Document ID: SEC-2008-1570-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange, Inc.
Posted Date: 2008-11-20T05:00Z

[Federal Register: November 20, 2008 (Volume 73, Number 225)]
[Notices]               
[Page 70394-70396]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20no08-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58942; File No. SR-BSE-2008-49]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend a Pilot Program That Allows for No Minimum Size Order 
Requirement for the Price Improvement Period Process on the Boston 
Options Exchange Facility

November 13, 2008.
    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 5, 2008 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 self-regulatory 
organization. The Exchange 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 from interested persons.
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    \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).

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[[Page 70395]]

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

    The Exchange proposes to amend the Supplementary Material to 
Section 18 (The Price Improvement Period ``PIP'') of Chapter V of the 
Rules of the Boston Options Exchange Group, LLC (``BOX'') to extend a 
pilot program that permits BOX to have no minimum size requirement for 
orders entered into the PIP and under certain circumstances permits the 
premature termination of the PIP process (``PIP Pilot Program''). 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://nasdaqtrader.com/
Trader.aspx?id=Boston_Stock_Exchange.

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 the proposed rule change is to extend the PIP Pilot 
Program under the BOX Rules for eight (8) additional months. The PIP 
Pilot Program allows BOX to have no minimum size requirement for orders 
entered into the PIP process and under certain circumstances permits 
the premature termination of the PIP process.\5\ The proposed rule 
change reflects change to the text of Supplementary Material .01 to 
Section 18 of Chapter V of the BOX Rules and seeks to extend the 
operation of the PIP Pilot Program until July 18, 2009. In two places, 
BOXR will be replaced with BOX to reflect that BOX is submitting the 
data to the U.S. Securities and Exchange Commission (``Commission''). 
Although, BOX is submitting the reports, the Exchange notes that it is 
also responsible for the timeliness and the accuracy of the 
information.
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    \5\ The Pilot Program is currently set to expire on November 18, 
2008. See Securities Exchange Act Release No. 58195 (July 18, 2008), 
73 FR 43801 (July 28, 2008) (SR-BSE-2008-39); See also Securities 
Exchange Act Release No. 55999 (July 2, 2007), 72 FR 37549 (July 10, 
2007) (SR-BSE-2007-27); See also Securities Exchange Act Release No. 
54066 (June 29, 2006), 71 FR 38434 (July 6, 2006) (SR-BSE-2006-24); 
See also Securities Exchange Act Release No. 52149 (July 28, 2005), 
70 FR 44704 (August 3, 2005) (SR-BSE-2005-22); See also Securities 
Exchange Act Release No. 49068 (January 13, 2004), 69 FR 2775 
(January 20, 2004) (SR-BSE-2002-15) (``Original PIP Pilot Program 
Approval Order''). See also Securities Exchange Act Release No. 
51821 (June 10, 2005), 70 FR 35143 (June 16, 2005) (SR-BSE-2004-51) 
(Order approving, among other things, under certain circumstances 
the premature termination of a PIP process).
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    The Exchange notes that the PIP Pilot Program provides small 
customer orders with benefits not available under the rules of some 
other exchanges. One of the important factors of the PIP Pilot Program 
is that it guarantees Participants the right to trade with their 
customer orders that are less than 50 contracts. In particular, any 
order entered into the PIP is guaranteed an execution at the end of the 
auction at a price at least one penny better than the national best bid 
or offer.
    In further support of this proposed rule change, and as required by 
the Original PIP Pilot Program Approval Order, BOX has represented to 
both BSE and to the Commission that it has been submitting to BSE and 
to the Commission a PIP Pilot Program Report, offering detailed data 
from, and analysis of, the PIP Pilot Program.
    To aid the Commission in its evaluation of the PIP Pilot Program, 
BOX has represented to BSE that BOX will provide the following 
additional information each month: (1) The number of orders of 50 
contracts or greater entered into the PIP auction; (2) The percentage 
of all orders of 50 contracts or greater sent to BOX that are entered 
into BOX's PIP auction; (3) The spread in the option, at the time an 
order of 50 contracts or greater is submitted to the PIP auction; (4) 
Of PIP trades for orders of fewer than 50 contracts, the percentage 
done at the National Best Bid or Offer (``NBBO'') plus $.01, plus $.02, 
plus $.03, etc.; (5) Of PIP trades for orders of 50 contracts or 
greater, the percentage done at the NBBO plus $.01, plus $.02, plus 
$.03, etc.; (6) The number of orders submitted by Order Flow Providers 
(``OFPs'') when the spread was $.05, $.10, $.15, etc. For each spread, 
BOX will specify the percentage of contracts in orders of fewer than 50 
contracts submitted to BOX's PIP that were traded by: (a) the OFP that 
submitted the order to the PIP; (b) BOX Market Makers assigned to the 
class; (c) other BOX Participants; (d) Public Customer Orders 
(including Customer PIP Orders (``CPOs'')); and (e) unrelated orders 
(orders in standard increments entered during PIP). For each spread, 
BOX will also specify the percentage of contracts in orders of 50 
contracts or greater submitted to BOX's PIP that were traded by: (a) 
The OFP that submitted the order to the PIP; (b) BOX Market Makers 
assigned to the class; (c) other BOX Participants; (d) Public Customer 
Orders (including CPOs); and (e) unrelated orders (orders in standard 
increments entered during PIP); (7) For the first Wednesday of each 
month: (a) The total number of PIP auctions on that date; (b) the 
number of PIP auctions where the order submitted to the PIP was fewer 
than 50 contracts; (c) the number of PIP auctions where the order 
submitted to the PIP was 50 contracts or greater; (d) the number of PIP 
auctions (for orders of fewer than 50 contracts) with 0 participants 
(excluding the initiating participant), 1 participant (excluding the 
initiating participant), 2 participants (excluding the initiating 
participant), 3 participants (excluding the initiating participant), 4 
participants (excluding the initiating participant), etc., and (e) the 
number of PIP auctions (for orders of 50 contracts or greater) with 0 
participants (excluding the initiating participant), 1 participant 
(excluding the initiating participant), 2 participants (excluding the 
initiating participant), 3 participants (excluding the initiating 
participant), 4 participants (excluding the initiating participant), 
etc.; and (8) For the third Wednesday of each month: (a) The total 
number of PIP auctions on that date; (b) the number of PIP auctions 
where the order submitted to the PIP was fewer than 50 contracts; (c) 
the number of PIP auctions where the order submitted to the PIP was 50 
contracts or greater; (d) the number of PIP auctions (for orders of 
fewer than 50 contracts) with 0 participants (excluding the initiating 
participant), 1 participant (excluding the initiating participant), 2 
participants (excluding the initiating participant), 3 participants 
(excluding the initiating participant), 4 participants (excluding the 
initiating participant), etc., and (e) the number of PIP auctions (for 
orders of 50 contracts or greater) with 0 participants (excluding the 
initiating participant), 1 participant (excluding the initiating 
participant), 2 participants (excluding the initiating participant), 3 
participants (excluding the initiating participant), 4 participants 
(excluding the initiating participant), etc.
2. Basis
    The Exchange believes that the proposal is consistent with the

[[Page 70396]]

requirements of Section 6(b) of the Act,\6\ in general, and Section 
6(b)(5) of the Act,\7\ in particular, in that it is designed to promote 
just and equitable principles of trade, to prevent fraudulent and 
manipulative acts, 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. The Exchange believes 
that the data demonstrates that there is sufficient investor interest 
and demand to extend the PIP Pilot Program for an additional eight (8) 
months. The Exchange represents that the Pilot Program is designed to 
provide investors with real and significant price improvement 
regardless of the size of the order.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) \8\ of the Act and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange requests that the 
Commission waive the 30-day operative delay, which would make the rule 
change operative upon filing. The Commission believes that waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest because such waiver will allow the PIP pilot 
program to continue without interruption.\10\ Accordingly, the 
Commission designates the proposed rule change operative upon filing 
with the Commission.\11\
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    \10\ For purposes only of waiving the 30-day operative delay for 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \11\ 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 text of 
the proposed rule change, at least five business days prior to the 
date of the filing of the proposed rule change.
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    At any time within 60 days of the filing of such 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.

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-2008-49 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-BSE-2008-49. 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 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, 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 will also be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-
2008-49 and should be submitted on or before December 11, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-27600 Filed 11-19-08; 8:45 am]

BILLING CODE 8011-01-P