[Federal Register Volume 74, Number 34 (Monday, February 23, 2009)]
[Notices]
[Pages 8132-8133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-3742]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59407; File No. SR-BX-2009-008]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing of Proposed Rule Change Allowing Entry of Orders Into the PIP at 
a Price Matching the National Best Bid or Offer

February 13, 2009.
    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 February 9, 2009, NASDAQ OMX BX, Inc. (the ``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 Exchange. 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

    The Exchange proposes to amend Chapter V, Section 18 (Price 
Improvement Period) (``PIP'') of the Rules of the Boston Options 
Exchange Group, LLC (``BOX'') to allow Options Participants to enter 
orders into the PIP at a price that matches the national best bid or 
offer (``NBBO''). The text of the proposed rule change is available 
from the principal office of the Exchange, at the Commission's Public 
Reference Room and also on the Exchange's Internet Web site at http://nasdaqtrader.com/Trader.aspx?id=Boston_Stock_Exchange.

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
    The purpose of this proposal is to expand the applicability of 
BOX's PIP auction.\3\ The PIP currently allows Options Participants to 
enter two-sided orders for execution at a price that improves upon the 
NBBO. The customer side of these orders (``PIP Order'') is then exposed 
to all market participants to give them an opportunity to participate 
in the trade at the proposed cross price or better. This provides an 
opportunity for the PIP Order to receive additional price improvement. 
BOX proposes to extend the application of the PIP to permit an Options 
Participant to enter an order (``Improvement Order'') into the PIP at a 
price that is equal to the NBBO when BOX's best bid or offer (``BOX 
BBO'') is equal or inferior to the NBBO.\4\ This will allow Options 
Participants to guarantee execution of their customer orders on BOX at 
a price that is at least as good as the NBBO, while providing the 
additional opportunity for price improvement over the NBBO.
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    \3\ See BOX Rules Chapter V, Section 18(e).
    \4\ Similarly, ISE Rule 723 permits ISE members to enter an 
order into the PIM at a price that is equal to the NBBO when the 
ISE's best bid or offer is inferior to the NBBO. See Securities 
Exchange Act Release No. 57847 (May 21, 2008), 73 FR 30987 (May 29, 
2008) (SR-ISE-2008-29).
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    PIP Orders are submitted to BOX with a matching guaranteed contra 
order, the ``Primary Improvement Order'', equal to the full size of the 
PIP Order. Under the proposal, the Primary Improvement Order must 
represent a price that is equal to or better than that of the NBBO at 
the time of the commencement of the PIP.\5\ BOX will commence a PIP by 
broadcasting a message to all Participants that (1) states that a 
Primary Improvement Order has been processed; (2) contains information 
concerning series, size, price and side of the market, and; (3) states 
when the PIP will conclude (``PIP Broadcast''). At the commencement of 
the PIP, in order to maintain the price/time priority of any orders on 
the BOX Book, BOX proposes that all quotes and orders on the BOX Book 
prior to the PIP Broadcast that are equal to or better than the Primary 
Improvement Order price (i.e. the PIP start price), except any 
proprietary quote or order from the Options Participant who submitted 
the Primary Improvement Order, will be immediately executed against the 
PIP Order in price/time priority.\6\
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    \5\ See proposed BOX Rules Chapter V, Section 18(e).
    \6\ See proposed BOX Rules Chapter V, Section 18(e)(i). Orders 
on the BOX Book will include AAO Limit Orders on the BOX Book. The 
AAO will immediately execute against the PIP Order at the AAO Limit 
Order Price (i.e. the displayed price at the minimum trading 
increment).
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    In addition, such proprietary quote or order shall not be executed 
against the PIP Order during the PIP. However, these proprietary quotes 
or orders will continue to be available for execution with all other 
types of quotes and orders as currently permissible under BOX Rules. At 
the conclusion of the PIP, the PIP Order shall be matched against the 
best prevailing quote(s) \7\ or order(s) on

[[Page 8133]]

BOX in accordance with the current PIP rule except that any pre-PIP 
Broadcast proprietary quote or order from the Options Participant who 
submitted the Primary Improvement Order will not be executed against 
the PIP Order.\8\
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    \7\ The proposal will also clarify that the PIP Order currently 
executes with the best prevailing order(s) and quote(s) on BOX.
    \8\ See proposed BOX Rules Chapter V, Section 18(e)(iii).
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    BOX believes that the proposal will continue to provide customers 
with an opportunity for price improvement over the NBBO. BOX notes that 
once a Primary Improvement Order is submitted into the PIP auction, the 
Primary Improvement Order may not be cancelled.\9\ Therefore, the PIP 
Order submitted to the PIP auction when BOX's BBO is not equal to the 
NBBO will be guaranteed an execution price at least equal to the NBBO 
and, moreover, will be given an opportunity for execution at a price 
better than the NBBO.
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    \9\ See BOX Rules Chapter V, Section 18(e)(ii).
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    BOX's PIP allows broad participation in its competitive auction by 
all types of market participants (e.g. customers, brokers and market 
makers). All Options Participants are able to receive the PIP 
Broadcasts and may respond by submitting Improvement Orders. Under the 
proposal, the PIP will continue to provide an opportunity for orders to 
receive price improvement. All PIP Orders entered into the PIP will 
continue to be broadly exposed in the auction to all BOX Options 
Participants before the submitting Options Participant can execute 
against the PIP Order. BOX believes the proposal will increase the 
likelihood of Options Participants starting auctions by entering PIP 
Orders into the PIP because the Options Participant will only be 
required to guarantee an execution at the NBBO, which will provide 
additional customer orders an opportunity for price improvement over 
the NBBO. The proposal also will encourage increased participation in a 
PIP auction by Options Participants willing to trade with the PIP Order 
at the NBBO but not better than the NBBO. Increased participation by 
Options Participants would increase competition in the PIP auction and 
may lower the proportion of a PIP Order that would be internalized by 
the submitting Options Participant.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\10\ in general, and Section 
6(b)(5) of the Act,\11\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. Specifically, the proposal 
will allow Options Participants to guarantee execution of their 
customer orders on BOX at a price that is at least as good as the NBBO, 
while providing the additional opportunity for price improvement over 
the NBBO.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 
result in 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-BX-2009-008 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BX-2009-008. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the 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 wish to make 
available publicly. All submissions should refer to File Number SR-BX-
2009-008 and should be submitted on or before March 16, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-3742 Filed 2-20-09; 8:45 am]
BILLING CODE 8011-01-P