Document ID: SEC-2011-1037-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2011-07-20T04:00Z

[Federal Register Volume 76, Number 139 (Wednesday, July 20, 2011)]
[Notices]
[Pages 43363-43364]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18220]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64886; File No. SR-BX-2011-042]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Modify 
Rule 7027 of the NASDAQ OMX BX Pricing Schedule

 July 14, 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 July 1, 2011, NASDAQ OMX BX, Inc. (the ``Exchange'') filed 
with the Securities and Exchange Commission (``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

    BX proposes to modify Rule 7027 of its pricing schedule. BX will 
implement the proposed change immediately upon filing. The text of the 
proposed rule change is available at the Exchange's principal office, 
at http://www.nasdaqomxbx.cchwallstreet.com, 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, BX 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. BX 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
    BX is amending Rule 7027, which allows affiliated members to 
aggregate their activity under certain provisions of BX's fee schedule 
that make fees dependent upon the volume of their activity. For 
example, various provisions of Rule 7018 contain pricing tiers, under 
which the fees charged to, or rebates received by, members are 
dependent upon their share volumes. Affiliated members that might not 
qualify for a favorable pricing tier by themselves may be able to 
qualify by aggregating their activity.
    Under the rule, a member may request that BX aggregate its activity 
with the activity of its affiliates. A member requesting aggregation of 
affiliate activity is required to certify to BX the affiliate status of 
entities whose activity it seeks to aggregate, and is required to 
inform BX immediately of any event that causes an entity to cease to be 
an affiliate. In contrast with the common definition of affiliate, 
which identifies one entity as an affiliate of another if it controls 
it, is controlled by it, or is under common control with it, Rule 7027 
requires that one affiliated member own 100% of the voting interests in 
the other, or that they are both under the common control of a parent 
that owns 100% of each.
    BX conducts a review of information regarding the entities, and 
reserves the right to request additional information to verify the 
affiliate status of an entity. BX then approves a request unless it 
determines that the member's certification is not accurate.\3\ Although 
BX is not changing the process for review and approval, it has 
determined that it would promote the clarity of the rule to add text 
describing this process.
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    \3\ In the event of an inaccurate certification, BX would refer 
the matter to its regulatory services provider, the Financial 
Industry Regulatory Authority (``FINRA''), to investigate whether 
the member had violated BX rules and to take appropriate 
disciplinary action.
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    Because BX's bills are prepared on a monthly basis, recognizing an 
affiliation in the middle of a month would require BX to engage in a 
complex proration of members' bills. Accordingly, it has been BX's 
practice to recognize an affiliation request either at the beginning of 
the month in which the affiliation occurs or at the beginning of the 
following month. BX believes, however, that the clarity of the rule 
would be enhanced by adopting a stated policy with respect to the 
timing of recognition of aggregation requests. Accordingly, BX is 
amending the rule by adding a new paragraph (a)(2). The paragraph 
stipulates that if two or more members become affiliated on or prior to 
the sixteenth day of a month, and submit a request for aggregation on 
or prior to the twenty-second day of the month, an approval of the 
request by BX shall be deemed effective as of the first day of the 
month. Thus, for example, if one member acquires another, the 
acquisition is completed by June 16, and the members file a request for 
aggregation by June 22, BX's approval of the request would allow the 
members to aggregate all activity during June. This would be the case 
regardless of the time required for BX to review and approve the 
request. However, if members become affiliated after the sixteenth day 
of the month, or do not submit a request for aggregation until after 
the twenty-second day, the request would not be recognized until the 
following month.
2. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\4\ in general, and with Section 
6(b)(5) of the Act \5\ 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. BX believes that the change 
will result in the adoption of a clear policy with respect to the 
meaning, administration, and enforcement of Rule 7027, thereby 
promoting members' understanding of the parameters of the rule and the 
efficiency of its administration.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(5).
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    BX further believes that the proposed rule change is consistent 
with Section 6(b)(4) of the Act,\6\ in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among

[[Page 43364]]

members and issuers and other persons using any facility or system 
which BX operates or controls. All similarly situated members are 
subject to the same fee structure, and access to BX is offered on fair 
and non-discriminatory terms. The addition of rule language stipulating 
that the timing for recognition of requests for aggregation is 
reasonable because it establishes a standard for implementation of such 
requests that is easy to administer and that reflects the need for BX 
to review and approve aggregation requests while avoiding the 
complexities associated with proration of the bills of members that 
affiliate during the course of a month. The provision is equitable 
because all members seeking to aggregate their activity are subject to 
the same parameters, in accordance with a commonsense standard that 
recognizes an affiliation as of the month's beginning closes in time to 
when the affiliation occurs, provided the members submit a timely 
filing.
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    \6\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    BX 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. Because the market 
for order execution and routing is extremely competitive, members may 
readily opt to disfavor BX's execution services if they believe that 
alternatives offer them better value. BX does not believe that the 
proposed changes will impair the ability of members or competing order 
execution venues to maintain their competitive standing in the 
financial markets.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act.\7\ 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.
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    \7\ 15 U.S.C. 78s(b)(3)(a)(i).
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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-2011-042 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-2011-042. 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 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-2011-042 and should be 
submitted on or before August 10, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-18220 Filed 7-19-11; 8:45 am]
BILLING CODE 8011-01-P