[Federal Register Volume 74, Number 141 (Friday, July 24, 2009)]
[Notices]
[Pages 36805-36807]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17637]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60337; File No. SR-BX-2009-038]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Extend a 
Pilot Program That Allows for No Minimum Size Order Requirement for the 
Price Improvement Period Process on the Boston Options Exchange 
Facility

July 17, 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 July 13, 2009 NASDAQ OMX BX, Inc. (the ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the self-regulatory organization. The Exchange filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act,\3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Supplementary Material to 
Section 18 (the Price Improvement Period ``PIP'') of Chapter V of the 
Rules of the Boston Options Exchange Group, LLC (``BOX'') to extend a 
pilot program that permits BOX to have no minimum size requirement for 
orders entered into the PIP and under certain circumstances permits the 
premature termination of the PIP process (``PIP Pilot Program''). 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://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.

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 self-regulatory organization 
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 self-regulatory organization 
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 the proposed rule change is to extend the PIP Pilot 
Program under the BOX Rules for twelve (12) additional months. The PIP 
Pilot Program allows BOX to have no minimum size requirement for orders 
entered into the PIP process and under certain circumstances permits 
the premature termination of the PIP process.\5\ The proposed rule 
change reflects change to the text of Supplementary Material .01 to 
Section 18 of Chapter V of the BOX Rules and seeks to extend the 
operation of the PIP Pilot Program until July 17, 2010.
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    \5\ The Pilot Program is currently set to expire on July 18, 
2009. See Securities Exchange Act Release No. 58942 (November 13, 
2008), 73 FR 70394 (November 20, 2008) (SR-BSE-2008-49); See also 
Securities and Exchange Act Release No. 58195 (July 18, 2008), 73 FR 
43801 (July 28, 2008) (SR-BSE-2008-39); See also Securities Exchange 
Act Release No. 55999 (July 2, 2007), 72 FR 37549 (July 10, 2007) 
(SR-BSE-2007-27); See also Securities Exchange Act Release No. 54066 
(June 29, 2006), 71 FR 38434 (July 6, 2006) (SR-BSE-2006-24); See 
also Securities Exchange Act Release No. 52149 (July 28, 2005), 70 
FR 44704 (August 3, 2005) (SR-BSE-2005-22); See also Securities 
Exchange Act Release No. 49068 (January 13, 2004), 69 FR 2775 
(January 20, 2004) (SR-BSE-2002-15) (``Original PIP Pilot Program 
Approval Order''). See also Securities Exchange Act Release No. 
51821 (June 10, 2005), 70 FR 35143 (June 16, 2005) (SR-BSE-2004-51) 
(Order approving, among other things, under certain circumstances, 
the premature termination of a PIP process).
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    The Exchange notes that the PIP Pilot Program provides small 
customer orders with benefits not available under the rules of some 
other exchanges. One of the important factors of the PIP Pilot Program 
is that it guarantees Participants the right to trade with their 
customer orders that are less than 50 contracts. In particular, any 
order

[[Page 36806]]

entered into the PIP is guaranteed an execution at the end of the 
auction at a price at least equal to the national best bid or offer.
    In further support of this proposed rule change, and as required by 
the Original PIP Pilot Program Approval Order, the Exchange represents 
that BOX has been submitting to the Exchange and to the Commission a 
PIP Pilot Program Report, offering detailed data from, and analysis of, 
the PIP Pilot Program. Although BOX is submitting the reports, the 
Exchange notes that it is also responsible for the timeliness and the 
accuracy of the information.
    To aid the Commission in its evaluation of the PIP Pilot Program, 
BOX has represented to the Exchange that BOX will provide the following 
additional information each month: (1) The number of orders of 50 
contracts or greater entered into the PIP auction; (2) The percentage 
of all orders of 50 contracts or greater sent to BOX that are entered 
into BOX's PIP auction; (3) The spread in the option, at the time an 
order of 50 contracts or greater is submitted to the PIP auction; (4) 
Of PIP trades for orders of fewer than 50 contracts, the percentage 
done at the National Best Bid or Offer (``NBBO'') plus $.01, plus $.02, 
plus $.03, etc.; (5) Of PIP trades for orders of 50 contracts or 
greater, the percentage done at the NBBO plus $.01, plus $.02, plus 
$.03, etc.; (6) The number of orders submitted by Order Flow Providers 
(``OFPs'') when the spread was $.05, $.10, $.15, etc. For each spread, 
BOX will specify the percentage of contracts in orders of fewer than 50 
contracts submitted to BOX's PIP that were traded by: (a) The OFP that 
submitted the order to the PIP; (b) BOX Market Makers assigned to the 
class; (c) other BOX Participants; (d) Public Customer Orders 
(including Customer PIP Orders (``CPOs'')); and (e) unrelated orders 
(orders in standard increments entered during the PIP). For each 
spread, BOX will also specify the percentage of contracts in orders of 
50 contracts or greater submitted to BOX's PIP that were traded by: (a) 
The OFP that submitted the order to the PIP; (b) BOX Market Makers 
assigned to the class; (c) other BOX Participants; (d) Public Customer 
Orders (including CPOs); and (e) unrelated orders (orders in standard 
increments entered during PIP); (7) For the first Wednesday of each 
month: (a) The total number of PIP auctions on that date; (b) the 
number of PIP auctions where the order submitted to the PIP was fewer 
than 50 contracts; (c) the number of PIP auctions where the order 
submitted to the PIP was 50 contracts or greater; (d) the number of PIP 
auctions (for orders of fewer than 50 contracts) with 0 participants 
(excluding the initiating participant), 1 participant (excluding the 
initiating participant), 2 participants (excluding the initiating 
participant), 3 participants (excluding the initiating participant), 4 
participants (excluding the initiating participant), etc., and (e) the 
number of PIP auctions (for orders of 50 contracts or greater) with 0 
participants (excluding the initiating participant), 1 participant 
(excluding the initiating participant), 2 participants (excluding the 
initiating participant), 3 participants (excluding the initiating 
participant), 4 participants (excluding the initiating participant), 
etc.; and (8) For the third Wednesday of each month: (a) The total 
number of PIP auctions on that date; (b) the number of PIP auctions 
where the order submitted to the PIP was fewer than 50 contracts; (c) 
the number of PIP auctions where the order submitted to the PIP was 50 
contracts or greater; (d) the number of PIP auctions (for orders of 
fewer than 50 contracts) with 0 participants (excluding the initiating 
participant), 1 participant (excluding the initiating participant), 2 
participants (excluding the initiating participant), 3 participants 
(excluding the initiating participant), 4 participants (excluding the 
initiating participant), etc., and (e) the number of PIP auctions (for 
orders of 50 contracts or greater) with 0 participants (excluding the 
initiating participant), 1 participant (excluding the initiating 
participant), 2 participants (excluding the initiating participant), 3 
participants (excluding the initiating participant), 4 participants 
(excluding the initiating participant), etc.
2. Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\6\ in general, and Section 
6(b)(5) of the Act,\7\ in particular, in that it is designed to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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. 
The Exchange believes that the data demonstrates that there is 
sufficient investor interest and demand to extend the PIP Pilot Program 
for an additional twelve (12) months. The Exchange represents that the 
Pilot Program is designed to provide investors with real and 
significant price improvement regardless of the size of the order.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The 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 comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change, as amended: (1) Does 
not significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) \8\ of the Act and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally 
may not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \11\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange requests that the 
Commission waive the 30-day operative delay, as specified in Rule 19b-
4(f)(6)(iii),\12\ which would make the rule change operative upon 
filing. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because such waiver will allow the PIP Pilot Program to continue 
without interruption.\13\ Accordingly, the

[[Page 36807]]

Commission designates the proposed rule change operative upon filing 
with the Commission.
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    \10\ Id.
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ Id.
    \13\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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-2009-038 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-2009-038. 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 will also 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-
2009-038 and should be submitted on or before August 14, 2009.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-17637 Filed 7-23-09; 8:45 am]
BILLING CODE 8010-01-P