[Federal Register Volume 79, Number 169 (Tuesday, September 2, 2014)]
[Notices]
[Pages 52092-52094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20700]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72918; File No. SR-BX-2014-042]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
BX Options Lead Market Maker Rules

August 26, 2014.
    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 August 21, 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 amend certain rule text related to an 
options rule at Chapter VI, Section 10, pertaining to system order 
executions on BX.
    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 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
    The purpose of the proposed rule change is to amend rule text in 
the BX Options Rules at Chapter VI, Section 10 to clarify certain 
language. A proposed rule change amending Chapter VI, Section 10 was 
recently approved by the Commission.\3\ As part of that rule change, 
Chapter VI, Section 10, entitled ``Book Processing'' was amended to 
afford a Lead Market Maker (``LMM'') a participation entitlement if the 
LMM's bid/offer is at the Exchange's disseminated price and all Public 
Customer \4\ orders have been fully executed.\5\ In that proposal the 
Exchange explained the manner in which orders will be allocated in both 
a Size Pro-Rata and Price/Time scenario and provided examples. The text 
of the rule change specified that prior to remaining interest being 
allocated, an LMM would receive an allocation based on the allocation 
methods noted in Chapter VI, Section 10.
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    \3\ See Securities Exchange Act Release No. 72883 (August 20, 
2014), 79 FR 50971 (August 26, 2014) (SR-BX-2014-035).
    \4\ See Chapter I, Section 1(50). The term ``Public Customer'' 
means a person that is not a broker or dealer in securities.
    \5\ The LMM participation entitlement is as follows with respect 
to Size Pro Rata executions: A BX Options LMM shall receive the 
greater of: The LMM's Size Pro-Rata share pursuant to proposed rule 
BX Options Rule at Chapter VI, Section 10(1)(C)(2)(iii); 50% of 
remaining interest if there is one or no other Market Maker at that 
price; 40% of remaining interest if there are two other Market 
Makers at that price; or 30% of remaining interest if there are more 
than two other Market Makers at that price; or if rounding would 
result in an allocation of less than one contract, a BX Options LMM 
shall receive one contract. The LMM participation entitlement is as 
follows is as follows with respect to Price/Time executions: A BX 
Options LMM shall receive the greater of: (a) Contracts the LMM 
would receive if the allocation was based on time priority with 
Public Customer priority pursuant to proposed BX Options Rule at 
Chapter VI, Section 10(1)(a); (b) 50% of remaining interest if there 
is one or no other Market Maker at that price; (c) 40% of remaining 
interest if there are two other Market Makers at that price; or (d) 
30% of remaining interest if there are more than two other Market 
Makers at that price or if rounding would result in an allocation of 
less than one contract, a BX Options LMM shall receive one contract.
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    While the Exchange believes that the rule text is clear on the 
allocations that the LMM shall be afforded, the Exchange is seeking to 
further amend Chapter VI, Section 10(1)(C)(1)(b)(2) to

[[Page 52093]]

amend the sentence that currently states, ``If there are contracts 
remaining after all LMM interest has been fully executed, such 
contracts shall be executed based on the Price/Time execution 
algorithm.'' The Exchange proposes to amend the sentence to state, ``If 
there are contracts remaining, such contracts shall be executed based 
on the Price/Time execution algorithm.'' The Exchange believes that 
removing the words ``after all LMM interest has been fully executed'' 
will avoid any confusion such as that an LMM would not be entitled to a 
portion of the remainder. The Exchange intended those words to apply to 
the remaining contracts, which would be allocated after the LMM was 
afforded their allocation. The Exchange believes the proposed text 
would avoid any confusion as to its interpretation. The Exchange's 
proposed change would also be added to Chapter VI, Section 
10(2)(ii)(2). The Exchange would add the corresponding sentence to the 
Size Pro-Rata allocation as follows, ``If there are contracts 
remaining, such contracts shall be executed based on the Size Pro-Rata 
execution algorithm.'' The Exchange believes that adding the 
aforementioned sentence to Chapter VI, Section 10(2)(ii)(2) clarifies 
that the remaining contracts would be treated in a similar manner 
within the Size Pro-Rata allocation method.
    The amendments proposed herein are in accordance with the text of 
the proposed rule change and the examples provided in the prior 
filing.\6\ The Exchange does not believe that the amendments are 
substantive, but rather are clarifying because the text adds 
specificity to allocation of remainder contracts. The allocation of 
remainder contracts is not impacted by this rule change. The amendments 
provide consistency to BX Rules to clarify that remainder contracts are 
treated in the same general manner under both allocation models.
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    \6\ See note 3.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \8\ in particular, in that it 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 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the non-substantive amendments to the 
rule text of Chapter VI, Section 10 will conform the wording in the 
rule text and add clarity. The Exchange believes that while the rule 
text does reflect the current allocation method, which will remain in 
place unaffected by this filing, by adding clarifying language the 
Exchange's text will be clear and concise.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The proposed rule change seeks to correct an error in rule 
text and make other clarifying changes to conform rule text to avoid 
confusion.

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 \9\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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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. The Exchange has 
provided the Commission written notice of its 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.

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-2014-042 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-BX-2014-042. 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 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-2014-042 and 
should be submitted on or before September 23, 2014.


[[Page 52094]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20700 Filed 8-29-14; 8:45 am]
BILLING CODE 8011-01-P