Document ID: SEC-2011-0943-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2011-07-07T04:00Z

[Federal Register Volume 76, Number 130 (Thursday, July 7, 2011)]
[Notices]
[Pages 39940-39942]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-16950]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64779; File No. SR-BX-2011-041]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 

Filing and Immediate Effectiveness of a Proposal To Extend a Pilot 

Program That Permits BOX to Have No Minimum Size Requirement for Orders 

Entered Into the Price Improvement Period (PIP) Process Until July 18, 

2012

June 30, 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 June 29, 2011, NASDAQ OMX BX, Inc. (``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 the 

proposed rule change pursuant to Section 19(b)(3)(A) of the Act,\3\ 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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I. Self-Regulatory Organization's Statement of the Terms of the 

Substance of the Proposed Rule Change

    The Exchange proposes to amend proposes to amend [sic] the 

Supplementary Material to Chapter V, Section 18 (The Price Improvement 

Period ``PIP'') of the Rules of the Boston Options Exchange Group, LLC 

(``BOX'') to extend a pilot program that permits BOX to have no minimum 

size requirement for orders entered into the PIP process (``PIP Pilot 

Program''). The text of the proposed rule change is available at the 

Exchange's principal office, at http://www.nasdaqomx.com, at the 

Commission's Public Reference Room, and at the Commission's Web site at 

http://www.sec.gov.

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 purpose of the proposed rule change is to extend the PIP Pilot 

Program under the BOX Rules for

[[Page 39941]]

twelve (12) additional months. The PIP Pilot Program allows BOX to have 

no minimum size requirement for orders entered into the PIP process.\5\ 

BOX has committed to provide certain data to the Commission during the 

PIP Pilot Program.\6\ The proposed rule change retains the text of 

Supplementary Material .01 to Section 18 of Chapter V of the BOX Rules 

and seeks to extend the operation of the PIP Pilot Program until July 

18, 2012.

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    \5\ The Pilot Program is currently set to expire on July 18, 

2011. See Securities Exchange Act Release No. 62512 (July 16, 2010), 

75 FR 43223 (July 23, 2010) (SR-BX-2010-046). See also Securities 

and Exchange Act Release Nos. 60337 (July 17, 2009), 74 FR 36805 

(July 24, 2009) (SR-BX-2009-38); 58942 (November 13, 2008), 73 FR 

70394 (November 20, 2008) (SR-BSE-2008-49); 58195 (July 18, 2008), 

73 FR 43801 (July 28, 2008) (SR-BSE-2008-39); 55999 (July 2, 2007), 

72 FR 37549 (July 10, 2007) (SR-BSE-2007-27); 54066 (June 29, 2006), 

71 FR 38434 (July 6, 2006) (SR-BSE-2006-24); 52149 (July 28, 2005), 

70 FR 44704 (August 3, 2005) (SR-BSE-2005-22); 49068 (January 13, 

2004), 69 FR 2775 (January 20, 2004) (SR-BSE-2002-15) (``Original 

PIP Pilot Program Approval Order''); and 51821 (June 10, 2005), 70 

FR 35143 (June 16, 2005) (SR-BSE-2004-51) (Order Approval Relating 

to the Trading of Market Orders on the Boston Options Exchange).

    \6\ See Securities Exchange Act Release No. 51821 (June 10, 

2005), 70 FR 35143 (June 16, 2005) (SR-BSE-2004-51).

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    The Exchange notes that the PIP Pilot Program guarantees 

Participants the right to trade with their customer orders that are 

less than 50 contracts. In particular, any order entered into the PIP 

is guaranteed an execution at the end of the auction at a price at 

least equal to the national best bid or offer. In further support of 

this proposed rule change, and as required by the Original PIP Pilot 

Program Approval Order, the Exchange represents that BOX has been 

submitting to the Exchange and to the Commission a PIP Pilot Program 

Report, offering detailed data from, and analysis of, the PIP Pilot 

Program. Although BOX is submitting the reports, the Exchange notes 

that it is also responsible for the timeliness and the accuracy of the 

information.

    To aid the Commission in its evaluation of the PIP Pilot Program, 

BOX has represented to the Exchange that BOX will provide the following 

additional information each month: (1) The number of orders of 50 

contracts or greater entered into the PIP auction; (2) The percentage 

of all orders of 50 contracts or greater sent to BOX that are entered 

into BOX's PIP auction; (3) The spread in the option, at the time an 

order of 50 contracts or greater is submitted to the PIP auction; (4) 

Of PIP trades for orders of fewer than 50 contracts, the percentage 

done at the National Best Bid or Offer (``NBBO'') plus $.01, plus $.02, 

plus $.03, etc.; (5) Of PIP trades for orders of 50 contracts or 

greater, the percentage done at the NBBO plus $.01, plus $.02, plus 

$.03, etc.; (6) The number of orders submitted by Order Flow Providers 

(``OFPs'') when the spread was $.05, $.10, $.15, etc. For each spread, 

BOX will specify the percentage of contracts in orders of fewer than 50 

contracts submitted to BOX's PIP that were traded by: (a) The OFP that 

submitted the order to the PIP; (b) BOX Market Makers assigned to the 

class; (c) other BOX Participants; (d) Public Customer Orders 

(including Customer PIP Orders (``CPOs'')); and (e) unrelated orders 

(orders in standard increments entered during the PIP). For each 

spread, BOX will also specify the percentage of contracts in orders of 

50 contracts or greater submitted to BOX's PIP that were traded by: (a) 

The OFP that submitted the order to the PIP; (b) BOX Market Makers 

assigned to the class; (c) other BOX Participants; (d) Public Customer 

Orders (including CPOs); and (e) unrelated orders (orders in standard 

increments entered during PIP); (7) For the first Wednesday of each 

month: (a) the total number of PIP auctions on that date; (b) the 

number of PIP auctions where the order submitted to the PIP was fewer 

than 50 contracts; (c) the number of PIP auctions where the order 

submitted to the PIP was 50 contracts or greater; (d) the number of PIP 

auctions (for orders of fewer than 50 contracts) with 0 participants 

(excluding the initiating participant), 1 participant (excluding the 

initiating participant), 2 participants (excluding the initiating 

participant), 3 participants (excluding the initiating participant), 4 

participants (excluding the initiating participant), etc., and (e) the 

number of PIP auctions (for orders of 50 contracts or greater) with 0 

participants (excluding the initiating participant), 1 participant 

(excluding the initiating participant), 2 participants (excluding the 

initiating participant), 3 participants (excluding the initiating 

participant), 4 participants (excluding the initiating participant), 

etc.; and (8) For the third Wednesday of each month: (a) The total 

number of PIP auctions on that date; (b) the number of PIP auctions 

where the order submitted to the PIP was fewer than 50 contracts; (c) 

the number of PIP auctions where the order submitted to the PIP was 50 

contracts or greater; (d) the number of PIP auctions (for orders of 

fewer than 50 contracts) with 0 participants (excluding the initiating 

participant), 1 participant (excluding the initiating participant), 2 

participants (excluding the initiating participant), 3 participants 

(excluding the initiating participant), 4 participants (excluding the 

initiating participant), etc., and (e) the number of PIP auctions (for 

orders of 50 contracts or greater) with 0 participants (excluding the 

initiating participant), 1 participant (excluding the initiating 

participant), 2 participants (excluding the initiating participant), 3 

participants (excluding the initiating participant), 4 participants 

(excluding the initiating participant), etc.

2. Statutory Basis

    The Exchange believes that the proposal is consistent with the 

requirements of Section 6(b) of the Act,\7\ in general, and Section 

6(b)(5) of the Act,\8\ in particular, in that it is designed 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 for a free and open market and a national market 

system and, in general, to protect investors and the public interest. 

The Exchange believes that the data demonstrates that there is 

sufficient investor interest and demand to extend the PIP Pilot Program 

for an additional twelve (12) months. The Exchange represents that the 

Pilot Program is designed to provide investors with real and 

significant price improvement regardless of the size of the order.

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    \7\ 15 U.S.C. 78f(b).

    \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 

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

    The Exchange has filed the proposed rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\ 

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) by its terms,

[[Page 39942]]

become operative prior to 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 upon filing with the Commission 

pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-

4(f)(6)(iii) thereunder.\12\

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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).

    \10\ 17 CFR 240.19b-4(f)(6).

    \11\ 15 U.S.C. 78s(b)(3)(A).

    \12\ 17 CFR 240.19b-4(f)(6)(iii). 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 met this requirement.

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    The Exchange has requested that the Commission waive the 30-day 

operative delay period. The Commission believes that waiver of the 30-

day operative delay period is consistent with the protection of 

investors and the public interest because such waiver will allow the 

PIP Pilot program to continue without interruption. Accordingly, the 

Commission designates the proposed rule change operative upon filing 

with the Commission.\13\

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    \13\ For purposes only of waiving the operative delay for this 

proposal, 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.\14\

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    \14\ 15 U.S.C. 78s(b)(3)(C).

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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-2011-041 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-2011-041. 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 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-BX-2011-041 and should be 

submitted on or before July 28, 2011.

    For the Commission, by the Division of Trading and Markets, 

pursuant to delegated authority.\15\

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    \15\ 17 CFR 200.30-3(a)(12).

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Cathy H. Ahn,

Deputy Secretary.

[FR Doc. 2011-16950 Filed 7-6-11; 8:45 am]

BILLING CODE 8011-01-P