Document ID: SEC-2008-0755-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston StockExchange, Inc.
Posted Date: 2008-05-30T04:00Z

[Federal Register: May 30, 2008 (Volume 73, Number 105)]
[Notices]               
[Page 31165-31167]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30my08-96]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57858; File No. SR-BSE-2008-30]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Obvious Errors on the Boston Options Exchange

May 23, 2008.
    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 May 22, 2008, the Boston Stock Exchange, Inc. (``BSE'' or 
``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 filed the proposal as a ``non-controversial'' proposed 
rule change pursuant to Section 19(b)(3)(A) \3\ of the Act and Rule 
19b-4(f)(6) thereunder,\4\ which renders the proposal effective upon 
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).

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[[Page 31166]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section 20 (Obvious Errors) of 
Chapter V of the Rules of the Boston Options Exchange Group, LLC 
(``BOX''). The proposed rule change would redefine theoretical price 
(``Theoretical Price'') for the purposes of determining whether an 
execution price constitutes an obvious error (``Obvious Error''). The 
text of the proposed rule change is available at the principal office 
of the Exchange, the Commission's Public Reference Room, and http://
www.bostonstock.com /regulatory/effective.aspx.

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. BSE 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 believes that the Obvious Error rules and procedures 
on BOX provide objective criteria by which certain transactions may be 
analyzed if believed to have been executed at erroneously high or low 
prices. Section 20 of Chapter V of the BOX Rules currently defines the 
Theoretical Price of an options series, if the series is traded on at 
least one other options exchange, as ``the last bid price with respect 
to an erroneous sell transaction, and last offer price with respect to 
an erroneous buy transaction, just prior to the trade disseminated by 
the competing options exchange that has the most liquidity in that 
option; or if there are no quotes for comparison purposes, as 
determined by the MRC.''
    The proposed rule change would re-define Theoretical Price to mean, 
with respect to options series traded on at least one other options 
exchange, either the last National Best Bid price (with respect to an 
erroneous sell transaction) or the last National Best Offer price (with 
respect to an erroneous buy transaction), just prior to the trade in 
question. This would provide the Market Regulation Center (``MRC'') 
with a clearly defined measure of the price on which to base their 
determination as to whether or not a particular transaction resulted 
from an erroneous price and thus was an obvious error.\5\ If approved, 
this proposal would continue to permit the MRC to establish the 
Theoretical Price when there are no quotes available for comparison 
purposes.
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    \5\ The Exchange notes that the Philadelphia Stock Exchange 
(``Phlx''), see Phlx Rule 1092(b), uses the NBBO to determine the 
theoretical price of an option.
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    As the proposed rule change would eliminate any comparison to the 
``competing options exchange that has the most liquidity in that 
option,'' the Exchange proposes to remove Supplemental Material .03 to 
Section 20 of Chapter V of the BOX Rules and modify the formatting of 
certain portions of the Supplemental Material for the purposes of 
conforming such formatting to that of the remainder of the BOX Rules. 
The Exchange also proposes to make a minor change to the rule text to 
correct an existing typographical error.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\7\ in particular, in that it 
is designed to promote just and equitable principles of trade, to 
prevent fraudulent and manipulative acts, 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 establish an objective 
definition of Theoretical Price when determining whether a particular 
transaction was or was not an Obvious Error and assure that any price 
adjustments made to Obvious Errors would not violate the terms of the 
Options Intermarket Linkage Plan.\8\
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ See Securities Exchange Act Release No. 43086 (July 28, 
2000), 65 FR 48023 (August 4, 2000) (File No. 4-429) (order 
approving the Options Intermarket Linkage Plan).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    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 after the date of filing (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 subparagraph (f)(6) 
of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of filing.\11\ 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay and designate the proposed 
rule change operative upon filing. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest. Given that the proposed rule change 
is substantially the same as that of the Phlx, previously approved by 
the Commission,\12\ the proposal does not appear to present any novel 
regulatory issues. In addition, waiving the 30-day operative delay 
ensures that the Exchange's obvious error rule conforms to the Options 
Intermarket Linkage Plan without delay. Therefore, the Commission 
designates the proposal to be operative upon filing.\13\
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    \11\ 17 CFR 240.19b-4(f)(6)(iii). The Exchange has satisfied the 
five-day pre-filing requirement of Rule 19b-4(f)(6)(iii).
    \12\ See Securities Exchange Act Release No. 57712 (April 24, 
2008), 73 FR 24100 (May 1, 2008) (order approving SR-Phlx-2007-69).
    \13\ For purposes only of waiving the operative delay of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 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 may summarily abrogate such rule change if it 
appears to the

[[Page 31167]]

Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in the 
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-BSE-2008-30 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BSE-2008-30. 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 Number SR-BSE-2008-30 and should be 
submitted on or before June 20, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8-12034 Filed 5-29-08; 8:45 am]

BILLING CODE 8010-01-P