[Federal Register Volume 71, Number 158 (Wednesday, August 16, 2006)]
[Notices]
[Pages 47264-47276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-13400]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54291; File No. SR-BSE-2006-30]


 Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Relating to the Implementation 
of the Second Phase of the Boston Equities Exchange (``BeX'') Trading 
System

August 8, 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 August 3, 2006, the Boston Stock Exchange (``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. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    In previous rule filings, BSE proposed to establish the governance 
framework for a new electronic trading facility, as that term is 
defined in Section 3(a)(2) of the Act,\3\ which is to be called BeX,\4\ 
and to propose rules that pertain to the first phase of BeX.\5\ The 
first phase of the BeX trading system involves a fully automated 
electronic book for the display and execution of orders in securities 
listed otherwise than on The Nasdaq Stock Market for which the BSE 
obtains unlisted trading privileges (``UTP'') after June 30, 2006.
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    \3\ Under the Act, the ``term `facility' when used with respect 
to an exchange includes its premises, tangible or intangible 
property whether on the premises or not, any right to the use of 
such premises or property or any service thereof for the purpose of 
effecting or reporting a transaction on an exchange (including, 
among other things, any system of communication to or from the 
exchange, by ticker or otherwise, maintained by or with the consent 
of the exchange), and any right of the exchange to the use of any 
property or service.'' See 15 U.S.C. 78c(a)(2).
    \4\ See Securities Exchange Act Release No. 54035 (June 22, 
2006), 71 FR 37135 (June 29, 2006) (SR-BSE-2006-20) (``BeX 
Governance Filing'').
    \5\ See Securities Exchange Act Release No. 54034 (June 22, 
2006), 71 FR 37140 (June 29, 2006) (SR-BSE-2006-22) (``BeX Facility 
Filing'').
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    The proposed rules set forth below are being filed in connection 
with the implementation of the second phase of the BeX trading system. 
As of January 1, 2007, there will no longer be any specialist 
participation in any transactions on the BSE or otherwise. 
Additionally, in connection with satisfying the requirements of 
Regulation NMS, the BSE is proposing eight new order types; rules to 
prevent locked or crossed quotations; a new order routing system; and 
an order protection rule. The text of the proposed rule change is 
available on Exchange's Web site (https://www.bostonstock.com), at the 
Exchange's Office of the Secretary, and at the Commission's Public 
Reference Room.
    The text of the proposed rule change also appears below. Proposed 
new language is italicized; deleted language is in [brackets].\6\
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    \6\ For clarity, the rule text below treats the rule text 
proposed in the BeX Facility Filing as existing rule text even 
though that filing has not been approved by the Commission.
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Rules of the Boston Stock Exchange

Chapter XXXVII--Boston Equities Exchange (``BeX'') Trading System

    The Boston Equities Exchange (``BeX'') trading system is a fully-
automated facility of the Exchange, which allows eligible orders in 
eligible securities to electronically match and execute against one 
another.

Section 1. BeX Eligible Securities

    (a) Eligible Securities. All securities eligible for trading on the 
Exchange [that are listed otherwise than on The Nasdaq Stock Market for 
which the BSE obtains unlisted trading privileges (``UTP'') after June 
30, 2006] shall be eligible for trading through BeX. Any specialist 
request to remove a security from BeX shall be considered by the 
appropriate Board Committee.

Section 2. Eligible Orders

    Subsections (a) through (b)--no change.
    (c) Eligible order types:
    (i) Orders eligible for execution in BeX may be designated as one 
of the following existing BSE order types as defined in Chapter I, 
Section 3 except that any reference in the existing BSE Rules to the 
execution of Orders as soon as ``represented at the specialist's post'' 
shall for purposes of this Section be understood to mean ``entered in 
BeX'':

(A) At the Opening or At the Opening Only Order.
(B) Day Order.
(C) Do Not Increase (DNI).
(D) Do Not Reduce (DNR).
(E) Fill or Kill.
(F) Good `Till Cancel Order.
(G) Immediate or Cancel.
(H) Limit, Limited Order or Limited Price Order.
(I) At the Close.
(J) Market Order.
(K) Stop Limit Order.
(L) Stop Order.

    With the exception of Fill or Kill and Immediate or Cancel Orders, 
a customer may append to an Order an instruction that the Order be 
routed to the market(s) displaying the National Best Bid or Offer if 
the Order would trade through the National Best Bid or Offer if 
executed on the BeX. Absent such an instruction, the order will be 
cancelled.
    (ii) Orders eligible for execution in BeX may also be designated as 
one of the following additional order types:
    (A) ``Cross'': An order to buy and sell the same security at a 
specific price better than the best bid and offer displayed in BeX and 
equal to or better than the National Best Bid and Offer. A Cross Order 
may represent interest of one or more BSE Members.
    (B) ``Cross with Size'': A Cross Order to buy and sell at least 
5,000 shares of the same security with a market value of at least 
$100,000.00 (i) at a price equal to or better than the best bid or 
offer displayed in BeX and the National Best Bid or Offer and (ii) 
where the size of the order is larger than the largest order [aggregate 
size of all interest] displayed in BeX at that price.[; and (iii) where 
neither side of the order is for the account of the BSE Member sending 
the order to BeX.]
    (C) ``Good `Till Date (GTD)'': An order to buy or sell that, if not 
executed, expires at the end of date specified in the order.
    (D) ``Good `Till Time (GTT)'': An order to buy or sell that, if not 
executed, expires at the time specified in the order.
    (E) ``Limit or Close'': A limit order to buy or sell that if not 
executed prior to the Market on Close cutoff time of 3:40 p.m., 
pursuant to Chapter II, Section 22, will automatically convert to an At 
the Close Order for inclusion in the closing process and if not so 
executed, at the close, will be cancelled.
    (F) ``Mid-Point Cross '': A two-sided order with both a buy and 
sell component combined that executes at the midpoint of the National 
Best Bid or Offer. A Mid-point Cross Order will be rejected when a 
locked or crossed

[[Page 47265]]

market exists in that security at the time the Order is received. 
Midpoint Cross Orders may be entered, quoted, executed and reported in 
increments as small as one-half of the Minimum Price Variation.
    (G) ``Reserve'': A Limit Order with a portion of the size displayed 
and with a reserve portion of the size that is not displayed. A Reserve 
Order cannot be an IOC Order or Market Order.
    (H) ``Minimum Quantity'': A Minimum Quantity Order is an order 
subject to the provisions of Chapter XXXVII, Section 6, that, upon 
entry, must be executed at least at its minimum quantity or it will be 
cancelled. If executed in part, the remaining quantity remains in the 
book and follows the execution rule of the order type. A Stop Limit 
Order can be a Minimum Quantity Order and, at the election of the 
order, will be handled pursuant to subsection (j) of Section 3.
    (I) ``Preferred Price Cross'': A Two-Sided Cross Order with a 
preferred limit price and an optional preferred tick, both set by the 
Member. A preferred limit price is the limit price the two-sided cross 
order will be executed at if it is equal to or better than the National 
Best Bid or National Best Offer (``Preferred Limit Price''). The 
optional preferred tick is the amount of ticks beyond the preferred 
limit price at which the two-sided cross order may be executed 
(``Optional Preferred Tick''). The Preferred Price Cross order cannot 
be executed at a price that is more than the preferred limit price plus 
the amount of optional preferred ticks or less than the preferred limit 
price minus the amount of optional preferred ticks. If the Preferred 
Price Cross cannot be executed at the Preferred Limit Price the 
execution price of the Cross will be determined by the Trading System 
to be the closest price to the Preferred Limit Price, respecting the 
Optional Preferred Tick and the National Best Bid or National Best 
Offer.
    (J) Best Price Intermarket Sweep Order (``BPISO''): A Best Price 
Intermarket Sweep Order (BPISO) is an order marked as required by SEC 
Rule 600(b)(30) that is to be executed against any orders at the 
Exchange's Best Bid or Best Offer (including any undisplayed orders at 
that price) as soon as the order is received by BSE, with any 
unexecuted balance of the order to be immediately cancelled. BSE, in 
executing the BPISO, shall not take any of the actions described in 
Chapter XXXVIII, Section 4 to prevent an improper trade through.
    (K) Automated Immediate or Cancel (``AIOC''): An automated 
immediate or cancel order received on BSE will execute immediately and 
automatically, either in whole or in part, at or better than its limit 
price, with any unexecuted balance of the order to be immediately 
cancelled. The unexecuted portion of the order will not be routed to 
another Trading Center.
    (L) ``Price-Penetrating ISO'': An order marked as required by SEC 
Rule 600(b)(30) that is to be executed at or better than its limit 
price as soon as the order is received by BSE, with any unexecuted 
balance of the order to be immediately cancelled. Orders marked as 
price-penetrating ISO shall be executed against any eligible orders in 
BSE (including any undisplayed orders, through multiple price points). 
BSE, in executing these orders, shall not take any of the actions 
described in Chapter XXXVIII, Section 4 to prevent an improper trade-
through.
    (M) ISO Cross Order: A two sided order that, upon receipt, will be 
executed without any action on the part of the Exchange to prevent an 
improper trade through. The Member submitting an ISO Cross is 
responsible for checking all protected quotes and must send one or more 
ISO orders to other Trading Centers displaying a price better than the 
cross price.
    (N) Cancel on Corporate Action: In the event of a dividend, 
distribution or stock split (``Corporate Action''), the order in the 
limit book will be cancelled.
    Subsection (d)--no change.
* * * Interpretations and Policies
    .01 The terms ``Best Bid'' and ``Best Offer'' shall mean, 
respectively, the highest and lowest priced order to buy and sell an 
eligible security in BeX.
    .02 The terms ``National Best Bid'' and ``National Best Offer'' 
shall mean, respectively, the highest and lowest priced order or quote 
to buy and sell a BeX eligible security displayed in the consolidated 
quotation system for the security.

Section 3. Operation of BeX

    Subsections (a)-(f)--no change.
    (g) Post-Primary Trading Session (PPS). The BeX PPS will operate 
from the time when the primary market disseminates its closing price 
until [4:30] 6:30 p.m. During the BeX PPS only cross orders at a 
specific price may be submitted.
    Subsection (h)--no change.
    (i) Ranking and Display of Orders
    (i)-(ii)--no change
    (iii) The displayed portion of Reserve Orders (not the reserve 
portion) shall be ranked at the specified limit price and the time of 
order entry. If the displayed portion of the Reserve Order is 
decremented such that fewer than 100 shares are displayed, the 
displayed portion of the Reserve Order shall be replenished for: a) The 
displayed amount; or b) the entire reserve amount, if the remaining 
reserve amount is smaller than the displayed amount. Upon replenishment 
the reserve portion shall be submitted and ranked at the specified 
limit price and time of replenishment.
    (iv) Except as otherwise permitted by Section 3, paragraphs (v)-
(vi) below, all orders at all price levels on BeX shall be displayed to 
all Members on an anonymous basis and transactions executed on BeX will 
be processed anonymously. The transaction reports will indicate the 
details of the transaction, but will not reveal contra party 
identities.
    (v) BeX will reveal the identity of a Member in the following 
circumstances:
    (A) For regulatory purposes or to comply with an order of a court 
or arbitrator;
    (B) When the National Securities Clearing Corporation (``NSCC'') 
ceases to act for a Member or the Member's clearing firm, and NSCC 
determines not to guarantee the settlement of the Member's trades; or
    (C) On risk management reports provided to the contra party of the 
Member or Member's clearing firm each day by 4 p.m. (E.S.T.) which 
disclose trading activity on the aggregate dollar value basis.
    (vi) In order to satisfy Members' record keeping obligations under 
SEC Rules 17a-3(a)(1) and 17a-4(a), BSE shall retain for the period 
specified in Rule 17a-4(a) the identity of each Member that executes an 
anonymous transaction described in paragraph (i)(iii) of this rule. The 
information shall be retained by BeX in its original form or a form 
approved under Rule 17a-6. Members shall retain the obligation to 
comply with SEC Rule 17a-3(a)(1) and 17a-4(a) whenever they possess the 
identity of their contra party.

Interpretations and Policies:

    .01 No Member having the right to trade through the facilities of 
BeX and who has been a party to or has knowledge of an execution shall 
be under obligation to divulge the name of the buying or selling firm 
in any transaction.
    .02 Except as required by paragraphs (v)-(vi), no Member shall 
transmit through the facilities of BeX any information regarding a bid, 
offer, other indication of an order, or the Member's identity, to 
another Member until permission to disclose and transmit such bid, 
offer, other indication of an order, or the Member 's identity has been 
obtained from the originating

[[Page 47266]]

Member or the originating Member affirmatively elects to disclose its 
identity.
    Subsections (j) through (k)--no change.

Section 4. Cancellation of Transactions

    Subsection (a)--no change.

Section 5. Handling of Clearly Erroneous Transactions

    Subsection (a)--no change.

Section 6. Orders To Be Reduced and Increased on Ex-Date

    Subsections (a) through (d)--no change.

Section 7. Application of BSE Rules

    Subsection (a)--no change.

Section 8. Approval of Market Makers

    (a) No Member shall act as a Market Maker in any security unless 
such Member has been approved as a Market Maker in such security by the 
Exchange pursuant to this Section and the Exchange has not suspended or 
canceled such approval. Approved Market Makers are designated as 
dealers on the Exchange for all purposes under the Securities Exchange 
Act of 1934 and the rules and regulations thereunder.
    (b) An applicant shall file an application for Market Maker status 
on such form as the Exchange may prescribe. Applications shall be 
reviewed by the Exchange, which shall consider such factors including, 
but not limited to capital operations, personnel, technical resources, 
and disciplinary history.
    (c) An applicant's Market Maker status shall become effective upon 
receipt by the Member of notice of an approval by the Exchange. In the 
event that an application is disapproved by the Exchange, the applicant 
shall have an opportunity to be heard upon the specific grounds for the 
denial, in accordance with the provisions of Chapter XXX of the BSE 
Rules.
    (d) A Market Maker may be suspended or terminated by the Exchange 
upon a determination of any substantial or continued failure by such 
Market Maker to engage in dealings in accordance with Section 10, 
below.
    (e) Any Market Maker may withdraw its Market Maker status by giving 
written notice to the Exchange. Such withdrawal shall become effective 
on the tenth business day following the Exchange's receipt of the 
notice. A Market Maker who fails to give a ten-day written notice of 
withdrawal to the Exchange may be subject to formal disciplinary action 
pursuant to Chapter XXX. Subsequent to withdrawal, the Member shall not 
be permitted to re-apply as a Market Maker for a period of six months.

Section 9. Assignments of Market Maker in a Security

    (a) A Market Maker may be assigned a newly authorized security or 
in a security already admitted to dealings on the BeX by filing an 
assignment request form with the Exchange. Assignment of the security 
shall become effective on the first business day following the 
Exchange's approval of the assignment. In considering the approval of 
the assignment of the Market Maker in a security, the Exchange may 
consider:
    (1) the financial resources available to the Market Maker;
    (2) the Market Maker's experience, expertise and past performance 
in making markets, including the Market Maker's performance in other 
securities;
    (3) the Market Maker's operational capability;
    (4) the maintenance and enhancement of competition among Market 
Makers in each security in which they are assigned;
    (5) the existence of satisfactory arrangements for clearing the 
Market Maker's transactions;
    (6) the character of the market for the security, e.g., price, 
volatility, and relative liquidity.
    (b) A Market Maker's assignment in a security may be terminated by 
the Exchange if the Market Maker fails to enter quotations in the 
security within five (5) business days after the Market Maker's 
assignment in the security becomes effective.
    (c) The Exchange may limit the number of Market Makers in a 
security upon prior written notice to Members.
    (d) Market Makers shall be selected by the Exchange. Such selection 
shall be based on, but is not limited to, the following: experience 
with making markets in equities; adequacy of capital; willingness to 
promote the BeX as a marketplace; issuer preference; operational 
capacity; support personnel; and history of adherence to Exchange rules 
and securities laws.
    (e) Voluntary Termination of Security Registration. A Market Maker 
may voluntarily terminate its assignment in a security by providing the 
Exchange with a one-day written notice of such termination. A Market 
Maker that fails to give advanced written notice of termination to the 
Exchange may be subject to formal disciplinary action pursuant to 
Chapter XXX.
    (f) The Exchange may suspend or terminate any assignment of a 
Market Maker in a security or securities under this Section whenever, 
in the Exchange's judgment, the interests of a fair and orderly market 
are best served by such action.
    (g) A Member may seek review of any action taken by the Exchange 
pursuant to this Rule, including the denial of the application for, or 
the termination or suspension of, a Market Maker's assignment in a 
security or securities, in accordance with Chapter XXX.

Section 10. Obligations of Market Makers

    (a) General. Members who are assigned as Market Makers in one or 
more securities traded on the BeX must engage in a course of dealings 
for their own account to assist in the maintenance, insofar as 
reasonably practicable, of fair and orderly markets on the BeX in 
accordance with this Section. The responsibilities and duties of a 
Market Maker specifically include, but are not limited to, the 
following:
    (1) Maintain continuous, two-sided quotes in those securities in 
which the Market Maker is assigned to trade;
    (2) Maintain adequate minimum capital in accordance with Rule 
15(c)3-1 promulgated under the Securities Exchange Act of 1934;
    (3) Remain in good standing with the Exchange;
    (4) Inform the Exchange of any material change in financial or 
operational condition or in personnel; and
    (5) Clear and settle transactions through the facilities of a 
registered clearing agency. This requirement may be satisfied by direct 
participation, use of direct clearing services, or by entry into a 
correspondent clearing arrangement with another Member that clears 
trades through such agency.
    (b) A Market Maker must satisfy the responsibilities and duties as 
set forth in paragraph (a) of this Section during the Primary Trading 
Session on all days in which the Exchange is open for business.
    (c) If the Exchange finds any substantial or continued failure by a 
Market Maker to engage in a course of dealings as specified in 
paragraph (a) of this Rule, such Market Maker will be subject to 
disciplinary action or suspension or revocation of the assignment by 
the Exchange in one or more of the securities in which the Market Maker 
is assigned. Nothing in this Section will limit any other power of the 
Board of Directors under the Bylaws, Rules, or procedures of the 
Exchange with respect to the Market Maker's Membership status or in 
respect of any violation by a Market Maker of the provisions of this 
Rule. In accordance with Chapter XXX, a

[[Page 47267]]

Member may seek review of actions taken by the Exchange pursuant to 
this Section.
    (d) Temporary Withdrawal. A Market Maker may apply to the Exchange 
to withdraw temporarily from its Market Maker status in the securities 
in which it is assigned. The Market Maker must base its request on 
demonstrated legal or regulatory requirements that necessitate its 
temporary withdrawal, or provide the Exchange an opinion of counsel 
certifying that such legal or regulatory basis exists. The Exchange 
will act promptly on such request and, if the request is granted, the 
Exchange may temporarily reassign the securities to another Market 
Maker.
    (e) Market Makers will be required to maintain minimum performance 
standards the levels of which may be determined from time to time by 
the Exchange. Such levels will vary depending on the price, liquidity, 
and volatility of the security in which the Market Maker is assigned. 
The performance measurements will include (i) percent of time at the 
National Best Bid or National Best Offer; (ii) percent of executions 
better than the National Best Bid or National Best Offer; (iii) average 
displayed size; (iv) average quoted spread; and (v) in the event the 
security is a derivative security, the ability of the Market Maker to 
transact in underlying markets.

Section 11. Limitations on Dealings

    (a) General. A Market Maker on the Exchange may engage in Other 
Business Activities, or it may be affiliated with a broker-dealer that 
engages in Other Business Activities, only if there is an Information 
Barrier (also commonly referred to as ``Chinese Wall'') between the 
market making activities and the Other Business Activities. ``Other 
Business Activities'' mean:
    (1) conducting an investment banking or public securities business; 
or
    (2) making markets in the options overlying the security in which 
it makes markets.
    (b) Information Barrier. For the purposes of this rule, an 
Information Barrier is an organizational structure in which:
    (1) The market making functions are conducted in a physical 
location separate from the locations in which the Other Business 
Activities are conducted, in a manner that effectively impedes the free 
flow of communications between persons engaged in the market making 
functions and persons conducting the Other Business Activities. 
However, upon request and not on his/her own initiative, a person 
engaged in the market making functions may furnish to persons at the 
same firm or an affiliated firm (``affiliated persons''), the same sort 
of market information that the person engaged in the market making 
function would make available in the normal course of its market making 
activity to any other person. The person engaged in the market making 
function must provide such information to affiliated persons in the 
same manner that he/she would make such information available to a non-
affiliated person.
    (2) There are procedures implemented to prevent the use of material 
non-public corporate or market information in the possession of persons 
on one side of the barrier from influencing the conduct of persons on 
the other side of the barrier.
    These procedures, at a minimum, must provide that:
    (A) the person performing the function of a Market Maker does not 
take advantage of knowledge of pending transactions, order flow 
information, corporate information or recommendations arising from the 
Other Business Activities; and
    (B) all information pertaining to the Market Maker's positions and 
trading activities is kept confidential and not made available to 
persons on the other side of the Information Barrier.
    (3) Persons on one side of the barrier may not exercise influence 
or control over persons on the other side of the barrier, provided 
that:
    (A) the market making function and the Other Business Activities 
may be under common management as long as any general management 
oversight does not conflict with or compromise the Market Maker's 
responsibilities under the Rules of the Exchange.
    (c) Documenting and Reporting of Information Barrier Procedures. A 
Member implementing an Information Barrier pursuant to this Section 
shall submit to the Exchange a written statement setting forth:
    (1) The manner in which it intends to satisfy the conditions in 
paragraph (b) of this Section, and the compliance and audit procedures 
it proposes to implement to ensure that the Information Barrier is 
maintained;
    (2) The names and titles of the person or persons responsible for 
maintenance and surveillance of the procedures;
    (3) A commitment to provide the Exchange with such information and 
reports as the Exchange may request relating to its transactions;
    (4) A commitment to take appropriate remedial action against any 
person violating this Section or the Member's internal compliance and 
audit procedures adopted pursuant to subparagraph (c)(1) of this 
Section, and that it recognizes that the Exchange may take appropriate 
remedial action, including (without limitation) reallocation of 
securities in which it serves as a Market Maker, in the event of such a 
violation;
    (5) Whether the Member or an affiliate intends to clear its 
proprietary trades and, if so, the procedures established to ensure 
that information with respect to such clearing activities will not be 
used to compromise the Member's Information Barrier, which procedures, 
at a minimum, must be the same as those used by the Member or the 
affiliate to clear for unaffiliated third parties; and
    (6) That it recognizes that any trading by a person while in 
possession of material, non-public information received as a result of 
the breach of the internal controls required under this Rule may be a 
violation of Rules 10b-5 and 14e-3 under the Exchange Act or one or 
more other provisions of the Exchange Act, the rules thereunder or the 
Rules of the Exchange, and that the Exchange intends to review 
carefully any such trading of which it becomes aware to determine 
whether a violation has occurred.
    (d) Approval of Information Barrier Procedures. The written 
statement required by paragraph (c) of this Section must detail the 
internal controls that the Member will implement to satisfy each of the 
conditions stated in that Section, and the compliance and audit 
procedures proposed to implement and ensure that the controls are 
maintained. If the Exchange determines that the organizational 
structure and the compliance and audit procedures proposed by the 
Member are acceptable under this Section, the Exchange shall so inform 
the Member, in writing. Absent the Exchange finding a Member's 
Information Barrier procedures acceptable, a Market Maker may not 
conduct Other Business Activities.
    (e) Clearing Arrangements. Subparagraph (c)(5) permits a Member or 
an affiliate of the Member to clear the Member's Market Maker 
transactions if it establishes procedures to ensure that information 
with respect to such clearing activities will not be used to compromise 
the Information Barrier. In this regard:
    (1) The procedures must provide that any information pertaining to 
Market Maker securities positions and trading activities, and 
information derived from any clearing and margin financing 
arrangements, may be made available only to those employees (other than 
employees actually performing clearing and margin functions) 
specifically

[[Page 47268]]

authorized under this Rule to have access to such information or to 
other employees in senior management positions who are involved in 
exercising general managerial oversight with respect to the market 
making activity.
    (2) Any margin financing arrangements must be sufficiently flexible 
so as not to limit the ability of any Market Maker to meet market 
making or other obligations under the Exchange's Rules.

Chapter XXXVIII--Regulation NMS

Section 1. Definitions

    (a) ``Automated Quotation'' means a quotation displayed by a 
trading center that:
    (i) Permits an incoming order to be marked as immediate-or-cancel;
    (ii) Immediately and automatically executes an order marked as 
immediate-or-cancel against the displayed quotation up to its full 
size;
    (iii) Immediately and automatically cancels any unexecuted portion 
of an order marked as immediate-or-cancel without routing the order 
elsewhere;
    (iv) Immediately and automatically transmits a response to the 
sender of an order marked as immediate-or-cancel indicating the action 
taken with respect to such order; and
    (v) Immediately and automatically displays information that updates 
the displayed quotation to reflect any change to its material terms.
    (b) ``Manual Quotation'' means any quotation other than an 
automated quotation.
    (c) ``Protected Bid'' or ``Protected Offer'' means a quotation in 
an NMS stock that:
    (i) Is displayed by an automated trading center;
    (ii) Is disseminated pursuant to an effective national market 
system plan; and
    (iii) Is an automated quotation that is the best bid or best offer 
of a national securities exchange, the best bid or best offer of The 
Nasdaq Stock Market Inc., or the best bid or best offer of a national 
securities association other than the best bid or best offer of The 
Nasdaq Stock Market, Inc.
    (d) ``Protected Quotation'' means a Protected Bid or a Protected 
Offer.
    (e) ``Regular Way'' means bids, offers, and transactions that 
embody the standard terms and conditions of a market.
    (f) ``Trading Center'' means a national securities exchange or 
national securities association that operates an SRO trading facility, 
an alternative trading system, an exchange market maker, an OTC market 
maker, or any other broker or dealer that executes orders internally by 
trading as principal or crossing orders as agent.

Section 2. Locking or Crossing Quotations in NMS Stocks.

    (a) Definitions. For purposes of this Rule, the following 
definitions shall apply:
    (i) The terms automated quotation, effective national market system 
plan, intermarket sweep order, manual quotation, NMS stock, protected 
quotation, regular trading hours, and trading center shall have the 
meanings set forth in SEC Rule 600(b) of Regulation NMS under the 
Securities Exchange Act of 1934.
    (ii) The term crossing quotation shall mean the display of a bid 
for an NMS stock during regular trading hours at a price that is higher 
than the price of an offer for such NMS stock previously disseminated 
pursuant to an effective national market system plan, or the display of 
an offer for an NMS stock during regular trading hours at a price that 
is lower than the price of a bid for such NMS stock previously 
disseminated pursuant to an effective national market system plan.
    (iii) The term locking quotation shall mean the display of a bid 
for an NMS stock during regular trading hours at a price that equals 
the price of an offer for such NMS stock previously disseminated 
pursuant to an effective national market system plan, or the display of 
an offer for an NMS stock during regular trading hours at a price that 
equals the price of a bid for such NMS stock previously disseminated 
pursuant to an effective national market system plan.
    (b) Prohibition. Except for quotations that fall within the 
provisions of paragraph (d) of this Rule, members of the Exchange shall 
reasonably avoid displaying, and shall not engage in a pattern or 
practice of displaying, any quotations that lock or cross a protected 
quotation, and any manual quotations that lock or cross a quotation 
previously disseminated pursuant to an effective national market system 
plan.
    (c) Manual quotations. If a member of the Exchange displays a 
manual quotation that locks or crosses a quotation previously 
disseminated pursuant to an effective national market system plan, such 
member of the Exchange shall promptly either withdraw the manual 
quotation or route an intermarket sweep order to execute against the 
full displayed size of the locked or crossed quotation.
    (d) Exceptions.
    (i) The locking or crossing quotation was displayed at a time when 
the trading center displaying the locked or crossed quotation was 
experiencing a failure, material delay, or malfunction of its systems 
or equipment.
    (ii) The locking or crossing quotation was displayed at a time when 
a protected bid was higher than a protected offer in the NMS stock.
    (iii) The locking or crossing quotation was an automated quotation, 
and the member of the Exchange displaying such automated quotation 
simultaneously routed an intermarket sweep order to execute against the 
full displayed size of any locked or crossed protected quotation.
    (iv) The locking or crossing quotation was a manual quotation that 
locked or crossed another manual quotation, and the member of the 
Exchange displaying the locking or crossing manual quotation 
simultaneously routed an intermarket sweep order to execute against the 
full displayed size of the locked or crossed manual quotation.

Section 3. Order Routing

    (a) Eligible Orders are any orders that are designated by the 
customer to execute or route. IOC, AIOC, all ISO order types and FOK 
orders shall not be designated to execute or route.
    (b) If any Eligible Order requiring routing to another Trading 
Center has not been executed in its entirety and the terms of the order 
require that it be routed to another Trading Center for execution it 
shall be routed as follows:
    (i) Limit Orders shall be routed either in their entirety or as 
component orders to an away Trading Center(s) as limit orders. Limit 
Orders will be routed to the Trading Center(s) publishing the best 
Protected Bid or Protected Offer and will execute against the best 
Protected Bid or Protected Offer superior or equal to the limit price 
for the full number of available shares at the away Trading Center(s). 
The remaining portion of the order, if any, shall be ranked and 
displayed on the BSE book in accordance with the terms of such order. 
Market Orders shall be routed in their entirety or as component orders 
to an away Trading Center(s) as IOC Market Orders. If the Market Order 
routed to an away Trading Center is not executed in its entirety at the 
away Trading Center, the BSE would attempt to match the residual or 
declined Market Order against then available trading interest on the 
BSE book. Any remaining unmatched trading interest would then be 
handled in the manner described in Chapter XXXVIII, Section 3 of these 
proposed rules.
    (ii) If the BSE system cannot execute or book an Eligible Order it 
will route the Eligible Order to another Trading

[[Page 47269]]

Center on behalf of the Member who submitted the Eligible Order if that 
Member is a member or subscriber of the away Trading Center, or in the 
case where the Member is not a member or subscriber of the away Trading 
Center the order will be routed on behalf of that Member through a 
third-party broker dealer, or ``give up,'' that is a member or 
subscriber of the away Trading Center and, if not executed in its 
entirety at the away Trading Center, would be handled in the manner 
described in subsection (b)(i), above.

Commentary:

    As described above, the Exchange will route orders to other trading 
centers under certain circumstances (``Routing Services''). The 
Exchange will provide its Routing Services pursuant to the terms of 
three separate agreements: (1) An agreement between the Exchange and 
each Member on whose behalf orders will be routed (``Member-Exchange 
Agreement''); (2) an agreement between the Exchange and each third-
party broker-dealer that will serve as a ``give-up'' on an away Trading 
Center when the Member on whose behalf an order is routed is not also a 
member or subscriber of the away Trading Center (``Give-Up 
Agreement''); and (3) an agreement between the Exchange and a third-
party service provider (``Technology Provider'') pursuant to which the 
Exchange licenses the routing technology used by the Exchange for its 
Routing Services (``Exchange-Technology Provider Agreement'').
    .01 (a) The Exchange will provide its Routing Services in 
compliance with these rules and with the provisions of the Act and the 
rules thereunder, including, but not limited to, the requirements in 
Section 6(b)(4) and (5) of the Act that the rules of a national 
securities exchange provide for the equitable allocation of reasonable 
dues, fees, and other charges among its members and issuers and other 
persons using its facilities, and not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
    (b) As provider of the Routing Services, the Exchange will license 
the necessary routing technology for use within its own systems and 
accordingly will control the logic that determines when, how, and where 
orders are routed away to other Trading Centers.
    (c) The Exchange will establish and maintain procedures and 
internal controls reasonably designed to adequately restrict the flow 
of confidential and proprietary information between the Exchange 
(including its facilities) and the Technology Provider, and, to the 
extent the Technology Provider reasonably receives confidential and 
proprietary information, that adequately restrict the use of such 
information by the Technology Provider to legitimate business purposes 
necessary for the licensing of routing technology.
    (d) The Exchange-Technology Provider Agreement will include terms 
and conditions that enable the Exchange to comply with this Commentary 
.01.
* * * * *
    (iii) The order that is routed away shall remain outside the BSE 
for a prescribed period of time and may be executed in whole or in part 
subject to the applicable trading rules of the relevant Trading Center. 
While an order remains outside the Exchange, it shall have no time 
standing, relative to other orders received from BSE Members at the 
same price which may be executed against orders in the BSE book. 
Requests from Members to cancel their orders while the order is routed 
away to another Trading Center and remains outside the Exchange shall 
be processed, subject to the applicable trading rules of the relevant 
Trading Center.
    (iv) Where an order or portion of an order is routed away and is 
not executed either in whole or in part at the other Trading Center 
(i.e., all attempts at the fill are declined or timed out), the order 
shall be ranked, displayed and eligible for execution on the BSE book 
in accordance with the terms of such order.

Section 4. Order Protection Requirements

    (a) An order is not eligible for execution on the BSE if its 
execution is at a price that is lower than a Protected Bid or higher 
than a Protected Offer (``Trade-Through''), or if its execution would 
be improper under SEC Rule 611 of Regulation NMS (together an 
``improper trade-through''). If the execution of an order on the 
Exchange would cause an improper trade-through, that order shall be 
routed to another appropriate market or, if not designated to route, 
automatically cancelled.
    (b) Exceptions. Purchases and sales of NMS stocks will be excepted 
from Section 4, paragraph (a) above, and an appropriate modifier 
approved by the operating committee of the relevant national market 
system plan for an NMS stock will be attached to the trade before it is 
publicly reported, in the following circumstances that are exceptions 
under Rule 611 of Regulation NMS:
    (i) Crossed markets. If a trade is executed on the BSE while the 
National Best Bid or National Best Offer is crossed;
    (ii) Other exceptions.
    (1) a non-regular way cross, (2) a single-price opening, reopening 
or closing trade;
    (3) an inbound ISO; or
    (4) a benchmark order is executed at the BSE.
    (c) In any transaction for or with a customer, a Member and persons 
associated with a Member shall use reasonable diligence to ascertain 
the best market for the subject security and buy or sell in such market 
so that the resultant price to the customer is as favorable as possible 
under prevailing market conditions. In all customer transactions, a 
Member and persons associated with a Member shall comply with all 
applicable best execution requirements.
    (d) Trade-through policies and procedures. In determining whether a 
trade on the BSE would create an improper trade-through, the BSE will 
adhere to the terms of the ITS Plan (so long as it is in effect and is 
applicable to the BSE) and the applicable provisions of Reg NMS (when 
it takes effect), as well as to the following policies and procedures 
to the extent the policies and procedures are consistent with the terms 
of the ITS Plan and Reg NMS:
    (i) Clock synchronization and timing of the determination of 
improper trade-throughs. The BSE's systems shall routinely, throughout 
the trading day, use processes that capture the time reflected on the 
atomic clock operated by the National Institute of Standards and 
Technology and shall automatically make adjustments to the time 
recorded in the BSE to ensure that the period between the two times 
will not exceed 500 milliseconds. The BSE shall determine whether a 
trade would create an improper trade-through based on the most recent 
National Best Bid and National Best Offer that has been received and 
processed by the BSE's systems.
    (ii) Manual quotations of other markets. The BSE shall disregard 
another Trading Center's bid or offer if it is identified by the other 
Trading Center as a manual quotation.
    (iii) Self-help exception. The BSE will apply the self-help 
exception to SEC Rule 611, and the BSE will disregard a Trading 
Center's bid and offer, if:
    (A) The other Trading Center has publicly announced that it is not 
disseminating automated quotations;
    (B) The other Trading Center has repeatedly failed to respond 
within one second to an incoming AIOC or ISO

[[Page 47270]]

order (after adjusting for order transmission time);
    (C) The BSE will notify the other Trading Center immediately after 
having made use of the self-help exception by using an appropriate 
mechanism for communicating with other Trading Centers. The BSE will 
continue to apply the self-help exception until the other Trading 
Center has provided reasonable assurance to the BSE or, more generally, 
to the public that the problems have been corrected.
    (e) The BSE is designed, under the rules set out in this Chapter, 
to display bids and offers that qualify as automated quotations under 
the definition set out in SEC Rule 600(b)(3). The BSE shall use the 
following procedures for determining whether the quotes should be 
identified as ``manual'':
    (i) Periodic testing. The Market Operations Center (``MOC'') will 
have a real time monitoring tool, which will check the elapsed time 
between receipt of every AIOC order (any order type) and the 
corresponding response to each AIOC order by the trading system. A 
predetermined threshold will be set to generate an alert for any 
instances where the elapsed time between order receipt and response 
exceeds the preset limit.
    (ii) Adding the ``manual'' identifier. Immediately upon receiving 
an alert from the processes described above in subparagraph (e)(i) that 
the Exchange's trading system has not accepted and properly handled two 
or more AIOC orders in a symbol sent as sequential messages the MOC 
shall append a ``manual'' identifier to the bids and offers it makes 
publicly available in that symbol.
    (iii) Returning to automated quotations. Once the Exchange has made 
any required systems changes, or has otherwise determined that its 
quotations satisfy the requirements of SEC Rule 600(b)(3), and has 
conducted the applicable test(s) set out above to confirm that the 
Exchange's quotes qualify as ``automated quotations,'' the Exchange 
shall remove the ``manual'' identifier from the bids and offers that 
are made publicly available. The Exchange also shall notify other 
Trading Centers that its quotations are automated by announcing that 
fact over the squawk box or other similar functionality available for 
communications with other Trading Centers.

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, 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 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
    In the BeX Facility Filing, the BSE proposed rules to implement the 
first phase of a new electronic trading facility, called BeX. BeX, 
which was developed by and is owned and operated by BSX Group, LLC 
(``BSX''), is an electronic securities communications and trading 
facility intended for the use of BSE Members, including Electronic 
Access Members, and their customers.\7\ In this rule filing, the 
Exchange proposes to implement the second phase of the BeX as a fully-
automated electronic book for the display and execution of orders in 
securities listed on any Exchange through the introduction of new rules 
as well as by amending certain existing rules (``BeX Phase II''). All 
such issues would not be assigned to a specialist. The new rules will 
be located in Chapter XXXVII of the Exchange's Rules of the Board of 
Governors (``BSE Rules''). The BSE also proposes to implement rules to 
satisfy the requirements of Regulation NMS. These rules will be located 
in Chapter XXXVIII of the BSE Rules.
---------------------------------------------------------------------------

    \7\ See BeX Governance Filing, nogte 4, supra.
---------------------------------------------------------------------------

    The Exchange previously proposed to institute rules governing BeX 
as a new fully-automated electronic book that would display and match 
eligible orders in these securities, without the participation of a 
specialist.\8\ As of January 1, 2007, there will no longer be any 
specialist participation in any transactions on the BSE or otherwise. 
For competitive reasons, the Exchange considered that proposal to be 
vitally important to its ability to attract and retain order flow to 
the BSE and continues in that belief.\9\
---------------------------------------------------------------------------

    \8\ See BeX Facility Filing, note 5, supra.
    \9\ The BSE intends to request from the staff of the Commission 
a limited exemption from paragraph (a)(2)(i)(A) of Rule 10b-10 under 
the Act on its own behalf and/or on behalf of its Members who 
execute trades on the BeX. The exemption request will be limited to 
those trades that BSE Members execute on BeX with other BSE Members 
when using the anonymous feature of BeX's electronic trading system. 
The BSE also intends to request assurance that the Commission staff 
will not recommend enforcement action to the Commission if, in lieu 
of making and preserving a separate record, BSE Members rely on 
BSE's retention of the identities of the BSE Members that execute 
anonymous trades through BeX to satisfy the requirements of Rules 
10a-3(a)(1) and 17a-4(a) under the Act.
---------------------------------------------------------------------------

    Prior to implementation of the first phase of the BeX, BSE 
Specialists would quote and trade approximately 300 securities. The BSE 
Floor Broker community would routinely receive baskets of securities 
that contained orders and cross trades in securities which were not 
quoted by BSE Specialists. As such, the orders and cross trades for 
securities not traded on the BSE would have to be routed to other 
trading centers (``Trading Centers'') for execution. Thus, the Exchange 
was not able to retain order flow that had been directed to the BSE. 
Moreover, BSE Floor Brokers were hampered in their ability to attract 
more sources of order flow to the Exchange, because a percentage of the 
order flow they do attract was eventually routed to other Trading 
Centers for execution. The other Trading Centers include those that 
have the capability to post and execute orders in securities that are 
not continuously quoted or traded by any Member in a market making 
capacity, including other exchanges that have rules governing the same 
type of electronic book functionality that the BSE is now seeking to 
employ.\10\ BeX allows Exchange Members, whether or not they are on the 
Exchange's floor, to enter orders into the BeX for possible execution.
---------------------------------------------------------------------------

    \10\ See, e.g., Chicago Stock Exchange (``Chx'') Rules, Article 
XXA.
---------------------------------------------------------------------------

    Additionally, in connection with satisfying the requirements of 
Regulation NMS, the Exchange proposes to offer several execution 
enhancements, such as eight additional order types, a rule aimed at the 
prevention of locked or crossed markets, electronic order routing, and 
an order protection rule as it transitions to a fully electronic 
trading venue with its proposed BeX facility and in accordance with the 
implementation of Regulation NMS. Under the BeX facility, the BSE 
expects that the current trading rules of the BSE will remain largely 
intact, with the exception of certain rule proposal changes filed with 
the Commission

[[Page 47271]]

regarding the BeX facility and the rule changes contained herein 
related to the BeX facility and required under Regulation NMS. The 
additional order types, rule aimed at prevention of locked and crossed 
markets, electronic order routing, and order protection rule proposed 
herein would be options available to BSE members in addition to that 
which is currently available under the Exchange's existing rule set.
    Eligible securities and eligible orders. Under the proposed rules 
submitted in connection with the first phase of the BeX,\11\ all 
securities eligible for trading on the Exchange that are not assigned 
to a specialist would be traded in the BeX. Orders sent to the BeX 
would be required to be specifically designated for handling in the 
BeX. The BeX accepts only round-lot market and limit orders.
---------------------------------------------------------------------------

    \11\ See BeX Facility Filing, note 5, supra.
---------------------------------------------------------------------------

    Orders eligible for execution in the BeX may be designated as one 
of the following existing BSE order types: ``at the close,'' ``at the 
opening or at the opening only,'' ``day,'' ``do not increase (DNI),'' 
``do not reduce (DNR),'' ``fill or kill,'' ``good `till cancel,'' 
``immediate or cancel,'' ``limit, limited or limited price,'' 
``market,'' ``stop limit,'' or ``stop,'' ``cross,'' ``cross with 
size,'' ``good `till date (GTD),'' ``good `till time (GTT),'' ``limit 
or close,'' or ``mid-point cross.'' In addition to the existing order 
types set forth above, orders may also be designated as one of the 
following new order types: ``reserve order'', ``minimum quantity 
order,'' ``preferred price cross,'' ``automatic immediate or cancel 
(``AIOC''), ``best price intermarket sweep'' (``BPISO''), ``ISO cross 
orders,'' ``price-penetrating orders'' and ``cancel on corporate action 
orders.'' It should be noted that AIOC, BPISO, ISO cross and price-
penetrating orders are being proposed in connection with the proposed 
rules related to Regulation NMS but will be located in the same chapter 
as the new order types being proposed in connection with BeX Phase II. 
Descriptions of the proposed order types are as follows:
    ``Reserve Order'': A Limit Order with a portion of the size 
displayed and with a reserve portion of the size that is not displayed. 
The displayed portion of Reserve Orders (not the reserve portion) shall 
be ranked at the specified limit price and the time of order entry. If 
the displayed portion of the Reserve Order is decremented such that 
fewer than 100 shares are displayed, the displayed portion of the 
Reserve Order shall be replenished for: (a) The displayed amount; or 
(b) the entire reserve amount, if the remaining reserve amount is 
smaller than the displayed amount. Upon replenishment the reserve 
portion shall be submitted and ranked at the specified limit price and 
time of replenishment. A Reserve Order cannot be an IOC Order or Market 
Order.
    ``Minimum Quantity'': A Minimum Quantity Order is an Order subject 
to the provisions of Chapter XXXVII, Section 6, that, upon entry, must 
be executed at least at its minimum quantity or it will be cancelled. 
If executed in part, the remaining quantity remains in the book and 
follows the execution rule of the order price type. A Stop Limit Order 
can be a minimum quantity and execution possibility will be checked at 
the election of the Order.
    ``Preferred Price Cross'': A Cross Order with a preferred limit 
price and an optional preferred tick, both set by the Member.\12\ A 
preferred limit price is the limit price the cross order will be 
executed at if it is equal to or better than the National Best Bid or 
Offer (``Preferred Limit Price''). The optional preferred tick is the 
amount of ticks beyond the preferred limit price at which the two-sided 
cross order may be executed (``Optional Preferred Tick''). The 
Preferred Price Cross order cannot be executed at a price that is more 
than the preferred limit price plus the amount of optional preferred 
ticks or less than the preferred limit price minus the amount of 
optional preferred ticks. If the Preferred Price Cross cannot be 
executed at the Preferred Limit Price, the execution price of the Cross 
will be determined by the Trading System to be the closest price to the 
Preferred Limit Price, respecting the Optional Preferred Tick and the 
National Best Bid or Offer.
---------------------------------------------------------------------------

    \12\ The Exchange represents that a Preferred Price Cross Order 
must satisfy the conditions of either a Cross Order or a Cross with 
Size Order. Telephone call between Brian D. Donnelly, Assistant Vice 
President of Regulation & Compliance, and Dan Hamm, Vice President 
of Trading Systems, BSE, and Nancy Sanow, Assistant Director, and 
Ira Brandriss, Special Counsel, Division of Market Regulation, 
Commission on August 4, 2006.
---------------------------------------------------------------------------

    AIOC Order: An automatic immediate or cancel order is an order 
received on BeX that will execute immediately and automatically, either 
in whole or in part, at or better than its limit price, with any 
unexecuted balance of the order to be immediately cancelled. The 
unexecuted portion of the order will not be routed to another Trading 
Center.
    Best Price ISO: A best price intermarket sweep order is an order 
marked as required by Rule 600(b)(30) under the Act that is to be 
executed against any orders at the Exchange's Best Bid or Best Offer 
(including any undisplayed orders at that price) as soon as the order 
is received by the BSE, with any unexecuted balance of the order to be 
immediately cancelled. The BSE, in executing the Best Price ISO, shall 
not take any of the actions described in Chapter XXXVIII, Section 4 to 
prevent an improper trade through.
    Price-Penetrating ISO: An order marked as required by Rule 
600(b)(30) under the Act that is to be executed at or better than its 
limit price as soon as the order is received by the BSE, with any 
unexecuted balance of the order to be immediately cancelled. Orders 
marked as price-penetrating ISO shall be executed against any eligible 
orders at the BSE (including any reserve size or other undisplayed 
orders, through multiple price points). The BSE, in executing these 
orders, shall not take any of the actions described in Chapter XXXVIII, 
Section 4 to prevent an improper trade-through.
    ISO Cross: A two sided order that, upon receipt, will be executed 
without any action on the part of the Exchange to prevent an improper 
trade through. The Member submitting an ISO Cross is responsible for 
checking all protected quotes and must send one or more ISO orders to 
other Trading Centers displaying a price better than the cross price.
    Cancel on Corporate Action: In the event of a dividend, 
distribution or stock split (``Corporate Action''), the order in the 
limit book will be cancelled.
    Compliance with Intermarket Trading System (``ITS'') Plan. As set 
forth in the BeX Facility Filing, to ensure compliance with the ITS 
Plan (as long as it remains in effect), otherwise eligible orders would 
be cancelled or routed away in certain circumstances. Specifically, if 
an order in an ITS eligible security crosses or locks the National Best 
Bid or National Best Offer at the time that it is received, the order 
would be immediately cancelled to ensure compliance with the ITS Plan's 
rules relating to locked markets.\13\ Marketable orders that would 
trade-though the National Best Bid or National Best Offer would either 
be cancelled or be routed to the market(s) showing the National Best 
Bid or National Best Offer at the order-entering firm's 
instructions.\14\
---------------------------------------------------------------------------

    \13\ Similarly, if an order in a listed security locks or 
crosses the Best Bid or Best Offer in BeX at the time it is 
received, but not the National Best Bid or National Best Offer, the 
order would be executed according to BeX's matching algorithm, and 
any remaining portion would be immediately cancelled, if it would 
lock or cross the National Best Bid or National Best Offer.
    \14\ See BeX Facility Filing, proposed BSE Rule, Chapter XXXVII, 
Section 3, Paragraph (j)(i) and (iii).

---------------------------------------------------------------------------

[[Page 47272]]

Ranking and Display of Orders

    Except as otherwise permitted by Section 3, paragraphs (v)-(vi) of 
the BSE Rules, all orders at all price levels on the BeX shall be 
displayed to all Members on an anonymous basis and transactions 
executed on the BeX will be processed anonymously.\15\ The transaction 
reports will indicate the details of the transaction, but will not 
reveal contra party identities. No Member having the right to trade 
through the facilities of BeX and who has been a party to or has 
knowledge of an execution shall be under obligation to divulge the name 
of the buying or selling firm in any transaction. Except as otherwise 
permitted by the supplementary material in Section 3, no Member shall 
transmit through the facilities of BeX any information regarding a bid, 
offer, other indication of an order, or the Member's identity, to 
another Member until permission to disclose and transmit such bid, 
offer, other indication of an order, or the Member's identity has been 
obtained from the originating Member or the originating Member 
affirmatively elects to disclose its identity.
---------------------------------------------------------------------------

    \15\ See note 9, supra.
---------------------------------------------------------------------------

    The BeX will reveal the identity of a Member in the following 
circumstances: (1) For regulatory purposes or to comply with an order 
of a court or arbitrator; (2) when the National Securities Clearing 
Corporation (``NSCC'') ceases to act for a Member or the Member's 
clearing firm, and NSCC determines not to guarantee the settlement of 
the Member's trades; or (3) on risk management reports provided to the 
contra party of the Member or Member's clearing firm each day by 4 p.m. 
(E.S.T.) which disclose trading activity on the aggregate dollar value 
basis.
    In order to satisfy Members' record keeping obligations under Rules 
17a-3(a)(1) and 17a-4(a) under the Act, BSE shall retain for the period 
specified in Rule 17a-4(a) the identity of each Member that executes an 
anonymous transaction described in paragraph (i)(iii) of this rule. The 
information shall be retained by the BeX in its original form or a form 
approved under Rule 17a-6. Members shall retain the obligation to 
comply with Rules 17a-3(a)(1) and 17a-4(a) under the Act whenever they 
possess the identity of their contra party.

Market Makers

    BSE Members may apply for Market Maker status. An applicant shall 
file an application for Market Maker status on such form as the 
Exchange may prescribe. Applications shall be reviewed by the Exchange, 
which shall consider such factors including, but not limited to capital 
operations, personnel, technical resources, and disciplinary history. 
No Member shall act as a Market Maker in any security unless such 
Member has been approved as a Market Maker in a security by the 
Exchange pursuant to the BSE Rules and the Exchange has not suspended 
or canceled such approval. Approved Market Makers are designated as 
dealers on the Exchange for all purposes under the Act the rules and 
regulations thereunder.
    An applicant's Market Maker status shall become effective upon 
receipt by the Member of notice of an approval by the Exchange. In the 
event that an application is disapproved by the Exchange, the applicant 
shall have an opportunity to be heard upon the specific grounds for the 
denial, in accordance with the provisions of Chapter XXX of the BSE 
Rules.
    Market Maker status may be suspended or terminated by the Exchange 
upon a determination of any substantial or continued failure by such 
Market Maker to engage in dealings in accordance with the BSE Rules. 
Likewise, any Market Maker may withdraw its Market Maker status by 
giving written notice to the Exchange. Such withdrawal shall become 
effective on the tenth business day following the Exchange's receipt of 
the notice. A Market Maker who fails to give a ten-day written notice 
of withdrawal to the Exchange may be subject to formal disciplinary 
action pursuant to Chapter XXX. Subsequent to withdrawal, the Member 
shall not be permitted to re-apply as a Market Maker for a period of 
six months.
    A Market Maker may be assigned a newly authorized security or a 
security already admitted to dealings on the BeX by filing an 
assignment request form with the Exchange. Assignment of the security 
shall become effective on the first business day following the 
Exchange's approval of the assignment. In considering the approval of 
the assignment of the Market Maker in a security, the Exchange may 
consider: (1) The financial resources available to the Market Maker; 
(2) the Market Maker's experience, expertise and past performance in 
making markets, including the Market Maker's performance in other 
securities; (3) the Market Maker's operational capability; (4) the 
maintenance and enhancement of competition among Market Makers in each 
security in which they are assigned; (5) the existence of satisfactory 
arrangements for clearing the Market Maker's transactions; (6) the 
character of the market for the security, e.g., price, volatility, and 
relative liquidity. A Market Maker's assignment in a security may be 
terminated by the Exchange if the Market Maker fails to enter 
quotations in the security within five (5) business days after the 
Market Maker's assignment in the security becomes effective. Moreover, 
the Exchange may limit the number of Market Makers in a security upon 
prior written notice to Members.
    Market Makers shall be selected by the Exchange based on, but is 
not limited to, the following: Experience with making markets in 
equities; adequacy of capital; willingness to promote the BeX as a 
marketplace; issuer preference; operational capacity; support 
personnel; and history of adherence to Exchange rules and securities 
laws.
    A Market Maker may voluntarily terminate its assignment in a 
security by providing the Exchange with a one-day written notice of 
such termination. A Market Maker that fails to give advanced written 
notice of termination to the Exchange may be subject to formal 
disciplinary action pursuant to Chapter XXX. Furthermore, the Exchange 
may suspend or terminate any assignment of a Market Maker in a security 
or securities under Chapter XXXVII, Section 9 whenever, in the 
Exchange's judgment, the interests of a fair and orderly market are 
best served by such action. A Member may seek review of any action 
taken by the Exchange pursuant to this Rule, including the denial of 
the application for, or the termination or suspension of, a Market 
Maker's assignment in a security or securities, in accordance with 
Chapter XXX.
    Members who are assigned as Market Makers in one or more securities 
traded on the BeX must engage in a course of dealings for their own 
account to assist in the maintenance, insofar as reasonably 
practicable, of fair and orderly markets on the BeX in accordance with 
this Section. The responsibilities and duties of a Market Maker 
specifically include, but are not limited to, the following: (1) 
Maintain continuous, two-sided quotes in those securities in which the 
Market Maker is assigned to trade; (2) maintain adequate minimum 
capital in accordance with Rule 15(c)3-1 promulgated under Act; (3) 
remain in good standing with the Exchange; (4) inform the Exchange of 
any material change in financial or operational condition or in 
personnel; (5) clear and settle transactions through the facilities of 
a registered clearing agency. This requirement may be

[[Page 47273]]

satisfied by direct participation, use of direct clearing services, or 
by entry into a correspondent clearing arrangement with another Member 
that clears trades through such agency. A Market Maker must satisfy the 
responsibilities and duties during the Primary Trading Session on all 
days in which the Exchange is open for business.
    If the Exchange finds any substantial or continued failure by a 
Market Maker to engage in a course of dealings as specified in the 
applicable BSE Rules, such Market Maker will be subject to disciplinary 
action or suspension or revocation of the assignment by the Exchange in 
one or more of the securities in which the Market Maker is assigned. 
Nothing in this Section will limit any other power of the Board of 
Directors under the Bylaws, Rules, or procedures of the Exchange with 
respect to the Market Maker's Membership status or in respect of any 
violation by a Market Maker of the provisions of this Rule. In 
accordance with Chapter XXX, a Member may seek review of actions taken 
by the Exchange pursuant to this Section.
    A Market Maker may apply to the Exchange to withdraw temporarily 
from its Market Maker status in the securities in which it is assigned. 
The Market Maker must base its request on demonstrated legal or 
regulatory requirements that necessitate its temporary withdrawal, or 
provide the Exchange an opinion of counsel certifying that such legal 
or regulatory basis exists. The Exchange will act promptly on such 
request and, if the request is granted, the Exchange may temporarily 
reassign the securities to another Market Maker.
    Market Makers will be required to maintain minimum performance 
standards the levels of which may be determined from time to time by 
the Exchange. Such levels will vary depending on the price, liquidity, 
and volatility of the security in which the Market Maker is assigned. 
The performance measurements will include (i) percent of time at the 
National Best Bid or National Best Offer; (ii) percent of executions 
better than the National Best Bid or National Best Offer; (iii) average 
displayed size; (iv) average quoted spread; and (v) in the event the 
security is a derivative security, the ability of the Market Maker to 
transact in underlying markets.
    A Market Maker on the Exchange may engage in Other Business 
Activities, or it may be affiliated with a broker-dealer that engages 
in Other Business Activities, only if there is an Information Barrier 
(also commonly referred to as ``Chinese Wall'') between the market 
making activities and the Other Business Activities. ``Other Business 
Activities'' mean: (1) Conducting an investment banking or public 
securities business; or (2) making markets in the options overlying the 
security in which it makes markets.
    A Member or an affiliate of the Member may clear the Member's 
Market Maker transactions if it establishes procedures to ensure that 
information with respect to such clearing activities will not be used 
to compromise the Information Barrier. In this regard: (1) The 
procedures must provide that any information pertaining to Market Maker 
securities positions and trading activities, and information derived 
from any clearing and margin financing arrangements, may be made 
available only to those employees (other than employees actually 
performing clearing and margin functions) specifically authorized under 
this Rule to have access to such information or to other employees in 
senior management positions who are involved in exercising general 
managerial oversight with respect to the market making activity; and 
(2) any margin financing arrangements must be sufficiently flexible so 
as not to limit the ability of any Market Maker to meet market making 
or other obligations under the Exchange's Rules.

Locked and Crossed

    BSE Members would have an obligation to reasonably avoid 
displaying, and avoid engaging in a pattern or practice of displaying 
any quotations that lock or cross a protected quotation, and any manual 
quotations that lock or cross a quotation previously disseminated 
pursuant to an effective national market system plan. This rule would 
be contained in new Chapter XXXVIII, Section 2 of the BSE Rules.
    For purposes of this rule a ``crossing quotation'' would mean the 
display of a bid for a NMS stock during regular trading hours at a 
price that is higher than the price of an offer for such NMS stock 
previously disseminated pursuant to an effective national market system 
plan, or the display of an offer for a NMS stock during regular trading 
hours at a price that is lower than the price of a bid for such NMS 
stock previously disseminated pursuant to an effective national market 
system plan. For purposes of this rule, a ``locking quotation'' would 
mean the display of a bid for a NMS stock during regular trading hours 
at a price that equals the price of an offer for such NMS stock 
previously disseminated pursuant to an effective national market system 
plan, or the display of an offer for a NMS stock during regular trading 
hours at a price that equals the price of a bid for such NMS stock 
previously disseminated pursuant to an effective national market system 
plan.
    The rule would provide for four exceptions from the prohibition on 
locking or crossing protected quotations. First, the rule would except 
those quotations displayed at a time when the trading customer 
displaying the locked or crossed quotation was experiencing a failure, 
material delay or malfunction of its systems or equipment. Second, the 
rule would also except those quotations displayed at a time when the 
protected bid was higher than a protected offer in the NMS stock. 
Third, the rule would except those automated quotations where the BSE 
member displaying such automated quotation simultaneously routed an 
intermarket sweep order to execute against the full displayed size of 
any locked or crossed protected quotation. For example, if there is a 
reserve size behind the displayed size of the previously displayed 
protected quotation, its price may not change even after execution of 
the intermarket sweep order. Fourth, the rule would except those manual 
quotations that locked or crossed another manual quotation, and the BSE 
member displaying the locking or crossing manual quotation 
simultaneously routed an intermarket sweep order to execute against the 
full displayed size of the locked or crossed manual quotation.
    The rule does not specify any procedures for reconciling 
unintentional locks/crosses when both quotations are automated as 
trading should continue and market forces will reconcile the lock/
cross. Market forces are likely to generate orders that will quickly 
resolve the lock/cross quotations.

Order Routing

    The BSE is proposing a rule, in accordance with Regulation NMS, 
that would govern the order routing process. The rules on electronic 
order routing would be contained in new Chapter XXXVIII, Section 3.
    The BSE will only route an Eligible Order when the order has not 
been executed in its entirety and the terms of the order require 
routing to another Trading Center for execution. The BSE has determined 
that Eligible Orders are orders that are designated by the customer to 
execute or route. IOC, AIOC, all ISO order types and FOK orders shall 
not be designated to execute or route.
    Limit Orders shall be routed either in their entirety or as 
component orders to an away Trading Center(s). Limit Orders will be 
routed to the Trading Center(s)

[[Page 47274]]

publishing the best Protected Bid or Protected Offer and will execute 
against the best Protected Bid or Protected Offer superior or equal to 
the limit price for the full number of available shares at the away 
Trading Center(s). The remaining portion of the order, if any, shall be 
ranked and displayed on the BSE book in accordance with the terms of 
such order. Market Orders shall be routed in their entirety or as 
component orders to an away Trading Center(s) as IOC Market Orders. If 
a Market Order routed to an away Trading Center is not executed in its 
entirety at the away Trading Center, the BSE would attempt to match the 
residual or declined Market Order against then available trading 
interest on the BSE book. Any remaining unmatched trading interest 
would then be handled in the manner described in Chapter XXXVIII, 
Section 3 of these proposed rules.\16\
---------------------------------------------------------------------------

    \16\ The Exchange has advised that it intends to file an 
amendment to the proposed rule change that sets forth more clearly 
the handling by BeX of the remainder of an order that has been 
routed to an away Trading Center. Telephone call between Brian D. 
Donnelly, Assistant Vice President of Regulation & Compliance, and 
Dan Hamm, Vice President of Trading Systems, BSE, and Nancy Sanow, 
Assistant Director, and Ira Brandriss, Special Counsel, Division of 
Market Regulation, Commission on August 4, 2006.
---------------------------------------------------------------------------

    Eligible Orders will be routed on behalf of the Member who 
submitted the Eligible Order if that Member is a member or subscriber 
of the away Trading Center or, in the case where the Member is not a 
member or subscriber of the away Trading Center, the order will be 
routed through a third party broker dealer, or ``give up,'' that is a 
member or subscriber of the away Trading Center pursuant to the terms 
of an agreement entered into between the BSE and that third party 
broker dealer which agreement is described below. The Eligible Order 
would route to another Trading Center as a limit order priced at the 
quote published by the Trading Center (an ISO).
    As stated above, the Exchange will route orders to other trading 
centers under certain circumstances (``Routing Services''). The 
Exchange will provide its Routing Services pursuant to the terms of 
three separate agreements: (1) An agreement between the Exchange and 
each Member on whose behalf orders will be routed (``Member-Exchange 
Agreement''); (2) an agreement between the Exchange and each third-
party broker-dealer that will serve as a ``give-up'' on an away trading 
center when the Member on whose behalf an order is routed is not also a 
member or subscriber of the away trading center (``Give-Up 
Agreement''); and (3) an agreement between the Exchange and a third-
party service provider (``Technology Provider'') pursuant to which the 
Exchange licenses the routing technology used by the Exchange for its 
Routing Services (``Exchange-Technology Provider Agreement'').
    The Exchange will provide its Routing Services in compliance with 
these rules and with the provisions of the Act and the rules 
thereunder, including, but not limited to, the requirements in Section 
6(b)(4) and (5) of the Act that the rules of a national securities 
exchange provide for the equitable allocation of reasonable dues, fees, 
and other charges among its members and issuers and other persons using 
its facilities, and not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
    As provider of the Routing Services, the Exchange will license the 
necessary routing technology for use within its own systems and 
accordingly will control the logic that determines when, how, and where 
orders are routed away to other trading centers.
    The Exchange will establish and maintain procedures and internal 
controls reasonably designed to adequately restrict the flow of 
confidential and proprietary information between the Exchange 
(including its facilities) and the Technology Provider, and, to the 
extent the Technology Provider reasonably receives confidential and 
proprietary information, that adequately restrict the use of such 
information by the Technology Provider to legitimate business purposes 
necessary for the licensing of routing technology. The Exchange-
Technology Provider Agreement will include terms and conditions that 
enable the Exchange to comply with all of its applicable Rules.
    As stated above, if an Eligible Order has not been executed in its 
entirety on the BSE, the order would route to another Trading Center as 
a limit order priced at the quote published by the Trading Center (an 
ISO). ISOs Orders routed to other Trading Centers would remain outside 
the BSE for a prescribed time period during which such orders could be 
executed (in whole or in part) or declined. While an order remains 
outside the BSE, it would have no time standing relative to others 
received from BSE Members at the same price that could be executed 
against interest on the BSE book. Requests from BSE Members to cancel 
their orders while the ISO is routed away to another Trading Center and 
remains outside the BSE would be processed subject to applicable 
trading rules of the relevant away Trading Center. When routing an 
order away to another Trading Center, the BSE would utilize such 
electronic intermarket linkages and order delivery facilities as could 
be approved by the BSE Board from time to time, subject to such 
applicable requirements as could be agreed to with the relevant Trading 
Center, subject to Commission approval or a proposed rule change 
submitted in accordance with Rule 19b-4 under the Act.
    Where an order or portion of an order is routed away and is not 
executed either in whole or in part at the other Trading Center (i.e., 
all attempts at the fill are declined or timed out), the order shall be 
ranked, displayed and eligible for execution on the BSE book in 
accordance with the terms of such order. In the event that a marketable 
order routed from the BSE to another Trading Center is not executed in 
its entirety at the other Trading Center's quote, the BSE would attempt 
to match the residual or declined market order against then available 
trading interest on the BSE book. Any remaining unmatched trading 
interest would then be handled in the manner described in Chapter 
XXXVIII, Section 3 of these proposed rules.

Order Protection Rule

    The BSE, in accordance with the requirements of Regulation NMS, is 
proposing an order protection rule that would be contained in new 
Chapter XXXVIII, Section 4. The proposed rule would prohibit trades 
from being executed on the BSE if the execution would result in an 
improper trade-through, i.e., at a price lower than a Protected Bid or 
higher than a Protected Offer. If the execution of an order on the 
Exchange would cause an improper trade-through, that order would be 
routed to another appropriate market or, if designated as ``do not 
route,'' automatically cancelled. Members, however, would still be 
subject to all applicable best execution requirements.
    The BSE does provide for several exceptions to the trade-through 
rule. Some of the exceptions include: a crossed markets exception, a 
non-regular way cross exception, a single priced opening, reopening or 
closing trade exception, an inbound ISO exception, a stop order 
exception and a benchmark order executed at the BSE exception. If a 
purchase or sale of an NMS stock does qualify for an exception to the 
order protection rule, an appropriate modifier approved by the 
operating committee of the relevant national market system plan for an 
NMS stock will be attached to the trade before it is publicly reported.

[[Page 47275]]

    The BSE would be an automated trading system which displays bids 
and offers that qualify as automated quotations under the definition 
set out in Rule 600(b)(3) under the Act, with manual capabilities in 
the event the automated trading feature is not available.
    In order to determine whether a trade would constitute an improper 
trade-through the BSE's systems would routinely, throughout the trading 
day, synchronize their time clocks and would immediately make 
adjustments to the time recorded in the BSE to ensure that the period 
between the two times would not exceed 500 milliseconds.
    If another market is displaying a manual quotation, the BSE would 
be able to disregard that market's bid or offer. The BSE would also be 
able to disregard another Trading Center's bid and offer if: the other 
market has publicly announced that it is not disseminating automated 
quotations and/or the other market has repeatedly failed to respond 
within one second to an incoming AIOC or ISO order (after adjusting for 
order transmission time).
    If the BSE bypassed another Trading Center's quote it would 
immediately notify the Trading Center after having used the ``self-
help'' exception through an appropriate mechanism for communicating 
with other Trading Centers. The BSE would be able to avail itself of 
the self-help exception until the other Trading Center has provided 
reasonable assurance to the BSE or to the public that the problems have 
been corrected.
    If the BSE has not accepted two or more AIOC orders sent as 
sequential test messages, the BSE will attach a ``manual'' identifier 
to its bids and offers it makes publicly available. Additionally, 
immediately upon receiving an alert from the processes that the 
Exchange's trading system has taken more than 2 seconds to process any 
one AIOC order, the MOC shall automatically attach a ``manual'' 
identifier to the bids and offers it makes publicly available. If for 
some reason the MOC is unable to attach a manual identifier, the 
Exchange shall announce that its quotes are manual through an 
appropriate mechanism for communicating with other Trading Centers.
    Once the BSE has made any required systems changes, or has 
otherwise determined that its quotations satisfy the requirements of 
Rule 600(b)(3) under the Act, and has conducted applicable tests set 
out above to confirm that the Exchange's quotes qualify as ``automatic 
quotations,'' the Exchange would remove the ``manual'' identifier from 
the bids and offers that are made publicly available. The Exchange 
would also have to notify other Trading Centers that its quotations are 
automated by announcing that fact through an appropriate mechanism for 
communicating with other Trading Centers.

Conclusion

    The Exchange represents that it has designed the BeX to be a fully-
automated system that would permit eligible orders in eligible 
securities to match against one another, without the required 
participation of a specialist. The Exchange believes that this system 
functionality would provide all Exchange Members with an efficient way 
to trade securities that would protect investors and the public 
interest by automatically handling orders in a fair and reasonable 
manner. Additionally, the BSE believes that the changes proposed herein 
are designed to enhance competition in the U.S. equities markets, 
particularly given the electrification of the marketplace and other 
fundamental changes that are rapidly taking place. The Exchange submits 
that the changes proposed herein are, among other things, intended to 
bring the BSE into compliance with the requirements of Regulation NMS.
2. Statutory Basis
    The basis for this proposed rule and proposed rule change is that 
Exchange believes its proposals are consistent with Section 6(b) \17\ 
of the Act and further the objectives of Section 6(b)(5) \18\ of the 
Act in particular, because they are designed 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    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 self-regulatory organization 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 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-2006-30 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 No. SR-BSE-2006-30. 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 at the Commission's Public Reference Room. Copies of such 
filing will also be available for inspection and copying at

[[Page 47276]]

the principal office of the above-mentioned self-regulatory 
organization. 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 with to make 
available publicly. All submissions should refer to the file number in 
the caption above and should be submitted on or before September 6, 
2006. 

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E6-13400 Filed 8-15-06; 8:45 am]
BILLING CODE 8010-01-P