[Federal Register Volume 71, Number 104 (Wednesday, May 31, 2006)]
[Notices]
[Pages 30975-30976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-8357]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53854; File No. SR-BSE-2006-23]


Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating To Decreasing the Exposure Period for Crossing Orders Under 
Chapter V, Section 17, Supplementary Material .02 and .03

May 24, 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 May 11, 2006, the Boston Stock Exchange, Inc. (``BSE'') 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. The BSE filed the proposed rule change as a ``non-
controversial'' rule change 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. 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The BSE proposes to decrease the exposure period for crossing 
orders under Chapter V, Section 17, Supplementary Material .02 and .03 
of the Boston Options Exchange (``BOX'') rules from 30 seconds to 3 
seconds. The text of the proposed rule amendment is provided below.
* * * * *
    (Additions are italicized; deletions are [bracketed], unless 
otherwise indicated)
Rules of the Boston Options Exchange Facility
CHAPTER V. DOING BUSINESS ON BOX
Sec. 17 Customer Orders and Order Flow Providers
    (a) through (c) No Change.
Supplementary Material to Section 17
    .01 No Change.
    .02 If an Options Participant fails to expose its Customer Order[s] 
\5\ on BOX, it will be a violation of this Section 17 for an Options 
Participant to cause the execution of an order it represents as agent 
on BOX through the use of orders it solicited from Options Participants 
and/or non-Participant broker-dealers to transact with such orders, 
whether such solicited orders are entered into the BOX market directly 
by the Options Participant or by the solicited party (either directly 
or through another Participant), unless the agency order is first 
exposed to the BOX Book for at least [thirty (30)]three (3) seconds.
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    \5\ The ``s'' and surrounding brackets appear in the current 
rule text, and are not intended to be deletions under the proposed 
rule change.
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    .03 An OFP may not execute as principal an order it represents as 
agent unless, (i) the agency order is first exposed to the BOX Book for 
at least [thirty (30)]three (3) seconds, or (ii) the OFP has been 
bidding or offering on BOX for a least [thirty (30)]three (3) seconds 
prior to receiving an agency order that is executable against such bid 
or offer; or (iii) the OFP sends the agency order to the Price 
Improvement Period process pursuant to Section 18 of this Chapter V.
    .04 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 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
    An Options Participant (``Participant'') may not execute an order 
it represents as agent with a facilitation or a solicited order 
(referred to herein as ``crossing orders'') unless it complies with the 
order exposure requirements contained in Chapter V, Section 17, 
Supplementary Material .03 and .02 respectively. Specifically, when a 
Participant is not submitting an order to the Price Improvement Period 
process, it may not execute a facilitation cross unless (i) the agency 
order is first exposed to the BOX Book for at least 30 seconds; or (ii) 
the Participant has been bidding or offering on BOX for at least 30 
seconds prior to receiving the agency order that is executable against 
such bid or offer. Similarly, a Participant may not execute a 
solicitation cross unless the agency order is first exposed to the BOX 
Book for 30 seconds.
    The BSE proposes to shorten the duration of the exposure period 
contained in the rules governing such transactions from 30 seconds to 3 
seconds. This shortened exposure period is fully consistent with the 
electronic nature of the BOX's market. Market participants on the BOX 
market have implemented systems that monitor any updates to the BOX 
market, including any changes resulting from orders being entered into 
the market, and can automatically respond based on pre-set parameters. 
Thus, an exposure period of 3 seconds will permit exposure of orders on 
BOX in a manner consistent with its electronic market.
    By reducing the exposure time to 3 seconds, the BSE believes that 
Participants will be able to provide liquidity to their customers' 
orders on a timelier basis, thus providing investors with more speedy 
executions. Timely and accurate executions are consistent with the 
principles under which the BOX's electronic market was developed.
2. Statutory Basis
    The BSE believes that the proposal is consistent with the 
requirements of section 6(b) of the Act,\6\ in general, and Section 
6(b)(5) of the Act,\7\ in particular, in that it is 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 regulating, clearing, settling,

[[Page 30976]]

processing information with respect to, and 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 general, to 
protect investors and the public interest. In particular, the proposal 
will permit members to provide liquidity to customer orders on a 
timelier basis, thus providing investors with more speedy executions. 
At the same time, it will preserve a reasonable period for orders to 
interact in the auction market.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 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 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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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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.
    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\10\ 
However, Rule 19b-4(f)(6)(iii) \11\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The BSE provided the Commission with 
written notice of its intent to file this proposed rule change at least 
five business days prior to the date of filing of the proposed rule 
change. In addition, the BSE has requested that the Commission waive 
the 30-day operative delay. The Commission believes that waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest because the proposed rule change is based on 
rules recently approved by the Commission for two other exchanges.\12\ 
For this reason, the Commission designates the proposal to be effective 
and operative upon filing with the Commission.\13\
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    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ Id.
    \12\ See Securities Exchange Act Release Nos. 53567 (March 29, 
2006), 71 FR 17529 (April 6, 2006) (SR-CBOE-2006-09) and 53609 
(April 6, 2006), 71 FR 19224 (April 13, 2006) (SR-NYSEArca-2006-01).
    \13\ 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. See 15 U.S.C. 
78c(f).
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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-BSE-2006-23 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-2006-23. 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 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-2006-23 and should be submitted on or before June 
21, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-8357 Filed 5-30-06; 8:45 am]
BILLING CODE 8010-01-P