[Federal Register Volume 71, Number 239 (Wednesday, December 13, 2006)]
[Notices]
[Pages 74965-74966]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-21158]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54884; File No. SR-BSE-2006-52]


Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change Relating to the Time a Marketable Order Is Exposed on the 
BOX Book

December 6, 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 November 15, 2006, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by BSE. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons and is approving the proposal on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(l).
    \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

    The Exchange proposes to amend Section 16 (Execution and Price/Time 
Priority) of Chapter V of the Rules of the Boston Options Exchange 
(``BOX'') to reduce the time that an order is exposed in the internal 
BOX market when BOX is not matching the national best bid or offer 
(``NBBO'') from three seconds to one second. The text of the proposed 
rule change is available on the Exchange's Internet Web site (http://www.bostonstock.com), at the Exchange's principal office, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposal. The text of these 
statements may be examined at the places specified in Item III below. 
The Exchange has prepared summaries, set forth in Sections A, B, and C 
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Section 16 (Execution and Price/Time 
Priority) of Chapter V of the BOX Rules to reduce the time that an 
order is exposed in the internal BOX market when the BOX best bid and 
offer (``BBO'') is not matching the NBBO from three seconds to one 
second. \3\ The Exchange's experience with the Filter has shown that 
one second is ample time for any party interested in trading with the 
exposed order at the NBBO to generate and send its contra-side order to 
the BOX Trading Host for matching. Consequently, the Exchange believes 
that a reduction in this exposure time will not result in an 
appreciable difference in the number of executions on BOX through the 
use of the Filter. In addition, the reduction in exposure time will 
permit the earlier generation and sending of an InterMarket Linkage P/A 
Order in the case where BOX is unable to provide the NBBO price. 
Therefore, the Exchange believes that the filtered order would have an 
improved chance of being executed at the NBBO before the market moves 
to the disfavor of the order.\4\
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    \3\ See BOX Rules, Chapter V, Section 16(b) ``Filtering of BOX 
In-Bound Orders to Prevent Trade-Throughs.'' This rule and the 
mechanism utilized by BOX for this purpose are called the 
``Filter.''
    \4\ The Exchange asked the Commission to incorporate in the 
Purpose section of this notice the purpose discussion in the Form 
19b-4 submitted for this filing rather than the discussion in the 
Exhibit 1 for the filing. E-mail communication between Brian 
Donnelly, AVP Regulation & Compliance, BSE, and Leah Mesfin, Special 
Counsel, Division of Market Regulation, Commission on December 5, 
2006.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)\5\ of the Act, in general, and furthers the 
objectives of Section 6(b)(5) \6\ in particular in that it is designed 
to promote just and equitable principles of trade, and to protect 
investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. 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:

[[Page 74966]]

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File No. SR-BSE-2006-52 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-2006-52. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commissions Internet Web site (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of the filing also will be 
available for inspection and copying at the principal office of 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-2006-52 
and should be submitted on or before January 3, 2007.

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

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\7\ 
Specifically, the Commission believes that the proposal is consistent 
with Section 6(b)(5) of the Act, \8\ which requires, among other 
things, that the rules of national securities exchange be designed to 
prevent fraudulent and manipulative practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism for a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \7\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The foregoing proposed rule change would reduce the time that a 
marketable order is exposed on the BOX Book in the event that the BBO 
is not at the NBBO. Currently, when the BOX market is not at the NBBO, 
a marketable order that would sit on the BOX Book for three seconds 
before being routed to an exchange displaying the NBBO or returned to 
the Options Participant. The proposed rule change would reduce the 
amount of time that such order would sit on the BOX Book to one second. 
The Commission notes that the Exchange has represented that one second 
is ample time for any party interested in trading with the exposed BOX 
order at the NBBO to send in a contra-side order to the BOX Trading 
Host for matching. The Exchange has also stated that, consequently, it 
believes that the reduction in exposure time will not result in an 
appreciable difference in the number of executions on BOX through the 
use of the Filter. The Commission also notes that the Exchange has 
argued that the reduction in exposure time on the BOX Book would 
improve the chances of a marketable order being executed at the NBBO 
before the market moves and (potentially) disfavors the order.
    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act, \9\ for approving the proposed rule change prior to the 30th 
day of the date of publication of the notice thereof in the Federal 
Register. The Commission notes that the proposal does not alter the 
order handling and routing procedures of the Filter in any other way 
than to reduce the exposure time for a marketable order on the BOX 
Book. The Commission believes that the proposed reduction in exposure 
time on the BOX Book should improve the efficient handling of 
marketable orders and minimize the risk of such orders failing to 
receive their expected execution at the NBBO. The Commission also notes 
that granting accelerated approval to this proposal would allow the 
Exchange to implement this change in the Filter's functionality without 
any further delay.
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    \9\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
\10\ that the proposed rule change (SR-BSE-2006-52) is hereby approved 
on an accelerated basis.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E6-21158 Filed 12-12-06; 8:45 am]
BILLING CODE 8011-01-P