossed. Under the 

proposal, in the event the RFQ Market 

is locked or crossed, FLEX Quotes and 

FLEX Orders would be eligible to trade 

at a single BBO clearing price pursuant 

to the existing BBO clearing price 

process. The priority among multiple 

FLEX Quotes and FLEX Orders that are 

priced at the same price and are on the 

same side of the market as the RFQ 

Order will be: (i) FLEX Quotes and 

FLEX Orders for the account of public 

customers and non-TPH broker-dealers, 

based on time priority; (ii) an RFQ 

Order, then any FLEX Quotes and FLEX 

Orders that are subject to a FLEX 

Appointed Market-Maker participation 

entitlement; and then (iii) all other 

FLEX Quotes and FLEX Orders, based 

on time priority. 

b. Intent to Cross Trade Condition 

Currently, in the event the Submitting 

Trading Permit Holder has indicated an 

Intention to Cross in its RFQ request, 

the Submitting Trading Permit Holder 

may obtain a crossing participation 

entitlement if certain conditions are 

met. The incoming RFQ Order will then 

be eligible to trade with the FLEX 

Quotes and FLEX Orders at the BBO 

clearing price. Priority among multiple 

FLEX Quotes and FLEX Orders that are 

priced at the BBO clearing price and on 

the same side of the market as the 

crossing participation entitlement is as 

follows: (i) FLEX Orders resting in the 

electronic book based on the current 

book priority algorithm; (ii) FLEX 

Quotes for the account of public 

customers and non-TPH broker-dealers, 

based on time priority; (iii) the crossing 

participation entitlement; (iv) any FLEX 

Quotes subject to a FLEX Appointed 

Market-Maker participation entitlement; 

and then (v) all other FLEX Quotes, 

based on time priority. 

Under the proposal, the Exchange 

would eliminate the ‘‘Intent to Cross’’ 

Trade Condition. As a result, the Intent 

to Cross/Crossing Participation 

Entitlement scenario under the 

electronic RFQ process described above 

would no longer be applicable.14

E. Electronic RFQ Processing of 

Complex Orders 

Finally, the Exchange proposes to 

adopt a new Interpretation and Policy 

under Rule 24B.5 to more fully describe 

the electronic processing of complex 

orders. Specifically, complex orders will 

only be eligible to electronically trade 

with other complex orders through the 

electronic RFQ process described in 

Rule 24B.5(a)(1). To the extent the 

Exchange determines to make an 

electronic book available for simple, 

resting FLEX Orders, there will be no 

‘‘legging’’ of complex orders represented 

in the electronic RFQ process with 

FLEX Orders that may be represented in 

the individual series legs represented in 

the electronic book. In the event there 

are bids (offers) in any of the individual 

component series legs represented in 

the electronic book when an electronic 

RFQ for a complex order strategy is 

submitted to the System, the electronic 

RFQ will not commence. In the event an 

unrelated FLEX Order in any of the 

individual series legs is received during 

the duration of an electronic RFQ, such 

FLEX Order will not be considered in 

the electronic RFQ allocation. Further, 

to the extent that a complex RFQ Order 

or responsive FLEX Quote is not 

executed, any remaining balance of the 

complex order or FLEX Quote will be 

automatically cancelled if not traded at 

the conclusion of the electronic RFQ 

process. 

III. Discussion and Commission 

Findings 

After careful consideration, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange 15 and, in 

particular, the requirements of Section 6 

of the Act.16 Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,17 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to promote just and equitable 

principles of trade, 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. The Commission 

believes that the proposal should benefit 

FLEX Traders and investors by 

providing a more simplified and 

efficient trading functionality that 

competes with the over-the-counter 

market in customized options. 

The Exchange proposes to revise the 

process for opening electronic trading in 

FLEX Option series with existing open 

interest. The Commission believes that 

the proposal to automatically open 

FLEX Option series with existing open 

interest could make the opening process 

more efficient for FLEX users. In 

addition, the Commission notes that 

new FLEX Option series will continue 

to be subject to the existing requirement 

that there be an initial RFQ to initiate 

trading in the FLEX series. 

In addition, the Exchange proposes to 

eliminate the Fill-or-Kill, Minimum Fill, 

Lots Of, and Intent to Cross Trade 

Conditions, and to adopt a new 

Immediate-or-Cancel Trade Condition. 

Furthermore, the Exchange proposes to 

eliminate European-Capped exercise 

style and foreign currency provisions for 

FLEX Options. The Commission notes 

that the proposed changes help to 

clarify the procedures utilized in the 

Exchange’s enhanced FLEX System and 

should help encourage further use of 

FLEX Options. The Commission notes 

that the eliminated Trade Conditions 

and foreign currency settlement 

provisions will not be supported under 

the FLEX System enhancements. Also, 

according to the Exchange, the 

eliminated Trade Conditions, as well as 

the European-Capped style and foreign 

currency provisions have generally not 

been actively used by FLEX Traders. 

The Exchange also proposes to adopt 

a new Interpretation and Policy to Rule 

24B.5 to describe the electronic 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Notices 8307 

18The Commission also believes that the 

amended priority and allocation rules for electronic 

FLEX trading are consistent with Section 11(a) of 

the Act. 15 U.S.C. 78k(a) Section 11(a)(1) prohibits 

a member of a national securities exchange from 

effecting transactions on that exchange for its own 

account, the account of an associated person, or an 

account over which it or its associated person 

exercises discretion unless an exception applies. 

The Commission believes, however, that neither a 

Submitting Trading Permit Holder who trades 

against an electronic RFQ Market nor any other 

FLEX Trader who itself submits an RFQ Quote 

electronically qualifies for the ‘‘effect-versus 

execute’’ exception to Section 11(a). 17 CFR 

240.11a2–2(T). Nevertheless, the Commission 

believes that other exceptions may apply. FLEX 

Market-Makers qualify for the market-maker 

exception. With respect to non-market-maker 

members, the new System appears reasonably 

designed to cause RFQ Quotes constituting the RFQ 

Market and the RFQ Order that trades against the 

RFQ Market to yield to non-member interest, 

consistent with the ‘‘G’’ exception. See 15 U.S.C. 

78k(a)(1)(G) (setting forth all requirements for the 

‘‘G’’ exception). 

19See e.g., Securities Exchange Act Release Nos. 

51822 (June 10, 2005), 70 FR 35321 (June 17, 2005) 

(SR–CBOE–2004–87) (Adopting rules pertaining to 

priority and allocation of trades for index options) 

and 56792 (November 15, 2007), 72 FR 65776 

(November 23, 2007) (SR–CBOE–2006–99) 

(Adopting rules providing for the trading of FLEX 

Options on an electronic platform). 

20See supra note 4. 

21 Id. 

22See Securities Exchange Act Release No. 56792, 

supra note 19. 

23See SR–CBOE–2006–99 Amendment No. 2, 

http://www.cboe.com/publish/RuleFilingsSEC/SRCBOE-2006-099.a2.pdf. 

24 15 U.S.C. 78s(b)(2). 

25 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The purpose of the fidelity bond is to protect a 

member against certain types of losses, including, 

Continued 

processing of complex orders. The 

Commission believes that such a 

provision will clarify application of 

Exchange rules and processes for CBOE 

Trading Permit Holders and investors. 

The Exchange further proposes to 

modify the priority algorithms 

applicable to the FLEX electronic book 

and to the FLEX electronic RFQ process. 

The Commission believes that the 

proposed changes will simplify the 

allocation algorithms for FLEX Traders 

and investors. Under the proposal, 

allocation will be based on price-time 

priority, subject to public customer and 

non-TPH broker-dealer priority and, if 

applicable, any applicable entitlement 

priority. The Commission believes that 

the priority and allocation rules are 

reasonable and consistent with the Act 

and applies a more consistent allocation 

algorithm across these FLEX electronic 

processes.18 Moreover, the proposed 

changes regarding public customer 

priority/non-TPH broker-dealer priority 

and price-time priority have previously 

been found consistent with the Act.19

The Commission received one 

comment letter regarding the proposed 

rule change.20 The comment suggested 

that there be an additional phase, the 

Decision Phase, in the RFQ process. 

During this Decision Phase, the initiator 

of an RFQ would have a brief period of 

time, during which no changes of any 

type to market quotes would be 

permitted, in order to decide to trade or 

cancel their RFQ.21 According to the 

Exchange, it previously proposed an 

RFQ process with a ‘‘locked up RFQ 

Market,’’ similar to the one suggested in 

the comment letter, during the Reaction 

Phase. However the Exchange amended 

the process to allow FLEX Quotes and 

FLEX Orders to be entered, modified or 

cancelled during the Reaction Phase.22

The Exchange stated that the 

amendment was the result of feedback 

received concerning the risk of market 

movements that might occur during the 

‘‘locked up RFQ Market.’’ 23 The 

Commission agrees with the Exchange 

that the five-minute RFQ Reaction 

Period should be sufficient time for the 

Submitting Trading Permit Holder to 

determine whether to trade against the 

RFQ Market while at the same time not 

exposing those who respond to an RFQ 

to any unreasonable risks of market 

movements that may occur during the 

RFQ Reaction Period. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,24 that the 

proposed rule change (File No. SR– 

CBOE–2011–122), as amended by 

Amendment No. 1, be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3328 Filed 2–13–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66359; File No. SR–BX– 

2012–008] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

and Immediate Effectiveness of 

Proposed Rule Change by NASDAQ 

OMX BX, Inc. Relating to Fidelity 

Bonds 

February 8, 2012. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1, and Rule 19b–4 2 thereunder, 

notice is hereby given that on February 

1, 2012, NASDAQ OMX BX, Inc. 

(‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Exchange Rule 3020 to reflect recent 

changes to a corresponding rule of the 

Financial Industry Regulatory Authority 

(‘‘FINRA’’). 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=BXRulefilings, 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 

Many of BX’s rules are based on rules 

of FINRA (formerly the National 

Association of Securities Dealers 

(‘‘NASD’’)). Beginning in 2008, FINRA 

embarked on an extended process of 

moving rules formerly designated as 

‘‘NASD Rules’’ into a consolidated 

FINRA rulebook. In most cases, FINRA 

has renumbered these rules, and in 

some cases has substantively amended 

them. Accordingly the Exchange also 

has initiated a process of modifying its 

rulebook to ensure that the Exchange 

rules corresponding to FINRA/NASD 

rules continue to mirror them as closely 

as practicable. 

This proposed rule change concerns 

BX Rule 3020 entitled ‘‘Fidelity Bonds,’’ 

which follows and incorporates by 

reference former NASD Rule 3020.3

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