[Federal Register Volume 76, Number 102 (Thursday, May 26, 2011)]
[Notices]
[Pages 30746-30748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-13038]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64530; File No. SR-BX-2011-027]


Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change Extending the 
Pilot Period for BOX to Receive Inbound Routes of Orders from NOS

May 20, 2011.
    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 May 18, 2011, NASDAQ OMX BX (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 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 submits this proposed rule change to extend the pilot 
period of the Exchange's prior approval for Boston Options Exchange 
(``BOX'') to receive inbound routes of certain option orders from 
Nasdaq Options Services, LLC (``NOS'') through August 16, 2011.

[[Page 30747]]

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
    Currently, NOS is the approved outbound routing facility of the 
NASDAQ Exchange for NOM, providing outbound routing from NOM to other 
market centers.\4\ The Exchange and the NASDAQ Exchange have previously 
adopted rules to permit BOX to receive inbound routes of certain option 
orders by NOS in its capacity as an order routing facility of the 
NASDAQ Exchange for NOM.\5\ The Exchange specifically has adopted a 
rule to prevent potential informational advantages resulting from the 
affiliation between BOX and NOS, as related to NOS's authority to route 
certain orders from NOM to BOX without checking the NOM book prior to 
routing.\6\ NOS's authority to route these orders to BOX is subject to 
a pilot period ending May 18, 2011.\7\ The Exchange hereby seeks to 
extend the previously approved pilot period (with the attendant 
obligations and conditions) for an additional 90 days, through August 
16, 2011.
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    \4\ NOM Rule Chapter VI, Section 11(c). Under NOM Rule Chapter 
VI, Section 11(c): (1) NOM routes orders in options via NOS, which 
serves as the sole ``routing facility'' of NOM; (2) the sole 
function of the routing facility is to route orders in options to 
away markets pursuant to NOM rules, solely on behalf of NOM; (3) NOS 
is a member of an unaffiliated self-regulatory organization, which 
is the designated examining authority for the broker-dealer; (4) the 
routing facility is subject to regulation as a facility of the 
NASDAQ Exchange, including the requirement to file proposed rule 
changes under Section 19 of the Act; (5) use of NOS to route order 
to other market centers is optional; (6) NOM must establish and 
maintain procedures and internal controls reasonably designed to 
adequately restrict the flow of confidential and proprietary 
information between the NASDAQ Exchange and its facilities 
(including the routing facility), and any other entity; and (7) the 
books, records, premises, officers, directors, agents, and employees 
of the routing facility, as a facility of the NASDAQ Exchange, shall 
be subject at all times to inspection and copying by the NASDAQ 
Exchange and the Commission.
    \5\ See Securities Exchange Act Release No. 60349 (July 20, 
2009), 74 FR 37071 (July 27, 2009) (SR-BX-2009-035); Securities 
Exchange Act Release No. 60354 (July 21, 2009), 74 FR 37074 (July 
27, 2009) (SR-NASDAQ-2009-065).
    \6\ See Chapter XXXIX, Section 2(c) of the Grandfathered Rules 
of the Exchange.
    \7\ See Securities Exchange Act Release No. 63364 (November 23, 
2010), 75 FR 74121 (November 30, 2010) (SR-BX-2010-078).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\8\ in general, and with 
Section 6(b)(5) of the Act,\9\ in particular, in that the proposal 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 regulating, clearing, 
settling, processing information with respect to, and 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 proposed rule change will allow BOX to continue receiving inbound 
routes of equities orders from NOS, acting in its capacity as a 
facility of the NASDAQ Exchange, in a manner consistent with prior 
approvals and established protections. The Exchange believes that 
extending the previously approved pilot period for sixty days is a 
sufficient length to permit both the Exchange and the Commission to 
assess the impact of the Exchange's authority to permit BOX to receive 
direct inbound routes of certain option orders via NOS (including the 
attendant obligations and conditions).
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    \8\ 15 U.S.C. 78f.
    \9\ 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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change: (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)\10\ of the Act and Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\12\ 
However, Rule 19b-4(f)(6)(iii) \13\ 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. The Exchange notes that 
the proposal will allow BOX to continue receiving inbound routes of 
equities orders from NOS, in a manner consistent with prior approvals 
and established protections, while also permitting the Exchange and the 
Commission to assess the impact of the pilot.\14\ The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
would allow the pilot period to be extended without undue delay through 
August 16, 2011. For this reason, the Commission designates the 
proposed rule change to be operative upon filing with the 
Commission.\15\
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    \12\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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 satisfied this five-day pre-filing requirement.
    \13\ Id.
    \14\ See supra Section II.A.2.
    \15\ For the purposes only of waiving the 30-day operative 
delay, 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,

[[Page 30748]]

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-2011-027 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-2011-027. 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 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-2011-027 and should be 
submitted on or before June 16, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-13038 Filed 5-25-11; 8:45 am]
BILLING CODE 8011-01-P