[Federal Register Volume 79, Number 33 (Wednesday, February 19, 2014)]
[Notices]
[Pages 9543-9545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03567]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71538; File No. SR-BX-2014-011]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Modify 
BX's Optional Anti-Internalization Functionality

February 12, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on February 4, 2014, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II 
and III 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

    The Exchange proposes to modify BX's optional anti-internalization 
functionality. The text of the proposed rule change is available on the 
Exchange's Web site at http://nasdaqomxbx.cchwallstreet.com, at the 
principal office of the Exchange, 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

[[Page 9544]]

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
    BX is proposing to modify its voluntary anti-internalization 
functionality to provide an additional option under that functionality. 
In addition, the proposed rule change contains certain clarifications 
to the text of the rule. Anti-internalization functionality is designed 
to assist market participants in complying with certain rules and 
regulations of the Employee Retirement Income Security Act (``ERISA'') 
that preclude and/or limit broker-dealers managing accounts governed by 
ERISA from trading as principal with orders generated for those 
accounts. The functionality can also assist market participants in 
avoiding execution fees that may result from the interaction of 
executable buy and sell trading interest from the same firm. BX notes 
that use of the functionality does not relieve or otherwise modify the 
duty of best execution owed to orders received from public customers. 
As such, market participants using anti-internalization functionality 
will need to take appropriate steps to ensure that public customer 
orders that do not execute because of the use of anti-internalization 
functionality ultimately receive the same execution price (or better) 
they would have originally obtained if execution of the order was not 
inhibited by the functionality.
    Currently, market participants may apply anti-internalization logic 
to all quotes/orders entered through a particular MPID, or to all 
orders entered through a particular order entry port, to which a unique 
group identification modifier is then appended. In other words, the 
logic may be applied on an MPID-by-MPID, or on a port-by-port basis. 
Currently, two forms of anti-internalization logic may be applied: (i) 
If quotes/orders are equivalent in size, both quotes/orders will be 
cancelled, or if they are not equivalent in size, the smaller will be 
cancelled and the size of the larger will be reduced by the size of the 
smaller; or (ii) regardless of the size of the quotes/orders, the 
oldest quote/order will be cancelled in full. The applicable logic may 
be applied to an entire MPID, or alternatively, different logic may be 
applied to different order entry ports under a particular MPID.
    In response to member input, the proposed rule change will add an 
additional form of anti-internalization logic that a market participant 
could choose to apply, under which the most recent quote/order would be 
cancelled. As with the two existing forms of anti-internalization 
logic, the logic could be applied to an entire MPID, or to selected 
order entry ports under a particular MPID. BX believes that the change 
will provide members with an additional tool for managing the book of 
orders that they submit to BX and the associated execution costs.
2. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act, in general, and with Section 
6(b)(5) of the Act 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, which is responsive to member input, will facilitate 
transactions in securities and perfect the mechanism of a free and open 
market by providing members with additional optional functionality that 
may assist them with managing the book of orders that they submit to BX 
and the associated execution costs.

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. Specifically, by 
offering market participants additional options with regard to 
preventing inadvertent internalization of orders submitted to BX, the 
change has the potential to enhance BX's competitiveness with respect 
to other trading venues, thereby promoting greater competition. 
Moreover, the change does not burden competition in that its use is 
optional and provided at no additional cost to members.

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 does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
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 \3\ and Rule 19b-
4(f)(6) thereunder.\4\
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    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6). 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 requirement.
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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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or 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 email to [email protected]. Please include 
File Number SR-BX-2014-011 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-2014-011. This file

[[Page 9545]]

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 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-2014-011 and should be 
submitted on or before March 12, 2014.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03567 Filed 2-18-14; 8:45 am]
BILLING CODE 8011-01-P