[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Notices]
[Pages 76503-76505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30804]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63416; File No. SR-BX-2010-083]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing of Proposed Rule Change Relating to The Price Improvement Period
To Permit an Initiating Participant To Designate a PIP Surrender
Quantity
December 2, 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 November 24, 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 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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend Chapter V, Section 18 (The Price
Improvement Period (``PIP'')) of the Rules of the Boston Options
Exchange Group, LLC (``BOX'') to permit an Options Participant
initiating a PIP to designate a PIP Surrender Quantity. The text of the
proposed rule change is available from the principal office of the
Exchange, on the Exchange's Web site at http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/, at the Commission's
Public Reference Room, and on the Commission's Web site at http://www.sec.gov/.
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 proposed rule change will amend Chapter V, Section 18 (The
Price Improvement Period (``PIP'')) of the BOX Rules to permit an
Options Participant initiating a PIP (``Initiating Participant''), at
its option, to designate a lower amount for which it will retain
certain priority and trade allocation privileges upon the conclusion of
the PIP auction than the forty percent (40%) of the PIP Order to which
the Initiating Participant is entitled as set forth in Chapter V,
Sections 18(f)(i) and (f)(ii) of the BOX Rules. In certain instances,
Chapter V, Sections 18(f)(i) and (f)(ii) of the BOX Rules allow an
Initiating Participant to retain priority and trade allocation
privileges for 40% of the size of a PIP Order upon conclusion of the
PIP. This proposal will permit an Initiating Participant, when starting
a PIP, to submit the Primary Improvement Order to BOX with a
designation to identify the total size of the PIP Order that the
Initiating Participant is willing to ``surrender'' to other PIP
Participants (``PIP Surrender Quantity''), resulting in the Initiating
Participant potentially being allocated less than the forty percent
(40%) to which it may be entitled. For example, when an Initiating
Participant submits a PIP Order and a Primary Improvement Order for 100
contracts and a PIP Surrender Quantity of 70 contracts, the Initiating
Participant is designating that it is willing to surrender seventy
percent (70%) of the PIP Order to other PIP Participants. Therefore,
the Initiating Participant is only retaining priority to thirty percent
(30%) of the PIP Order,
[[Page 76504]]
rather than the forty percent (40%) it could have received. The Primary
Improvement Order shall yield priority to certain competing orders in
the circumstances set forth in Chapter V, Section 18(f)(iii) of the BOX
Rules.
The proposed rule change will further provide that in no case shall
the Initiating Participant's use of the Surrender Quantity function
result in an allocation to the Initiating Participant that would be
greater than the maximum allowable allocation the Initiating
Participant would otherwise receive in accordance with the PIP
allocation procedures set forth in Chapter V, Section 18(f) of the BOX
Rules. The proposal specifies that the PIP Surrender Quantity shall not
be effective for an amount that is lesser than or equal to sixty
percent (60%) of the size of the PIP Order. In such a case, the forty
percent (40%) maximum allowable priority allocation to the Initiating
Participant would apply.
Additionally, the proposed rule change will modify the BOX Trading
Host's trade allocation at the conclusion of the PIP to account for the
PIP Surrender Quantity. The proposal specifies that when the BOX
Trading Host determines the priority and trade allocation amounts for
the Initiating Participant upon the conclusion of the PIP auction, the
Trading Host will automatically adjust the trade allocations to the
other PIP Participants according to the priority set forth in Chapter
V, Section 18(e) of the BOX Rules, providing a total amount to the
other PIP Participants up to the PIP Surrender Quantity. The Primary
Improvement Order shall be allocated the remaining size of the PIP
Order, if any. If the aggregate size of other PIP Participants' contra
orders is not equal to or greater than the PIP Surrender Quantity, then
the remaining PIP Surrender Quantity shall be left unfilled and the
Primary Improvement Order shall be allocated the remaining size of the
PIP Order as set forth in Chapter V, Section 18(f) of the BOX Rules.
For example, an Initiating Participant submits a PIP Order and a
Primary Improvement Order for 100 contracts and a PIP Surrender
Quantity of 70 contracts. During the PIP auction only one Improvement
Order for 25 contracts is received. Even though the Initiating
Participant was willing to surrender 70 contracts to the other PIP
Participants, there is not enough competing size in this instance to
allocate 70 contracts to someone else. Therefore, the Primary
Improvement Order's requirement to completely fill the PIP Order takes
precedence, and the Initiating Participant is allocated the remaining
75 contracts.
BOX will provide Options Participants with three (3) business days
notice, via Information Circular, about the implementation date of the
PIP Surrender Quantity prior to its implementation in the BOX trading
system.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\3\ in general, and Section
6(b)(5) of the Act,\4\ in particular. Specifically, the Exchange
believes the proposed rule change is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, 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 the proposed rule change will benefit
investors and Options Participants by allowing an Initiating
Participant the flexibility to designate a lower amount for which it
will retain certain priority and trade allocation privileges upon the
conclusion of the PIP auction than the forty percent (40%) of the PIP
Order to which the Initiating Participant is entitled, while providing
other PIP Participants increased trade allocations.
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\3\ 15 U.S.C. 78f(b).
\4\ 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 Regarding 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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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-2010-083 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-2010-083. 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 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 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 publicly available. All submissions
should refer to File Number SR-BX-
[[Page 76505]]
2010-083 and should be submitted on or before December 29, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-30804 Filed 12-7-10; 8:45 am]
BILLING CODE 8011-01-P