[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Notices]
[Pages 76503-76505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30804]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63416; File No. SR-BX-2010-083]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing of Proposed Rule Change Relating to The Price Improvement Period 
To Permit an Initiating Participant To Designate a PIP Surrender 
Quantity

December 2, 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 November 24, 2010, 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 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.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Chapter V, Section 18 (The Price 
Improvement Period (``PIP'')) of the Rules of the Boston Options 
Exchange Group, LLC (``BOX'') to permit an Options Participant 
initiating a PIP to designate a PIP Surrender Quantity. The text of the 
proposed rule change is available from the principal office of the 
Exchange, on the Exchange's Web site at http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/, at the Commission's 
Public Reference Room, and on the Commission's Web site at http://www.sec.gov/.

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 proposed rule change will amend Chapter V, Section 18 (The 
Price Improvement Period (``PIP'')) of the BOX Rules to permit an 
Options Participant initiating a PIP (``Initiating Participant''), at 
its option, to designate a lower amount for which it will retain 
certain priority and trade allocation privileges upon the conclusion of 
the PIP auction than the forty percent (40%) of the PIP Order to which 
the Initiating Participant is entitled as set forth in Chapter V, 
Sections 18(f)(i) and (f)(ii) of the BOX Rules. In certain instances, 
Chapter V, Sections 18(f)(i) and (f)(ii) of the BOX Rules allow an 
Initiating Participant to retain priority and trade allocation 
privileges for 40% of the size of a PIP Order upon conclusion of the 
PIP. This proposal will permit an Initiating Participant, when starting 
a PIP, to submit the Primary Improvement Order to BOX with a 
designation to identify the total size of the PIP Order that the 
Initiating Participant is willing to ``surrender'' to other PIP 
Participants (``PIP Surrender Quantity''), resulting in the Initiating 
Participant potentially being allocated less than the forty percent 
(40%) to which it may be entitled. For example, when an Initiating 
Participant submits a PIP Order and a Primary Improvement Order for 100 
contracts and a PIP Surrender Quantity of 70 contracts, the Initiating 
Participant is designating that it is willing to surrender seventy 
percent (70%) of the PIP Order to other PIP Participants. Therefore, 
the Initiating Participant is only retaining priority to thirty percent 
(30%) of the PIP Order,

[[Page 76504]]

rather than the forty percent (40%) it could have received. The Primary 
Improvement Order shall yield priority to certain competing orders in 
the circumstances set forth in Chapter V, Section 18(f)(iii) of the BOX 
Rules.
    The proposed rule change will further provide that in no case shall 
the Initiating Participant's use of the Surrender Quantity function 
result in an allocation to the Initiating Participant that would be 
greater than the maximum allowable allocation the Initiating 
Participant would otherwise receive in accordance with the PIP 
allocation procedures set forth in Chapter V, Section 18(f) of the BOX 
Rules. The proposal specifies that the PIP Surrender Quantity shall not 
be effective for an amount that is lesser than or equal to sixty 
percent (60%) of the size of the PIP Order. In such a case, the forty 
percent (40%) maximum allowable priority allocation to the Initiating 
Participant would apply.
    Additionally, the proposed rule change will modify the BOX Trading 
Host's trade allocation at the conclusion of the PIP to account for the 
PIP Surrender Quantity. The proposal specifies that when the BOX 
Trading Host determines the priority and trade allocation amounts for 
the Initiating Participant upon the conclusion of the PIP auction, the 
Trading Host will automatically adjust the trade allocations to the 
other PIP Participants according to the priority set forth in Chapter 
V, Section 18(e) of the BOX Rules, providing a total amount to the 
other PIP Participants up to the PIP Surrender Quantity. The Primary 
Improvement Order shall be allocated the remaining size of the PIP 
Order, if any. If the aggregate size of other PIP Participants' contra 
orders is not equal to or greater than the PIP Surrender Quantity, then 
the remaining PIP Surrender Quantity shall be left unfilled and the 
Primary Improvement Order shall be allocated the remaining size of the 
PIP Order as set forth in Chapter V, Section 18(f) of the BOX Rules. 
For example, an Initiating Participant submits a PIP Order and a 
Primary Improvement Order for 100 contracts and a PIP Surrender 
Quantity of 70 contracts. During the PIP auction only one Improvement 
Order for 25 contracts is received. Even though the Initiating 
Participant was willing to surrender 70 contracts to the other PIP 
Participants, there is not enough competing size in this instance to 
allocate 70 contracts to someone else. Therefore, the Primary 
Improvement Order's requirement to completely fill the PIP Order takes 
precedence, and the Initiating Participant is allocated the remaining 
75 contracts.
    BOX will provide Options Participants with three (3) business days 
notice, via Information Circular, about the implementation date of the 
PIP Surrender Quantity prior to its implementation in the BOX trading 
system.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\3\ in general, and Section 
6(b)(5) of the Act,\4\ in particular. Specifically, the Exchange 
believes the proposed rule change is designed to prevent fraudulent and 
manipulative acts and 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. In particular, 
the Exchange believes that the proposed rule change will benefit 
investors and Options Participants by allowing an Initiating 
Participant the flexibility to designate a lower amount for which it 
will retain certain priority and trade allocation privileges upon the 
conclusion of the PIP auction than the forty percent (40%) of the PIP 
Order to which the Initiating Participant is entitled, while providing 
other PIP Participants increased trade allocations.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 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 Regarding 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 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove the 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-2010-083 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-2010-083. 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 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 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 such 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 publicly available. All submissions 
should refer to File Number SR-BX-

[[Page 76505]]

2010-083 and should be submitted on or before December 29, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-30804 Filed 12-7-10; 8:45 am]
BILLING CODE 8011-01-P