Document ID: SEC-2006-1279-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Boston Stock Exchange, Inc.
Posted Date: 2006-10-02T04:00Z

[Federal Register: October 2, 2006 (Volume 71, Number 190)]
[Notices]               
[Page 58021-58023]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02oc06-132]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54505; File No. SR-BSE-2006-40]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Trade Information Submitted to the Exchange

 September 26, 2006.
    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 15, 2006, 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 by the Exchange. The BSE 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section 15 (Audit Trail) of Chapter 
V of the Rules of the Boston Options Exchange (``BOX'') to delete the 
language that specifically references the two specific participant 
capacity codes and the three specific customer identification codes. 
The text of the proposed rule change is available on the BSE's Web site 
at http://www.bostonstock.com, at the principal office of the Exchange 

and in the Commission's Public Reference Room.

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 Exchange states that the proposed rule change mimics the 
Chicago Board Options Exchange (``CBOE'') Rule 6.51 \5\ and the 
International Securities Exchange, Inc. (``ISE'') Rule 712 \6\ and 
proposes to amend Section 15 (Audit Trail) of Chapter V of the BOX 
Rules to delete the language that specifically references the two 
specific participant capacity codes and the three specific customer 
identification codes.\7\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 45226 (January 3, 
2002), 67 FR 1383 (January 10, 2002) (SR-CBOE-2001-69).
    \6\ See Securities Exchange Act Release No. 43795 (January 3, 
2001),66 FR 2468 (January 11, 2001) (SR-ISE-00-21).
    \7\ Currently, BOX Rules Chapter V, Section 15(b)(vi) and (viii) 
statethat order information submitted under BOX Rule Chapter V, 
Section 15 must include certain specific participant capacity codes 
and customer identification codes.
---------------------------------------------------------------------------

    Chapter V, Section 15 of the BOX Rules requires members to file 
with BOX order information in such form as may be prescribed by the 
Exchange. Among the ``order information'' that the rule requires to be 
marked on an order ticket \8\ includes ``participant capacity'' and 
``customer identification.'' The purpose of these marking requirements 
is primarily twofold. First, participant capacity codes and customer 
identification codes ensure that orders route to the proper exchange 
systems, provide the Boston Options Exchange Regulation LLC (``BOXR'') 
with a mechanism by which to surveil whether members are in fact 
marking orders correctly and provide BOX with customer information. 
Second, the marking requirements assist the Options Clearing 
Corporation (``OCC'') in the clearance of trades.
---------------------------------------------------------------------------

    \8\ All order tickets are submitted to BOX in electronic form.
---------------------------------------------------------------------------

    BSE currently lists two participant capacity codes in Chapter V, 
Section 15(b)(vi) of the BOX Rules and three customer identification 
codes in Chapter V, Section 15(b)(viii) of the BOX Rules.\9\ Because 
BOX's participant capacity codes and customer identification codes are 
specifically listed in its rules, each time BOX determines to add, 
delete, or change a participant capacity code or customer 
identification code, BSE must submit a rule filing to the Commission. 
This could require several separate rule filings if BOX decided to add 
participant capacity codes and customer identification codes at 
different times.\10\
---------------------------------------------------------------------------

    \9\ BOX currently uses the following participant capacity codes: 
(1)Order Flow Provider or (2) Market Maker. See BOX Rules Chapter V, 
Section 15(b)(vi). BOX currently uses the following customer 
identification codes: (1) Public Customer; (2) Broker-dealer; or (3) 
Market Maker. See BOX Rules Chapter V, Section 15(b)(viii).
    \10\ Over the next few months, the Exchange anticipates adding 
severalnew identification codes to the BOX system. This could 
require the submission of several rule filings if all participant 
capacity and customer identification codes are not added at the same 
time.
---------------------------------------------------------------------------

    Accordingly, since Chapter V, Section 15(a) of the BOX Rules 
already provides that ``each Options Participant shall submit order 
information in such form as may be prescribed by BOXR. * * *,'' \11\ 
BSE proposes to delete the language from Chapter V, Section 15(b)(vi) 
and (viii) of the BOX Rules that references the two specific 
participant capacity codes and three specific customer identification 
codes. This change will have two primary effects. First, it would 
eliminate the need for BSE to submit a rule filing each time BOX adds, 
deletes or changes a participant capacity code or customer 
identification code. Second, and more importantly, it would allow BSE 
to continue to ensure that members submit requisite trade information, 
including participant capacity codes and customer

[[Page 58022]]

identification codes, in an Exchange-dictated manner. BSE notes that 
the proposed change to Chapter V, Section 15(b)(vi) and (viii) would 
not eliminate the requirement that members submit tickets with 
participant capacity codes and customer identification codes. Rather, 
this change simply eliminates the specific participant capacity codes 
and customer identification codes from Chapter V, Section 15(b)(vi) and 
(viii) of the BOX Rules. Options Participants would still be required 
to submit orders with participant capacity codes and customer 
identification codes as may be prescribed by BOXR.
---------------------------------------------------------------------------

    \11\ See BOX Rules Chapter V, Section 15(a).
---------------------------------------------------------------------------

    Upon approval of this filing, BSE will notify members of the 
current order marking requirements (i.e., valid participant capacity 
codes and customer identification codes) by regulatory circular. As 
such, each time BOX adds, deletes, or changes a participant capacity 
code or customer identification code, BSE will distribute a regulatory 
circular to the Options Participants apprising them of the change. BSE 
believes that this will ensure that BOX's Options Participants are 
aware of the applicable participant capacity codes and customer 
identification codes with which it must mark order tickets.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\12\ in general, and furthers 
the objectives of Section 6(b)(5) of the Act,\13\ in particular, in 
that it is designed to promote just and equitable principles of trade, 
and to protect investors and the public interest. The Exchange believes 
that the proposed rule change would enhance BOX's ability to surveil 
for and investigate potential fraudulent and manipulative conduct. The 
Exchange further believes that, since the proposed rule change would 
enhance BOX's ability to conduct investigations and surveil for 
misconduct, it would protect investors and the public interest.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 that is 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

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative prior to 30 days after the date of filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interests, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A)(iii) of the Act \14\ 
and Rule 19b-4(f)(6) thereunder.\15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    BSE requests that the Commission waive both the 30-day pre-
operative period specified in Rule 19b-4(f)(6)(iii).\16\ The Commission 
believes that waiving the 30-day pre-operative period is consistent 
with the protection of investors and public interest. BSE's proposed 
deletion of the language from Chapter V, Section 15(b)(vi) and (viii) 
of the BOX Rules that references certain specific participant capacity 
and customer identification codes allows for greater Exchange 
flexibility in administering its order ticket marking rules while 
maintaining the underlying requirements. According to the Exchange, 
this change will eliminate the need for BSE to submit a rule filing 
each time BOX adds, deletes or changes a participant capacity code or 
customer identification code and will allow BSE to continue to ensure 
that members submit requisite trade information, including participant 
capacity codes and customer identification codes, in an Exchange-
dictated manner. The change is also consistent with the approaches used 
by other self-regulatory organizations.\17\ For these reasons, the 
Commission designates the proposal to be effective and operative upon 
filing with the Commission.\18\
---------------------------------------------------------------------------

    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ See n. 5-6, supra.
    \18\ For purposes only of waiving the 30-day operative delay, 
theCommission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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.\19\
---------------------------------------------------------------------------

    \19\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

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-BSE-2006-40 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities andExchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BSE-2006-40. 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 inspection and 
copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal offices 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-BSE-2006-40 and 
should

[[Page 58023]]

be submitted on or before October 23, 2006.
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-16165 Filed 9-29-06; 8:45 am]

BILLING CODE 8010-01-P