[Federal Register Volume 70, Number 163 (Wednesday, August 24, 2005)]
[Notices]
[Pages 49689-49691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4628]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52296; File No. SR-BSE-2005-30]


Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change and Amendment No. 2 Thereto 
Relating to the Removal of Unreliable Quotes From the Exchange's 
Calculation of the National Best Bid or Offer

August 18, 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 27, 2005, the Boston Stock Exchange, Inc. (``BSE'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by the BSE. The BSE filed Amendment No. 1 to the 
proposed rule change on August 5, 2005 and withdrew Amendment No. 1 on 
August 12, 2005. The BSE filed Amendment No. 2 to the proposed rule 
change on August 12, 2005.\3\ The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Form 19b-4 dated August 12, 2005 (``Amendment No. 2''). 
Amendment No. 2 added clarifying language and corrected 
typographical and technical errors.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The BSE is proposing to add subsection (e) of Section 3 of Chapter 
XII of the Boston Options Exchange (``BOX'') Rules to add provisions 
for declaring an away market's quote(s) in a particular class of 
option(s) unreliable, and to thereby exclude quote(s) from BOX's NBBO 
determination when an away market: (1) Is disconnected from the 
Intermarket Option Linkage (``Linkage''); (2) disseminates non-firm 
quotes; or (3) has other quoting problems. The text of the proposed 
rule change is available on the BSE's Web site (http://www.bostonstock.com), at

[[Page 49690]]

the BSE's Office of the Secretary, and at the Commission's Public 
Reference Room.

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 BSE 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 BSE 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 allow BOX to exclude 
an away market's quote(s) from BOX's NBBO determination in a particular 
option class(es) when that away market's quote(s) are unreliable. The 
BOX Trading Host, pursuant to obligations to avoid trade-throughs under 
the Intermarket Option Linkage Plan, in general, filters certain orders 
to either trade on BOX if the best BOX price is at the NBBO, or if the 
best BOX price is not at the NBBO, to access the best price for such 
order through Linkage. In certain circumstances, away markets 
disseminate unreliable or inaccessible quotes in a particular option 
class(es) to OPRA. BOX proposes to eliminate such away market 
unreliable or inaccessible quote(s) in a particular class(es) in BOX's 
NBBO determination, thereby only including in BOX's NBBO determination 
market quotes that are reliable and accessible to investors. BOX seeks 
only to exclude an away market's unreliable quote(s) in a particular 
class(es) from BOX's NBBO determination for such time that the quote(s) 
remain unreliable. Utilizing only reliable accessible quotes in the 
NBBO determination provides for a more appropriate NBBO determination 
and a significantly more efficient marketplace.
    The procedure for declaring an away market's quote(s) unreliable 
would be for the Market Operations Center (``MOC'') to either: (a) 
Receive a message from the away market, OPRA, or the OLA Administrator; 
or (b) confirm with the affected market, that the away market's 
particular quote(s) in a class(es) are unreliable. Then the MOC would 
request the Options Official declare the away market's quote(s) in a 
particular class(es) unreliable. Upon a declaration that the away 
market's quote(s) is unreliable, the MOC will both remove the quote(s) 
from BOX's NBBO determination and promptly notify the affected away 
market. Additionally, the MOC will continue to monitor the reliability 
of the affected away market's quote(s) and resume inclusion of the 
affected away market's quote(s) in BOX's NBBO determination at the end 
of the trading day or once the quote(s) is confirmed to be reliable, 
whichever occurs first. Quotes of an away market are confirmed to be 
reliable once: (a) A message stating a quote(s) in a particular option 
class is reliable has been received from the affected away market, 
OPRA, or the OLA Administrator; or (b) the MOC has verbally received 
confirmation of such from the affected away market.
2. Statutory Basis
    The basis under the Act for this proposed rule change is that BOX 
believes that its proposal is consistent with Section 6(b) of the 
Act,\4\ and furthers the objectives of Section 6(b)(5) of the Act \5\ 
in that the proposed rule change is designed to perfect the mechanism 
of a free and open market and a national market system, protect 
investors and the public interest, and promote just and equitable 
principles of trade. Excluding unreliable quotes from BOX's 
determination of the NBBO would help BOX provide better executions to 
customers. Currently, the execution of customer orders is delayed when 
another market appears to be at the NBBO but such market's quotes are 
inaccessible.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The BSE does not believe 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 BSE 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 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the BSE consents, the Commission will:
    (A) By order approve such 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, as amended, 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-2005-30 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 Number SR-BSE-2005-30. 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 BSE. All comments received will be posted

[[Page 49691]]

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-2005-30 and should be submitted on or before 
September 14, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4628 Filed 8-23-05; 8:45 am]
BILLING CODE 8010-01-P