[Federal Register Volume 70, Number 249 (Thursday, December 29, 2005)]
[Notices]
[Pages 77207-77209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-8043]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53015; File No. SR-BSE-2005-52]


Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto 
Relating to the Directed Orders Process on the Boston Options Exchange

December 22, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 25, 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, II, 
and III below, which Items have been prepared by the BSE. On December 
20, 2005, BSE filed Amendment No. 1 to the proposed rule change.\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\ Amendment No. 1 amends the rule text to include additional 
language in Chapter V, Section 14(e) of the BOX Rules clarifying 
that the identities of Options Participants that send Directed 
Orders to the Trading Host are not anonymous.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the rules of the Boston Options 
Exchange (``BOX'') to clarify the information contained in a ``Directed 
Order'' on BOX. The text of the proposed rule change is available on 
the BOX's Web site (http://www.bostonoptions.com), at the principal 
office of BOX, 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

[[Page 77208]]

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
    BSE seeks to clarify the information contained in a ``Directed 
Order'' on BOX. Market Makers are able to handle orders on an agency 
basis directed to them by Order Flow Providers (``OFPs''). In Chapter 
I, Section 1 of the BOX Rules, a Directed Order is defined as a 
Customer order directed to a Market Maker by an OFP. An OFP sends a 
Directed Order to BOX with a designation of the Market Maker to whom 
the order is to be directed. BOX then routes the Directed Order to the 
appropriate Market Maker. Under Chapter VI, Section 5(c)(ii) of the BOX 
Rules, a Market Maker only has two choices when he receives a Directed 
Order: (1) Submit the order to the PIP process; or (2) send the order 
back to BOX for placement onto the BOX Book.
    The BSE proposes to amend Chapter V, Section 14(e) and Chapter VI, 
Section 5(c)(i) of the BOX Rules to clarify that unlike all other 
orders submitted to the BOX Trading Host, Directed Orders are not 
anonymous.\4\ The Options Participant identification number 
(``Participant ID'') of the OFP sending the Directed Order will be 
revealed to the Market Maker recipient. The Market Maker must submit 
this Participant ID to BOX whenever the Market Maker chooses to submit 
the Directed Order and his Primary Improvement Order to the PIP 
process. However, once the Directed Order is submitted to the PIP 
process or the BOX Book, the Participant ID is not shown to any market 
participant and the identity of the OFP will be anonymous pursuant to 
Chapter V, Section 14(e) of the BOX Rules.
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    \4\ Telephone conversation between Jan Woo, Attorney, Division 
of Market Regulation, Commission, and William C. Meehan, Head of 
Regulation & Compliance, BOX, on December 22, 2005.
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    Chapter VI, Section 5(c)(i) of the BOX Rules prohibits a Market 
Maker from rejecting a Directed Order. The BSE wishes to clarify that 
upon systematically indicating its desire to accept Directed Orders, a 
Market Maker that receives a Directed Order is not permitted, under any 
circumstances, to reject the receipt of the Directed Order from the BOX 
Trading Host nor reject the Directed Order back to the OFP who sent it. 
A Market Maker who desires to accept Directed Orders must systemically 
indicate that it is an Executing Participant (``EP'') whenever the 
Market Maker wishes to receive Directed Orders from the BOX Trading 
Host. If a Market Maker does not systemically indicate that it is an 
EP, then the BOX Trading Host will not forward any Directed Orders to 
that Market Maker. In such a case, the BOX Trading Host will send the 
order directly to the BOX Book.
Other Clarifying Rule Change Relating to Directed Orders
    Currently, Chapter V, Section 14(e) of the BOX Rules states that 
the identity of Options Participants who submit orders to the Trading 
Host will remain anonymous to market participants at all times, except 
during error resolution or through the normal clearing process as set 
forth in Chapter V, Section 16(a)(vi) of the BOX Rules. The BSE 
proposes to amend Chapter V, Section 14(e) of the BOX Rules and add new 
Supplementary Material .01 to Chapter V, Section 14(e) to clarify that 
the Participant ID of an OFP who submits orders to the Trading Host for 
use in the Directed Order process will be revealed to the Market Maker 
who receives such Directed Orders as set forth in Chapter VI, Section 
5(c) of the BOX Rules.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
designed to clarify the information contained in a Directed Order. This 
clarification will allow Options Participants to make better informed 
decisions in determining when and how to use the Directed Order 
process. Accordingly, the Exchange believes that the proposal is 
consistent with the requirements of Section 6(b) of the Act,\5\ in 
general, and Section 6(b)(5) of the Act,\6\ 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 transaction 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.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    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 BSE consents, the Commission shall: (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 No. SR-BSE-2005-52 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-BSE-2005-52. 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

[[Page 77209]]

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 such filing also will be 
available for inspection and copying at the principal office of the 
BOX. 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-
2005-52 and should be submitted on or before January 19, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-8043 Filed 12-28-05; 8:45 am]
BILLING CODE 8010-01-P