[Federal Register Volume 75, Number 96 (Wednesday, May 19, 2010)]
[Notices]
[Pages 28088-28090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11941]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62103; File No. SR-BX-2010-036]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Reduce
the Required Number of Market Makers Appointed in a Particular Class
for the Opening of Trading
May 13, 2010.
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 May 4, 2010, NASDAQ OMX BX, Inc. (the ``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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ OMX BX, Inc. (the ``Exchange'') proposes to amend Chapter
IV, Section 5 (Minimum Participation Requirement for Opening Trading of
Option Classes) of the Rules of the Boston Options Exchange Group, LLC
(``BOX'') to reduce the required number of Market Makers appointed in a
particular class for the opening of trading in series of an options
class from at least two (2) Market Makers to at least one (1) Market
Maker. The text of the proposed rule change is attached as Exhibit
5.\5\ 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://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.
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\5\ The Commission notes that the text of the proposed rule
change is attached as Exhibit 5 to the Form 19b-4, but is not
attached to this Notice.
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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 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
Chapter IV, Section 5(a) of the BOX Rules currently provides, in
relevant part, that after a particular class of options has been
approved for listing on BOX, BOXR \6\ will open trading in series of
options in that class only if there are at least two (2) Market Makers
\7\
[[Page 28089]]
appointed for trading that particular class. Additionally, Chapter IV,
Section 5(c) of the BOX Rules currently provides, in relevant part,
that BOXR may continue trading in a class where subsequently only one
(1) Market Maker remains appointed to that class.\8\
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\6\ The term ``BOXR'' or ``BOX Regulation'' means Boston Options
Exchange Regulation LLC, a wholly-owned subsidiary of the Exchange.
See Chapter I, Section 1(a)(9) of the BOX Rules.
\7\ The term ``Market Maker'' means an Options Participant
registered with the Exchange for the purpose of making markets in
options contracts traded on the Exchange and that is vested with the
rights and responsibilities specified in Chapter VI of the BOX
Rules. All Market Makers are designated as specialists on the
Exchange for all purposes under the Exchange Act or Rules
thereunder. See Chapter I, Section 1(a)(31) of the BOX Rules. The
term ``Options Participant'' or ``Participant'' means a firm, or
organization that is registered with the Exchange pursuant to
Chapter II of the BOX Rules for purposes of participating in options
trading on BOX as an ``Order Flow Provider'' or ``Market Maker''.
See Chapter I, Section 1(a)(48) of the BOX Rules.
\8\ If an Options Official makes an affirmative determination
that halting of trading in such class is detrimental to the
remaining Market Maker, and that continued trading in such class by
one Market Maker is in the interest of maintaining a fair and
orderly marketplace and would not create adverse consequence to an
existing Customer of BOX or an Options Participant. The term
``Options Official'' means an officer of BOXR vested by the BOXR
Board with certain authority to supervise option trading on BOX. See
Chapter I, Section 1(a)(44) of the BOX Rules.
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The Exchange is proposing to reduce the requirement of Section
5(a), from at least two (2) Market Makers to at least one (1) Market
Maker, in order to expand the number of options classes available to
investors for trading on BOX and for hedging risks associated with
securities underlying those options classes, as well as to enhance the
BOX Market in products which are likely to receive customer order flow.
Reducing this listing requirement on BOX to one (1) Market Maker would
provide BOX with the opportunity to trade options classes that may have
interest but that do not have the presently required interest to meet
the two (2) Market Maker requirement.
Additionally, the reduction of the requirement of Section 5(a),
from at least two (2) Market Makers to at least one (1) Market Maker,
requires that Section 5(c) be amended to reflect that once a class is
opened for trading and subsequently zero (0) Market Makers remain
appointed to that class, an Options Official shall halt trading in such
options class until such time when at least one (1) Market Maker is
again appointed for trading in that particular class. In such a case
BOX will not execute any orders whatsoever, whether against the BOX
Book, or otherwise, and will not accept any incoming orders from BOX
Options Participants or from Away Exchanges.\9\
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\9\ The term ``Away Exchange'' means a national securities
exchange that trades listed options, other than the Exchange. See
Chapter XII, Section 1(a) of the BOX Rules.
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The Exchange also proposes adding new rule text to Section 5 to
address the circumstance where a particular class of options has been
approved for listing on BOX and there is not at least one (1) series of
options in that class open for trading. In this circumstance the class
shall be halted from trading until such time as a series of options in
that class may be opened for trading and BOX will neither execute
orders on its book nor accept inbound orders from BOX Options
Participants or from away markets.\10\
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\10\ The Exchange proposes inserting this rule text as new
Section 5(b). This proposed insertion requires that current Sections
5(b) and (c) be re-numbered as Sections 5(c) and (d), respectively.
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The Commission previously stated, in its approval order for the
proposed rule change establishing the NASDAQ Options Market (``NOM''),
that it does not believe that the Act requires an exchange to have
market makers and that although market makers could be an important
source of liquidity on NOM, they likely would not be the only
source.\11\ Furthermore, the Commission also recently approved a
proposed rule change establishing rules governing the trading of
standardized options contracts on the BATS Exchange (``BATS'').
Specifically, after a particular class of options has been approved for
listing on BATS Options a series of options in that class will be
opened for trading only if there is at least one (emphasis added)
options market maker registered for trading that particular series.\12\
Both NOM and BATS Options trading rules also place an options class in
a `regulatory execution suspension,' or halt, when there are no longer
any NOM Market Makers or BATS Options Members, respectively, registered
or appointed in the particular class as well in a `non-regulatory
suspension,' or halt, in the circumstance where a particular class of
options has been approved for listing and there is not at least one (1)
series of options in that class open for trading.\13\
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\11\ See Securities Exchange Act Release No. 57478 (March 12,
2008), 73 FR 14521 (March 18, 2008) (SR-NASDAQ-2007-004). As the
Commission noted in its approval order for the NOM market, in its
release adopting Regulation ATS, the Commission rejected the
suggestion that a guaranteed source of liquidity was a necessary
component of an exchange. See Securities Exchange Act Release No.
40760 (December 8, 1998), 63 FR 70844 (December 22, 1998)
(``Regulation ATS Release''). The Exchange notes that NASDAQ
recently submitted a proposed rule change with the Commission which,
among other things, would eliminate, in its entirety, the
requirement that at least one options market maker be registered for
trading a particular series before it may be opened for trading on
NOM.
\12\ See Securities Exchange Act Release No. 61419 (January 26,
2010), 75 FR 5157 (February 1, 2010) (SR-BATS-2009-031) (Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified
by Amendment No. 1 Thereto, to Establish Rules Governing the Trading
of Options on the BATS Options Exchange).
\13\ See Chapter IV, Section 5 of the NOM Rules and BATS Options
Rule 19.5, respectively.
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With regard to the impact on system capacity, the Exchange has
analyzed BOX's capacity and represents that BOX and the Options Price
Reporting Authority have the necessary systems capacity to handle any
additional traffic associated with the listing and trading of an
expanded number of options classes, and series within those classes,
which may result from approval of this proposal.
2. Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\14\ in general, and Section
6(b)(5) of the Act,\15\ in particular, in that it is designed 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 proposal would expand the ability of investors to
hedge risks associated with securities underlying options which are
currently not listed on BOX and allow the BOX Rules to more closely
conform to the rules of other options exchanges.
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\14\ 15 U.S.C. 78f(b).
\15\ 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
[[Page 28090]]
with the protection of investors and the public interest, the proposed
rule change has become effective pursuant to Section 19(b)(3)(A) \16\
of the Act and Rule 19b-4(f)(6) thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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 Commission deems this requirement to have been met.
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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 [email protected]. Please include
File Number SR-BX-2010-036 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-BX-2010-036. 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,\18\ 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 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
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-BX-
2010-036 and should be submitted on or before June 9, 2010.
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\18\ The text of the proposed rule change is available on the
Commission's Web site at https://www.sec.gov.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-11941 Filed 5-18-10; 8:45 am]
BILLING CODE 8010-01-P