[Federal Register Volume 80, Number 213 (Wednesday, November 4, 2015)]
[Notices]
[Pages 68347-68354]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28024]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76301; File No. SR-BX-2015-032]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing of Amendment No. 2 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To Adopt a 
New Price Improvement Auction, BX PRISM

October 29, 2015.

I. Introduction

    On August 19, 2015, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') 
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 an options price improvement mechanism (``PRISM''). On 
September 2, 2015, BX filed Amendment No. 1 to the proposal. The 
proposed rule change, as modified by Amendment No. 1, was published for 
comment in the Federal Register on September 10, 2015.\3\ The 
Commission received no substantive comments regarding the proposal.\4\ 
On October 22, 2015, BX granted an extension of time for Commission 
action until October 30, 2015. On October 23, 2015, BX filed Amendment 
No. 2 to the proposal.\5\ The Commission is publishing this notice to 
solicit comment on Amendment No. 2 from interested persons and is 
approving the proposed rule change, as modified by Amendment Nos. 1 and 
2, on an accelerated basis, with certain provisions subject to a pilot 
period scheduled to expire on July 18, 2016.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 75827 (September 3, 
2015), 80 FR 54601 (``Notice'').
    \4\ See infra note 5 (noting that when BX submitted Amendment 
No. 2, it also submitted the document as a comment letter to the 
file to promote the public dissemination of its Amendment).
    \5\ In Amendment No. 2, BX makes certain technical and 
clarifying changes to the proposal, which BX believes does not 
result in any material differences over its original filing as 
modified by Amendment No. 1. Specifically, BX proposes to: (i) 
Remove the term ``displayed''; (ii) describe ``rejected'' orders 
more accurately as ``immediately cancelled'' in certain 
circumstances; (iii) provide more specificity as to the amounts of 
allocations for which an Initiating Participant is entitled to be 
allocated; (iv) remove an incorrect reference to ``orders'' and 
define interest more specifically; (v) add more specificity related 
to Customer-to-Customer orders; (vi) correct a citation error; and 
(vii) correct typographical errors. Amendment 2 amends and replaces 
the original filing, as modified by Amendment 1, in its entirety. To 
promote transparency of its proposed amendment, when BX filed 
Amendment No. 2 with the Commission, it also submitted Amendment No. 
2 as a comment letter to the file, which the Commission posted on 
its Web site and placed in the public comment file for SR-BX-2015-
032. The Exchange also posted a copy of its Amendment No. 2 on its 
Web site when it filed the amendment with the Commission.
---------------------------------------------------------------------------

II. Description of the Proposal

    BX proposes to establish a price-improvement mechanism, ``PRISM,'' 
on the Exchange's options platform, in which a BX Participant (an 
``Initiating Participant'') may electronically submit for execution a 
two-sided paired order, where one side is an order it represents as 
agent on behalf of a Public Customer,\6\ Professional customer, broker-
dealer, or any other entity (``PRISM Order'') and the other side is 
principal interest or any other order it represents as agent (an 
``Initiating Order'') provided that the member first exposes the PRISM 
Order in the PRISM Auction (``Auction'') pursuant to the proposed Rule.
---------------------------------------------------------------------------

    \6\ For purposes of this Rule, a Public Customer order does not 
include a Professional order, and therefore a Professional would not 
be entitled to Public Customer priority as described herein. A 
Public Customer means a person that is not a broker or dealer in 
securities. See BX Chapter I, Section 1(a)(50). A Public Customer 
order does not include a Professional order for purposes of BX 
Chapter VI, Section 10(a)(C)(1)(a), which governs allocation 
priority. A ``Professional'' means any person or entity that (i) is 
not a broker or dealer in securities, and (ii) places more than 390 
orders in listed options per day on average during a calendar month 
for its own beneficial account(s). A Participant or a Public 
Customer may, without limitation, be a Professional. All 
Professional orders shall be appropriately marked by Participants. 
See BX Chapter I, Section 1(a)(49).

---------------------------------------------------------------------------

[[Page 68348]]

A. Auction Eligibility Requirements

    All options traded on the Exchange are eligible for PRISM.\7\ To 
initiate a PRISM Auction, an Initiating Participant first must ``stop'' 
the PRISM Order at a price that is equal to or better than the NBBO. In 
addition, the proposed rules governing the eligible stop price 
recognize a distinction between PRISM Orders for Public Customers and 
PRISM Orders for non-Public Customers. Specifically, a PRISM Order that 
is a Public Customer Order must be stopped at an improved price over 
any resting a limit orders on the book on the same side as the PRISM 
Order. A PRISM Order that is for a non-Customer (account of a broker-
dealer or any other person or entity that is not a Public Customer) is 
always required to improve the same side BX BBO as the PRISM Order, 
even if there is no resting limit order on the book. PRISM Orders that 
do not comply with the aforementioned auction eligibility requirements 
will be immediately cancelled. In addition, PRISM Orders submitted at 
or before the opening of trading are not eligible to initiate an 
Auction and will be rejected. PRISM Orders submitted during the final 
two seconds of the trading session are not eligible to initiate an 
Auction and will be immediately cancelled. Finally, an Initiating Order 
may not be a solicited order for the account of any BX Options Market 
Maker assigned in the affected series.\8\
---------------------------------------------------------------------------

    \7\ See proposed BX Chapter VI, Section 9(i).
    \8\ See proposed BX Chapter VI, Section 9(i)(C) through (F).
---------------------------------------------------------------------------

B. Auction Process

    To initiate the Auction, the Initiating Participant must mark the 
PRISM Order for Auction processing, and specify either: (a) A single 
price at which it seeks to execute the PRISM Order (a ``stop price''); 
(b) that it is willing to automatically match as principal or as agent 
on behalf of an Initiating Order the price and size of all PRISM 
Auction Notifications (``PAN'') responses, and trading interest 
(``auto-match'') in which case the PRISM Order will be stopped at the 
NBBO on the Initiating Order side; \9\ or (c) that it is willing to 
either: (i) Stop the entire order at a single stop price and auto-match 
PAN responses and trading interest at a price or prices that improve 
the stop price up to a maximum specified price (a ``No Worse Than'' or 
``NWT'' price); (ii) stop the entire order at a single stop price and 
auto-match all PAN responses and trading interest at or better than the 
stop price; or (iii) stop the entire order at the NBBO on the 
Initiating Order side, and auto-match PAN responses and trading 
interest at a price or prices that improve the stop price up to the NWT 
price. In all cases, if the BX BBO on the same side of the market as 
the PRISM Order represents a limit order on the book, the stop price 
must be at least one minimum trading increment (specified in Chapter 
VI, Section 5) better than the booked limit order's limit price.
---------------------------------------------------------------------------

    \9\ This is accomplished by marking the Initiating Order with a 
market (MKT) price.
---------------------------------------------------------------------------

    Only one Auction would be conducted at a time in any given series. 
Once the Initiating Participant has submitted a PRISM Order for 
exposure in the Auction, such PRISM Order may not be modified or 
cancelled, nor may any Auction be cancelled once it has commenced. 
Under any of the circumstances described above, the stop price or NWT 
price may be improved to the benefit of the PRISM Order during the 
Auction, but may not be cancelled.
    Under the proposal, except for rounding purposes, the Initiating 
Participant would not receive an allocation percentage of more than 50% 
with one competing quote, order or PAN response, or 40% with multiple 
competing quotes, orders or PAN responses at the final price point, 
when competing quotes, orders or PAN responses have contracts available 
for execution.\10\ However, when starting an Auction, the Initiating 
Participant may submit the Initiating Order with a designation of 
``surrender'' to other PRISM Participants (``Surrender''), which will 
result in the Initiating Participant forfeiting priority and trade 
allocation privileges. If Surrender is specified, the Initiating 
Participant would trade only if there were not enough interest 
available to fully execute the PRISM Order at prices which are equal to 
or improve upon the stop price.\11\ Surrender information would not be 
available to other market participants and may not be modified after 
the order is submitted to the Auction.
---------------------------------------------------------------------------

    \10\ See proposed BX Chapter VI, Section 9(ii)(A)(1).
    \11\ Surrender will not be permitted if both the Initiating 
Order and PRISM Order are Public Customer Orders. See proposed BX 
Chapter VI, Section 9(ii)(A)(1).
---------------------------------------------------------------------------

    When the Exchange receives a PRISM Order for Auction, a PAN 
detailing the side, size and options series of the PRISM Order would be 
sent over the Exchange's Specialized Quote Feed and BX Depth Feed. 
PRISM Auctions would be for a specified duration of no less than one 
hundred milliseconds and no more than one second, as determined by the 
Exchange and announced on the Nasdaq Trader Web site.\12\ Any person or 
entity may submit a response to the PAN, provided such response is 
properly marked specifying price, size, and side of the market. PAN 
responses would not be visible to Auction participants, including the 
initiator, and would not be disseminated to OPRA. The minimum price 
increment for PAN responses and for an Initiating Participant's stop 
price and/or NWT price would be the minimum price improvement increment 
established pursuant to proposed Rule Chapter VI, Section 9(i)(A).\13\
---------------------------------------------------------------------------

    \12\ In May 2014, NASDAQ OMX PHLX LLC's (``Phlx'') staff 
distributed a survey to all Phlx market maker firms inquiring as to 
the timeframe within which these market participants respond to an 
auction with a duration time ranging from less than fifty (50) 
milliseconds to more than one (1) second. According to BX, the 
market marker firms on Phlx represent membership similar to BX 
Market Makers, and 90 percent of the BX Market Maker firms 
participated in the survey. Of the thirty five (35) Phlx market 
maker firms that were surveyed, twenty (20) of these market makers 
responded to the survey and of those respondents 100% indicated that 
that their firm could respond to auctions with a duration time of at 
least 50 milliseconds. Based on the results of the survey, the 
Exchange believes that allowing for an auction period of no less 
than one hundred (100) milliseconds and no more than one (1) second 
would provide a meaningful opportunity for BX Participants to 
respond to the PRISM Auction while at the same time facilitating the 
prompt execution of orders. Based on experience with the Phlx's PIXL 
mechanism on BX's affiliated exchange, BX believes that 100 
milliseconds will continue to provide all market participants with 
sufficient time to respond, compete, and provide price improvement 
for orders and will provide investors and other market participants 
with more timely executions, thereby reducing their market risk.
    \13\ See proposed BX Chapter VI, Section 9(ii)(A)(2) through 
(6).
---------------------------------------------------------------------------

    A PAN response size at any given price point may not exceed the 
size of the PRISM Order. Any such oversized response would be 
immediately cancelled. A PAN response must be equal to or better than 
the NBBO at the time of receipt of the PAN response or it would be 
immediately cancelled. PAN responses may be modified or cancelled 
during the Auction. PAN responses on the same side of the market as the 
PRISM Order are considered invalid and will be immediately cancelled. 
Finally, multiple PAN responses from the same Participant may be 
submitted during the Auction. However, multiple orders at a particular 
price point submitted by a Participant in response to a PAN may not 
exceed, in the aggregate, the size of the PRISM Order.\14\
---------------------------------------------------------------------------

    \14\ See proposed BX Chapter VI, Section 9(ii)(A)(7) through 
(10).
---------------------------------------------------------------------------

C. Conclusion of an Auction

    The PRISM Auction would conclude at the earlier of: (i) The end of 
the Auction period; (ii) any time the BX

[[Page 68349]]

BBO crosses the PRISM Order stop price on the same side of the market 
as the PRISM Order; \15\ or (iii) any time there is a trading halt \16\ 
on the Exchange in the affected series.\17\
---------------------------------------------------------------------------

    \15\ This provision regarding the BX BBO crossing the PRISM 
Order stop price on the same side of the market as the PRISM Order, 
as a conclusion to a PRISM Auction, would be subject to a pilot 
period scheduled to expire July 18, 2016.
    \16\ This provision regarding the trading halt, as a conclusion 
to a PRISM Auction, would be subject to a pilot period scheduled to 
expire July 18, 2016.
    \17\ See proposed BX Chapter VI, Section 9(ii)(B).
---------------------------------------------------------------------------

    If the PRISM Auction concludes earlier than the end of the 
prescribed Auction period, the entire PRISM Order will be executed at: 
(i) In the case of the BX BBO crossing the PRISM Order stop price, the 
best response price(s) or, if the stop price is the best price in the 
Auction, at the stop price, unless the best response price is equal to 
or better than the price of a limit order resting on the Order Book on 
the same side of the market as the PRISM Order, in which case the PRISM 
Order will be executed against that response, but at a price that is at 
the minimum trading increment better than the price of such limit order 
at the time of the conclusion of the Auction; or (ii) in the case of a 
trading halt on the Exchange in the affected series, the stop price, in 
which case the PRISM Order will be executed solely against the 
Initiating Order.\18\
---------------------------------------------------------------------------

    \18\ See proposed BX Chapter VI, Rule 9(ii)(C).
---------------------------------------------------------------------------

    Any unexecuted PAN responses will be cancelled.\19\ An unrelated 
market or marketable limit order (against the BX BBO) on the opposite 
side of the market from the PRISM Order received during the Auction 
will not cause the Auction to end early and will execute against 
interest outside of the Auction.\20\ If contracts remain from such 
unrelated order at the time the auction ends, they will be considered 
for participation in the order allocation process.
---------------------------------------------------------------------------

    \19\ See id.
    \20\ See proposed BX Chapter VI, Section 9(ii)(D). This 
provision would be subject to a pilot period scheduled to expire on 
July 18, 2016. The Commission notes that this provision is based on 
a similar provision in Phlx's Price Improvement XL (``PIXL'') 
auction. See Phlx Rule 1080(n).
---------------------------------------------------------------------------

1. Order Allocation--Size Pro-Rata
    At the conclusion of the Auction, for option classes governed under 
BX's Size Pro-Rata execution algorithm, the PRISM Order will be 
allocated at the best price(s), pursuant to the priority set forth in 
Chapter VI, 9(ii)(E)(1) through (5).\21\ First, Public Customer orders 
would have time priority at each price level. Next, the Initiating 
Participant would receive an allocation after Public Customer 
orders.\22\
---------------------------------------------------------------------------

    \21\ See Notice, supra note 3, at 54607-54610, for examples 
illustrating trade allocations under the Size Pro-Rata execution 
algorithm.
    \22\ The Initiating Participant shall receive additional 
allocation only if contracts remain after any allocation pursuant to 
proposed BX Chapter VI, Section 9(ii)(E)(3) through (5).
---------------------------------------------------------------------------

    If the Initiating Participant selected the single stop price 
option, PRISM executions will occur first at prices that improve the 
stop price, and then at the stop price with up to 40% of the remaining 
contracts after Public Customer interest is satisfied being allocated 
to the Initiating Participant at the stop price. However, if only one 
other quote, order or PAN response matches the stop price, then the 
Initiating Participant may be allocated up to 50% of the contracts 
executed at such price.
    If the Initiating Participant selected the auto-match option, the 
Initiating Participant would be allocated a number of contracts equal 
to the aggregate size of all other quotes, orders, and PAN responses at 
each price point until a price point is reached where the balance of 
the order can be fully executed, except that the Initiating Participant 
would be entitled to receive up to 40% (if there are multiple competing 
quotes, orders or PAN responses) or 50% (if there is only one competing 
quote, order or PAN response) of the contracts remaining at the final 
price point (including situations where the stop price is the final 
price) after Public Customer interest has been satisfied but before 
remaining interest receives an allocation.
    If the Initiating Participant selected the ``stop and NWT'' option, 
contracts would be allocated as follows: (i) First to quotes, orders, 
and PAN responses at prices better than the NWT price (if any), 
beginning with the best price, pursuant to proposed Chapter VI, Section 
9(ii)(E)(3) through (5), at each price point; and (ii) next, to quotes, 
orders, and PAN responses at prices at the Initiating Participant's NWT 
price and better than the Initiating Participant's stop price, 
beginning with the NWT price. The Initiating Participant would be 
allocated a number of contracts equal to the aggregate size of all 
other quotes, orders, and PAN responses at each price point, except 
that the Initiating Participant would be entitled to receive up to 40% 
(if there are multiple competing quotes, orders or PAN responses) or 
50% (if there is only one competing quote, order or PAN response) of 
the contracts remaining at the final price point (including situations 
where the final price is the stop price), after Public Customer 
interest has been satisfied but before remaining interest receives an 
allocation. In the case of an Initiating Order with a NWT price at the 
market, the Initiating Participant would be allocated a number of 
contracts equal to the aggregate size of all other quotes, orders, and 
PAN responses at all price points, except that the Initiating 
Participant would be entitled to receive up to 40% or 50% of the 
contracts remaining at the final price point (including situations 
where the final price is the stop price), after Public Customer 
interest has been satisfied but before remaining interest receives an 
allocation.\23\
---------------------------------------------------------------------------

    \23\ See proposed BX Chapter VI, Section 9(ii)(E)(2)(a) through 
(c).
---------------------------------------------------------------------------

    After Public Customers and the Initiating Participant receive their 
allocations, BX Options Market Makers that were at a price equal to the 
NBBO on the opposite side of the market from the PRISM Order at the 
time of initiation of the PRISM Auction (``Priority Market Makers'') 
would have priority up to their quote size in the NBBO which was 
present when the PRISM Auction was initiated (``Initial NBBO'') at each 
price level at or better than such Initial NBBO.\24\ Priority Market 
Maker quotes and PAN responses will be allocated pursuant to the Size 
Pro-Rata algorithm set forth in BX Chapter VI, Section 10(1)(B).\25\ 
Priority Market Maker status is valid only for the duration of the 
particular PRISM auction.
---------------------------------------------------------------------------

    \24\ Miami International Securities Exchange, LLC (``MIAX'') 
allocates executions resulting from Priority Public Customer 
interest and priority Market Maker quotes ahead of other interest. 
MIAX's system may designate Market Maker quotes as either priority 
quotes or non-priority quotes in accordance with the provisions in 
MIAX Rule 517(b). BX is prioritizing Priority Market Maker 
allocations in the proposed BX PRISM Auction in a similar manner, 
ahead of other non-Public Customer interest.
    \25\ See proposed BX Chapter VI, Section 9(ii)(E)(3).
---------------------------------------------------------------------------

    Next, Non-Priority Market Makers, as well as Priority Market Maker 
PRISM Auction interest which exceeded the Priority Market Maker's size 
in the Initial NBBO, would have priority at each price level at or 
better than the Initial NBBO after Public Customers, the Initiating 
Participant and Priority Market Makers have received allocations. Non-
Priority Market Maker and such excess Priority Market Maker interest 
will be allocated pursuant to the Size Pro-Rata algorithm set forth in 
BX Chapter VI, Section 10(1)(B).\26\
---------------------------------------------------------------------------

    \26\ See proposed BX Chapter VI, Section 9(ii)(E)(4).
---------------------------------------------------------------------------

    Finally, all other interest will receive an allocation after the 
interest discussed above has been satisfied. Such interest will be 
allocated pursuant to the Size

[[Page 68350]]

Pro-Rata algorithm set forth in BX Chapter VI, Section 10(1)(B).\27\
---------------------------------------------------------------------------

    \27\ See proposed BX Chapter VI, Section 9(ii)(E)(5).
---------------------------------------------------------------------------

2. Order Allocation--Price/Time
    At the conclusion of the Auction, for option classes governed under 
BX's Price/Time execution algorithm, the PRISM Order will be allocated 
at the best price(s), pursuant to the priority set forth in proposed 
Chapter VI, Section 9(ii)(F)(1) through (4).\28\ First, Public Customer 
orders would have time priority at each price level. Next, the 
Initiating Participant would receive an allocation after Public 
Customer orders.\29\
---------------------------------------------------------------------------

    \28\ See Notice, supra note 3, at 54607-54610, for examples 
illustrating trade allocations under the Price/Time execution 
algorithm.
    \29\ The Initiating Participant shall receive additional 
allocation only if contracts remain after any allocation pursuant to 
proposed BX Chapter VI, Section 9(ii)(F)(3) and (4).
---------------------------------------------------------------------------

    If the Initiating Participant selected the single stop price 
option, PRISM executions will occur first at prices that improve the 
stop price, and then at the stop price with up to 40% of the remaining 
contracts after Public Customer interest is satisfied being allocated 
to the Initiating Participant at the stop price. However, if only one 
other quote, order or PAN response matches the stop price, the 
Initiating Participant may be allocated up to 50% of the contracts 
executed at such price.
    If the Initiating Participant selected the auto-match option, the 
Initiating Participant would be allocated a number of contracts equal 
to the aggregate size of all other quotes, orders, and PAN responses at 
each price point until a price point is reached where the balance of 
the order can be fully executed, except that the Initiating Participant 
would be entitled to receive up to 40% (if there are multiple competing 
quotes, orders or PAN responses) or 50% (if there is only one competing 
quote, order or PAN response) of the contracts remaining at the final 
price point (including situations where the stop price is the final 
price), after Public Customer interest has been satisfied but before 
remaining interest receives an allocation.
    If the Initiating Participant selected the ``stop and NWT'' option, 
contracts would be allocated as follows: (i) First to quotes, orders, 
and PAN responses at prices better than the NWT price (if any), 
beginning with the best price, pursuant to proposed Chapter VI, Section 
9(ii)(F)(3) and (4), at each price point; and (ii) next, to quotes, 
orders, and PAN responses at prices at the Initiating Participant's NWT 
price and better than the Initiating Participant's stop price, 
beginning with the NWT price. The Initiating Participant would be 
allocated a number of contracts equal to the aggregate size of all 
other quotes, orders, and PAN responses at each price point, except 
that the Initiating Participant would be entitled to receive up to 40% 
(if there are multiple competing quotes, orders or PAN responses) or 
50% (if there is only one competing quote, order or PAN response) of 
the contracts remaining at the final price point (including situations 
where the final price is the stop price), after Public Customer 
interest has been satisfied but before remaining interest receives an 
allocation. In the case of an Initiating Order with a NWT price at the 
market, the Initiating Participant would be allocated a number of 
contracts equal to the aggregate size of all other quotes, orders, and 
PAN responses at all price points, except that the Initiating 
Participant would be entitled to receive up to 40% multiple competing 
quotes, orders or PAN responses) or 50% (one competing quote, order or 
PAN response) of the contracts remaining at the final price point 
(including situations where the final price is the stop price), after 
Public Customer interest has been satisfied but before remaining 
interest receives an allocation.
    After Public Customers and the Initiating Participant receive their 
allocations, Priority Market Makers that were at a price equal to the 
NBBO on the opposite side of the market from the PRISM Order at the 
time of initiation of PRISM Auction would have priority up to their 
quote size in the Initial NBBO at each price level better than the 
Initial NBBO. Priority Market Maker interest at prices better than the 
Initial NBBO will be allocated pursuant to the Size Pro-Rata algorithm 
set forth in BX Chapter VI, Section 10(1)(B). Priority Market Maker 
interest at a price equal to or inferior to the Initial NBBO will not 
have priority over other participants and will be allocated pursuant to 
the Price/Time algorithm set forth in BX Chapter VI, Section 
10(1)(A).\30\
---------------------------------------------------------------------------

    \30\ See proposed BX Chapter VI, Section 9(ii)(F)(3).
---------------------------------------------------------------------------

    Finally, all other interest will receive an allocation, after the 
interest discussed above has been satisfied. Such interest will be 
allocated pursuant to the Price/Time algorithm set forth in BX Chapter 
VI, Section 10(1)(A).\31\
---------------------------------------------------------------------------

    \31\ See proposed BX Chapter VI, Section 9(ii)(F)(4).
---------------------------------------------------------------------------

D. Crossing Agency Orders

    The Exchange also proposes, in lieu of the PRISM Auction procedures 
set forth in proposed Chapter VI, Section 9(i)-(ii), to allow an 
Initiating Participant to enter a PRISM Order for the account of a 
Public Customer paired with an order for the account of another Public 
Customer, and such paired orders will be automatically executed without 
a PRISM Auction, provided there is not currently an Auction in progress 
in the same series, in which case the paired orders would be 
cancelled.\32\ In its proposal, the Exchange notes that it would be a 
violation of BX Chapter VII, Section 12 for a Participant to circumvent 
Chapter VII, Section 12 by providing an opportunity for (i) a Public 
Customer affiliated with the Participant, or (ii) a Public Customer 
with whom the Participant has an arrangement that allows the 
Participant to realize similar economic benefits from the transaction 
as the Participant would achieve by executing agency orders as 
principal, to regularly execute against agency orders handled by the 
firm immediately upon their entry as PRISM Public Customer-to-Public 
Customer immediate crosses.\33\
---------------------------------------------------------------------------

    \32\ See discussion infra Section VI, Amendment No. 2. As noted 
in proposed BX Chapter VI, Section 9(ii), only one Auction may be 
conducted at a time in any given series.
    \33\ See Notice, supra note 3, at 54606. See also proposed BX 
Chapter VI, Section 9(vi)(a).
---------------------------------------------------------------------------

E. Pilot Program Information to the Commission

    Subject to a pilot program expiring July 18, 2016,\34\ there will 
be no minimum size requirement for orders to be eligible for the 
Auction. The Exchange also has proposed two additional components of 
its rules on a pilot basis, expiring on July 18, 2016: (i) The early 
conclusion of the PRISM Auction; and (ii) an unrelated market or 
marketable limit order (against the BX BBO) on the opposite side of the 
market from the PRISM Order received during the Auction will not cause 
the Auction to end early and will execute against interest outside of 
the Auction.\35\ During this pilot period, the Exchange represents that 
it periodically will submit certain data, as requested by the 
Commission staff, to provide supporting evidence that, among other 
things, there is meaningful competition in PRISM Auctions for all size 
orders, there are opportunities for significant price improvement for 
orders executed through PRISM, and that there is an active and liquid 
market functioning on the Exchange outside of the Auction

[[Page 68351]]

mechanism.\36\ The Exchange further noted that it would seek to request 
confidential treatment for any raw data that it submits to the 
Commission.\37\
---------------------------------------------------------------------------

    \34\ See proposed BX Chapter VI, Section 9(viii).
    \35\ See proposed BX Chapter VI, Section 9(ii)(B)(2) through (4) 
(governing the early conclusion of a PRISM auction) and proposed BX 
Chapter VI, Section 9(ii)(D) (governing the treatment of unrelated 
orders on the opposite side of the market from the PRISM Order).
    \36\ See Notice, supra note 3, at 54606-07.
    \37\ See id. See also proposed BX Chapter VI, Section 6(vii).
---------------------------------------------------------------------------

    The Exchange represented that it will provide the following 
additional information on a monthly basis:
    (i) The number of contracts (of orders of 50 contracts or greater) 
entered into the PRISM;
    (ii) The number of contracts (of orders of fewer than 50 contracts) 
entered into the PRISM;
    (iii) The number of orders of 50 contracts or greater entered into 
the PRISM; and
    (iv) The number of orders of fewer than 50 contracts entered into 
the PRISM.

III. Amendment No. 2

    In Amendment No. 2, the Exchange proposes to revise its proposal to 
make certain clarifications and representations relating to the use of 
Price Improving and Post-Only Orders and to make other clarifying 
revisions to the rule text.
    The Exchange proposes to amend its rule text to delete the term 
``displayed'' which modifies ``BX BBO'' in proposed Chapter VI, Section 
9(i)(B) and the term ``or better than'' in proposed Chapter VI, Section 
9(ii)(E)(3) because these references represent the impact of repricing 
resulting from Price Improving and Post-Only Orders. The Exchange 
represents that it will file a rule change separately with the 
Commission to remove Price Improving and Post-Only Order types from its 
Rules.\38\ The Exchange also represents that it will not commence 
offering BX PRISM until such time as it has an effective and operative 
rule in place from the Commission to remove Price Improving and Post-
Only Orders and removes the ability to submit Price Improving and Post-
Only Orders into the Auction.\39\ In the event the Exchange determines 
in the future to allow the entry of any type of non-displayed order 
types, the Exchange represents that it will file a proposed rule change 
pursuant to Section 19(b)(2) under the Exchange Act with the Commission 
to seek approval for such rule change.\40\ As there will be no longer 
be any repricing order types on BX due to BX's elimination of Price 
Improving and Post Only Orders, the Exchange proposes to delete these 
terms from the rule text. The Exchange also proposes to delete the term 
``displayed'' in other parts of the rule where it modifies the term 
``NBBO,'' ``quote size,'' or ``size'' because the Exchange believes the 
modifier ``displayed'' is redundant and unnecessary and wishes to avoid 
any inference that the NBBO or quote size may be non-displayed, which 
it represents is not the case.\41\
---------------------------------------------------------------------------

    \38\ See Amendment No. 2, supra note 5, at 3.
    \39\ See id.
    \40\ See id. at 3-4.
    \41\ See id. at 5. The Exchange states that the term 
``displayed'' prior to NBBO is simply redundant as the NBBO is 
always displayed and therefore unnecessary. The term ``displayed'' 
before the terms ``quote size'' and ``size'' is not necessary as 
such references may create an inference that the quote size may be 
non-displayed in certain circumstances, which is not the case. 
Additionally, the term ``displayed'' is not utilized in the Phlx 
PIXL rule text (Phlx Rule 1080(n)), which auction is similar to 
PRISM.
---------------------------------------------------------------------------

    The Exchange also proposes to replace certain uses of the term 
``rejected'' in the rule text with the term ``immediately cancelled.'' 
In Amendment No. 2, BX notes that non-eligible and non-compliant orders 
that are submitted into PRISM will be immediately cancelled when those 
orders are reviewed for compliance with Exchange Rules. These orders 
will not technically be rejected as there will be time, however 
miniscule, between the submission of the order and the cancellation of 
the order. The Exchange believes this non-substantive change adds more 
clarity to the rule text. The Exchange also proposes to amend the rule 
text to provide more specificity concerning the allocation guarantee to 
which an Initiating Participant is entitled. While the current rule 
text clearly states that the Initiating Participant may receive up to 
40% if there is multiple competing interest or 50% of there is one 
competing quote, order, or response, the amendments add this detail to 
other places in the rule where the 40% and 50% guarantees are 
referenced to consistently make clear the conditions under which they 
apply. The Exchange believes this non-substantive change adds more 
clarity to the rule text.
    Further, the Exchange proposes to amend the rule text at proposed 
Chapter VI, Section 9(ii)(E)(3) to delete the term ``orders.'' This 
amendment will correct the reference to the types of interest that 
would be attributed to a Priority Market Maker. While quotes and PAN 
responses will be allocated according to Priority Marker Maker status, 
orders will be accepted but will not receive Priority Market Maker 
status. Therefore, BX proposes to delete the term ``orders'' to make 
clear which interest shall be included for calculation within the 
allocation.
    In addition, the Exchange proposes to replace the terms ``orders'' 
or ``participants'' in certain places within the rule text that 
reference the Initiating Participant's guarantee with the terms 
``quote(s), order(s) or PAN response(s),'' which more fully and 
explicitly represent the types of interest that is considered when 
PRISM allocates 40% or 50% of the PRISM Order to the Initiating 
Participant. The Exchange believes these amendments are non-substantive 
changes that add more clarity to the rule text.
    The Exchange also proposes to amend the rule text at proposed 
Chapter VI, Section 9(vi) to clarify that a Participant cannot submit a 
Public Customer-to-Public customer paired order when there is a PRISM 
Auction in progress in the same series. Any attempt to do so will 
result in the Exchange canceling the Public Customer-to-Public customer 
paired order. In its original notice, the Exchange noted that only one 
Auction may be conducted at a time in any given series,\42\ and this 
additional text just makes clear that the general prohibition also 
applies when a Participant seeks to submit a Public Customer-to-Public 
customer paired order. The remaining proposed changes in Amendment No. 
2 correct a cross-reference and some typographical errors.
---------------------------------------------------------------------------

    \42\ See Notice, supra note 3, at 54602.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange 
and, in particular, with Section 6(b) of the Act.\43\ In particular, 
the Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\44\ which 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 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 customers, issuers, brokers and dealers. The Commission 
believes that the Exchange's proposal to establish the PRISM Auction 
may increase competition among those

[[Page 68352]]

options exchanges that offer similar price improvement mechanisms. The 
Commission further believes that allowing BX members to enter orders 
into the PRISM Auction could provide additional opportunities for such 
orders to receive price improvement over the NBBO. The Commission also 
believes that the BX's proposal to give priority to a Priority Market 
Maker who is quoting at the NBBO before an Auction is initiated may 
provide an incentive for BX Market Makers to publicly display their 
best quotes with size on the Exchange, which would benefit all options 
market participants.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78f(b). In approving this proposed rule change, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \44\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    BX's proposed PRISM Auction is based in large part on Phlx's PIXL, 
and also is similar to existing functionality at other options 
exchanges, except that, as discussed further below, it adds a new type 
of allocation for Priority Market Makers.\45\ All options traded on BX 
are eligible for the PRISM Auction, and PRISM Orders are given the 
opportunity for price improvement over the NBBO by being exposed to 
members during the PRISM Auction. In addition, BX's proposal protects 
resting interest on its limit order book as the Initiating 
Participant's stop price \46\ must be at least one minimum trading 
increment better than any booked order's limit price on the same side 
of the market as the PRISM Order, when the PRISM Order is for a Public 
Customer. A PRISM Order for any entity other than a Public Customer 
must be stopped at a price better than the same side of the BX BBO even 
if there is no resting limit order on the book.
---------------------------------------------------------------------------

    \45\ See, e.g., Phlx Rule 1080(n) (Phlx's PIXL), Chicago Board 
Options Exchange (``CBOE'') Rule 6.74A (CBOE's Automated Improvement 
Mechanism (``AIM'') auction), and MIAX Rule 515A (MIAX's Price 
Improvement Mechanism (``PRIME'') auction).
    \46\ The Initiating Participant may forfeit priority and trade 
allocation privileges by designating the Initiating Order as 
Surrender, in which case the Initiating Participant would trade only 
if there were not enough interest available to fully execute the 
PRISM Order at prices which are equal to or improve upon the stop 
price. The Commission notes that this feature may encourage use of 
the PRISM Auction to provide certain orders with an opportunity for 
price improvement that such orders may not otherwise receive.
---------------------------------------------------------------------------

    BX will not accept PRISM Orders during certain times, including 
during the final two seconds of the regular trading session, as well as 
at or before the opening of trading. BX also would cancel any PRISM 
Order that does not meet the Auction eligibility requirements specified 
in the proposed rule. Further, once a PRISM Auction has commenced, it 
cannot be cancelled.
    When the BX receives an eligible PRISM Order for submission to the 
PRISM Auction, it will broadly announce the Auction by sending a PAN 
over the BX Depth feed and the Exchange's Specialized Quote Feed 
detailing the option, side, and size.\47\ This message is designed to 
help attract competitive responses to a PRISM Auction. The PRISM rules 
also permit any person or entity to submit responses to the PAN on 
behalf of all types of interest.\48\ The Commission believes that these 
requirements provide the opportunity for a PRISM Order to be exposed in 
an auction designed to attract competitive responses and facilitate 
price improvement, and thus may result in ultimately better prices for 
the PRISM Order to the extent the PAN is successful in attracting 
competitive responses.
---------------------------------------------------------------------------

    \47\ According to the Exchange, SQF is available to Market 
Makers at no cost. The Depth Feed is available to all other market 
participants that pay to subscribe to the service to receive 
broadcast information regarding auctions.
    \48\ Cf. CBOE Rule 6.74A(b)(1)(D)-(E) (only CBOE Market Makers 
with an appointment in the relevant option class, and CBOE Members 
acting as agent for orders resting at the top of the CBOE book 
opposite the Agency Order, may submit responses to the AIM RFR).
---------------------------------------------------------------------------

    All PRISM Auctions will last for a period for a predefined time of 
no less than 100 milliseconds and no more than 1 second as determined 
by the Exchange and announced on the Nasdaq Trader Web site. As the 
Exchange discussed in its proposal, in May 2014, Phlx surveyed its 
Market Maker members as to the timeframe within which these firms could 
respond to an auction with a duration time ranging from less than 50 
milliseconds to more than 1 second.\49\ Of the 20 Market Maker firms 
\50\ that responded to the question, 100% indicated that their firm 
could respond to auctions with a duration time of at least 50 
milliseconds.\51\ Based on BX's statements, the Commission believes 
that proposed duration of the PRISM Auction could facilitate the prompt 
execution of orders in the PRISM auction, while providing market 
participants with an opportunity to compete for exposed bids and 
offers. The Commission notes that other exchanges' price improvement 
mechanisms provide for auction response periods within the range of the 
response duration proposed by BX.\52\
---------------------------------------------------------------------------

    \49\ See Notice, supra note 3, at 54602.
    \50\ The Exchange represents that 90% of the BX market maker 
firms participated in the survey (i.e., 90% of BX market maker firms 
were also market makers on Phlx who participated in the Phlx 
survey). See Notice, supra note 3, at 5460203, n. 19.
    \51\ See Notice, supra note 3, at 54602-03, n. 19-20 and 
accompanying text.
    \52\ See International Securities Exchange Rule 723(c)(5) 
(auction period of 500 milliseconds), CBOE Rule 6.74A(b)(1)(C) 
(auction period of 1 second), Boston Options Exchange Rule 
7150(f)(1) (auction period of 100 milliseconds).
---------------------------------------------------------------------------

    At the conclusion of a PRISM Auction, Public Customer orders have 
first priority to trade against the PRISM Order. After Public Customer 
orders receive their allocation, the Initiating Participant next may be 
allocated a limited percentage of the PRISM Order, not to exceed 40% of 
the contracts at the applicable final price point if competing quotes, 
orders or PAN responses have contracts available for execution 
(however, if only one other competing quote, order or PAN response 
matches the Initiating Participant's submission at the best price, then 
the Initiating Participant may be allocated up to 50% of the PRISM 
Order). After the Initiating Participant's primary allocation, quotes 
and PAN responses from Priority Market Makers have next priority. 
Thereafter, Non-Priority Market Makers, as well as Priority Market 
Maker interest which exceeded their displayed size in the Initial NBBO, 
would have the next priority at each price level at or better than the 
Initial NBBO. Finally, all other interest would receive an allocation 
if contracts remained. The Commission believes that the BX PRISM's 
proposed matching algorithm is sufficiently clear regarding how orders 
are to be allocated in the PRISM Auction and is designed in a manner 
that should facilitate a competitive auction process.
    As noted above, the proposed BX rules grant a BX Market Maker 
``priority'' status for the duration of an Auction when the Market 
Maker is quoting at the NBBO at the time the PRISM Auction was 
initiated, up to the size of its quote. The Commission believes that 
this provision is designed to encourage BX Market Makers to quote 
aggressively with additional size outside of the PRISM Auction and, 
therefore, may enhance competition and liquidity on the BX market. The 
Commission notes that another exchange, the Miami International 
Securities Exchange, offers a similar ``priority quote'' feature in its 
general matching system,\53\ and also provides for enhanced priority 
for ``priority quotes'' in its PRIME price improvement auction in a 
substantially similar manner as to what BX proposes for PRISM.\54\
---------------------------------------------------------------------------

    \53\ See MIAX Rule 517(b)(1)(i).
    \54\ See MIAX Rule 515A(a)(2)(iii)(C).
---------------------------------------------------------------------------

    The Exchange has represented its commitment to submit certain data 
on PRISM Auctions at the request of Commission staff. The Commission 
expects such data to be used, by both the Exchange and the Commission 
staff, to assess the performance of PRISM Auction, including, among 
other things, to study whether there is meaningful competition for all 
size orders with the

[[Page 68353]]

PRISM, the degree of price improvement for all orders executed through 
the PRISM, and whether there is an active and liquid market functioning 
on the Exchange outside of the PRISM. The data provided will enable the 
Commission, as well as the Exchange itself, to evaluate the PRISM 
Auction to determine its performance and possible impact on BX and 
options market structure in general and the degree to which it is 
beneficial to customers and to the options market as a whole.

V. Section 11(a) of the Act

    Section 11(a)(1) of the Act \55\ prohibits a member of a national 
securities exchange from effecting transactions on that exchange for 
its own account, the account of an associated person, or an account 
over which it or its associated person exercises investment discretion 
(collectively, ``covered accounts'') unless an exception applies. Rule 
11a2-2(T) under the Act,\56\ known as the ``effect versus execute'' 
rule, provides exchange members with an exemption from the Section 
11(a)(1) prohibition. Rule 11a2-2(T) permits an exchange member, 
subject to certain conditions, to effect transactions for covered 
accounts by arranging for an unaffiliated member to execute 
transactions on the exchange. To comply with Rule 11a2-2(T)'s 
conditions, a member: (i) Must transmit the order from off the exchange 
floor; (ii) may not participate in the execution of the transaction 
once it has been transmitted to the member performing the execution; 
\57\ (iii) may not be affiliated with the executing member; and (iv) 
with respect to an account over which the member or an associated 
person has investment discretion, neither the member nor its associated 
person may retain any compensation in connection with effecting the 
transaction except as provided in the Rule. For the reasons set forth 
below, the Commission believes that Exchange members entering orders 
into the PRISM Auction would satisfy the requirements of Rule 11a2-
2(T).
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78k(a)(1).
    \56\ 17 CFR 240.11a2-2(T).
    \57\ This prohibition also applies to associated persons. The 
member may, however, participate in clearing and settling the 
transaction.
---------------------------------------------------------------------------

    The Rule's first condition is that orders for covered accounts be 
transmitted from off the exchange floor. In the context of automated 
trading systems, the Commission has found that the off-floor 
transmission requirement is met if a covered account order is 
transmitted from a remote location directly to an exchange's floor by 
electronic means.\58\ BX has represented that the BX trading system and 
the proposed PRISM Auction receive all orders electronically through 
remote terminals or computer-to-computer interfaces.\59\ The Exchange 
also represents that orders for covered accounts from Participants will 
be transmitted from a remote location directly to the proposed PRISM 
mechanism by electronic means. Because no Exchange members may submit 
orders into the PRISM Auction from on the floor of the Exchange, the 
Commission believes that the PRISM Auction satisfies the off-floor 
transmission requirement.
---------------------------------------------------------------------------

    \58\ See, e.g., Securities Exchange Act Release Nos. 61419 
(January 26, 2010), 75 FR 5157 (February 1, 2010) (SR-BATS-2009-031) 
(approving BATS options trading); 59154 (December 23, 2008), 73 FR 
80468 (December 31, 2008) (SR-BSE-2008-48) (approving equity 
securities listing and trading on BSE); 57478 (March 12, 2008), 73 
FR 14521 (March 18, 2008) (SR-NASDAQ-2007-004 and SR-NASDAQ-2007-
080) (approving NOM options trading); 53128 (January 13, 2006), 71 
FR 3550 (January 23, 2006) (File No. 10-131) (approving The Nasdaq 
Stock Market LLC); 44983 (October 25, 2001), 66 FR 55225 (November 
1, 2001) (SR-PCX-00-25) (approving Archipelago Exchange); 29237 (May 
24, 1991), 56 FR 24853 (May 31, 1991) (SR-NYSE-90-52 and SR-NYSE-90-
53) (approving NYSE's Off-Hours Trading Facility); and 15533 
(January 29, 1979), 44 FR 6084 (January 31, 1979) (``1979 
Release'').
    \59\ See Notice, supra note 3, at 54612. See also Amendment No. 
2, supra note 5.
---------------------------------------------------------------------------

    Second, the Rule requires that the member and any associated person 
not participate in the execution of its order after the order has been 
transmitted. The Exchange represents that at no time following the 
submission of an order is a Participant able to acquire control or 
influence over the result or timing of the order's execution.\60\ 
According to the Exchange, the execution of an order is determined by 
what other orders are present in the PRISM and the priority of those 
orders.\61\ Accordingly, the Commission believes that a member does not 
participate in the execution of an order submitted to the PRISM 
mechanism.
---------------------------------------------------------------------------

    \60\ See Notice, supra note 3, at 54612. See also Amendment No. 
2, supra note 5 (also representing, among other things, that: (1) No 
Participant, including the Initiating Participant, will see a PAN 
response submitted into PRISM and therefore and will not be able to 
influence or guide the execution of their PRISM Orders, (2) the 
Surrender feature will not permit a Participant to have any control 
over an order, and that the election to Surrender an order is 
available prior to the submission of the order, will not be 
broadcast and further, that the Surrender option may not be modified 
by the market participant during the auction).
    \61\ See Notice, supra note 3, at 54612. See also Amendment No. 
2, supra note 5. The Exchange notes that a Member may cancel or 
modify the order, or modify the instructions for executing the 
order, but that such instructions would be transmitted from off the 
floor of the Exchange. The Commission has stated that the non-
participation requirement is satisfied under such circumstances so 
long as such modifications or cancellations are also transmitted 
from off the floor. See Securities Exchange Act Release No. 14563 
(March 14, 1978), 43 FR 11542 (March 17, 1978) (``1978 Release'') 
(stating that the ``non-participation requirement does not prevent 
initiating members from canceling or modifying orders (or the 
instructions pursuant to which the initiating member wishes orders 
to be executed) after the orders have been transmitted to the 
executing member, provided that any such instructions are also 
transmitted from off the floor'').
---------------------------------------------------------------------------

    Third, Rule 11a2-2(T) requires that the order be executed by an 
exchange member who is unaffiliated with the member initiating the 
order. The Commission has stated that this requirement is satisfied 
when automated exchange facilities, such as the PRISM mechanism, are 
used, as long as the design of these systems ensures that members do 
not possess any special or unique trading advantages in handling their 
orders after transmitting them to the exchange.\62\ BX represents that 
the PRISM is designed so that no Member has any special or unique 
trading advantage in the handling of its orders after transmitting its 
orders to the mechanism.\63\ Based on the Exchange's representation, 
the Commission believes that the PRISM mechanism satisfies this 
requirement.
---------------------------------------------------------------------------

    \62\ In considering the operation of automated execution systems 
operated by an exchange, the Commission noted that, while there is 
not an independent executing exchange member, the execution of an 
order is automatic once it has been transmitted into the system. 
Because the design of these systems ensures that members do not 
possess any special or unique trading advantages in handling their 
orders after transmitting them to the exchange, the Commission has 
stated that executions obtained through these systems satisfy the 
independent execution requirement of Rule 11a2-2(T). See 1979 
Release, supra note 58.
    \63\ See Notice, supra note 3, at 54612. See also Amendment No. 
2, supra note 5.
---------------------------------------------------------------------------

    Fourth, in the case of a transaction effected for an account with 
respect to which the initiating member or an associated person thereof 
exercises investment discretion, neither the initiating member nor any 
associated person thereof may retain any compensation in connection 
with effecting the transaction, unless the person authorized to 
transact business for the account has expressly provided otherwise by 
written contract referring to Section 11(a) of the Act and Rule 11a2-
2(T) thereunder.\64\ BX represents

[[Page 68354]]

that Members relying on Rule 11a2-2(T) for transactions effected 
through the PRISM must comply with this condition of the Rule and that 
the Exchange will enforce this requirement pursuant to its obligations 
under Section 6(b)(1) of the Act to enforce compliance with federal 
securities laws.\65\
---------------------------------------------------------------------------

    \64\ In addition, Rule 11a2-2(T)(d) requires a member or 
associated person authorized by written contract to retain 
compensation, in connection with effecting transactions for covered 
accounts over which such member or associated persons thereof 
exercises investment discretion, to furnish at least annually to the 
person authorized to transact business for the account a statement 
setting forth the total amount of compensation retained by the 
member or any associated person thereof in connection with effecting 
transactions for the account during the period covered by the 
statement. See 17 CFR 240.11a2-2(T)(d). See also 1978 Release, supra 
note 61 (stating ``[t]he contractual and disclosure requirements are 
designed to assure that accounts electing to permit transaction-
related compensation do so only after deciding that such 
arrangements are suitable to their interests'').
    \65\ See Notice, supra note 3, at 54612. See also Amendment No. 
2, supra note 5.
---------------------------------------------------------------------------

VI. Accelerated Approval of Proposal, as Modified by Amendment No. 2

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Exchange Act, to approve the proposal, as modified by Amendment 
Nos. 1 and 2, prior to the 30th day after publication of Amendment No. 
2 in the Federal Register. In Amendment No. 2, BX revised the original 
proposal, which had been previously amended by Amendment No. 1 before 
it was published in the Federal Register, to make the changes discussed 
in detail above. Notably, in Amendment No. 2, BX represents that Price 
Improving and Post-Only Order types will be removed from its Rules 
before BX implements the PRISM Auction mechanism. BX also made changes 
to clarify and add detail to the rule text. The Commission believes 
that Amendment No. 2 does not raise any novel regulatory issues and 
instead provides additional clarity in the rule text, which is 
consistent with BX's original proposal, as modified by Amendment No. 1, 
and supports BX's analysis of how its proposal is consistent with the 
Act, thus facilitating the Commission's ability to make the findings 
set forth above to approve the proposal. Accordingly, the Commission 
finds that good cause exists to approve the proposal, as modified by 
Amendment No. 2, on an accelerated basis.

VII. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 2 
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-2015-032 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-2015-032. 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 20549-1090, 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-2015-032 and should be 
submitted on or before November 25, 2015.

VIII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\66\ that the proposed rule change (SR-BX-2015-032), as modified by 
Amendment Nos. 1 and 2, be and hereby is approved on an accelerated 
basis, except that BX Chapter VI, Section 9(ii)(B)(2)-(3), Section 
9(ii)(D), and Section 9(vii) are approved on a pilot basis until July 
18, 2016.
---------------------------------------------------------------------------

    \66\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\67\
---------------------------------------------------------------------------

    \67\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-28024 Filed 11-3-15; 8:45 am]
 BILLING CODE 8011-01-P