Document ID: SEC-2009-0099-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2009-01-26T05:00Z

[Federal Register: January 26, 2009 (Volume 74, Number 15)]
[Notices]               
[Page 4491-4493]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26ja09-132]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59259; File No. SR-BX-2009-003]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Establish 
a Post-Only Order

January 15, 2009.
    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 January 14, 2009, 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 
substantially prepared by the Exchange. The Exchange has filed this 
proposal pursuant to Exchange Act Rule 19b-4(f)(6) \3\ and requests 
that the Commission waive the 30-day pre-operative waiting period 
contained in Exchange Act Rule 19b-4(f)(6)(iii).\4\ If such waiver is 
granted by the Commission, this rule proposal, which is effective upon 
filing with the Commission, shall become immediately operative.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
    \4\ 17 CFR 240.19b-4(f)(6)(iv).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to establish a Post-Only Order.
    The text of the proposed rule change is below. Proposed new 
language is in italics.
* * * * *
4751. Definitions
    (a)-(e) No change.
    (f) No change.
    (1)-(8) No change.
    (9) ``Post-Only Orders'' are orders that if, at the time of entry, 
would lock an order on the System, the order will be re-priced and 
displayed by the System to one minimum price increment (i.e., $0.01 or 
$0.0001) below the current low offer (for bids) or above the current 
best bid (for offers).
    (g)-(j) No change.
* * * * *

[[Page 4492]]

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
    In order to provide enhanced functionality, the Exchange proposes 
to adopt an additional order type known as the Post-Only Order. A Post-
Only Order is an order that does not remove liquidity from the System 
upon entry if it would lock an order on the Exchange's system for 
trading cash equities (the ``System''). If, at the time of entry, a 
Post-Only Order would lock an order on the System it will be re-priced 
and displayed by the System to one minimum price increment (i.e., $0.01 
or $0.0001) below the current low offer (for bids) or above the current 
best bid (for offers). In the case of a Post-Only Order locking an 
order, the Post-Only Order will be repriced only once upon entry into 
the System. As with other Exchange orders, the Post-Only Order will not 
be routed away to other trading centers.
    An example of how the price sliding mechanism will work if the 
Post-Only Order locks an order on the System is as follows:
     The System is displaying a $10.15 offer.
     A firm enters a Post-Only Order to buy at $10.15.
     The incoming Post-Only Order will go on the book and 
display at $10.14.
    If the Post-Only Order would lock or cross a protected quote of 
another market center the post-only logic is not applicable and the 
order will be processed in the same manner as a Price to Comply Post 
Order.
     Another market center is displaying a $10.15 offer.
     A firm enters a Post-Only Order to buy at $10.15.
     The incoming Post-Only Order will be accepted and display 
at $10.14.
    If the Post-Only Order would cross another order already on the 
System and the price improvement for executing the order is greater 
than the liquidity taker fee and higher than the rebate for being a 
liquidity provider, then the post-only logic is not applicable and the 
order will be processed and execute in the same manner as an order with 
a time-in-force of Immediate or Cancel (IOC).
     The System is displaying a $10.15 offer.
     A firm enters a Post-Only Order to buy at $10.16.
     The incoming Post-Only Order will execute at $10.15.
    The Exchange believes that the Post-Only Order type will increase 
the ability of market participants to control their provision or taking 
of market liquidity and thus better anticipate their trading costs. The 
Exchange notes that orders similar to the proposed Post-Only Order type 
are already in use by other market centers.\5\ In addition, the process 
for re-pricing Post-Only Orders is comparable to the existing re-
pricing mechanism approved for use for Price to Comply Post Orders.\6\
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    \5\ See Rule 11.9(c)(5) of the BATS Exchange and Rule 7.31 of 
NYSE Arca. The proposed Post-Only Order has functionalities similar 
to the NYSE Arca Adding Liquidity Only Order and the BATS Post Only 
Order.
    \6\ See Rule 4751(f)(8).
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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,\7\ in general, and with 
Section 6(b)(5) of the Act,\8\ 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 Post-Only Order is designed to encourage displayed liquidity and to 
offer Exchange users greater discretion and flexibility to post 
liquidity on the Exchange.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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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 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. To 
the contrary, the Exchange believes that the Post-Only Order is 
designed to compete with orders already approved and in use at other 
national securities exchanges, thereby enhancing competition between 
the exchanges.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; or (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 effective 
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) 
thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with 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, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    The Exchange has asked the Commission to waive the operative delay 
to permit the proposed rule change to become operative prior to the 
30th day after filing. The Commission has determined that waiving the 
30-day operative delay of the Exchange's proposal is consistent with 
the protection of investors and the public interest because such waiver 
will enable the Exchange to encourage increased liquidity concurrent 
with the launch of cash equities trading by the Exchange.\11\ 
Therefore, the Commission designates the proposal operative upon 
filing.
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    \11\ 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 such proposed rule 
change, the Commission may summarily abrogate 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

[[Page 4493]]

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 No. 
SR-BX-2009-003 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-2009-003. 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 inspection and 
copying 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 such 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 No. SR-BX-2009-003 and should be 
submitted on or before February 17, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-1464 Filed 1-23-09; 8:45 am]

BILLING CODE 8011-01-P