[Federal Register Volume 71, Number 31 (Wednesday, February 15, 2006)]
[Notices]
[Pages 8010-8012]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-2113]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53245; File No. SR-BSE-2006-02]


Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change and Amendment No. 1 Thereto To Amend and Clarify Its Rules 
Governing the Hours of Trading on the Boston Options Exchange

February 7, 2006.
    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 January 11, 2006, 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 BSE. On February 2, 
2006, the Exchange 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 and to 
approve the amended proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange requested that the 
implementation date for the new closing time be changed from 
February 1, 2006, as was originally proposed, to February 13, 2006.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The BSE proposes to amend and clarify its rules governing its hours 
of trading on the Boston Options Exchange (``BOX''). The Exchange 
proposes that these changes be implemented on February 13, 2006.\4\ The 
text of the proposed rule change, as amended, is available on the BSE's 
Web site (http://www.bostonstock.com), at the principal office of the 
BSE, and at the Commission's Public Reference Room.
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    \4\ Id.
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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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change, as 
amended, and discussed any comments it received on the proposed rule 
change, as amended. The text of these statements may be examined at the 
places specified in Item III 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
    According to the Exchange, the purpose of the proposed rule change, 
as amended, is to amend and clarify its rules with respect to the hours 
of trading on BOX. Currently, Chapter V, Section 3(a) of BOX's rules 
states that the Boston Options Exchange Regulation LLC (``BOXR'') Board 
shall determine the days BOX shall be open for options business and the 
hours of such days during which options transactions may be made on 
BOX. When BOX launched trading in February of 2004, the BOXR Board set 
the closing time for the hours of business for options trading on 
individual stocks at 4:02 p.m. e.s.t. to conform to the business hours 
of the other five options exchanges.\5\ It is the BSE's understanding 
that all of the options exchanges collectively have determined to 
change their rules to adjust the closing time in options on individual 
stocks from 4:02 p.m. e.s.t. to

[[Page 8011]]

4 p.m. e.s.t on February 13, 2006.\6\ The BOXR Board intends to pass a 
resolution to change the hours of business for options trading on 
individual stocks to be 4 p.m. e.s.t., effective on February 13, 
2006.\7\
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    \5\ According to the Exchange, the BOXR Board has also set the 
hours of business for options on Fund Shares, as defined in Chapter 
4, Section 3(i) of BOX Rules, to be 4:15 p.m. e.s.t.
    \6\ The Exchange represents that it is not currently trading 
options on narrow-based indexes, and thus is not proposing changes 
at this time related to the hours of trading for narrow-based index 
options. However, if the Exchange were to list options on narrow-
based indexes, the Exchange will at that time make necessary changes 
regarding the closing time for options on narrow-based indexes. 
Telephone conversation between Bill Meehan, Assistant Vice 
President, Regulation & Compliance, BOX Regulation, and Cyndi N. 
Rodriguez, Special Counsel, Division of Market Regulation 
(``Division''), Commission, on February 6, 2006.
    \7\ See Amendment No. 1, supra note 3.
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    According to the Exchange, the options exchanges propose to change 
their respective hours of business because: (1) The initial rationale 
to continue trading options for some limited period of time after the 
underlying market close period (which allowed options traders to 
respond to late reports of closing prices over the consolidated tape) 
is no longer necessary due to improvements in the processing and 
reporting of transactions, and (2) it is difficult for the market to 
price options when the underlying security is not trading.
    Chapter V, Section 3(b) of BOX's rules further states that 
transactions may be effected in an options class on BOX until two (2) 
minutes after the primary market on which the underlying security 
trades closes for trading. The Exchange proposes to eliminate this 
additional language for clarification purposes. By eliminating this 
reference that transactions may be effected on BOX until two minutes 
after the underlying primary market, the Exchange believes it will 
eliminate any confusion as to BOX's hours of business for options on 
individual stocks.
    The Exchange notes that if it were to unilaterally modify its 
closing time, the existence of dissimilar closing times applicable to 
the different options exchanges would likely lead to confusion for 
options investors and broker-dealers.
    The Exchange also proposes to update its rules with respect to the 
closing time of Fund Shares on BOX. The BOXR Board has set the closing 
time of Fund Shares at 4:15 p.m. e.s.t., and Fund Shares will continue 
to close at that time. Currently, Chapter V, Section 3(b) of BOX Rules 
states that ``Notwithstanding the foregoing, transactions may be 
effected in options contracts overlying the Nasdaq 100 Index Trading 
Stock[supreg] on BOX until 4:15 p.m.'' \8\ However, this sentence does 
not list all of the Fund Shares traded on BOX. This proposal would 
clarify that all Fund Shares may trade on BOX until 4:15 p.m. e.s.t. by 
using the defined term of Fund Shares, rather than listing specific 
options traded until 4:15 p.m. e.s.t.
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    \8\ Telephone conversation between Bill Meehan, Assistant Vice 
President, Regulation & Compliance, BOX Regulation, and Cyndi N. 
Rodriguez, Special Counsel, Division, Commission, on February 6, 
2006 (correcting the reference to language contained in Chapter V, 
Section 3(b) of BOX Rules).
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2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act \9\ in general, and furthers 
the objectives of Section 6(b)(5) of the Act \10\ in particular, 
because it 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 of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 that the proposed rule change, as amended, 
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

    No written comments were solicited or received with respect to the 
proposed rule change, as amended.

III. 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 at (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-BSE-2006-02 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BSE-2006-02. 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 Section. Copies of such filing also will 
be available for inspection and copying at the principal office of the 
BSE. 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-
2006-02 and should be submitted on or before March 8, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\11\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\12\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in

[[Page 8012]]

general, to protect investors and the public interest.
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    \11\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the Exchange believes that the need to 
continue trading options for some period of time after the close of 
trading in the underlying securities markets is no longer necessary 
because improvements in the processing and reporting of transactions 
have obviated the need to respond to late reports of closing prices 
over the consolidated tape in order to bring options quotes in line 
with the closing price of the underlying security. Because the two 
minute delay between the close of normal trading in equity options and 
the corresponding underlying equity markets is no longer necessary, the 
Commission believes that eliminating the delay is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets. Therefore, the Commission 
finds that it is consistent with the Act for the Exchange to amend and 
clarify its rules governing the hours of trading of options on 
individual stocks on BOX from 4:02 p.m. (e.s.t.) to 4 p.m. (e.s.t.).
    The Commission finds good cause for approving this proposed rule 
change, as amended, before the thirtieth day after publication of 
notice thereof in the Federal Register. The Commission notes that all 
of the options exchanges have filed substantially similar proposals and 
seek to implement these industry-wide changes simultaneously on 
February 13, 2006.\13\ For example, on December 20, 2005, the 
Commission published for comment in the Federal Register a similar 
proposed rule change submitted by the Chicago Board Options Exchange, 
Incorporated (``CBOE'').\14\ The Commission received no comments on the 
CBOE's proposed rule change. The Commission believes that the BSE's 
proposed rule change, as amended, raises no new issues or novel 
regulatory questions. Accordingly, the Commission finds good cause, 
pursuant to Section 19(b)(2) of the Act,\15\ for approving the proposed 
rule change, as amended, prior to the thirtieth day after publication 
in the Federal Register. In addition, because the existence of 
dissimilar closing times among the options exchanges could lead to 
confusion for options investors and broker-dealers, the Commission 
finds good cause to accelerate approval of the proposed rule change, as 
amended, to enable the six options exchanges to simultaneously amend 
their hours of trading on an industry-wide basis in a uniform 
manner.\16\
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    \13\ See note 16, infra.
    \14\ See Securities Exchange Act Release No. 52949 (December 13, 
2005), 70 FR 75513 (December 20, 2005) (SR-CBOE-2005-104). See also 
Securities Exchange Act Release No. 53055 (January 5, 2006), 71 FR 
2279 (January 13, 2006) (SR-ISE-2005-58).
    \15\ 15 U.S.C. 78s(b)(2).
    \16\ The Commission notes that it is simultaneously approving 
similar proposals from the other options exchanges. See Securities 
Exchange Act Release Nos. 53244 (SR-Amex-2006-003); 53246 (SR-CBOE-
2005-104); 53248 (SR-ISE-2005-58); 53249 (SR-PCX-2005-138); and 
53247 (SR-Phlx-2006-01) (February 7, 2006).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change and Amendment No. 1 thereto (SR-
BSE-2006-02) be, and hereby are, approved on an accelerated basis.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-2113 Filed 2-14-06; 8:45 am]
BILLING CODE 8010-01-P