Document ID: SEC-2009-0962-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Provide an Optional Anti-Internalization Functionality
Posted Date: 2009-07-14T04:00Z

[Federal Register Volume 74, Number 133 (Tuesday, July 14, 2009)]
[Notices]
[Pages 34057-34059]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-16553]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60246; File No. SR-BX-2009-031]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Provide 
an Optional Anti-Internalization Functionality

July 6, 2009.
    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 June 24, 2009, NASDAQ OMX BX, Inc. (``NASDAQ OMX BX'' 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 NASDAQ OMX BX. NASDAQ OMX 
BX filed the proposed rule change as a ``non-controversial'' 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

[[Page 34058]]

publishing this notice to solicit comments on the proposed rule change 
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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ OMX BX is filing with the Commission a proposed rule change 
to provide an optional anti-internalization functionality.
    The text of the proposed rule change is below. Proposed new 
language is underlined and proposed deletions are in brackets.
* * * * *

4757. Book Processing

    System orders shall be executed through the Book Process set forth 
below:
    (a) Execution Algorithm-Price/Time--The System shall execute 
equally priced or better priced trading interest within the System in 
price/time priority in the following order:
    (1)-(2) No Change.
    (3) Exception: Anti-Internalization--Market participants may direct 
that quotes/orders entered into the System not execute against quotes/
orders entered under the same MPID. In such a case, the later entered 
of the quote/orders will be cancelled back to the entering party.
    (b)-(c) No Change.
* * * * *

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. NASDAQ OMX BX 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
    NASDAQ OMX BX is proposing to provide a voluntary anti-
internalization function. Under the proposal, market participants 
entering quotes/orders under a specific market participant identifier 
(``MPID'') may voluntarily direct that they not execute against other 
quotes/orders entered into the System under the same MPID.
    Under the proposal, the System, if requested, will not execute 
quote/orders entered under the same MPID against each other. Instead, 
the System will execute against all eligible trading interest of other 
market participants, in time-priority, up to the point where it would 
interact with a resting order having the MPID and thereupon immediately 
cancel any remaining portion of the most recently entered of the two 
same-MPID quote/orders to its entering party.
    Anti-internalization functionality is designed to assist market 
participants in complying with certain rules and regulations of the 
Employee Retirement Income Security Act (``ERISA'') that preclude and/
or limit managing broker-dealers of such accounts from trading as 
principal with orders generated for those accounts. It can also assist 
market participants in reducing execution fees potentially resulting 
from the interaction of executable buy and sell trading interest from 
the same firm. Nasdaq OMX BX notes that use of the functionality does 
not relieve or otherwise modify the duty of best execution owed to 
orders received from public customers. As such, market participants 
using anti-internalization functionality will need to take appropriate 
steps to ensure that public customer orders that do not execute because 
of the use of anti-internalization functionality ultimately receive the 
same execution price (or better) they would have originally obtained if 
execution of the order was not inhibited by the functionality.
2. Statutory Basis
    Nasdaq OMX BX believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\5\ in general, and with 
Sections [sic] 6(b)(5) of the Act,\6\ in particular, in that the 
proposal is designed to prevent fraudulent and manipulative acts and 
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 of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
Nasdaq OMX BX notes that similar functionality has previously [sic] 
approved for other trading systems.\7\
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ See SR-NASD-2003-039.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ OMX BX does not believe that the proposed rule change will 
result in 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

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \8\ 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). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide 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 of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has fulfilled this requirement.
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    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.

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-2009-031 on the subject line.

[[Page 34059]]

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-2009-031. 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 such filing also will be available for 
inspection and copying at the principal office of the NASDAQ OMX BX. 
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-2009-031 
and should be submitted on or before August 4, 2009.

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-16553 Filed 7-13-09; 8:45 am]
BILLING CODE 8010-01-P