Document ID: SEC-2010-1478-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2010-09-27T04:00Z

[Federal Register: September 27, 2010 (Volume 75, Number 186)]
[Notices]               
[Page 59304-59305]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27se10-141]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62959; File No. SR-BX-2010-065]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Provide 
an Additional Order Type Which Will Give Options Participants Greater 
Control Over the Circumstances in Which Their Orders Are Executed

September 21, 2010.
    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 September 13, 2010, 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 self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 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 Chapter V, Section 14 (Order Entry) 
of the Rules of the Boston Options Exchange Group, LLC (``BOX'') to 
provide an additional order type which will give Options Participants 
greater control over the circumstances in which their orders are 
executed. The text of the proposed rule change is available from the 
principal office of the Exchange, at the Commission's Public Reference 
Room and also on the Exchange's Internet Web site at http://
nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.

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 self-regulatory organization 
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 self-regulatory organization 
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 this proposed rule change is to provide an 
additional order type, the ``Session Order'', which will give Options 
Participants greater control over the circumstances in which their 
orders are cancelled or executed. By designating the Session Order 
duration type for an order, an Options Participant will be able to 
specify on an order by order basis that the designated Session Order it 
has sent to BOX should be cancelled as soon as the Options Participant 
loses its connection to the BOX system and its ability to either 
directly modify or cancel the order.\3\ The proposal will offer 
protection to Options Participants' orders in the event that they lose 
communication with the BOX Trading Host \4\ due to a loss of 
connectivity between their system and BOX or when there is a 
disconnection between internal BOX components.
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    \3\ Session Order duration type is not available for PIP Orders, 
Primary Improvement Orders or Improvement Orders. See proposed 
Section 16(d)(3) of Chapter V of the BOX Rules.
    \4\ References herein to the term Trading Host will have the 
meaning as set forth in Section 1(a)(67) of Chapter I of the BOX 
Rules.
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    An order sent to BOX with this Session Order duration type will 
remain active in the BOX trading system until one of the following 
events (``Triggering Event'') occurs:
     The connection between the Options Participant and BOX 
that was used to enter the order is interrupted;
     There is a disconnection between internal BOX components 
used to process orders, causing a component to lose its connection to 
the Options Participant or the Trading Host while in possession of the 
Session Order;
     A component of the Trading Host experiences a system error 
in which it is unable to process open orders while in possession of the 
Session Order.
    Upon the occurrence of one of these Triggering Events, meaning the 
Options Participant has lost its ability to either directly modify or 
cancel the order, only those Session Orders residing in the affected 
BOX internal system(s) will be automatically cancelled by BOX. Any 
Triggering Events are connection or component specific. Therefore, when 
a particular external connection between BOX and the Options 
Participant is interrupted, only those Session Orders that came through 
the interrupted connection will be automatically cancelled by BOX. 
Similarly, when the Triggering Event is a disconnection between 
internal BOX components, the BOX system will only automatically cancel 
Session Orders related to the component that is not ``responding''. The 
cancellation of the Session Orders from an affected connection will 
neither impact nor determine the treatment of the orders of the same or 
other Options Participants entered into the Trading Host via a separate 
and distinct connection. All Session Orders will be cancelled at the 
end of the normal trading day.
    A Session Order will not be cancelled and shall remain active in 
the BOX market if the order is not allowed to be cancelled pursuant to 
another BOX Rule or it is in one of the following BOX system processes 
when a Triggering Event occurs:
     The order is being exposed to the BOX market pursuant to 
the NBBO trade through filter process; \5\
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    \5\ See Section 16(b) of Chapter V of the BOX Rules.
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     The order is a Directed Order to which the Executing 
Participant has not yet responded; \6\
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    \6\ See Section 5(c)(ii) of Chapter VI of the BOX Rules.
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     The order has been routed to an away exchange pursuant to 
the Routing Rules.\7\
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    \7\ See Section 5 of Chapter XII of the BOX Rules.
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    When a Session Order is automatically cancelled, BOX will 
immediately generate a cancellation message to notify the Options 
Participant that its order is no longer active. After the Session 
Order(s) are

[[Page 59305]]

automatically cancelled for an Options Participant that lost its 
connection to BOX, and upon a reconnection between the Options 
Participant and the Trading Host on the same trading day, the Options 
Participant will be able to retrieve any Session Order cancellation 
notices when it reconnects.
    BOX will inform Options Participants via Information Circular about 
the functionality and use of the Session Order duration type and the 
implementation date prior to its implementation in the BOX trading 
system.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\8\ in general, and Section 
6(b)(5) of the Act,\9\ 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. 
In particular, the Exchange believes that this proposed rule change 
will benefit the marketplace and protect investors because it will 
reduce the risk of erroneous or stale orders on the BOX Book in the 
event that an Options Participant loses connectivity with the Trading 
Host. Furthermore, the proposed Session Order will provide for the 
protection of Options Participants and their customers, who must bear 
the burden of market risk for stale orders caused by circumstances 
outside of their control, as well as for the protection of investors 
and the efficiency and fairness of the market as a whole.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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

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

III. Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or 
for Accelerated Effectiveness Pursuant to Section 19(b)(2)

    Because the foregoing rule 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 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, provided that the self-regulatory organization 
has given the Commission written notice of its intent to file 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 proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 
thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a self-regulatory organization submit to the 
Commission written notice of its intention 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 filing of the 
proposed change, or such shorter time as designated by the 
Commission. The Commission notes that 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.

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-2010-065 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-2010-065. 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 website viewing and 
printing in the Commission's Public Reference Room, located at 100 F 
Street, NE., Washington, DC 20549, on 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-2010-065 and should be 
submitted on or before October 18, 2010.

    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. 2010-24077 Filed 9-24-10; 8:45 am]
BILLING CODE 8010-01-P