Document ID: SEC-2011-1279-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2011-08-26T04:00Z

[Federal Register Volume 76, Number 166 (Friday, August 26, 2011)]
[Notices]
[Pages 53507-53509]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-21857]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65177; File No. SR-BX-2011-058]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Extending 
the Pilot Period for BOX To Receive Inbound Routes of Orders From NOS

August 19, 2011.
    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 15, 2011, NASDAQ OMX BX, Inc. (the ``Exchange'') filed 
with the Securities and Exchange Commission (``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

[[Page 53508]]

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 submits this proposed rule change to extend the pilot 
period of the Exchange's prior approval for the Boston Options Exchange 
(``BOX'') to accept inbound routes by NASDAQ Options Services, LLC 
(``NOS'') of Nasdaq Options Market (``NOM'') Exchange Direct Orders 
without checking the NOM book and 2) [sic] NOM non-System securities, 
including Exchange Direct Orders.\3\
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    \3\ Pursuant to chapter VI, Section 1(b) of the NOM Rules, 
``System Securities'' are all options that are currently trading on 
NOM pursuant to chapter IV of the NOM rules. All other options are 
``Non-System Securities.'' Pursuant to chapter VI, Section (1)(e)(7) 
of the NOM Rules, Exchange Direct Orders are orders that route 
directly to other Options Markets on an immediate-or-cancel basis 
without checking the NOM book for liquidity.
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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
    Currently, NOS is the approved outbound routing facility of the 
NASDAQ Stock Market (the ``NASDAQ Exchange'') for NOM, providing 
outbound routing from NOM to other market centers.\4\ The Exchange and 
the NASDAQ Exchange have previously adopted rules to permit BOX to 
receive inbound routes of certain option orders, specifically (1) 
Exchange Direct Orders without checking the NOM book prior to routing, 
and (2) NOM non-system securities, by NOS on a pilot basis.\5\ The 
Exchange specifically has adopted a rule to prevent potential 
information advantages resulting from the affiliation between BOX and 
NOS, as related to NOS's authority to route orders from NOM to BOX.\6\ 
NOS's authority to route these orders to BOX is subject to a pilot 
period ending on August 16, 2011.\7\ The Exchange hereby seeks to 
extend the previously approved pilot period (with the attendant 
obligations and conditions) to permit BOX to accept inbound routes of 
(1) exchange Direct Orders without checking the NOM book and (2) NOM 
non-System securities, including Exchange Direct Orders that NOS routes 
from NOM for an additional 30 days, through September 15, 2011. The 
Exchange is also seeking permanent approval of the BOX and NOS inbound 
routing relationship.\8\
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    \4\ NOM Rule chapter VI, Section 11(c). Under NOM Rule chapter 
VI, Section 11(c): (1) NOM routes orders in options via NOS, which 
serves as the sole ``routing facility'' of NOM; (2) the sole 
function of the routing facility is to route orders in options to 
away markets pursuant to NOM rules, solely on behalf of NOM; (3) NOS 
is a member of an unaffiliated self-regulatory organization, which 
is the designated examining authority for the broker-dealer; (4) the 
routing facility is subject to regulation as a facility of the 
NASDAQ Exchange, including the requirement to file proposed rule 
changes under Section 19 of the Act; (5) use of NOS to route order 
to other market centers is optional; (6) NOM must establish and 
maintain procedures and internal controls reasonably designed to 
adequately restrict the flow of confidential and proprietary 
information between the NASDAQ Exchange and its facilities 
(including the routing facility), and any other entity; and (7) the 
books, records, premises, officers, directors, agents, and employees 
of the routing facility, as a facility of the NASDAQ Exchange, shall 
be subject at all times to inspection and copying by the NASDAQ 
Exchange and the Commission.
    \5\ See Securities Exchange Act Release Nos. 60349 (July 20, 
2009), 74 FR 37071 (July 27, 2009) (SR-BX-2009-035); 60354 (July 21, 
2009), 74 FR 37074 (July 27, 2009) (SR-NASDAQ-2009-065); 62555 (July 
22, 2010), 75 FR 44835 (July 29, 2010) (SR-BX-2010-051); 63364 
(November 23, 2010), 75 FR 74121 (November 30, 2010) (SR-BX-2010-
078); 64530 (May 20, 2011), 76 FR 30746 (May 26, 2011) (SR-BX-2011-
027).
    \6\ See chapter XXXIX, Section 2(c) of the Grandfathered Rules 
of the Exchange.
    \7\ See Securities Exchange Act Release No. 64530 (May 20, 
2011), 76 FR 30746 (May 26,
     2011) (SR-BX-2011-027).
    \8\ See Securities Exchange Act Release No. 64896 (July 15, 
2011), 76 FR 30476 (July 21,
     2011) (SR-BX-2011-045).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\9\ in general, and with 
Section 6(b)(5) of the Act,\10\ in particular, in that the proposal 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 regulating, clearing, 
settling, processing information with respect to, and 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. Specifically, 
the proposed rule change would permit inbound routing of certain orders 
from NOM to BOX through NOS in a manner consistent with prior approvals 
and established protections. The Exchange believes that extending the 
previously approved pilot period for thirty days is a sufficient length 
to permit both the Exchange and the Commission to assess the impact of 
the Exchange's authority to permit BOX to receive direct inbound routes 
of certain option orders via NOS (including the attendant obligations 
and conditions), while the Commission evaluates the pending proposal to 
make the pilot permanent.\11\
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ See supra at note 8.
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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.

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) of the Act\12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Exchange believes that the proposed rule change 
does not significantly affect the protection of investors or the public 
interest because it seeks to extend for a limited period a currently 
operating pilot program so as

[[Page 53509]]

to allow the Exchange and Commission to assess whether to make the 
pilot permanent in accordance with its attendant obligations and 
conditions.\14\ The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because such waiver would allow the pilot period to be 
extended without undue delay through September 15, 2011 while the 
Exchange's proposal to make the pilot permanent is under consideration. 
Therefore, the Commission designates the proposal operative upon 
filing.\15\
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    \14\ See SR-BX-2011-058, Item 7.
    \15\ 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.

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2011-058 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2011-058. This file 
number should be included on the subject line if e-mail 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 
a.m. and 3 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-2011-058 and should be 
submitted on or before September 16, 2011.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-21857 Filed 8-25-11; 8:45 am]
BILLING CODE 8011-01-P