[Federal Register Volume 80, Number 234 (Monday, December 7, 2015)]
[Notices]
[Pages 76052-76053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30720]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76531; File No. SR-BX-2015-074]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Market Order Spread Protection

December 1, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 20, 2015, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the BX rules at Chapter VI, Section 
6, entitled ``Acceptance of Quotes and Orders,'' specifically at 
Section 6(c) concerning Market Order Spread Protection.
    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 this filing is to amend Chapter VI, Section 6 
entitled ``Acceptance of Quotes and Orders,'' specifically, at 
paragraph (c) related to Market Order Spread Protection. This feature 
was adopted in 2012.\3\ The Market Order Spread Protection was designed 
to protect Market Orders \4\ from being executed in very wide markets. 
This feature is not optional and is set at the same threshold for all 
options traded on BX. The Market Order Spread Protection is applicable 
to all Participants submitting Market Orders.
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    \3\ See Securities Exchange Act Release No. 67256 (June 26, 
2012), 77 FR 39277 (July 2, 2012) (SR-BX-2012-030) (Order Granting 
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 
and 2, Relating to the Establishment of a New Options Market, NASDAQ 
OMX BX Options).
    \4\ ``Market Orders'' are orders to buy or sell at the best 
price available at the time of execution. Participants can designate 
that their Market Orders not executed after a pre-established period 
of time, as established by the Exchange, will be cancelled back to 
the Participant. See BX Rules at Chapter VI, Section 1(e)(5).
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    At this time, the Exchange is proposing to amend Section 6(c) which 
currently states, ``System Orders that are Market Orders will be 
rejected if the NBBO is wider than a preset threshold at the time the 
order is received by the System.'' The Exchange proposes to amend this 
sentence as follows: ``System Orders that are Market Orders will be 
rejected if the best of the NBBO and the internal market BBO \5\ (the 
``Reference BBO'') is wider than a preset threshold at the time the 
order is received by the System.'' The Exchange is amending this rule 
text to account for orders which would lock or cross another market,\6\ 
could result in non-displayed pricing and would result in the internal 
market BBO being better than the NBBO.
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    \5\ Best Bid or Best Offer on BX.
    \6\ Options Order Protection and Locked and Crossed Market Rules 
are located in Chapter XII of BX Rules. In the event of a locked and 
crossed market, the BBO will be repriced and displayed in accordance 
with BX Rules at Chapter VI, Section 7(b)(3)(C).
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    The current rule text does not reflect the possibility that orders 
will be re-priced to the current national best offer (for bids) or the 
current national best bid (for offers) and displayed at one minimum 
price variance above (for offers) or below (for bids) the national best 
price. The proposed rule text amends the current rule text to account 
for the results of repricing.
    This rule change will correct the existing rule text to reflect 
current practice which accounts for repricing due to trade-through and 
locked and crossed market restrictions.\7\ Participants were notified 
via an Options Trader Alert of this rule text error.\8\
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    \7\ See Chapter XII of BX Rules.
    \8\ See Options Regulatory Alert 2015-28 dated September 4, 
2015.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \10\ in particular, in that it is designed 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, by amending the rule text to reflect the impact of repricing 
due to trade-through and locked and crossed market restrictions.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    Amending the current BX rule text for Market Order Spread 
Protection to account for repricing due to trade-through and locked and 
crossed market restrictions would provide Participants with the 
expected results of the Market Order Spread Protection feature. The 
Exchange believes that it is consistent with the Act to amend the rule 
text to reflect the possibility that orders will be re-priced to the 
current national best offer (for bids) or the current national best bid 
(for offers) and displayed at one

[[Page 76053]]

minimum price variance above (for offers) or below (for bids) the 
national best price.
    The Exchange believes that the amendment to the Market Order Spread 
Protection language does not otherwise create an impediment to a free 
and open market because the repricing due to trade throughs and locked 
and crossed markets exists today and serve to protect against trading 
through or locking or crossing another market. This proposal reflects 
the impact of repricing due to trade-through and locked and crossed 
market restrictions on the Market Order Spread Protection feature.
    By reflecting the proper rule text to account for trade-through and 
locked and crossed market restrictions, the Exchange is providing 
Participants with additional information with which to anticipate the 
impact of the Market Order Spread Protection feature.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposal to amend the Market Order Spread Protection rule text 
to account [sic] repricing due to trade-through and locked and crossed 
market restrictions creates an undue burden on competition because it 
will serve to provide Participants with greater information to 
anticipate the impact of the Market Order Spread Protection feature. 
Today, Participants' orders are repriced due to trade-through and 
locked and crossed market restrictions. The purpose of this rule change 
is to protect market orders resting on the Order Book when the market 
is wide. This feature will be applied in a similar manner to all 
Participants on BX.

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 significantly 
affect the protection of investors or the public interest; does not 
impose any significant burden on competition; and by its terms does not 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) \11\ of the Act and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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: Necessary 
or appropriate in the public interest; for the protection of investors; 
or 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-2015-074 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-2015-074. 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-2015-074 and should be 
submitted on or before December 28, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Robert W. Errett,
Deputy Secretary.
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    \13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-30720 Filed 12-4-15; 8:45 am]
 BILLING CODE 8011-01-P