Document ID: SEC-2011-0080-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2011-01-18T05:00Z

[Federal Register: January 18, 2011 (Volume 76, Number 11)]
[Notices]               
[Page 2938-2940]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18ja11-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63694; File No. SR-BX-2011-001]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
BOX Trading Rules Regarding Voluntary Withdrawal From Trading Options 
Classes in Which They Are Appointed

January 11, 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 January 7, 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 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 VI, Section 4 (Appointment 
of Market Makers) of the Rules of the Boston Options Exchange Group, 
LLC (``BOX'') to permit the Exchange and Market Makers greater 
flexibility in handling Market Makers' voluntary withdrawal from 
trading options classes in which they are appointed. 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 Exchange proposes to amend Chapter VI, Section 4(f) of the BOX 
Rules (Appointment of Market Makers) to eliminate the requirement that 
a Market Maker provide three business days' notice if they wish to 
withdraw from trading an options class in which they are appointed. The 
proposed rule change will provide that Boston Options Exchange 
Regulation, LLC (``BOXR'') (i) may determine an appropriate minimum 
amount of prior notice required for Market Makers to withdraw from 
trading; and (ii) has the authority to place other conditions on Market 
Maker withdrawal as may be appropriate in the interests of maintaining 
fair and orderly markets.
    Chapter VI, Section 4(f) of the BOX Trading Rules currently 
provides that a Market Maker may voluntarily withdraw from trading an 
options class that is within their appointment by providing BOX with 
three business days' written notice of such withdrawal. The proposed 
rule change will eliminate

[[Page 2939]]

this specific notice requirement and give BOXR the discretion to 
determine a minimum prior notice period required for a Market Maker's 
withdrawal. Additionally, the proposed rule change will permit BOXR to 
place other conditions on Market Maker withdrawal as may be appropriate 
in the interests of maintaining fair and orderly markets. BOX believes 
that removing the requirement of three business days' notice is 
appropriate because requests for withdrawal can generally be addressed 
within one business day. As such, three business days' notice is simply 
unnecessary for BOX to respond to such requests. Market Makers' 
requests for withdrawal from a class in which they are appointed will 
not be permitted intraday, but may be approved as soon as the opening 
of trading on the following business day.
    Under the proposed rule change, BOXR will also have the authority 
to place conditions on Market Maker withdrawal as may be appropriate in 
the interests of maintaining fair and orderly markets. With this 
discretionary authority, BOXR can consider the impact of a Market 
Maker's withdrawal on the market's customers, participants, other 
Market Makers, and the overall marketplace, and place conditions on a 
Market Maker's withdrawal as appropriate and necessary. This authority 
allows BOXR to consider various factors, but BOXR will exercise its 
discretion to place conditions on Market Maker withdrawal in a non-
discriminatory manner.
    In particular, the proposed rule change will allow BOXR greater 
flexibility when addressing instances where the Market Maker requesting 
voluntary withdrawal is the only Market Maker appointed to such class. 
Chapter IV, Section 5(a) of the BOX Rules specifies that BOXR will open 
trading in a series of options in a class only if there is at least one 
Market Maker appointed for trading in that particular class. BOX 
believes that requiring at least one Market Maker to be appointed for 
trading a class provides BOX Options Participants with the greatest 
amount of potential liquidity. Generally, BOXR anticipates placing 
conditions on a Market Maker's request for withdrawal when the Market 
Maker is the only Market Maker appointed to a class. For example, the 
Market Maker may be required to continue trading in its appointed class 
until BOXR can appoint another Market Maker in such options class, or 
for one or more additional trading days, as BOXR deems appropriate in 
the interests of maintaining a fair and orderly market and so that BOX 
market participants may continue trading without interruption, if 
possible. If BOXR is unable to appoint another Market Maker in the 
options class, then BOXR may, in accordance with the proposed rule 
change and the BOX Rules, approve the Market Maker withdrawal, but then 
be unable to open trading in that class the following day.
    BOX believes that this proposed rule change eliminating the 
specific notice requirement for Market Makers' voluntary withdrawal 
from trading will provide BOX and its Market Makers greater flexibility 
in modifying Market Maker appointments in options classes on BOX, while 
retaining BOXR's ability to act in the best interests of a fair and 
orderly market when a Market Maker requests voluntary withdrawal. BOX 
believes that all of its market participants benefit from continuous 
open trading on BOX, and Market Makers assist in the maintenance of 
fair and orderly markets and provide liquidity to BOX. BOX believes 
that providing potential BOX Market Makers greater flexibility in 
handling their class appointments for trading on BOX may encourage 
additional market participants to act as a Market Maker on BOX and 
allow Market Makers to better fulfill their role on BOX to the benefit 
of all BOX participants. BOX believes that additional Market Makers may 
add liquidity and result in better markets.
    Finally, Chapter VI, Section 4(f) will continue to specify that 
Market Makers who fail to give the required advance written notice of 
withdrawal may be subject to formal disciplinary action by the 
Exchange. The Exchange believes that this continues to be appropriate 
so that regulatory action might be taken against any Market Maker that 
fails to comply with the notice requirement, or any other conditions 
that BOXR may place on the Market Maker, for withdrawal.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\3\ in general, and Section 
6(b)(5) of the Act,\4\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, facilitate transactions in securities, 
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 
this proposal will enhance Market Maker flexibility in decision-making 
about the options classes in which they are appointed and trade and 
benefit BOX market participants by removing impediments to and 
perfecting the mechanism for a free and open market and a national 
market system. Further, BOX believes that all of its market 
participants benefit from continuous open trading on BOX, and Market 
Makers assist in the maintenance of fair and orderly markets and 
provide liquidity to BOX. Moreover, BOX believes that providing 
potential BOX Market Makers greater flexibility in handling their class 
appointments for trading on BOX may encourage additional market 
participants to act as a Market Maker on BOX and allow Market Makers to 
better fulfill their role on BOX to the benefit of all BOX 
participants. BOX believes that additional Market Makers may add 
liquidity and result in better markets.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    This Exchange believes that the proposed rule change is 
substantially similar to the rules of another self-regulatory 
organization that has previously been approved by the Commission.\5\ 
Accordingly, the Exchange has designated this rule filing as non-
controversial under Section 19(b)(3)(A) of the Exchange Act \6\ and 
Rule 19b-4(f)(6) thereunder.\7\ The Exchange believes that the proposed 
rule change should take effect immediately upon filing because it will 
effect a change that: (1) Does not significantly affect the protection 
of investors or the public interest, (2) does

[[Page 2940]]

not impose any significant burden on competition, and (3) does not 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate. The Exchange 
provided the Commission with written notice of its 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, or such shorter time as designated by the Commission.\8\
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    \5\ See Securities Exchange Act Release No. 58644 (September 25, 
2008), 73 FR 57172 (October 1, 2008) (BATS-2008-005) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to Amend 
BATS Rulebook Chapter XI to Add Four New Rules Regarding the 
Registration and Obligations of Market Makers).
    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 17 CFR 240.19b-4(f)(6).
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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 Exchange 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-2011-001 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-2011-001. 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-2011-001 and should be 
submitted on or before February 8, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-892 Filed 1-14-11; 8:45 am]
BILLING CODE 8011-01-P