[Federal Register Volume 70, Number 148 (Wednesday, August 3, 2005)]
[Notices]
[Pages 44704-44705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4121]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52149; File No. SR-BSE-2005-22]


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

July 28, 2005.
    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 July 22, 2005, 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 Exchange. The BSE filed 
the proposal 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.\5\ The Commission is 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).
    \5\ The BSE has asked the Commission to waive the five-day pre-
filing notice requirement and the 30-day operative delay. See Rule 
19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii). See also discussion 
infra Section III.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend Supplementary Material .01 to 
Chapter V, Section 18 of the rules of the Boston Options Exchange 
(``BOX''), an options trading facility of the BSE, to extend its 
existing Price Improvement Period (``PIP'') pilot program that allows 
for no minimum size order requirement (``PIP Pilot Program'') from 
August 7, 2005 until July 18, 2006. Below is the text of the proposed 
rule change. Proposed new language is italicized; proposed deletions 
are in [brackets].
* * * * *

Chapter V, Section 18

* * * * *

Supplementary Material to Section 18

    .01 [Initially, and for at least] During the extended Pilot Period 
from August 7, 2005 to July 18, 2006 [of eighteen months from the 
commencement of trading on BOX], there will be no minimum size 
requirement for Customer Orders to be eligible for the PIP process. 
During this extended Pilot Period, BOXR will continue to submit certain 
data, periodically as required by the Commission, to provide supporting 
evidence that, among other things, there is meaningful competition for 
all size PIP orders, that there is significant price improvement for 
all orders executed through the PIP, and that there is an active and 
liquid market functioning on BOX outside of the PIP mechanism. Any data 
which is submitted to the Commission by BOXR will be provided on a 
confidential basis.
    .02 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. 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
    The purpose of the proposed rule change is to extend the PIP Pilot 
Program under the rules of the BOX.\6\ The PIP Pilot Program allows BOX 
to have no minimum size requirement for orders entered into the PIP. 
The proposed rule change retains the text of the Supplementary Material 
to Section 18 of Chapter V of the BOX Rules, as currently approved on 
an eighteen-month pilot basis, and seeks to extend the operation of the 
PIP Pilot Program until July 18, 2006.
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    \6\ See Securities Exchange Act Release No. 49068 (January 13, 
2004), 69 FR 2768 (January 20, 2004) (SR-BSE-2003-04) (``PIP Pilot 
Program Approval Order'').
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    The PIP Pilot Program provides small customer orders with benefits 
not available under the rules of most other

[[Page 44705]]

exchanges. One of the important factors of the PIP Pilot Program is 
that it guarantees members 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 a penny better than the National Best Bid 
and Offer (``NBBO'').
    In further support of this proposed rule change and as required by 
the PIP Pilot Program Approval Order, the Exchange has been submitting 
to the Commission a monthly PIP Pilot Program Report, offering detailed 
data from and analysis of the PIP Pilot Program.
2. Statutory Basis
    The Exchange believes the data demonstrates that there is 
sufficient investor interest and demand to extend the PIP Pilot Program 
for another year. The proposed rule change is designed to provide 
investors with real and significant price improvement regardless of the 
size of the order, without adversely affecting the regular auction. 
Accordingly, the Exchange believes that the proposal is consistent with 
the requirements of Section 6(b) of the Act,\7\ in general, and Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to provide 
price improvement to any order, which is consistent with the public 
interest and protection of investors from a best execution standpoint. 
Additionally, the Exchange believes price improvement to any size order 
creates competition for the best execution of all orders, without 
unduly burdening competition.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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 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

    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) of the Act and Rule 19b-4(f)(6) thereunder.
    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 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. 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 BSE has asked the Commission to waive the five-day pre-filing 
notice requirement and the 30-day operative delay to allow the PIP 
Pilot Program to continue to operate without interruption. The 
Commission waives the five-day pre-filing notice requirement. In 
addition, the Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because it will allow the PIP Pilot Program to continue 
without interruption through July 18, 2006.\9\ For this reason, the 
Commission designates that the proposal become operative immediately.
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    \9\ For purposes only of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
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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 Comment

    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-BSE-2005-22 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File No. SR-BSE-2005-22. 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. Copies of the 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-BSE-2005-22 and should be submitted on or before August 24, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4121 Filed 8-2-05; 8:45 am]
BILLING CODE 8010-01-P