[Federal Register Volume 76, Number 226 (Wednesday, November 23, 2011)]
[Notices]
[Pages 72486-72488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30179]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65780; File No. SR-BX-2011-076]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Perform a
Test of Routing Functionality
November 17, 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 November 10, 2011, 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 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
BX is filing this proposed rule change to allow a limited use of
its broker-dealer affiliate, Nasdaq Execution
[[Page 72487]]
Services LLC (``NES''), to perform a test of routing functionality to
be introduced by the Exchange. BX proposes to implement the rule change
prior to November 14, 2011. 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 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
As provided in Rule 4758, BX recently adopted rules that will allow
it to route orders to other trading venues for execution.\3\ Routing
will be performed by NES, a registered broker-dealer that is an
affiliate of the Exchange. In order to ensure that the routing
functionality is operating properly prior to making it available to
members, the Exchange proposes to use NES to perform test trades in an
actual security, so as to track the performance of the systems to be
used by the Exchange from order entry to clearance and settlement.
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\3\ Securities Exchange Act Release No. 65470 (October 3, 2011),
76 FR 62489 (October 7, 2011) (SR-BX-2011-048).
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The test will be performed through two buy orders for 100 shares in
a highly liquid security, such as the Power Shares QQQ Trust. Upon the
execution of each buy order, NES will enter an offsetting sell order in
the same security for the same quantity, in order to close out the test
position and minimize financial impact on the Exchange. For the buy
orders, NES will submit a routable marketable limit order with a time-
in-force of Immediate or Cancel to the Exchange, with instructions to
route to a directed away market. The Exchange will then deliver the
order to NES, as the routing broker, which will route to the designated
away market and receive an execution back. The first offsetting sell
order will be handled in a similar manner. The second offsetting sell
order will be executed at the Exchange itself, to ensure that the
Exchange's systems are correctly distinguishing between routed and non-
routed trades. To the extent that the offsetting trades require the
Exchange to pay out funds, the funds will be provided out of the cash
accounts of the Exchange; to the extent that the trades result in a
profit, the funds will be deposited in the cash accounts of the
Exchange.
2. Statutory Basis
BX believes that the proposed rule change is consistent with the
provisions of Section 6 of the Act,\4\ in general, and with Section
6(b)(5) of the Act,\5\ 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, BX believes
that the change will allow it to perform adequate testing of its
systems for routing member orders before such systems become
operational. The Exchange believes that adequate testing of market
functionality is an important component of the operation of the
national market system.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
BX 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 significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-
4(f)(6) thereunder.\7\
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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 satisfied this requirement.
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The Exchange has requested that the Commission waive the 30-day
operative delay. The Exchange believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest because it would allow the Exchange to conduct a
limited test to assess the performance of its routing functionality and
related systems prior to implementation and use by its members. The
Exchange believes that a limited test prior to the launch of its
routing functionality will assist the Exchange in uncovering and fixing
any potential ``bugs'' so as to increase the likelihood of a successful
implementation. The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because such waiver would allow the Exchange to conduct a
limited test without undue delay to ensure that its routing
functionality and related systems are operating properly prior to
implementation. Therefore, the Commission designates the proposal
operative upon filing.\8\
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\8\ For 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 the 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:
[[Page 72488]]
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BX-2011-076 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-2011-076. This file
number should be included on the subject line if email 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 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 available publicly. All
submissions should refer to File Number SR-BX-2011-076 and should be
submitted on or before December 14, 2011.
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\9\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30179 Filed 11-22-11; 8:45 a.m.]
BILLING CODE 8011-01-P