Self-Regulatory Organizations; Proposed Rule Changes:

Federal Register Volume 76, Number 102 (Thursday, May 26, 2011)

Notices

Pages 30746-30748

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

FR Doc No: 2011-13038

SECURITIES AND EXCHANGE COMMISSION

Release No. 34-64530; File No. SR-BX-2011-027

Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Extending the

Pilot Period for BOX to Receive Inbound Routes of Orders from NOS

May 20, 2011.

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 May 18, 2011, NASDAQ OMX BX (the ``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 Exchange has designated the proposed rule change as constituting a non-controversial rule change under Rule 19b- 4(f)(6) under the Act,\3\ which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

\1\ 15 U.S.C. 78s(b)(1).

\2\ 17 CFR 240.19b-4.

\3\ 17 CFR 240.19b-4(f)(6).

1. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

   The Exchange submits this proposed rule change to extend the pilot period of the Exchange's prior approval for Boston Options Exchange

   (``BOX'') to receive inbound routes of certain option orders from

   Nasdaq Options Services, LLC (``NOS'') through August 16, 2011.

   Page 30747

2. 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.

   1. Self-Regulatory Organization's Statement of the Purpose of, and

      Statutory Basis for, the Proposed Rule Change 1. Purpose

      Currently, NOS is the approved outbound routing facility of the

      NASDAQ Exchange for NOM, providing outbound routing from NOM to other market centers.\4\ The Exchange and the NASDAQ Exchange have previously adopted rules to permit BOX to receive inbound routes of certain option orders by NOS in its capacity as an order routing facility of the

      NASDAQ Exchange for NOM.\5\ The Exchange specifically has adopted a rule to prevent potential informational advantages resulting from the affiliation between BOX and NOS, as related to NOS's authority to route certain orders from NOM to BOX without checking the NOM book prior to routing.\6\ NOS's authority to route these orders to BOX is subject to a pilot period ending May 18, 2011.\7\ The Exchange hereby seeks to extend the previously approved pilot period (with the attendant obligations and conditions) for an additional 90 days, through August 16, 2011.

      \4\ NOM Rule Chapter VI, Section 11(c). Under NOM Rule Chapter

      VI, Section 11(c): (1) NOM routes orders in options via NOS, which serves as the sole ``routing facility'' of NOM; (2) the sole function of the routing facility is to route orders in options to away markets pursuant to NOM rules, solely on behalf of NOM; (3) NOS is a member of an unaffiliated self-regulatory organization, which is the designated examining authority for the broker-dealer; (4) the routing facility is subject to regulation as a facility of the

      NASDAQ Exchange, including the requirement to file proposed rule changes under Section 19 of the Act; (5) use of NOS to route order to other market centers is optional; (6) NOM must establish and maintain procedures and internal controls reasonably designed to adequately restrict the flow of confidential and proprietary information between the NASDAQ Exchange and its facilities

      (including the routing facility), and any other entity; and (7) the books, records, premises, officers, directors, agents, and employees of the routing facility, as a facility of the NASDAQ Exchange, shall be subject at all times to inspection and copying by the NASDAQ

      Exchange and the Commission.

      \5\ See Securities Exchange Act Release No. 60349 (July 20, 2009), 74 FR 37071 (July 27, 2009) (SR-BX-2009-035); Securities

      Exchange Act Release No. 60354 (July 21, 2009), 74 FR 37074 (July 27, 2009) (SR-NASDAQ-2009-065).

      \6\ See Chapter XXXIX, Section 2(c) of the Grandfathered Rules of the Exchange.

      \7\ See Securities Exchange Act Release No. 63364 (November 23, 2010), 75 FR 74121 (November 30, 2010) (SR-BX-2010-078).

      2. Statutory Basis

      The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,\8\ in general, and with

      Section 6(b)(5) of the Act,\9\ 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, the proposed rule change will allow BOX to continue receiving inbound routes of equities orders from NOS, acting in its capacity as a facility of the NASDAQ Exchange, in a manner consistent with prior approvals and established protections. The Exchange believes that extending the previously approved pilot period for sixty days is a sufficient length to permit both the Exchange and the Commission to assess the impact of the Exchange's authority to permit BOX to receive direct inbound routes of certain option orders via NOS (including the attendant obligations and conditions).

      \8\ 15 U.S.C. 78f.

      \9\ 15 U.S.C. 78f(b)(5).

   2. 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.

   3. 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.

3. Date of Effectiveness of the Proposed Rule Change and Timing for

   Commission Action

   Because the foregoing proposed rule change: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to

   Section 19(b)(3)(A)\10\ of the Act and Rule 19b-4(f)(6) thereunder.\11\

   \10\ 15 U.S.C. 78s(b)(3)(A).

   \11\ 17 CFR 240.19b-4(f)(6).

   A proposed rule change filed under 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing.\12\

   However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the

   Commission waive the 30-day operative delay. The Exchange notes that the proposal will allow BOX to continue receiving inbound routes of equities orders from NOS, in a manner consistent with prior approvals and established protections, while also permitting the Exchange and the

   Commission to assess the impact of the pilot.\14\ The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because such waiver would allow the pilot period to be extended without undue delay through

   August 16, 2011. For this reason, the Commission designates the proposed rule change to be operative upon filing with the

   Commission.\15\

   \12\ 17 CFR 240.19b-4(f)(6)(iii). 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 five-day pre-filing requirement.

   \13\ Id.

   \14\ See supra Section II.A.2.

   \15\ For the purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

   At any time within 60 days of the filing of such 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.

4. Solicitation of Comments

   Interested persons are invited to submit written data, views, and arguments concerning the foregoing,

   Page 30748

   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 e-mail to rule-comments@sec.gov. Please include

   File Number SR-BX-2011-027 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-2011-027. This file number should be included on the subject line if e-mail 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 a.m. and 3 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-2011-027 and should be submitted on or before June 16, 2011.

   For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\16\

   \16\ 17 CFR 200.30-3(a)(12).

   Cathy H. Ahn,

   Deputy Secretary.

   FR Doc. 2011-13038 Filed 5-25-11; 8:45 am

   BILLING CODE 8011-01-P