[Federal Register Volume 75, Number 197 (Wednesday, October 13, 2010)]
[Notices]
[Pages 62902-62904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-25742]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63052; File No. SR-BX-2010-067]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend BX 
Rule 4751 To Include Order Collar Functionality

October 6, 2010.
    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 October 1, 2010, NASDAQ OMX BX, Inc. (the ``Exchange'' or ``BX'') 
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 Exchange. The Exchange has designated the 
proposed rule change as constituting a non-controversial rule change 
under Rule 19b-4(f)(6) under the Act,\3\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 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 BX Rule 4751 to include Order Collar 
functionality that cancels any portion of any Unpriced orders (also 
known as market orders) submitted to the Exchange that would execute at 
a price that is more than $0.25 or 5 percent worse than the national 
best bid and offer at the time the order initially reaches the 
Exchange, whichever is greater. The text of the proposed rule change is 
available at http://nasdaqomxbx.cchwallstreet.com, at BX'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 proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The

[[Page 62903]]

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 the proposed rule change is to protect market 
participants by reducing the risk that unpriced orders, also known as 
market orders, will execute at prices that are significantly worse than 
the national best bid and offer (``NBBO'') at the time the Exchange 
receives the order. BX believes that most market participants expect 
that their order will be executed at its full size at a price 
reasonably related to the prevailing market. However, participants may 
not be aware that there is insufficient liquidity at or near the NBBO 
to fill the entire order, particularly for more thinly-traded 
securities. These Unpriced orders can be disruptive both to the BX and 
to other markets that are impacted by BX's participation in the 
national market system.
    BX is proposing to implement order collar functionality that 
cancels any portion of any unpriced orders that would execute on BX at 
a price that is the greater of $0.25 or 5 percent worse than the NBBO 
at the time BX receives the order. Unpriced orders that would be 
subject to this calculation and potential cancellation are defined in 
new BX Rule 4751(f)(10).
    The following example illustrates the Order Collar functionality. A 
market participant submits an Unpriced order to buy 500 shares. The 
NBBO is $6.00 bid by $6.05 offer, with 100 shares available on each 
side. Both sides of the NBBO are set by BX and BX has 100 shares 
available at the $6.05 to sell at the offer price and also has reserve 
orders to sell 100 shares at $6.32 and 400 shares at $6.40. No other 
market center is publishing offers to sell the security in between 
$6.05 and $6.40.
    In this example, the Unpriced Order would be executed in the 
following manner:
     100 shares would be executed by BX at the $6.05;
     100 shares executed by BX at $6.32 (more than $0.25 but 
less than 5 percent worse than the NBBO); and
     300 shares, representing the remainder of the Unpriced 
Order, would be cancelled because the remaining liquidity available at 
$6.40 is more than 5 percent worse than the NBBO.
    BX believes that market participants who wish to trade at prices 
further away from the NBBO than the Unpriced Order thresholds would 
permit, may still accomplish their strategy by submitting a marketable 
limit order to BX. In the example above, a market participant with such 
a strategy could have input a limit order with a price of $7.00, which 
would have executed up to its full size provided liquidity is 
available. BX's proposal is similar to a rule change already 
implemented by NASDAQ, BATS Exchange, Inc. and NYSE Arca, Inc.\4\
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    \4\ See NASDAQ Rule 4751(f)(13); BATS Rule 11.9; NYSE Arca 
Equities Rule 7.31(a).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act in general,\5\ and furthers the objectives of Section 
6(b)(5) of the Act in particular,\6\ in that it is 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, 
by avoiding execution of unpriced orders on the Exchange at prices that 
are significantly worse than the NBBO at the time the order is 
initially received by the Exchange. The Exchange believes that the NBBO 
provides reasonable guidance of the current value of a given security 
and therefore that market participants should have confidence that 
their unpriced orders will not be executed at a significantly worse 
price than the NBBO.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78(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, as amended.

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

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not: (1) 
Significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, BX has given the 
Commission 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 on which the 
Exchange filed the proposed rule change.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\9\ 
However, Rule 19b-4(f)(6)\10\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay so that the proposal may 
become operative upon filing. The Commission notes (i) the proposal is 
similar to existing thresholds on market orders adopted by The NASDAQ 
Stock Market LLC, BATS Exchange, Inc., and NYSE Arca, Inc; (ii) it 
presents no novel issues; and (iii) the functionality is voluntary, and 
it may provide a benefit to market participants. For these reasons, the 
Commission believes it is consistent with the protection of investors 
and the public interest to waive the 30-day operative delay, and hereby 
grants such waiver.\11\
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    \9\ 17 CFR 240.19b-4(f)(6)(iii).
    \10\ Id.
    \11\ For the purposes only of waiving the operative date of 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 summarily may temporarily suspend 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

[[Page 62904]]

Number SR-BX-2010-067 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-2010-067. 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,\12\ 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 Web site viewing and printing 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 Exchange. 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-2010-067 and should be submitted on or before 
November 3, 2010.
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    \12\ The text of the proposed rule change is available on 
Exchange's Web site at http://nasdaqomxbx.cchwallstreet.com, on the 
Commission's Web site at http://www.sec.gov, at BX, and at the 
Commission's Public Reference Room.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-25742 Filed 10-12-10; 8:45 am]
BILLING CODE 8011-01-P