Document ID: SEC-2015-2114-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.,
Posted Date: 2015-12-22T05:00Z

[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]

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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.
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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 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\
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    \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.
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    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.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    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.
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    \7\ See BX Rules at Chapter VI, Section 9(ii)(A)(1).
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    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\
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    \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.
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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. 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 rule-comments@sec.gov. 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\
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    \10\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-32044 Filed 12-21-15; 8:45 am]
BILLING CODE 8011-01-P