[Federal Register Volume 78, Number 111 (Monday, June 10, 2013)]
[Notices]
[Pages 34683-34687]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13630]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69684; File No. SR-BX-2013-016]


Self-Regulatory Organizations; NASDAQ OMX BX Inc.; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove 
the Proposed Rule Change To Adopt a Directed Order Process

June 3, 2013.

I. Introduction

    On February 21, 2013, NASDAQ OMX BX Inc. (``Exchange'' or ``BX'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
establish a directed order process. The proposed rule change was 
published for comment in the Federal Register on March 11, 2013.\3\ The 
Commission received a comment letter from one commenter on the 
proposal,\4\ a letter responding to the comment,\5\ and a follow up 
comment letter from the same commenter.\6\ In addition, on April 17, 
2013, the Exchange filed Amendment No. 1 to the proposed rule 
change.\7\ On April 22, 2013, the

[[Page 34684]]

Exchange extended to June 6, 2013, the time period within which the 
Commission must approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
disapprove the proposed rule change. This order institutes proceedings 
under Section 19(b)(2)(B) of the Act to determine whether to approve or 
disapprove the proposed rule change.
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    \1\ 15 U.S.C. 78a.
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 69040 (March 5, 
2013), 78 FR 15385 (March 11, 2013) (``Notice'').
    \4\ See Letter, dated April 2, 2013, to the Commission from 
Janet McGuiness, Executive Vice President, Secretary and General 
Counsel, NYSE Euronext (``NYSE Letter'').
    \5\ See Letter, April 17, 2013, to the Commission from Edith 
Hallahan, Principal Associate General Counsel, BX (``BX Response 
Letter'').
    \6\ See Letter, dated May 10, 2013, to the Commission from Janet 
McGuiness, Executive Vice President, Secretary and General Counsel, 
NYSE Euronext (``NYSE Response Letter'').
    \7\ Amendment No. 1, which the Commission believes is technical 
in nature and not subject to notice and comment, clarifies that, 
when a Directed Order (as defined below) is submitted in an options 
class that is subject to the price/time priority on the Exchange, 
the Directed Market Maker's Directed Allocation (as defined below) 
would be capped at 40%, unless the Directed Market Maker's size at 
the first position in time priority at that price exceeds 40%, in 
which case the Directed Market Maker would have priority for that 
size.
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II. Description of the Proposal

    The Exchange proposes to establish a directed order process that 
would permit members of the Exchange (``BX Participants'') to direct 
orders (``Directed Orders'') to a particular market maker on the 
Exchange (``Directed Market Maker'').\8\ Under the proposed rule 
change, a Directed Order that could not be executed upon receipt would 
be placed on the BX book and would retain its status as a Directed 
Order.\9\ Further, a Directed Market Maker would remain eligible to be 
allocated a percentage of the Directed Order at all price levels at 
which the Directed Market Maker has a quote or order (a ``Directed 
Allocation'').\10\ To receive a Directed Allocation, the Directed 
Market Maker would be required to have quotes or orders at the National 
Best Bid or National Best Offer (``NBBO'') at the time of the execution 
of the Directed Order; the Directed Market Maker would not be required 
to be quoting at the NBBO at the time the Directed Order is 
received.\11\
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    \8\ Specifically, BX proposes to add Chapter VI, Section 1(e)(1) 
to Chapter VI to define a Directed Order as ``an order to buy or 
sell which has been directed (pursuant to the Exchange's 
instructions on how to direct an order) to a particular Market Maker 
(``Directed Market Maker'') after the opening.'' BX's also proposes 
to amend Chapter VI, Section 6(a)(2) to include Directed Order to 
the list of orders handled within the BX System.
    \9\ Chapter VI, Section 10(3)(iv)(C). For example, as shown in 
Example 6 in the Notice, if a non-routable Directed Order to buy is 
received on BX and BX is not quoting at the NBO, the order would be 
posted on the BX Book. If the market moves such that BX and Directed 
Market Maker are quoting at the NBO, the Directed Order would be 
executed against the BX Book and the Directed Market Maker would 
receive a 40% allocation of the Directed Order.
    \10\ Chapter VI, Section 10(3)(iv)(C).
    \11\ For example, as shown in Example 4 in the Notice, a 
Directed Market Maker that was not at the NBO when the Directed 
Order was received on the Exchange, would receive a Directed 
Allocation at the next price level below the NBO if the quotes or 
orders at the NBO were exhausted.
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    The calculation of a Directed Market Maker's Directed Allocation 
would depend on whether the Directed Order is submitted in an options 
class that is subject to price/time priority or in an options class 
that is subject to the size pro-rata execution algorithm on the 
Exchange. Specifically, if a Directed Order is submitted in an options 
class that is subject to price/time priority, a Directed Market Maker 
who has time priority at a particular price would receive the amount of 
the Directed Order equal to the Directed Market Maker's quotes or 
orders with time priority at that price.\12\ However, if the Directed 
Market Maker does not have time priority for a size equal to or greater 
than 40% of the Directed Allocation, the Directed Market Maker would be 
eligible to receive 40% of the Directed Order at each price level at 
which there is an execution and at which the Directed Market Maker has 
quotes or orders.\13\ The Exchange further proposes to allocate the 
remainder of the Directed Order to the other participants in price/time 
priority sequence, including any remaining contracts of the Directed 
Market Maker and multiple quotes or orders from the same firm.\14\
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    \12\ Chapter VI, Section 10(3)(i)(A). See Amendment No. 1, supra 
note 7.
    \13\ If there are multiple resting quotes or orders from the 
same Directed Market Maker, the Directed Market Maker would receive 
the Directed Allocation (up to 40% of the Directed Order) 
distributed among those quotes or orders on a time priority basis. 
Chapter VI, Section 10(3)(i)(A).
    \14\ Chapter VI, Section 10(3)(i)(A).
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    If a Directed Order is submitted in an options class that is 
subject to the size pro-rata execution algorithm, any Public Customer 
limit orders resting on the limit order book at the execution price 
would first be executed against the Directed Order.\15\ Once all Public 
Customer limit orders are executed, the Directed Market Maker would 
receive the greater of: (1) The pro-rata allocation to which such 
Directed Market Maker would be entitled or (2) the 40% of the Directed 
Order at that particular price.\16\ Once the Directed Allocation is 
determined, the Exchange proposes to allocate all remaining contracts 
of the Directed Order on a size pro-rata basis among all remaining 
participants (except for the Directed Market Maker).
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    \15\ Chapter VI, Section 10(3)(i)(B).
    \16\ If there are multiple quotes or orders for the same 
Directed Market Maker, the Exchange would distribute the Directed 
Allocation among those quotes or orders on a size pro-rata basis. 
Chapter VI, Section 10(3)(i)(B).
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    The Directed Market Maker would not be entitled to receive a number 
of contracts that is greater than the size associated with its quote or 
order at a particular price.\17\ In addition, if the calculation of the 
40% Directed Allocation results in a fractional remainder, the Exchange 
proposes to round up the Directed Market Maker's Directed Allocation to 
the next whole number whether the Directed Order is submitted in an 
options class subject to price/time priority or in an options class 
that is subject to the size pro-rata execution algorithm.\18\
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    \17\ Chapter VI, Section 10(3)(iv)(A).
    \18\ Chapter VI, Section 10(3)(iv)(B).
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    The Exchange also proposes to reduce the quoting obligations 
applicable to its Market Makers but subject Directed Market Makers to 
heightened quoting requirements. Currently, BX Market Makers are 
required to quote during regular market hours on a continuous basis 
(i.e., 90% of the trading day) in at least 60% of the series in options 
in which the Market Maker is registered. The proposed rule would reduce 
this requirement such that Market Makers would be required to quote 60% 
of the trading day (as a percentage of the total number of minutes in 
such trading day) or such higher percentage as BX may announce in 
advance, in all options in which the Market Maker is registered. 
Compliance with the obligation that a Market Maker quote 60% of each 
trading day in all options in which it is registered would be 
determined on a monthly basis.\19\
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    \19\ Chapter VII, Section 6(d)(i)(4).
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    Directed Market Makers, however, would be required to quote such 
options 90% of the trading day (as a percentage of the total number of 
minutes in such trading day) or such higher percentage as BX announces 
in advance, applied collectively to all series in all of the options in 
which the Directed Market Maker receives Directed Orders (rather than 
on an option-by-option basis). The Directed Market Maker would be 
required to comply with the heightened quoting requirements only upon 
receiving a Directed Order and the heightened quoting requirements 
would be applicable until the end of the calendar month. Compliance 
with the obligation that a Directed Market Maker quote options in which 
they have received a Directed Order 90% of each trading day would be 
determined on a monthly basis.\20\
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    \20\ Chapter VII, Section 6(d)(i)(4).
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III. Summary of Comments

    In its comment letter on the proposed rule change, NYSE Euronext 
(``NYSE'') raises two primary concerns regarding the Exchange's 
proposal.\21\ First, NYSE argues that a provision in the proposed rule 
that applies to options classes with price/time priority is vague and 
that, accordingly, could be interpreted to imply that as long as a 
Directed Market Maker establishes time priority for at least one 
contract, all of the Directed Market Maker's interest at that price

[[Page 34685]]

will be accorded time priority over all other interest in the book at 
that price. NYSE believes that providing Directed Market Makers with 
this time priority could result in the Directed Market Maker receiving 
a 100% Directed Allocation. NYSE suggests a modification of BX's 
proposal to clarify that ``the Directed Market Maker will receive only 
the size he/she has at the first position in time priority, plus up to 
40% of the remainder of the Directed Order'' (emphasis in 
original).\22\
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    \21\ See NYSE Letter, supra note 4.
    \22\ See NYSE Letter, supra note 4, at 3.
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    In response to NYSE's concerns, the Exchange submitted a letter and 
an amendment to its proposal.\23\ In its response, the Exchange 
explains that the language related to Directed Market Makers receiving 
100% of a Directed Allocation when the Directed Market Maker is first 
in time was intended to address the scenario when a Directed Market 
Maker already has time priority and a Directed Allocation is not 
needed. Therefore, BX explains that ``a Directed Market Maker cannot 
use a small quote/order to `jump the queue' by later submitting a 
larger quote/order at the same price, because priority afforded via 
Directed Allocation is limited to the 40% calculation.'' \24\ BX 
submitted Amendment 1 to clarify this point in its proposed rule text 
and discussion of its proposed rule change.\25\
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    \23\ See BX Response Letter, supra note 5 and Amendment 1, supra 
note 7.
    \24\ See BX Response Letter, supra note 5, at 1.
    \25\ In its comment letter, NYSE raises additional concerns 
about BX's proposal based on the interpretation that the Exchange's 
proposed rule could permit 100% internalization. These concerns 
relate to opportunities for selective quoting and use of price 
improving orders, as well as concerns relating to information 
barriers that govern permissible communication between the market 
making function of a broker-dealer and other divisions within a 
broker-dealer, such as an order sending affiliate. Id. at 3-5. The 
Exchange notes that these additional concerns are based on NYSE's 
interpretation of the proposed rule and that, given that the 
Directed Allocation will not function the way NYSE understood, 
NYSE's additional concerns are not applicable. See BX Response 
Letter, supra note 5, at 2.
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    NYSE also expressed concern with the Exchange's proposed rule to 
allow a Market Maker to receive a Directed Allocation when the Market 
Maker does not have a quote at the NBBO at the time the Directed Order 
is received by the Exchange. NYSE believes that the proposal enables a 
Market Maker to ``lay in wait outside the NBBO, allowing other 
participants to participate in the order at less attractive prices.'' 
\26\ The Market Maker would then receive a 40% guarantee for that 
portion of the Directed Order that trades beyond the initial NBBO. NYSE 
argues that this rule would be unprecedented and recommends that the 
Exchange stipulate that a preferential Directed Order allocation of any 
kind is only available to Market Makers who have a quote or order at 
the NBBO at the time the Directed Order is received by the Exchange.
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    \26\ See NYSE Letter, supra note 4, at 5.
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    In response to this concern, the Exchange recognizes that its 
proposal does break new ground, but stresses that in order to receive 
an execution of a Directed Order, a Directed Market Maker must be 
quoting at the NBBO at the time of execution, and that there would 
never be an allocation to a quote outside the NBBO.\27\ The Exchange 
argues that its proposal addresses the reality of multiple prices and 
creates an ability to efficiently execute a larger volume of an order. 
The Exchange further maintains that it ``recognizes the new NBBO and 
preserves the requirement that the Directed Market Maker be at the 
NBBO'' (emphasis in original).\28\ The Exchange believes that 
availability of a certain depth of a quote beyond the current NBBO is 
an important aspect of price discovery, particularly with respect to 
execution of larger orders when the NBBO is for a small size. 
Therefore, the Exchange argues that its proposal provides preferential 
allocation to Market Makers who are fostering price discovery and 
transparency by taking the commensurate risk of quoting at the NBBO at 
the time of execution of the Directed Order. Accordingly, the Exchange 
maintains that Directed Market Makers will continue to have the 
incentive to quote aggressively to maximize their participation.
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    \27\ See BX Response Letter, supra note 5, at 2.
    \28\ Id. at 3.
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    In its second letter, NYSE states that the Exchange's response was 
inadequate and the concerns regarding allowing Directed Market Makers 
to receive a Directed Allocation when the Directed Market Maker's quote 
is not at the NBBO persist. NYSE argues that the proposed rule change, 
by rewarding market makers whose quotes are not the most aggressive, 
will encourage market makers to quote away from the inside market.\29\ 
In addition, NYSE asserts that the proposed rule change raises concerns 
``that are even more troubling than those held by the Commission and 
staff for more than a decade about the tendency of passive price 
matching behavior to degrade price competition in options markets.'' 
\30\ As a result, NYSE believes that allowing the Exchange's proposal 
would deteriorate market makers' incentives to compete for incoming 
orders based on price.
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    \29\ See NYSE Response Letter, supra note 6, at 1.
    \30\ Id. (citing Special Study: Payment for Order Flow and 
Internalization in the Options Markets, Office of Compliance 
Inspections and Examinations and Office of Economic Analysis (Dec. 
2000). Indeed, the NYSE notes that BX would not even require a 
Directed Market Maker to passively price match--i.e., promising to 
match the price of the NBBO--to receive a Directed Allocation.
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    NYSE also raises a concern with the Exchange permitting Directed 
Allocations to a Directed Market Maker before a Public Customer when 
the Directed Market Maker is not first-in-time. NYSE notes that, under 
the Exchange's proposal, a Directed Market Maker that arrives after a 
Public Customer who has aggressively improved the NBBO would receive a 
Directed Allocation of an order that the earlier-arriving Public 
Customer could potentially have completely filled. According to the 
NYSE, public customers would not be fully rewarded for providing an 
aggressive quote and thus the incentives to improve the NBBO would 
decrease, resulting in fewer displayed public customer orders and fewer 
public customers willing to improve the NBBO. NYSE describes the 
longstanding history of distinguishing public customers from 
professionals and allowing advantages to public customer orders.\31\ 
NYSE provides NYSE Arca Inc. and NYSE Amex Options LLC as examples of 
exchanges that use the ``appropriate approach'' of maintaining 
incentives for public customers willing to aggressively quote, 
especially when public customer orders are ranked ahead of a Directed 
Market Maker's order. Specifically, NYSE Arca Inc. does not award the 
Lead Market Maker the 40% participation entitlement they would 
otherwise receive, but instead grants strict time priority to the 
customer, thus ensuring that customers aggressively improving the NBBO 
are fully rewarded.\32\ Under the rules of NYSE Amex Options LLC, 
customer orders have priority for incoming Directed Orders, even if the 
market maker has time priority.\33\
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    \31\ See NYSE Response Letter, supra note 6, at 2.
    \32\ See NYSE Response Letter, supra note 6, at 4 (citing NYSE 
Arca Options Rule 6.76A).
    \33\ See NYSE Response Letter, supra note 6, at 4 (citing NYSE 
MKT Rule 964NY).
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IV. Proceedings To Determine Whether To Approve or Disapprove SR-BX-
2013-016 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act to determine whether the proposed rule change 
should be approved or disapproved. Institution of such proceedings is 
appropriate at this time in view of the legal and policy issues raised 
by the

[[Page 34686]]

proposed rule change. Institution of these proceedings does not 
indicate that the Commission has reached any conclusions with respect 
to any of the issues involved. Rather, as described in greater detail 
in Section V below, the Commission seeks and encourages interested 
persons to provide additional comments on the proposed rule change to 
inform the Commission's analysis of whether to approve or disapprove 
the proposed rule change.
    As described above, the Exchange's proposed Directed Order process 
would enable a Directed Market Maker to be eligible to receive a 
Directed Allocation regardless of whether the Market Maker is quoting 
at the NBBO at the time the Directed Order is received. The Directed 
Allocation would be available for the life of the Directed Order. If 
the Directed Market Maker does not have time priority for a size equal 
to or greater than the Directed Allocation at a particular price that 
is the NBBO, the Directed Market Maker would be entitled to a Directed 
Allocation, regardless of time priority. Further, the Directed Market 
Maker would be entitled to a Directed Allocation at all price levels at 
which the Directed Market Maker has a quote or order. In addition, when 
a Directed Order is submitted in an options class that is subject to 
the price/time priority on the Exchange, the Exchange would provide 
Directed Market Makers with priority for the Directed Allocation ahead 
of any Public Customer limit orders, including those that arrived prior 
to the Directed Market Maker's quotes or orders at that price. In 
addition, if the calculation of the 40% Directed Allocation results in 
a fractional remainder, the Exchange further proposes to round up to 
the next whole number. Further, the Directed Market Maker would be 
subject to heightened quoting requirements only upon receiving a 
Directed Order, it would not be required to meet those requirements 
beforehand. The Exchange also proposes to reduce the quoting 
obligations applicable to its Market Makers.
    Pursuant to Section 19(b)(2)(B), the Commission is providing notice 
of the grounds for disapproval under consideration. The section of the 
Act applicable to the proposed rule change that provide the grounds for 
approval or disapproval under consideration are Section 6(b)(5) \34\ 
and Section 6(b)(8).\35\ Section 6(b)(5) of the Act requires, among 
other things, that the rules of a national securities exchange be 
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 of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest; and are not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. Section 6(b)(8) of the Act 
requires that the rules of the exchange do not impose any burden on 
competition not necessary or appropriate in furtherance of the Act.
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    \34\ 15 U.S.C. 78f(b)(5).
    \35\ 15 U.S.C. 78f(b)(8).
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    The Commission believes that the Exchange's proposal raises 
questions as to whether the proposed rule change is consistent with 
these standards. Specifically, the Commission questions whether, and if 
so how, the proposed rules could impact quote competition on the 
Exchange. The Commission also questions whether, and if so, how, any 
impact on quote competition on the Exchange could impact execution 
quality on the Exchange. In addition, the Commission questions whether 
BX's proposal is designed to protect investors in that the proposal 
would provide Directed Market Makers with priority for Directed 
Allocations ahead of Public Customer limit orders that arrived first in 
time.

V. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
concerns identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) \36\ or any other provision of the Act, 
or the rules and regulations thereunder. Although there do not appear 
to be any issues relevant to approval or disapproval which would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\37\
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    \36\ 15 U.S.C. 78f(b)(5).
    \37\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by July 1, 2013. Any person who wishes to file a rebuttal 
to any other person's submission must file that rebuttal by July 15, 
2013.
    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule change. In particular, the Commission seeks comment on 
the following:
    1. Unlike the Directed Order rules of other options exchanges, the 
Exchange's proposed rule would not require that a Directed Market Maker 
be quoting at the NBBO at the time a Directed Order is received. The 
Commission seeks comment on whether this aspect of the proposed rule 
change would impact market makers' incentives to quote competitively on 
the Exchange. If so, how? If not, why not? If the Commission were to 
approve this aspect of the proposed rule change and if other options 
exchanges also eliminated the requirement that Directed Market Makers 
quote at the NBBO to receive Directed Orders as part of their Directed 
Order process, what, if any, impact could there be more generally on 
the quality of quotations in the options markets?
    2. In support of not including an NBBO quoting requirement, the 
Exchange argues that availability of quotes beyond the current NBBO is 
an important aspect of price discovery, particularly with respect to 
execution of larger orders when the NBBO is for a small size. The 
Exchange further argues that its proposal ``acknowledges and addresses 
the reality of executions at multiple prices'' and creates an ability 
to efficiently execute a larger volume of an order. Therefore, the 
Exchange argues that its proposal provides preferential allocation to 
Market Makers who are fostering price discovery and transparency by 
``taking the commensurate risk of quoting at the NBBO at the time of 
execution of the Directed Order.'' Do commenters have any views 
regarding the Exchange's arguments? If so, please explain.
    3. NYSE argues that, because of the lack of an NBBO quoting 
requirement, ``BX Market Makers will be able to lay in wait outside the 
NBBO, allowing other participants to participate in the order at less 
attractive prices and then receiving a 40% guarantee for that portion 
of the Directed Order that trades at more attractive prices (from the 
Market Maker's standpoint) beyond the

[[Page 34687]]

initial NBBO,'' and this will destroy incentives for Market Makers to 
quote aggressively at the NBBO. However, the Exchange argues that 
Market Makers will continue to have the incentive to quote aggressively 
to maximize their participation and that quoting outside of the NBBO 
contributes to the market by providing depth and the ability to execute 
more of an order, especially where the NBBO size is small. Do 
commenters have any views regarding the NYSE's or the Exchange's 
arguments? If so, please explain.
    4. Under the proposed rule, a Directed Market Maker to whom an 
order is directed in an option subject to price/time priority would 
receive a 40% allocation ahead of orders of other market participants, 
including customer orders that had time priority over the Directed 
Market Maker's quotation. What are commenters' views on this aspect of 
the proposal? Does this aspect of the proposed rule change impact the 
protection of investors? If so, how? If not, why not? Does this aspect 
of the proposed rule change have any impact on the options markets as a 
whole? If so, please explain.
    5. NYSE notes that, under the Exchange's proposal, a Directed 
Market Maker that arrives after a Public Customer who has aggressively 
improved the NBBO would receive a Directed Allocation of an order that 
the earlier-arriving Public Customer could potentially have completely 
filled. NYSE argues that this provision would reduce the incentives of 
public customers to improve the NBBO, resulting in fewer displayed 
public customer orders and fewer public customers willing to improve 
the NBBO. Do commenters have any views regarding the NYSE's arguments? 
If so, please explain.
    6. Under the proposed rule change, a Directed Order would remain as 
such as long as it exists on the Exchange and the Directed Market Maker 
would be eligible for a Directed Allocation at all price levels at 
which the Directed Market Maker has a quote or order. Do commenters 
have any views on whether this aspect of the proposed rule change would 
have an impact on quote competition on the Exchange? Is so, how so? If 
not, why not?
    7. Unlike the Directed Order rules of other options exchanges that 
subject Directed Market Makers to heightened quoting obligations prior 
to receiving Directed Orders, the Exchange's proposed rules would only 
subject a Directed Market Maker to heightened quoting obligations after 
receipt of the first Directed Order in a given month. Do commenters 
have any views on whether this provision would balance the benefits of 
receiving enhanced allocations with heightened quoting obligations, 
consistent with the Exchange Act? Is so, please explain.
    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 email to [email protected]. Please include 
File Number No. SR-BX-2013-016 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 No. SR-BX-2013-016. 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 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of BX. 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 No. SR-BX-2013-016, and should 
be submitted on or before July 1, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
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    \38\ 17 CFR 200.30-3(a)(57).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13630 Filed 6-7-13; 8:45 am]
BILLING CODE 8011-01-P