Document ID: SEC-2005-0458-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2005-12-29T05:00Z

[Federal Register: December 29, 2005 (Volume 70, Number 249)]
[Notices]               
[Page 77218-77220]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de05-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53013; File No. SR-BSE-2005-49]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval 
of a Proposed Rule Change and Amendment No. 1 Thereto Relating to the 
Market Opening Procedures of the Boston Options Exchange Facility

December 22, 2005.
    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 November 4, 2005, the Boston Stock Exchange, Inc. (``BSE'' or 
``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

[[Page 77219]]

by BSE. The Exchange filed Amendment No. 1 to the proposed rule change 
on December 13, 2005.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons and is approving the proposal on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, BSE modified the proposed rule text to 
clarify the timing of the opening process and also requested 
accelerated approval of the proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    BSE is proposing to amend its rules governing its market opening 
procedures on the Boston Options Exchange (``BOX''). The Exchange is 
proposing specifically to revise Chapter V, Section 9, of the BOX Rules 
to (1) amend the timeframe in which the BOX Trading Host will start 
opening the market and the intervals in which option classes in a 
series may be opened to provide a quicker, more efficient, fair, and 
orderly market opening; and (2) to require BOX Market Makers to provide 
continuous, two-sided quotes at the opening of the market.

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, as 
amended, and discussed any comments it received on the proposal. The 
text of these statements may be examined at the places specified in 
Item III below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.
    The text of the proposed rule change is available on the Exchange's 
Internet Web site (http://www.bostonstock.com), at the Exchange's 

principal office, and at the Commission's Public Reference Room.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule is to create a quicker, more 
efficient, fair, and orderly market opening, and to require BOX Market 
Makers to provide continuous, two-sided quotes at the opening of the 
market.
    The BOX Trading Host currently opens classes starting at the first 
round minute of trading of the underlying security in the primary 
market, and at each round minute thereafter. Due to enhancements to BOX 
technology, the BOX Trading Host would be capable of opening an 
individual options class within seconds after the opening of trading of 
the underlying security and opening additional classes in successive 
seconds. This ability of the BOX Trading Host to start opening the 
market sooner would allow BOX to open individual classes quicker than 
it currently does today and to complete the opening process in a 
shorter timeframe. The BOX Trading Host could facilitate a quicker 
opening than it currently provides if it could facilitate the opening 
of options classes closer to the opening for the underlying security 
and spread the opening of classes over seconds rather than minutes.
    BOX Market Maker obligations during the Pre-Opening Phase are 
currently to provide continuous, two-sided quotes according to BOX 
minimum standards commencing the minute preceding the scheduled opening 
of the market for the underlying security. The BOX Trading Host only 
needs Market Maker quotes at the opening of the underlying security to 
be calculated into the Theoretical Opening Price (``TOP'') and 
subsequently to be included in the Opening Match price. This proposed 
rule change does not affect the ability of BOX Market Makers to 
maintain a fair and orderly market, nor does it relieve them of that 
obligation. However, the proposed rule requires Market Makers to be 
quoting at the open and should encourage Market Makers to provide 
tighter quotes prior to the Opening Match. The BOX Trading Host will 
still continue to accept continuous, two-sided quotes and broadcast the 
TOP during the Pre-Opening Phase.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \4\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative 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 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 the proposed rule change will 
provide a quicker, more efficient, fair, and orderly market opening 
process.
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    \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. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 No. SR-BSE-2005-49 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-BSE-2005-49. 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 Commissions 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 inspection and copying in the 
Commission's Public Reference Room. Copies of the filing also will be 
available for inspection and copying at the principal office of BSE. 
All

[[Page 77220]]

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-BSE-2005-49 and should be 
submitted on or before January 19, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\5\ 
Specifically, the Commission believes that the proposal is consistent 
with Section 6(b)(5) of the Act,\6\ which requires, among other things, 
that the rules of national securities exchange be designed to prevent 
fraudulent and manipulative practices, to promote just and equitable 
principles of trade, 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.
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    \5\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that, on account of enhancements to BOX's 
technology, BSE is proposing to allow BOX to open trading in an options 
series promptly following the opening of the underlying security and to 
complete the opening of all the classes in that series without the 
existing mandated one-minute opening increments for each class. The 
Exchange represents that the absence of such specified intervals for 
opening each class of options in a series would allow the opening to be 
completed within seconds, rather than minutes. The Commission believes 
that a faster opening should benefit investors because it would allow 
them to begin trading closer to the time of the opening of the 
underlying security, thus allowing investors to manage their risks 
better as well as enhancing competition among the options markets.
    The Commission notes that the proposal would also modify the 
requirement regarding when BOX Market Makers must begin quoting in 
accordance with BOX minimum standards. Specifically, the proposal would 
require BOX Market Makers to start quoting at the actual opening of the 
market for the underlying security, rather than one minute preceding 
the scheduled opening of the market for the underlying security. The 
Exchange represents that BOX Market Maker quotes are not needed until 
the actual opening of the underlying security, and that requiring 
Market Makers to quote at the opening, rather than earlier, should 
encourage BOX Market Makers to provide tighter quotes.
    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\7\ for approving the proposed rule change, as amended, prior 
to the 30th day of the date of publication of the notice thereof in the 
Federal Register. The Commission notes that the proposed rule change 
seeks to provide a faster opening on BOX. The Commission believes that 
granting accelerated approval to this proposal would allow BOX to more 
quickly begin to conduct faster openings, thus affording investors the 
benefits that should flow from the proposal sooner.\8\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ The Commission notes that Chapter V, Section 9 of the BOX 
Rules, which govern BOX's opening process, was approved as a pilot 
program scheduled to expire on August 6, 2006. The proposed changes 
to this rule in the instant filing, while modifying the opening 
process, would not extend or otherwise affect the duration of the 
pilot, which is scheduled to end on August 6, 2006.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-BSE-2005-49), as amended, is 
hereby approved on an accelerated basis.
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Jonathan G. Katz,
Secretary.
[FR Doc. E5-8045 Filed 12-28-05; 8:45 am]

BILLING CODE 8010-01-P