Document ID: SEC-2012-1977-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2012-12-03T05:00Z

[Federal Register Volume 77, Number 232 (Monday, December 3, 2012)]
[Notices]
[Pages 71647-71649]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-29074]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68294; File No. SR-BOX-2012-019]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change to Rule 
7110 Regarding Session Orders

November 27, 2012.
    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 19, 2012, BOX Options Exchange LLC (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 its rules to amend Rule 7110 
regarding Session Orders. 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://boxexchange.com.

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 amend Rule 
7110(e)(1)(iii)(C) to add a provision related to an exception to the 
manner in which certain Session Orders are handled when they have been 
routed to an away exchange. Specifically, the Exchange proposes to add 
a provision in Rule 7110(e)(1)(iii)(C)(3) to provide that any remaining 
quantity of a Session Order that has been routed away, if a Triggering 
Event occurs while the order is routed away and receives a partial 
execution, will be cancelled by BOX upon the return of the remainder to 
BOX from the away exchange.\3\
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    \3\ Note that the Triggering Event does not need to be ongoing 
at the time the remainder is returned to BOX for it to be cancelled.
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    Exchange Rule 7110(e)(1)(iii) provides that a Session Order will 
remain active in the BOX trading system until a ``Triggering Event'' 
occurs that causes a BOX Participant to lose its connection to the BOX 
system, or causes BOX to be unable to process the Session Order.\4\ The 
following are ``Triggering Events'': (1) The connection between the 
Participant and BOX that was used to enter the order is interrupted; 
(2) there is a disconnection between internal BOX components used to 
process orders, causing a component to lose its connection to the 
Participant or the Trading Host while in possession of the Session 
Order; or (3) a component of the

[[Page 71648]]

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 a Triggering Event, Session Orders within the affected 
BOX system are cancelled.
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    \4\ See Securities Exchange Act Release No. 62959 (September 21, 
2010) 75 FR 59304 (September 27, 2010) (Notice of Filing and 
Immediate Effectiveness To Provide an Additional Order Type Which 
Will Give Options Participants Greater Control Over the 
Circumstances in Which Their Orders Are Executed) (BX-2010-065). See 
also BOX Informational Circular IC-2010-005 (New Order Duration 
Type--Session Order) available on the BOX Web site here: http://boxexchange.com/f_circulars/_BOX_Informational_Circular_2010-005_Session_Order.pdf.
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    Currently, Rule 7110(e)(1)(iii)(C) provides certain exceptions to 
the cancellation of Session Orders. Specifically, the rule provides 
that a Session Order will not be cancelled and shall remain active in 
the BOX market if the order is in one of the following BOX system 
processes when a Triggering Event occurs:
    (1) The order is being exposed to the BOX market pursuant to Rule 
7130(b);
    (2) The order is a Directed Order to which the Executing 
Participant has not yet responded pursuant to Rule 8040(d)(2);
    (3) The order has been routed to an away exchange pursuant to Rule 
15030.
    Exchange Rule 15030 provides that certain orders that are 
specifically designated by Options Participants as eligible for routing 
will be routed to an Away Exchange (``Eligible Orders''). If BOX cannot 
execute or book an Eligible Order, then it will route the Eligible 
Order to an Away Exchange on behalf of the Options Participant who 
submitted the Eligible Order through a third-party broker dealer. The 
full quantity of an Eligible Order is routed to one or more Away 
Exchange(s) as Immediate or Cancel limit order(s) priced at the current 
NBBO. If the Eligible Order routed away is not executed in its entirety 
at the Away Exchange(s) and its limit price is reached, then it is 
returned to BOX.
    A technology system upgrade will now allow BOX to cancel any 
remaining quantity of a Session Order if a Triggering Event occurs 
while the order has been routed away, received a partial execution, and 
is returned to BOX by the away exchange. As such, the Exchange is 
proposing to add a provision to Rule 7110(e)(1)(iii)(C)(3). Upon the 
effectiveness of this proposed rule change, BOX will inform Options 
Participants via Information Circular about the implementation date of 
this change in the manner in which certain Session Orders are handled 
when they have been routed to an away exchange.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\5\ in general, and Section 
6(b)(5) of the Act,\6\ in particular, in that it is designed 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, consistent with the purpose of Session Orders, it will further 
reduce the risk of erroneous or stale orders on BOX in the event that 
an Options Participant loses connectivity with the BOX system. 
Furthermore, Session Orders are intended to 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. The additional provision to the exception to provide for 
when a Triggering Event occurs while a Session Order has been routed to 
an away exchange, so that any remaining quantity that might be returned 
to BOX will be cancelled, is consistent with the purpose of the Session 
Order, and would further provide for the protection of investors and 
the efficiency and fairness of the market. As such, the Exchange 
believes the proposed change is consistent with the Act.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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 proposed rule change is filed pursuant to paragraph (A) of 
section 19(b)(3) of the Exchange Act \7\ and Rule 19b-4(f)(6) 
thereunder.\8\ This proposed rule change does not significantly affect 
the protection of investors or the public interest, does not impose any 
significant burden on competition, and, by its terms, does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest.\9\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with written notice of its intent to file 
the proposed rule change along with a brief description and the text 
of 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.
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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 email to rule-comments@sec.gov. Please include 
File Number SR-BOX-2012-019 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-BOX-2012-019. This file 
number should be included on the subject line if email 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

[[Page 71649]]

business days between the hours of 10:00 a.m. and 3:00 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-BOX-2012-019 and should be submitted on or before 
December 24, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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 Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29074 Filed 11-30-12; 8:45 am]
BILLING CODE 8011-01-P