80 FR 10179 - Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify and Reorganize Chapter VI (Trading Systems), Section 8 (BX Opening and Halt Cross) of the Exchange's Options Rules

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 37 (February 25, 2015)

Page Range		10179-10187
FR Document		2015-03819
Federal Register, Volume 80 Issue 37 (Wednesday, February 25, 2015)
[Federal Register Volume 80, Number 37 (Wednesday, February 25, 2015)]
[Notices]
[Pages 10179-10187]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-03819]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74310; File No. SR-BX-2015-010]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Modify 
and Reorganize Chapter VI (Trading Systems), Section 8 (BX Opening and 
Halt Cross) of the Exchange's Options Rules

February 19, 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 February 9, 2015, 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 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to modify and reorganize Chapter VI (Trading 
Systems), Section 8 (BX Opening and Halt Cross) of the Exchange's 
Options rules. The proposal would update or add Section 1 and Section 8 
definitions in respect of the BX Opening and Halt Cross. The proposal 
would also make changes regarding: The criteria for opening of trading 
or resumption of trading after a halt; BX posting on its Web site any 
changes to the dissemination interval or prior Order Imbalance 
Indicator; the procedure if more than one price exists; the procedure 
if there are unexecuted contracts; and the ability of firms to elect 
that orders be returned in symbols that were not opened on BX before 
the conclusion of the Opening Order Cancel Timer.
    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 modify BX Chapter VI, 
Section 1 and Section 8 to update or add definitions, which include 
Current Reference Price, BX Opening Cross, Eligible Interest, Valid 
Width National Best Bid or Offer (``Valid Width NBBO''), Away Best Bid 
or Offer (``ABBO''), and On the Open Order (``OPG''). The purpose is to 
also make changes regarding: The criteria for opening of trading or 
resumption of trading after a halt; BX posting on its Web site any 
changes to the dissemination interval or prior Order Imbalance 
Indicator; the procedure if more than one price exists; the procedure 
if there are unexecuted contracts; and the ability of firms to elect 
that orders be returned in symbols

[[Page 10180]]

that were not opened on BX before the conclusion of the Opening Order 
Cancel Timer.\3\
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    \3\ The Exchange will explain the proposed change to its 
participants via an Options Trader Alert.
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    Section 8 of Chapter VI describes the BX opening and halt cross and 
opening imbalance process (``Opening Cross''). Section 8(a) currently 
contains definitions that are applicable to Section 8. Section 8(b) 
currently states that for the opening of trading of System 
Securities,\4\ the Opening Cross shall occur at or after 9:30 a.m. 
Eastern Time \5\ if any of the following ``conditions'' occur: (1) 
There is no Imbalance; \6\ (2) the dissemination of a regular market 
hours quote or trade (as determined by the Exchange on a class-by-class 
basis) by the Market for the Underlying Security \7\ has occurred (or, 
in the case of index options, the Exchange has received the opening 
price of the underlying index); or (3) in the case of a trading halt, 
when trading resumes pursuant to Chapter V, Section 4, and a certain 
number (as the Exchange may determine from time to time) of other 
options exchanges have disseminated a firm quote on the Options Price 
Reporting Authority (``OPRA'').\8\ Market hours trading on BX Options 
in specific options commences, or in the case of specific halted 
options resumes, when the BX Opening Cross concludes. Section 8(c) 
currently describes the procedure if firm quotes are not disseminated 
for an option by the predetermined number of options exchanges by a 
specific time during the day that is determined by the Exchange; \9\ 
provided that dissemination of a regular market hours quote or trade by 
the Market for the Underlying Security has occurred (or, in the case of 
index options, the Exchange has received the opening price of the 
underlying index). This filing proposes several changes to enhance the 
usability and effectiveness of Section 8 regarding the opening and halt 
cross and imbalance process.
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    \4\ ``System Securities'' means all options that are currently 
trading on BX Options pursuant to Chapter IV. All other options are 
``Non System Securities.'' Chapter VI, Section 1(b).
    \5\ In this proposal, all time is Eastern Time unless otherwise 
noted.
    \6\ ``Imbalance'' means the number of contracts of Eligible 
Interest that may not be equal. Chapter VI, Section 8(a)(1). 
``Eligible Interest'' means any quotation or any order that may be 
entered into the system and designated with a time-in-force of IOC, 
DAY, GTC. Chapter VI, Section 8(a)(4). The Exchange is deleting the 
reference to Imbalance from Section 8(b) because, as discussed, the 
occurrence of the Opening Cross depends on the parameters proposed 
in Section 8(b) rather than on whether there is an imbalance.
    \7\ ``Market for the Underlying Security'' means either the 
primary listing market, the primary volume market (defined as the 
market with the most liquidity in that underlying security for the 
previous two calendar months), or the first market to open the 
underlying security, as determined by the Exchange on an issue-by-
issue basis and announced to the membership on the Exchange's Web 
site. Chapter VI, Section 8(a)(5).
    \8\ For better readability, this part of Section 8(b) is 
proposed to be broken into two sentences and the phrase ``the 
Opening Cross shall occur'' inserted. Reference to firm quote on 
OPRA is proposed to be deleted from this part of Section 8(b) and 
is, as discussed, put into proposed Section 8(b)(2)(B).
    \9\ The specific time of day, currently 9:45 a.m., is 
disseminated at https://www.nasdaqtrader.com/Content/TechnicalSupport/BXOptions_SystemSettings.pdf.
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    First, the Exchange proposes to update or add new Section 8 
definitions.
    The Exchange proposes a change to the definition of ``Current 
Reference Price''. Current Section 8(a)(2)(A) defines the ``Current 
Reference Price'' to mean: (i) The single price at which the maximum 
number of contracts of Eligible Interest can be paired at or within the 
NBBO; (ii) If more than one price exists under subparagraph (i), the 
Current reference Price shall mean the entered price at which contracts 
will remain unexecuted in the cross; (iii) If more than one price 
exists under subparagraph (ii), the Current Reference Price shall mean 
the price that is closest to the midpoint of the (1) National Best Bid 
or the last offer on BX against which contracts will be traded 
whichever is higher, and (2) National Best Offer or the last bid on BX 
against which contracts will be traded whichever is lower. Proposed 
Section 8(a)(2)(A) seeks to simplify the definition of the ``Current 
Reference Price'' to state that ``Current Reference Price'' shall mean 
an indication of what the Opening Cross price would be at a particular 
point in time. The ``Current Reference Price'' determination will be 
substantively similar to what is currently described in Section 
8(a)(2)(A), with the criteria for the Opening Cross price, as discussed 
below, set forth elsewhere in Section 8,\10\ according to various 
parameters (e.g. existence of opening interest, existence of Valid 
Width NBBO, whether the issue is open elsewhere).\11\ The Exchange 
believes that this construction makes the rule easier to follow. In 
addition, this construction also makes the language contained in 
current Section 8(a)(2)(E) no longer necessary as it is replaced with 
the new definition proposed for ``Current Reference Price'' in Section 
8(a)(2)(A) and proposed criteria for the Opening Cross price set forth 
in Section 8(b). Thus, the Exchange proposes to delete current Section 
8(a)(2)(E).
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    \10\ See proposed Section 8(b).
    \11\ Simultaneously, the price parameters are deleted from 
current Section 8(a)(2)(A). In a similar vein, current Section 
8(a)(2)(E) indicative prices are deleted. The Exchange is re-
organizing Section 8 and thereby deleting the noted price parameters 
and indicative prices in order to offer an integrated description of 
the opening process in proposed Section 8(b).
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    The Exchange proposes a change to the definition of ``BX Opening 
Cross''. Specifically, in proposed Section 8(a)(3) the Exchange 
introduces a clarifying change that references opening or resuming 
trading, and states that ``BX Opening Cross'' shall mean the process 
for opening or resuming trading pursuant to this rule and shall include 
the process for determining the price at which Eligible Interest, as 
discussed below, shall be executed at the open of trading for the day, 
or the open of trading for a halted option, and the process for 
executing that Eligible Interest.
    The Exchange proposes to define a new order type in Section 
1(e)(11), ``On the Open Order'', which is an order with a designated 
time-in-force of OPG.\12\ An On the Open Order will be executable only 
during the Opening Cross. If such order is not executed in its entirety 
during the Opening Cross, the order, or any unexecuted portion of such 
order, will be cancelled back to the entering participant.
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    \12\ The term ``On the Open Order'' (OPG) is also proposed to be 
added as a Time in Force to Chapter VI, Sec 1(g), and is added as an 
Order Type to Chapter VI, Sec. 8(a)(4).
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    The Exchange proposes a change to the definition of ``Eligible 
Interest'' contained in current Section 8(a)(4). Specifically, in 
Section 8(a)(4) the Exchange proposes a change to reflect the addition 
of a new order type, On the Open Order, with a time-in force of OPG, so 
that ``Eligible Interest'' shall mean any quotation or any order that 
may be entered into the system and designated with a time-in-force of 
IOC (immediate-or-cancel), DAY (day order), GTC (good-till-cancelled), 
and OPG. The Exchange also proposes new language to indicate how 
certain time-in-force orders will be handled, to state that orders 
received via FIX protocol prior to the BX Opening Cross designated with 
a time-in-force of IOC will be rejected and shall not be considered 
Eligible Interest. Orders received via SQF prior to the BX Opening 
Cross designated with a time-in-force of IOC will remain in-force 
through the opening and shall be cancelled immediately after the 
opening. The Exchange notes that FIX protocol users generally prefer a 
cancel if an order is not executed immediately in order that these 
users have an a opportunity to access other markets. SQF users are 
liquidity providers who

[[Page 10181]]

prefer that the order lives throughout the entire opening process, 
until it is clear their liquidity was not utilized in the opening. The 
Exchange believes that these changes help to clarify how eligible 
quotations and orders are handled in the opening process.
    The Exchange proposes to add the concept of a Valid Width NBBO and 
ABBO with respect to away and on-Exchange interest. Specifically, in 
proposed Section 8(a)(6) the Exchange defines ``Valid Width NBBO'' as 
the combination of all away market quotes and any combination of BX 
Options-registered Market Maker (``Market Maker'') orders and quotes 
received over the SQF Protocol within a specified bid/ask differential 
as established and published by the Exchange. The Valid Width NBBO will 
be configurable by underlying, and a table with valid width 
differentials will be posted by BX on its Web site. Away markets that 
are crossed (e.g. AMEX crosses AMEX, AMEX crosses CBOE) will void all 
Valid Width NBBO calculations. If any Market Maker orders or quotes on 
BX Options are crossed internally, then all such orders and quotes will 
be excluded from the Valid Width NBBO calculation. In addition, in 
proposed Section 8(a)(7), the Exchange defines ``ABBO'' as the 
displayed National Best Bid or Offer not including the Exchange's Best 
Bid or Offer.
    The Exchange is making these proposals to ensure that all away 
market quotes and any combination of Market Maker orders and 
quotes,\13\ whether they include the Exchange's Best Bid or Offer or 
not, are represented. The Exchange believes that including (or adding) 
the proposed Valid Width NBBO and ABBO within the opening rule should 
be beneficial to market participants by offering a more robust Opening 
Cross process. The proposed change will significantly enhance the price 
discovery mechanism in the opening process to include not only Market 
Maker orders and quotes but also away market interest.\14\
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    \13\ In respect of the Valid Width NBBO, the orders and quotes 
on the Exchange would be received over the SQF Protocol.
    \14\ Current Section 8(b)(2)(B) and (b)(2)(C) discuss the 
Opening Cross procedure if more than one price exists. As noted 
below, the Exchange proposes to add language to current Section 
8(b)(2)(C) regarding unexecuted contracts. Proposed Section 8(b)(5) 
and (b)(6) (renumbered from current Section 8(b)(3) and (b)(4), 
respectively) discuss how Eligible Interest would be handled vis a 
vis the Opening Cross; proposed (b)(5) states that if the BX Opening 
Cross price is selected and not all Eligible Interest available in 
BX Options is executed, then all Eligible Interest shall be executed 
at the BX Opening Cross price in accordance with the execution 
algorithm assigned to the associated underlying option. No changes 
are proposed to Sections 8(b)(6) and 8(b)(7) other than re-
numbering. Section 8 (b)(6) (renumbered from current Section 
8(b)(4)) states that all Eligible Interest executed in the BX 
Opening Cross shall be executed at the BX Opening Cross price. 
Proposed Section 8(b)(7) (renumbered from current Section 8(b)(5)) 
discusses the procedure of disseminating one additional Order 
Imbalance Indicator, if the conditions specified in proposed Section 
8(b) have occurred, but there is an imbalance containing marketable 
routable interest; any remaining Imbalance will be canceled, posted, 
or routed as per the directions on the customer's order.
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    Following are examples to illustrate, among other things, the 
calculation of the Valid Width NBBO as proposed in Section 8(a)(6) and 
the definition of the ABBO as proposed in Section 8(a)(7).
    Example 1 (normal market conditions). Assume that the Valid Width 
NBBO bid/ask differential is set by the Exchange at .10. MM1 is quoting 
on the Exchange .90-1.15 and MM2 is quoting on the Exchange .80-.95, 
thus making the BX BBO .90-.95. Assume the ABBO is .85-1.00. The 
Exchange considers all bid and all offers to determine the bid/ask 
differential; in this example, the best bid/ask is .90-.95 which 
satisfies the required .10 bid/ask differential and is considered a 
Valid Width NBBO. Pursuant to the rule proposed in Section 8(b)(2)(A), 
BX Options will open with no trade and BBO disseminated as .90-.95.
    Example 2 (away markets are crossed). Assume the Valid Width NBBO 
bid/ask differential is set by the Exchange at .10. MM1 is quoting on 
the Exchange 1.05-1.15 and MM2 is quoting on the Exchange 1.00-1.10, 
thus making the BX BBO 1.05-.1.10. Assume Exchange 2 is quoting .90-
1.10 and Exchange 3 is quoting .70-.85. Since the ABBO is crossed 
(.90-.85), Valid Width NBBO calculations are not taken into account 
until the away markets are no longer crossed. Once the away markets are 
no longer crossed, the Exchange will determine if a Valid Width NBBO 
can be calculated. Assume the ABBO uncrosses because Exchange 3 updates 
their quote to .90-1.15, the BX BBO of 1.05-1.10 is considered a Valid 
Width NBBO. Pursuant to the rule proposed in Section 8(b)(2)(A), BX 
Options will open with no trade and BBO disseminated as 1.05-1.10.
    Example 3 (BX Options orders/quotes are crossed, ABBO is Valid 
Width NBBO). Assume that the Valid Width NBBO bid/ask differential is 
set by the Exchange at .10. MM1 is quoting on the Exchange 1.05-1.15 
(10x10 contracts) and MM2 is quoting on the Exchange .90-.95 (10x10 
contracts), thus making the BX BBO crossed, 1.05-.95, while another MM3 
is quoting on the Exchange at .90-1.15 (10x10 contracts). Since the BX 
BBO is crossed, the crossing quotes are excluded from the Valid Width 
NBBO calculation. However, assume Exchange 2 is quoting .95-1.10 and 
Exchange 3 is quoting .95-1.05, resulting in an uncrossed ABBO of .95-
1.05. The ABBO of .95-1.05 meets the required .10 bid/ask differential 
and is considered a Valid Width NBBO. The Opening Cross will follow the 
rules set forth in proposed Section 8(b)(4)(B) because MM1 and MM2 have 
10 contracts each which cross and there is more than one price at which 
those contracts could execute. Thus, the Opening Cross will occur with 
10 contracts executing at 1.00, which is the mid-point of the National 
Best Bid and the National Best Offer. At the end of the opening 
process, only the quote from MM3 remains so the BX Options disseminated 
quote at the end of opening process will be .90-1.15 (10x10 contracts).
    Second, in current Section 8(b) the Exchange proposes to remove 
language that ``there is no Imbalance'' and language regarding ``on a 
class-by-class basis'', and proposes to add additional clarifying 
language pertaining to an Opening Cross after a trading halt. The 
Imbalance language is being removed from the introductory sentence of 
current Section 8(b) to make the language of the Processing of the 
Opening Cross apply more generally. The details surrounding the Opening 
Cross as it relates specifically to an Imbalance is currently provided 
for in Section 8(b)(5) and is being added in new proposed Section 
8(b)(4)(C). The Exchange proposes to remove the ``on a class-by-class 
basis'' language because the Exchange will use a regular market hours 
quote or trade (as determined by the Exchange) for all classes on the 
Exchange for the Opening Cross, without distinguishing among different 
classes. Additionally, the Exchange proposes to add language to current 
Section 8(b) to make it clear that an Opening Cross shall occur after a 
trading halt when trading resumes pursuant to Chapter V, Section 4.\15\
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    \15\ Chapter V, Section 4 states that trading in an option that 
has been the subject of a halt under Section 3 of Chapter V shall be 
resumed upon the determination by BX Regulation, that the conditions 
which led to the halt are no longer present or that the interests of 
a fair and orderly market are best served by a resumption of 
trading. Trading shall resume according to the process set forth in 
proposed Chapter VI, Section 8 of the rules.
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    Third, the Exchange proposes to add certain criteria to current 
Section 8(b), in order to describe how the opening process will differ 
depending on whether a trade is possible or not on BX Options. Provided 
that the ABBO is not crossed these criteria necessitate, per

[[Page 10182]]

proposed new Section 8(b)(1), that a Valid Width NBBO will always be 
required to open a series when there is tradable interest on BX 
Options; and require, per proposed new Section 8(b)(2), that in cases 
where there is no tradable interest, any one of three conditions could 
trigger a series on BX Options to open. Those conditions are listed in 
proposed new (b)(2) as: (A) A Valid Width NBBO is present, (B) a 
certain number of other options exchanges (as determined by the 
Exchange) have disseminated a firm quote on OPRA, or (C) a certain 
period of time (as determined by the Exchange) has elapsed.\16\ The 
Exchange believes that listing these criteria will, similarly to other 
proposed changes, organize and clarify the opening process and make it 
more robust and protective for market participants. The requirement of 
a Valid Width NBBO being present will help to ensure that opening 
execution prices are rational based on what is present in the broader 
marketplace during the opening process.
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    \16\ In the case of a crossed ABBO, the conditions set forth in 
new proposed Section (8)(b)(1) and (b)(2) will become operative when 
the ABBO becomes uncrossed.
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    Fourth, the Exchange proposes changes to provide additional 
information during the opening process. Current Section 8(b)(1) 
indicates that BX shall disseminate an Order Imbalance Indicator every 
5 seconds and does not allow for a shorter dissemination interval. New 
proposed Section 8(b)(3) indicates that BX shall disseminate by 
electronic means an Order Imbalance Indicator \17\ every 5 seconds 
beginning between 9:20 a.m. and 9:28 a.m., or a shorter dissemination 
interval as established by BX Options, with the default being set at 
9:25 a.m. The start of dissemination, dissemination interval, and 
changes to prior Order Imbalance Indicators, if any, shall be posted on 
the Exchange Web site. To further enhance price discovery and 
disclosure regarding the Opening Cross process, the Exchange proposes 
to add the ability for it to disseminate imbalances more frequently, 
which the rule currently does not allow for. The Exchange will indicate 
start of dissemination and the dissemination interval on its Web site. 
The Exchange believes that, like the other proposed changes, this 
proposed enhancement regarding additional information disclosure should 
prove to be very helpful to market participants, particularly those 
that are involved in adding liquidity during the Opening Cross process.
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    \17\ ``Order Imbalance Indicator'' means a message disseminated 
by electronic means containing information about Eligible Interest 
and the price in penny increments at which such interest would 
execute at the time of dissemination. For the information 
disseminated by the Order Imbalance Indicator (e.g. Current 
Reference Price, number of paired contracts, size and buy/sell 
direction of Imbalance, indicative prices), see Chapter VI, Section 
8(a)(2). The term ``order'' means a firm commitment to buy or sell 
options contracts. Chapter 1, Section 1(a)(5).
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    Fifth, the Exchange proposes to add language regarding how the 
Opening Cross will occur in relation to the Valid Width NBBO, and 
further what would happen if more than one price exists under certain 
circumstances. With this proposal, current Section 8(b)(2)(B) will be 
deleted and the determination of the Opening Cross price will be more 
fully described under proposed new Section 8(b)(4)(A)-(C). The new 
language added to current subparagraph (A) stipulates that the Opening 
Cross shall occur at the price that maximizes the number of contracts 
of Eligible Interest in BX Options to be executed at or within the ABBO 
and within a defined range, as established and published by the 
Exchange, of the Valid Width NBBO. Current subparagraph (A) simply 
states the Opening Cross shall occur at the price that maximizes the 
number of contracts of Eligible Interest in BX Options to be executed 
at or within the NBBO. The new proposed language being added to (A) 
will require that the Opening Cross price not only be at a price at or 
within the ABBO but also be within a defined range of the Valid Width 
NBBO. This addition will ensure that the Exchange does not open at a 
price too far away from the best interest available in the marketplace 
as a whole.
    The new proposed Section 8(b)(4)(B) and (C) describe in detail at 
what price the Opening Cross will occur if there exists more than one 
price under Section 8(b)(4)(A) at which the maximum number of contracts 
could be executed at or within the ABBO and equal to or within a 
defined range of the Valid Width NBBO. Current Section 8(b)(2)(C) 
(renumbered as proposed to (b)(4)(B)) states that if more than one 
price exists under subparagraph (B),\18\ the BX Opening Cross shall 
occur at the price that is closest to the midpoint price of (1) the 
National Best Bid or the last offer on BX Options against which 
contracts will be traded whichever is higher, and (2) the National Best 
Offer or the last bid on BX Options against which contracts will be 
traded whichever is lower. In an effort to make the rule language more 
precise and to signify that to the extent possible the Opening Cross 
will occur at the midpoint price, the Exchange proposes to delete the 
language ``the price that is closest to''. New subparagraph (B), as 
proposed, will read that if more than one price exists under 
subparagraph (A) \19\ and there are no contracts that would remain 
unexecuted in the cross, the BX Opening Cross shall occur at the 
midpoint price, rounded to the penny closest to the price of the last 
execution in that series and in the absence of a previous execution 
price, the price will round up, if necessary.\20\ The price is 
determined using the midpoint of (1) the National Best Bid or the last 
offer on BX Options against which contracts will be traded whichever is 
higher, and (2) National Best Offer or the last bid on BX Options 
against which contracts will be traded whichever is lower.\21\ The 
Exchange believes the proposed language more fully describes how 
rounding is applied to determine the opening execution price in place 
of a general statement of ``the price that is closest to the midpoint 
price''. In addition, the Exchange proposes new subparagraph (C) to 
describe the price at which the Opening Cross will occur when more than 
one price exists under subparagraph (A) and there are contracts which 
would remain unexecuted in the cross which was previously described in 
Section 8(b)(2)(B) with less granularity and without consideration of 
the new Valid Width NBBO. New proposed subparagraph (C) will state if 
more than one price exists under subparagraph (A), and contracts would 
remain unexecuted in the cross, then the opening price will be the 
highest/lowest price, in the case of a buy/sell imbalance, at which the 
maximum number of contracts can trade which is equal to or within a 
defined range as established and published by the Exchange,\22\ of the 
Valid Width

[[Page 10183]]

NBBO on the contra side of the imbalance that would not trade through 
the ABBO. Where there is more than one price and there is an imbalance, 
in Section 8(b)(4)(C) the Exchange is proposing that the Opening Cross 
price also be within a defined range of the Valid Width NBBO on the 
contra side of the imbalance, to help ensure that the opening price 
does not stray too far from the best prices available and that the 
opening price is rational. In addition, the Opening Cross price will be 
the highest price, in the case of a buy imbalance, where the maximum 
number of contracts can trade which is equal to or within the defined 
range of the Valid Width NBBO. Similarly, in the case of a sell 
imbalance, the Opening Cross price will be the lowest price at which 
the maximum number of contracts can trade which is equal to or within 
the defined range of the Valid Width NBBO. This serves to provide 
opening execution price protections as well as an Opening Cross price 
which will not have residual unexecuted interest reflected in the 
marketplace, after the Opening Cross execution, at a price which 
crosses the Opening Cross execution price.
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    \18\ Current Section 8(b)(2)(B) currently states that if more 
than one price exists under subparagraph (A), the BX Opening Cross 
shall occur at the entered price at which contracts will remain 
unexecuted in the cross. Subparagraph (A) states that the BX Opening 
Cross shall occur at the price that maximizes the number of 
contracts of Eligible Interest in BX Options to be executed at or 
within the National Best Bid and Offer.
    \19\ The Exchange proposes to change the subparagraph reference 
from (B) to (A) as current subparagraph (B) is being deleted and 
expanded upon with new subparagraphs (B) and (C).
    \20\ The Exchange notes that rounding will be applied, if 
needed, in the following manner: If the previous closing price is 
less than the midpoint, then the opening price rounds down; and if 
the previous closing price is greater than the midpoint, or if there 
is no closing price, then the opening price rounds up. For example, 
if there is a midpoint of 1.045, the opening price would be rounded 
to 1.04 if the previous closing price was 1.00, and would be rounded 
to 1.05 if the previous closing price was 1.10.
    \21\ A reference to BX OPTIONS is being corrected to read BX 
Options. No change in meaning is intended.
    \22\ The Exchange notes that the system will also calculate a 
defined range to limit the range of prices at which an order will be 
allowed to execute. Chapter VI, Section 10 (7).
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    The following examples illustrate, among other things, the 
determination of the Opening Cross price.
    Example 4 (no imbalance and one possible price). Assume a Valid 
Width NBBO bid/ask differential allowance of .10 and a defined range of 
.10. Also, assume that the ABBO is 1.00-1.10 (10x10 contracts) and the 
BX BBO is .99-1.15 (10x10 contracts) which represents a quote from MM1. 
Assume that a Customer Order 1 comes in to Buy 10 contracts for 1.05 
and a Customer Order 2 comes in to Sell 10 contracts at 1.05. Once 
regular markets hours have begun and the underlying security has 
opened, the system determines if there is a Valid Width Quote present. 
While the BX BBO of .99-1.15 is wider than the allowed bid/ask 
differential to qualify as a Valid Width NBBO on its own, the ABBO 
market of 1.00-1.10 does qualify as a Valid Width NBBO. In this 
scenario, there is not an opening imbalance since there are 10 
contracts on both the buy and sell side which could possibly trade. 
Thus, the Opening Cross will follow the rules set forth in proposed 
Section 8(b)(4)(A). Under this rule, the Opening Cross will occur at 
the price which maximizes the number of contracts of Eligible Interest 
at or within the ABBO and within a defined range of the Valid Width 
NBBO. In this scenario, the Opening Cross price will be 1.05 with 10 
contracts executing and BX BBO disseminated as .99-1.15.
    Example 5 (no imbalance and more than one possible price). Assume a 
Valid Width NBBO bid/ask differential allowance of .10 and a defined 
range of .10. Assume the ABBO is 1.00-1.10 (10x10 contracts) and the BX 
BBO is .99-1.11 (10x10 contracts) which represents a quote from MM1. 
Assume that a Customer Order 1 comes in to Buy 10 contracts for 1.08, 
and a Customer Order 2 comes in to Sell 10 contracts at 1.00. Once 
regular markets hours have begun and the underlying security has 
opened, the system determines if there is a Valid Width Quote present. 
While the BX BBO of .99-1.11 is wider than the allowed bid/ask 
differential to qualify as a Valid Width NBBO on its own, the ABBO 
market of 1.00-1.10 does qualify as a Valid Width NBBO. In this 
scenario, there is not an imbalance as there are 10 contracts to buy 
and 10 contracts to sell, however, there exist multiple price points at 
which those 10 contracts could execute within the ABBO and within a .10 
range of the Valid Width NBBO. Thus, the Opening Cross will follow the 
rules set forth in proposed Section 8(b)(4)(B) and the Opening Cross 
will occur with 10 contracts executing at 1.04. 1.04 represents the 
midpoint of 1.00 (the last offer on BX Options against which contracts 
will be traded or the National Best Bid since the two are equal) and 
1.08 (the last bid on BX Options against which contracts will be 
traded). If the example is changed slightly such that Order 1 is a 
market order to Buy 10 contracts, the Opening Cross will occur with 10 
contracts executing at 1.05 which represents the midpoint of 1.00 (the 
last offer on BX Options against which contracts will be traded or the 
National Best Bid since the two are equal) and 1.10 (the National Best 
Offer against which contracts will be traded). The market order is 
considered to be a price higher than the National Best Offer and 
outside of the NBBO therefore, the National Best Offer is used in 
determining the Opening Cross price. The BX BBO disseminated after the 
opening in either case will be .99-1.11.
    Example 6 (imbalance and more than one possible price). Assume that 
the ABBO is 1.05-1.50 (10x10 contracts) and MM1 is quoting on BX 
Options 1.15-1.20 (10x10 contracts) as well as MM2 is quoting on BX 
Options 1.05-1.50 (10x10 contracts). Also assume that the Valid Width 
NBBO bid/ask differential allowance and defined range are each .10. 
Also assume a Customer Order 1 is entered to Buy 30 contracts for 1.45. 
In this example, the Valid Width NBBO is comprised solely of the BX 
Options 1.15-1.20 quote. There is more than one price at which the 
Exchange can maximize the number of contracts executed, 10 contracts, 
during the Opening Cross and there exist multiple prices at which 20 
contracts will remain unexecuted in the Opening Cross. Thus, the 
Opening Cross price will be determined under proposed Section 
8(b)(4)(C). In this example, the Valid Width NBBO is 1.15-1.20 which is 
the best bid and best offer of the MM1 quote and the ABBO and is 
tighter than the allowed differential of .10. With a defined range of 
.10 of the Valid Width NBBO on the contra side of the imbalance (1.20 
+.10), and a buy imbalance, the Opening Cross price will be 1.30 with 
Order 1 buying 10 contracts from MM1. The Opening Cross price of 1.30 
represents the highest price at which the maximum number of contracts, 
10 contracts, can trade which is equal to or within the defined range 
of the Valid Width NBBO on the contra side of the imbalance that would 
not trade through the ABBO. The remaining unexecuted contracts will be 
posted on the book and reflected in the BX Options quote as a 1.30 bid 
with BX BBO disseminated as 1.30-150 [sic] with offer as non-firm, as 
proposed in Section 8(b)(4)(C)(iii). If this example were changed 
slightly such that the ABBO was 1.05-1.25, the opening price would be 
1.25 since the Opening Cross cannot occur at a price outside of the 
ABBO.
    Because new proposed subsections (b)(1) and (b)(2) are added, 
current subsections (b)(1) through (b)(5) are re-numbered to (b)(3) 
through (b)(7), and the reference to (b)(2) in current (b)(7) is re-
numbered to (b)(4).
    Sixth, the Exchange is proposing new language to indicate the price 
at which remaining unexecuted contracts will be posted. Specifically, 
in proposed Section 8(b)(4)(C), formerly covered in (b)(2), the 
Exchange proposes to state that if more than one price exists under 
subparagraph (A), and contracts would remain unexecuted in the cross, 
then the opening price will be the price at which the maximum number of 
contracts can trade that are equal to or within the defined range of 
the Valid Width NBBO on the contra side of the imbalance that would not 
trade through the ABBO. New proposed subsections (i)-(iv) to Section 
8(b)(4)(C) indicate the price at which unexecuted contracts will be 
posted on the book following the Opening Cross and the subsequent 
handling of the residual unexecuted contracts, as follows: (i) If 
unexecuted contracts remain with a limit price that is equal to the 
opening price, then the remaining unexecuted contracts will be

[[Page 10184]]

posted at the opening price, displayed one minimum price variation 
(MPV) away if displaying at the opening price would lock or cross the 
ABBO, with the contra-side BX BBO reflected as firm; (ii) if unexecuted 
contracts remain with a limit price that is through the opening price, 
and there is a contra side ABBO at the opening price, then the 
remaining unexecuted contracts will be posted at the opening price, 
displayed one minimum price variation (MPV) away from the ABBO, with 
the contra side BX BBO reflected as firm and order handling of any 
remaining interest will be done in accordance with the routing and 
time-in-force instructions of such interest and shall follow the 
Acceptable Trade Range mechanism set forth in Chapter VI, Section 10; 
(iii) if unexecuted contracts remain with a limit price that is through 
the opening price, and there is no contra side ABBO at the opening 
price, then the remaining contracts will be posted at the opening 
price, with the contra-side BX BBO reflected as non-firm; and (iv) 
order handling of any residual unexecuted contracts will be done in 
accordance with the reference price set forth in Chapter VI, Section 
10, with the opening price representing the reference price. This 
proposed behavior ensures that residual unexecuted contracts from the 
Opening Cross, regardless of their limit prices, are posted on the book 
at the opening price before subsequently being routed pursuant to 
Chapter VI, Section 11 or walked to the next potential execution 
price(s) under the Acceptable Trade Range set forth in Chapter VI, 
Section 10(7), with the opening price representing the ``reference 
price'' of that rule. This enhancement to the BX Opening Cross ensures 
that aggressively priced interest does not immediately post at prices 
which may be considered to be egregious if the interest were to post 
and execute immediately following the Opening Cross. The `firm' versus 
`non-firm' tagging of contra-side interest when residual Opening Cross 
interest is posted follows the construct currently in place on the 
Exchange when aggressive interest is received and triggers an 
Acceptable Trade Range (ATR) process. Contra-side BX BBO interest is 
reflected as non-firm when the Exchange has interest with a limit price 
(or market order) that is more aggressive than the Opening Cross price. 
The purpose behind this is to ensure that aggressively priced residual 
interest maintains priority should other aggressively priced interest 
be entered before the residual interest is permitted to access the next 
allowable range of prices.
    Following are examples illustrating the proposed rule text 
regarding the handling of unexecuted contracts.
    Example 7 (proposed Section 8(b)(4)(C)(i)). Assume the ABBO is 
1.00-1.10 (10x10 contracts), and the BX BBO is .99-1.11 (10x10 
contracts). Assume there is a Customer order to Buy 10 contracts at the 
market and a Customer order to Sell 50 contracts at 1.00. Further 
assume the Valid Width NBBO is defined as .10 and the defined range is 
also .10. The Valid Width NBBO in this example is comprised solely of 
the ABBO which has a bid/ask differential equal to the allowance of 
.10. Since there is (1) an imbalance, (2) multiple prices at which the 
maximum number of contracts (10) can execute equal to or within the 
ABBO and, (3) multiple prices at which the maximum number of contracts 
can execute equal to or within a defined range of the Valid Width NBBO 
on the contra side of the imbalance that would not trade through the 
ABBO, the Opening Cross will occur at a price determined under Section 
8(b)(4)(C). The Opening Cross will result in 10 contracts being 
executed at 1.00. The 40 remaining unexecuted contracts will be posted 
as a 40 contract offer at 1.00 and displayed at 1.01 (one MPV away from 
the away market bid of 1.00) in order to not display at a price which 
locks the ABBO under proposed Section 8(b)(4)(C)(i). The resulting 
displayed BX BBO would be .99-1.01, reflected as firm on both sides of 
the market, and the remaining interest would be handled in accordance 
with the routing and time in-force instructions of the residual 
interest.\23\ Since the residual interest is posted at its limit and 
therefore would not be permitted to execute at more aggressive prices, 
the contra-side BX BBO is reflected as firm.
---------------------------------------------------------------------------

    \23\ As set forth in proposed Section 8(b)(4)(C)(iv), order 
handling of any residual interest in the Opening Cross will also be 
done in accordance with the reference price set forth in Chapter VI, 
Section 10, with the opening price representing the reference price.
---------------------------------------------------------------------------

    Example 8 (proposed Section 8(b)(4)(C)(ii)). Assume the ABBO is 
1.00-1.10 (10x10 contracts), and the BX BBO is .99-1.11 (10x10 
contracts). Assume there is a Customer order to Buy 10 contracts at the 
market and a Customer order to Sell 50 contracts at .85. Further assume 
the Valid Width NBBO is defined as .10 and the defined range is also 
.10. The Valid Width NBBO in this example is comprised solely of the 
ABBO which has a bid/ask differential equal to the allowance of .10. 
Since there is an imbalance and multiple prices exist at which the 
maximum number of contracts (10) can execute equal to or within the 
ABBO and within a defined range of the Valid Width NBBO without trading 
through the ABBO, the Opening Cross will occur at a price determined 
under Section 8(b)(4)(C). The Opening Cross would result in 10 
contracts being executed at 1.00. The 40 remaining unexecuted contracts 
will be posted as a 1.00 offer and be displayed at 1.01 so as not to 
lock the away market bid under proposed Section 8(b)(4)(C)(ii). Since 
the residual interest is posted at a price which internally locks the 
ABBO and therefore would not be permitted to execute at more aggressive 
prices until the ABBO moves, the contra-side BX BBO is reflected as 
firm. The resulting displayed BX BBO would be .99-1.01, reflected as 
firm on both sides of the market, and the remaining interest would be 
handled in accordance with the routing and time-in-force instructions 
of the residual interest and in accordance with Chapter VI, Section 10 
of the BX Options rules, and the contra-side BBO will be marked as firm 
or non-firm in accordance with the same Section 10 rule.
    Example 9 (proposed Section 8(b)(4)(C)(iii)). Assume the ABBO is 
.00-5.00 (0x10 contracts). Also assume the Valid Width NBBO bid/ask 
differential is defined as 0.10 and the defined range as described in 
proposed Section 8(b)(4)(C) is .10. Further, assume BX Options has 
received a quote of .99-1.09 (10x10), a Customer order to Buy 10 
contracts at the market, a Customer order to Buy 10 contracts for .70, 
and a Customer order to Sell 50 contracts at .85. There is a Valid 
Width NBBO present with the BX Options quote of .99-1.09, which is 
equal to the defined bid/ask differential of .10. The Opening Cross has 
an imbalance on the sell side. Since there is more than one price at 
which contracts would remain unexecuted in the cross, the Opening Cross 
price is determined using the logic included in proposed Section 
8(b)(4)(C). This will result in an execution of 20 contracts at .89, 
since the Valid Width NBBO on the bid side (contra to the imbalance 
side) is .99 less the defined range of .10, with the residual contracts 
of the .85 Sell Order posted on the book at .89. The resulting BX BBO 
would be reflected as .70-.89, reflected as non-firm on the bid, firm 
on the offer, and the remaining unexecuted interest would be handled in 
accordance with the routing and time-in-force instructions of the 
residual interest. The .70 bid is reflected as non-firm to ensure that 
incoming interest will not be permitted to immediately

[[Page 10185]]

execute ahead of the more aggressively priced Opening Cross residual 
interest. The residual interest from the Opening Cross will been 
handled in accordance with Chapter VI, Section 10 of the BX Options 
rules, and the contra-side BBO will be marked as firm or non-firm in 
accordance with the same Section 10 rule.
    Seventh, the Exchange is proposing new language to indicate the use 
of execution algorithms assigned to the underlying options. 
Specifically, in proposed Section 8(b)(5) (formerly (b)(3)), the 
Exchange proposes to delete price/time priority and add the use of 
execution algorithms by stating that if the BX Opening Cross price is 
selected and fewer than all contracts of Eligible Interest that are 
available in BX Options would be executed, all Eligible Interest shall 
be executed at the BX Opening Cross price in accordance with the 
execution algorithm assigned to the associated underlying option. By 
substituting language indicating use of execution algorithms rather 
than price/time priority, the Exchange recognizes that there are now 
multiple execution allocation models,\24\ and these are factored into 
the Opening Cross.
---------------------------------------------------------------------------

    \24\ See, e.g., Chapter VI, Section 10(1).
---------------------------------------------------------------------------

    Lastly, the Exchange proposes to add a provision regarding the 
return of orders in un-opened symbols in the absence of an Opening 
Cross. Proposed new Section 8(c) is substituted for current Section 
8(c) and provides the procedure if an Opening Cross in a symbol is not 
initiated before the conclusion of the Opening Order Cancel Timer. 
Specifically, proposed new Section 8(c) states that if an Opening Cross 
is not initiated under such circumstances, a firm may elect to have 
orders returned by providing written notification to the Exchange. 
These orders include all non GTC orders received over the FIX protocol. 
The Opening Order Cancel Timer represents a period of time since the 
underlying market has opened, and shall be established and disseminated 
by BX on its Web site. Proposed Section 8(c) will provide participants 
the ability to have their orders returned to them if BX Options is 
unable to initiate an Opening Cross within a reasonable time of the 
opening of the underlying market. In addition, proposed Section 8(c) 
deletes language which is present in current Section 8(c) regarding how 
the Opening Cross operates in relation to the presence or absence of a 
regular market hour quote or trade by the Market for the Underlying and 
the process of the Opening Cross in relation to opening quotes or 
orders which lock or cross each other. The deleted provisions are now 
being more thoroughly described in proposed Section 8(b).
    The Exchange believes that the proposed changes significantly 
improve the quality of execution of BX Options' opening. The proposed 
changes give participants more choice about where, and when, they can 
send orders for the opening that would afford them the best experience. 
The Exchange believes that this should attract new order flow. The 
proposed changes should prove to be very helpful to market 
participants, particularly those that are involved in adding liquidity 
during the Opening Cross. Absent these proposed enhancements, BX 
Options' opening quality will remain less robust than on other 
exchanges.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \25\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \26\ in particular, in that the proposal 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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposal is consistent with the goals of the Act because it 
will enhance and clarify the Opening Cross process, minimize or negate 
unnecessary complexity, and encourage liquidity at the crucial time of 
market open. The proposed change will also enhance the price discovery 
mechanism in the opening process to include not only Market Maker 
orders and quotes but also away market interest as represented by 
quotes. The Exchange believes this change will make the transition from 
the Opening Cross period to regular market trading more efficient and 
thus promote just and equitable principles of trade and serve to 
protect investors and the public interest.
    The proposal is designed to promote just and equitable principles 
of trade by updating and clarifying the rules regarding the BX Opening 
and Halt Cross. In particular, the proposal would update or add Chapter 
VI, Section 8 definitions regarding BX Opening Cross, Eligible 
Interest, NBBO, and ABBO in respect of the Opening Cross and resuming 
options trading after a halt. The Exchange would add to Chapter VI, 
Section 1 the definition of ``On the Opening Order'' (OPG) as used in 
Section 8 in respect of the Opening Cross. The proposal would also, as 
discussed, make changes in Section 8 regarding: The criteria for 
opening of trading or resumption of trading after a halt; BX posting on 
its Web site any changes to the dissemination interval or prior Order 
Imbalance Indicator; the procedure if more than one price exists; the 
procedure if there are unexecuted contracts; and the ability of firms 
to elect that orders be returned in symbols that were not opened on BX 
Options before the conclusion of the Opening Order Cancel Timer.
    The proposal is designed to remove impediments to and perfect the 
mechanism of a free and open market and a national market system. In 
particular, the Exchange proposes in Chapter VI, Section 8(b) to remove 
the class-by-class quote or trade characteristic because for the 
Opening Cross the Exchange will use a regular market hours quote or 
trade (as determined by the Exchange) for all underylings [sic] on the 
Exchange, without distinguishing among underlying symbols, or, in the 
case of a trading halt the Opening Cross shall occur when trading 
resumes pursuant to Chapter V, Section 4. The Exchange proposes to set 
forth in Section 8(b) clear language describing under what 
circumstances an Opening Cross will occur, and how the Opening Cross 
will occur if more than one price exists under certain circumstances. 
Thus, for example, proposed Section 8(b)(4) specifies that if more than 
one price exists under subparagraph (A), and contracts would remain 
unexecuted in the cross, then the opening price will be the highest/
lowest price, in the case of a buy/sell imbalance, at which the maximum 
number of contracts can trade which is equal to or within a defined 
range, as established and published by the Exchange, of the Valid Width 
NBBO on the contra side of the imbalance that would not trade through 
the ABBO. The Exchange proposes, in Section 8(b)(4)(C), three 
alternatives for how remaining unexecuted contracts will be handled. 
These include: If unexecuted contracts remain with a limit price that 
is equal to the opening price, if unexecuted contracts remain with a 
limit price that is through the opening price and there is a contra 
side ABBO at the opening price, and if unexecuted contracts remain with 
a limit price that is through the opening price and there is no contra 
side ABBO at the opening price. The Exchange also proposes to clarify 
what happens if an Opening Cross in a symbol is not initiated before 
the conclusion of the Opening Order Cancel Timer. In that case, 
proposed

[[Page 10186]]

Section 8(c)(2) [sic] indicates that a firm may elect to have orders 
returned by providing written notification to the Exchange. These 
orders include all non GTC orders received over the FIX protocol. The 
Opening Order Cancel Timer represents a period of time since the 
underlying market has opened, and shall be established and disseminated 
by the Exchange on its Web site.
    The proposal is designed in general to protect investors and the 
public interest. The Exchange proposes to add certain criteria to 
current Section 8(b), in order to describe how the opening process will 
differ depending on whether a trade is possible or not on BX Options. 
Assuming that ABBO is not crossed, proposed new Chapter VI, Section 
8(b)(1) states that if there is a possible trade on BX, a Valid Width 
NBBO must be present. Assuming that ABBO is not crossed, proposed 
Section 8(b)(2) states that if no trade is possible on BX, then BX will 
open dependent upon one of the following: A Valid Width NBBO is 
present; a certain number of other options exchanges (as determined by 
the Exchange) have disseminated a firm quote on OPRA; or a certain 
period of time (as determined by the Exchange) has elapsed. The 
Exchange proposes to further enhance price discovery and disclosure 
regarding the Opening Cross process, by proposing in current Section 
(b)(1) (renumbered to be (b)(3)) that BX may choose to establish a 
dissemination interval that is shorter than every 5 seconds; and that 
the Exchange will indicate the interval on its Web site in conjunction 
to other information regarding the Opening Process. Moreover, the 
Exchange proposes to add language in current Section 8(c)(2) regarding 
the return of orders in un-opened symbols in the absence of an Opening 
Cross. Thus, if an Opening Cross in a symbol is not initiated before 
the conclusion of the Opening Order Cancel Timer, a firm may elect to 
have orders returned by providing written notification to the Exchange. 
These orders include all non GTC orders received over the FIX protocol. 
The Opening Order Cancel Timer represents a period of time since the 
underlying market has opened, and shall be established and disseminated 
by BX on its Web site.
    For the above reasons, BX believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act. The 
Exchange believes that the proposed changes significantly improve the 
quality of execution of BX Options' opening. The proposed changes give 
participants more choice about where, and when, they can send orders 
for the opening that would afford them the best experience. The 
Exchange believes that this should attract new order flow. The proposed 
changes should prove to be more robust and helpful to market 
participants, particularly those that are involved in adding liquidity 
during the Opening Cross.

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. While the Exchange does not 
believe that the proposal should have any direct impact on competition, 
it believes the proposal should help to further clarify the Opening 
Cross process and make it more efficient, reduce order entry 
complexity, enhance market liquidity, and be beneficial to market 
participants. Moreover, the Exchange believes that the proposed changes 
significantly improve the quality of execution of the BX Options 
opening. The proposed changes give participants more choice about 
where, and when, they can send orders for the opening that would afford 
them the best experience. The Exchange believes that this should 
attract new order flow. Absent these proposed enhancements, BX Options' 
opening quality will remain less robust than on other exchanges, and 
the Exchange will remain at a competitive disadvantage.

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 \27\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\28\
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(a).
    \28\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and the text of 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.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BX-2015-010 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2015-010. 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 such filing also will be available 
for inspection and copying at the principal offices of the Exchange. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from

[[Page 10187]]

submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-BX-
2015-010, and should be submitted on or before March 18, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-03819 Filed 2-24-15; 8:45 am]
BILLING CODE 8011-01-P
Federal Register / Vol. 80, No. 37 / Wednesday, February 25, 2015 / Notices 10179

will allow the obvious error pilot those that may be withheld from the Systems), Section 8 (BX Opening and
program to continue uninterrupted public in accordance with the Halt Cross) of the Exchange’s Options
while the industry gains further provisions of 5 U.S.C. 552, will be rules. The proposal would update or
experience operating under the Plan, available for Web site viewing and add Section 1 and Section 8 definitions
and avoid any investor confusion that printing in the Commission’s Public in respect of the BX Opening and Halt
could result from a temporary Reference Room, 100 F Street NE., Cross. The proposal would also make
interruption in the pilot program. For Washington, DC 20549 on official changes regarding: The criteria for
this reason, the Commission designates business days between the hours of opening of trading or resumption of
the proposed rule change to be operative 10:00 a.m. and 3:00 p.m. Copies of such trading after a halt; BX posting on its
upon filing.9 filing also will be available for Web site any changes to the
At any time within 60 days of the inspection and copying at the principal dissemination interval or prior Order
filing of the proposed rule change, the office of the Exchange. All comments Imbalance Indicator; the procedure if
Commission summarily may received will be posted without change; more than one price exists; the
temporarily suspend such rule change if the Commission does not edit personal procedure if there are unexecuted
it appears to the Commission that such identifying information from contracts; and the ability of firms to
action is necessary or appropriate in the submissions. You should submit only elect that orders be returned in symbols
public interest, for the protection of information that you wish to make that were not opened on BX before the
investors, or otherwise in furtherance of available publicly. All submissions conclusion of the Opening Order Cancel
the purposes of the Act. If the should refer to File Number SR–BOX– Timer.
Commission takes such action, the 2015–13, and should be submitted on or The text of the proposed rule change
Commission shall institute proceedings before March 18, 2015. is available on the Exchange’s Web site
to determine whether the proposed rule For the Commission, by the Division of at http://nasdaqomxbx.cchwallstreet
should be approved or disapproved. Trading and Markets, pursuant to delegated .com/, at the principal office of the
IV. Solicitation of Comments authority.10 Exchange, and at the Commission’s
Brent J. Fields, Public Reference Room.
Interested persons are invited to
Secretary.
submit written data, views, and II. Self-Regulatory Organization’s
[FR Doc. 2015–03814 Filed 2–24–15; 8:45 am]
arguments concerning the foregoing, Statement of the Purpose of, and
including whether the proposed rule BILLING CODE 8011–01–P Statutory Basis for, the Proposed Rule
change is consistent with the Act. Change
Comments may be submitted by any of In its filing with the Commission, the
SECURITIES AND EXCHANGE
the following methods: Exchange included statements
COMMISSION
Electronic Comments concerning the purpose of and basis for
[Release No. 34–74310; File No. SR–BX–
• Use the Commission’s Internet the proposed rule change and discussed
2015–010]
comment form (http://www.sec.gov/ any comments it received on the
rules/sro.shtml); or Self-Regulatory Organizations; proposed rule change. The text of these
• Send an email to rule-comments@ NASDAQ OMX BX, Inc.; Notice of Filing statements may be examined at the
sec.gov. Please include File Number SR– and Immediate Effectiveness of places specified in Item IV below. The
BOX–2015–13 on the subject line. Proposed Rule Change To Modify and Exchange has prepared summaries, set
Reorganize Chapter VI (Trading forth in sections A, B, and C below, of
Paper Comments Systems), Section 8 (BX Opening and the most significant aspects of such
• Send paper comments in triplicate Halt Cross) of the Exchange’s Options statements.
to Brent J. Fields, Secretary, Securities Rules A. Self-Regulatory Organization’s
and Exchange Commission, 100 F Street Statement of the Purpose of, and
NE., Washington, DC 20549–1090. February 19, 2015.
Pursuant to Section 19(b)(1) of the Statutory Basis for, the Proposed Rule
All submissions should refer to File Change
Number SR–BOX–2015–13. This file Securities Exchange Act of 1934
number should be included on the (‘‘Act’’),1 and Rule 19b–4 thereunder,2 1. Purpose
subject line if email is used. To help the notice is hereby given that on February
The purpose of the proposed rule
Commission process and review your 9, 2015, NASDAQ OMX BX, Inc. (‘‘BX’’
change is to modify BX Chapter VI,
comments more efficiently, please use or ‘‘Exchange’’) filed with the Securities
Section 1 and Section 8 to update or add
only one method. The Commission will and Exchange Commission (‘‘SEC’’ or
definitions, which include Current
post all comments on the Commission’s ‘‘Commission’’) the proposed rule
Reference Price, BX Opening Cross,
Internet Web site (http://www.sec.gov/ change as described in Items I and II
Eligible Interest, Valid Width National
rules/sro.shtml). Copies of the below, which Items have been prepared
Best Bid or Offer (‘‘Valid Width
submission, all subsequent by the Exchange. The Commission is
NBBO’’), Away Best Bid or Offer
amendments, all written statements publishing this notice to solicit
(‘‘ABBO’’), and On the Open Order
with respect to the proposed rule comments on the proposed rule change
(‘‘OPG’’). The purpose is to also make
change that are filed with the from interested persons.
changes regarding: The criteria for
Commission, and all written I. Self-Regulatory Organization’s opening of trading or resumption of
asabaliauskas on DSK5VPTVN1PROD with NOTICES

communications relating to the Statement of the Terms of the Substance trading after a halt; BX posting on its
proposed rule change between the of the Proposed Rule Change Web site any changes to the
Commission and any person, other than The Exchange proposes to modify and dissemination interval or prior Order
reorganize Chapter VI (Trading Imbalance Indicator; the procedure if
9 For purposes only of waiving the 30-day
more than one price exists; the
operative delay, the Commission has also
considered the proposed rule’s impact on
10 17 CFR 200.30–3(a)(12). procedure if there are unexecuted
efficiency, competition, and capital formation. See 1 15 U.S.C. 78s(b)(1). contracts; and the ability of firms to
15 U.S.C. 78c(f). 2 17 CFR 240.19b–4. elect that orders be returned in symbols

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Federal Register / Vol. 80, No. 37 / Wednesday, February 25, 2015 / Notices 10181

prefer that the order lives throughout Following are examples to illustrate, crossing quotes are excluded from the
the entire opening process, until it is among other things, the calculation of Valid Width NBBO calculation.
clear their liquidity was not utilized in the Valid Width NBBO as proposed in However, assume Exchange 2 is quoting
the opening. The Exchange believes that Section 8(a)(6) and the definition of the .95–1.10 and Exchange 3 is quoting .95–
these changes help to clarify how ABBO as proposed in Section 8(a)(7). 1.05, resulting in an uncrossed ABBO of
eligible quotations and orders are Example 1 (normal market .95–1.05. The ABBO of .95–1.05 meets
handled in the opening process. conditions). Assume that the Valid the required .10 bid/ask differential and
The Exchange proposes to add the Width NBBO bid/ask differential is set is considered a Valid Width NBBO. The
concept of a Valid Width NBBO and by the Exchange at .10. MM1 is quoting Opening Cross will follow the rules set
ABBO with respect to away and on- on the Exchange .90–1.15 and MM2 is forth in proposed Section 8(b)(4)(B)
Exchange interest. Specifically, in quoting on the Exchange .80–.95, thus because MM1 and MM2 have 10
proposed Section 8(a)(6) the Exchange making the BX BBO .90–.95. Assume contracts each which cross and there is
defines ‘‘Valid Width NBBO’’ as the the ABBO is .85–1.00. The Exchange more than one price at which those
combination of all away market quotes considers all bid and all offers to contracts could execute. Thus, the
and any combination of BX Options- determine the bid/ask differential; in Opening Cross will occur with 10
registered Market Maker (‘‘Market this example, the best bid/ask is .90–.95 contracts executing at 1.00, which is the
Maker’’) orders and quotes received over which satisfies the required .10 bid/ask mid-point of the National Best Bid and
the SQF Protocol within a specified bid/ differential and is considered a Valid the National Best Offer. At the end of
ask differential as established and Width NBBO. Pursuant to the rule the opening process, only the quote
published by the Exchange. The Valid proposed in Section 8(b)(2)(A), BX from MM3 remains so the BX Options
Width NBBO will be configurable by Options will open with no trade and disseminated quote at the end of
underlying, and a table with valid width BBO disseminated as .90–.95. opening process will be .90–1.15 (10x10
differentials will be posted by BX on its Example 2 (away markets are contracts).
Web site. Away markets that are crossed crossed). Assume the Valid Width Second, in current Section 8(b) the
(e.g. AMEX crosses AMEX, AMEX NBBO bid/ask differential is set by the Exchange proposes to remove language
crosses CBOE) will void all Valid Width Exchange at .10. MM1 is quoting on the that ‘‘there is no Imbalance’’ and
NBBO calculations. If any Market Maker Exchange 1.05–1.15 and MM2 is quoting language regarding ‘‘on a class-by-class
orders or quotes on BX Options are on the Exchange 1.00–1.10, thus making basis’’, and proposes to add additional
crossed internally, then all such orders the BX BBO 1.05–.1.10. Assume clarifying language pertaining to an
and quotes will be excluded from the Exchange 2 is quoting .90–1.10 and Opening Cross after a trading halt. The
Valid Width NBBO calculation. In Exchange 3 is quoting .70–.85. Since the Imbalance language is being removed
addition, in proposed Section 8(a)(7), ABBO is crossed (.90–.85), Valid Width from the introductory sentence of
the Exchange defines ‘‘ABBO’’ as the NBBO calculations are not taken into current Section 8(b) to make the
displayed National Best Bid or Offer not account until the away markets are no language of the Processing of the
including the Exchange’s Best Bid or longer crossed. Once the away markets Opening Cross apply more generally.
Offer. are no longer crossed, the Exchange will The details surrounding the Opening
The Exchange is making these determine if a Valid Width NBBO can Cross as it relates specifically to an
proposals to ensure that all away market be calculated. Assume the ABBO Imbalance is currently provided for in
quotes and any combination of Market uncrosses because Exchange 3 updates Section 8(b)(5) and is being added in
Maker orders and quotes,13 whether their quote to .90–1.15, the BX BBO of new proposed Section 8(b)(4)(C). The
they include the Exchange’s Best Bid or 1.05–1.10 is considered a Valid Width Exchange proposes to remove the ‘‘on a
Offer or not, are represented. The NBBO. Pursuant to the rule proposed in class-by-class basis’’ language because
Exchange believes that including (or Section 8(b)(2)(A), BX Options will the Exchange will use a regular market
adding) the proposed Valid Width open with no trade and BBO hours quote or trade (as determined by
NBBO and ABBO within the opening disseminated as 1.05–1.10. the Exchange) for all classes on the
rule should be beneficial to market Example 3 (BX Options orders/quotes Exchange for the Opening Cross,
participants by offering a more robust are crossed, ABBO is Valid Width without distinguishing among different
Opening Cross process. The proposed NBBO). Assume that the Valid Width classes. Additionally, the Exchange
change will significantly enhance the NBBO bid/ask differential is set by the proposes to add language to current
price discovery mechanism in the Exchange at .10. MM1 is quoting on the Section 8(b) to make it clear that an
opening process to include not only Exchange 1.05–1.15 (10x10 contracts) Opening Cross shall occur after a
Market Maker orders and quotes but and MM2 is quoting on the Exchange trading halt when trading resumes
also away market interest.14 .90–.95 (10x10 contracts), thus making pursuant to Chapter V, Section 4.15
the BX BBO crossed, 1.05–.95, while Third, the Exchange proposes to add
13 In respect of the Valid Width NBBO, the orders
another MM3 is quoting on the certain criteria to current Section 8(b),
and quotes on the Exchange would be received over
the SQF Protocol.
Exchange at .90–1.15 (10x10 contracts). in order to describe how the opening
14 Current Section 8(b)(2)(B) and (b)(2)(C) discuss Since the BX BBO is crossed, the process will differ depending on
the Opening Cross procedure if more than one price whether a trade is possible or not on BX
exists. As noted below, the Exchange proposes to Sections 8(b)(6) and 8(b)(7) other than re- Options. Provided that the ABBO is not
add language to current Section 8(b)(2)(C) regarding numbering. Section 8 (b)(6) (renumbered from
crossed these criteria necessitate, per
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unexecuted contracts. Proposed Section 8(b)(5) and current Section 8(b)(4)) states that all Eligible
(b)(6) (renumbered from current Section 8(b)(3) and Interest executed in the BX Opening Cross shall be
(b)(4), respectively) discuss how Eligible Interest executed at the BX Opening Cross price. Proposed 15 Chapter V, Section 4 states that trading in an

would be handled vis a vis the Opening Cross; Section 8(b)(7) (renumbered from current Section option that has been the subject of a halt under
proposed (b)(5) states that if the BX Opening Cross 8(b)(5)) discusses the procedure of disseminating Section 3 of Chapter V shall be resumed upon the
price is selected and not all Eligible Interest one additional Order Imbalance Indicator, if the determination by BX Regulation, that the conditions
available in BX Options is executed, then all conditions specified in proposed Section 8(b) have which led to the halt are no longer present or that
Eligible Interest shall be executed at the BX occurred, but there is an imbalance containing the interests of a fair and orderly market are best
Opening Cross price in accordance with the marketable routable interest; any remaining served by a resumption of trading. Trading shall
execution algorithm assigned to the associated Imbalance will be canceled, posted, or routed as per resume according to the process set forth in
underlying option. No changes are proposed to the directions on the customer’s order. proposed Chapter VI, Section 8 of the rules.

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10182 Federal Register / Vol. 80, No. 37 / Wednesday, February 25, 2015 / Notices

proposed new Section 8(b)(1), that a believes that, like the other proposed which contracts will be traded
Valid Width NBBO will always be changes, this proposed enhancement whichever is lower. In an effort to make
required to open a series when there is regarding additional information the rule language more precise and to
tradable interest on BX Options; and disclosure should prove to be very signify that to the extent possible the
require, per proposed new Section helpful to market participants, Opening Cross will occur at the
8(b)(2), that in cases where there is no particularly those that are involved in midpoint price, the Exchange proposes
tradable interest, any one of three adding liquidity during the Opening to delete the language ‘‘the price that is
conditions could trigger a series on BX Cross process. closest to’’. New subparagraph (B), as
Options to open. Those conditions are Fifth, the Exchange proposes to add proposed, will read that if more than
listed in proposed new (b)(2) as: (A) A language regarding how the Opening one price exists under subparagraph
Valid Width NBBO is present, (B) a Cross will occur in relation to the Valid (A) 19 and there are no contracts that
certain number of other options Width NBBO, and further what would would remain unexecuted in the cross,
exchanges (as determined by the happen if more than one price exists the BX Opening Cross shall occur at the
Exchange) have disseminated a firm under certain circumstances. With this midpoint price, rounded to the penny
quote on OPRA, or (C) a certain period proposal, current Section 8(b)(2)(B) will closest to the price of the last execution
of time (as determined by the Exchange) be deleted and the determination of the in that series and in the absence of a
has elapsed.16 The Exchange believes Opening Cross price will be more fully previous execution price, the price will
that listing these criteria will, similarly described under proposed new Section round up, if necessary.20 The price is
to other proposed changes, organize and 8(b)(4)(A)–(C). The new language added determined using the midpoint of (1)
clarify the opening process and make it to current subparagraph (A) stipulates the National Best Bid or the last offer on
more robust and protective for market that the Opening Cross shall occur at the BX Options against which contracts will
participants. The requirement of a Valid price that maximizes the number of be traded whichever is higher, and (2)
Width NBBO being present will help to contracts of Eligible Interest in BX National Best Offer or the last bid on BX
ensure that opening execution prices are Options to be executed at or within the Options against which contracts will be
rational based on what is present in the ABBO and within a defined range, as traded whichever is lower.21 The
broader marketplace during the opening established and published by the Exchange believes the proposed
process. Exchange, of the Valid Width NBBO. language more fully describes how
Fourth, the Exchange proposes Current subparagraph (A) simply states rounding is applied to determine the
changes to provide additional the Opening Cross shall occur at the opening execution price in place of a
information during the opening process. price that maximizes the number of general statement of ‘‘the price that is
Current Section 8(b)(1) indicates that BX contracts of Eligible Interest in BX closest to the midpoint price’’. In
shall disseminate an Order Imbalance Options to be executed at or within the addition, the Exchange proposes new
Indicator every 5 seconds and does not NBBO. The new proposed language subparagraph (C) to describe the price at
allow for a shorter dissemination being added to (A) will require that the which the Opening Cross will occur
interval. New proposed Section 8(b)(3) Opening Cross price not only be at a when more than one price exists under
indicates that BX shall disseminate by price at or within the ABBO but also be subparagraph (A) and there are contracts
electronic means an Order Imbalance within a defined range of the Valid which would remain unexecuted in the
Indicator 17 every 5 seconds beginning Width NBBO. This addition will ensure cross which was previously described in
between 9:20 a.m. and 9:28 a.m., or a that the Exchange does not open at a Section 8(b)(2)(B) with less granularity
shorter dissemination interval as price too far away from the best interest and without consideration of the new
established by BX Options, with the available in the marketplace as a whole. Valid Width NBBO. New proposed
default being set at 9:25 a.m. The start The new proposed Section 8(b)(4)(B) subparagraph (C) will state if more than
of dissemination, dissemination and (C) describe in detail at what price one price exists under subparagraph (A),
interval, and changes to prior Order the Opening Cross will occur if there and contracts would remain unexecuted
Imbalance Indicators, if any, shall be exists more than one price under in the cross, then the opening price will
posted on the Exchange Web site. To Section 8(b)(4)(A) at which the be the highest/lowest price, in the case
further enhance price discovery and maximum number of contracts could be of a buy/sell imbalance, at which the
disclosure regarding the Opening Cross executed at or within the ABBO and maximum number of contracts can trade
process, the Exchange proposes to add equal to or within a defined range of the which is equal to or within a defined
the ability for it to disseminate Valid Width NBBO. Current Section range as established and published by
imbalances more frequently, which the 8(b)(2)(C) (renumbered as proposed to the Exchange,22 of the Valid Width
rule currently does not allow for. The (b)(4)(B)) states that if more than one
Exchange will indicate start of price exists under subparagraph (B),18 19 The Exchange proposes to change the
dissemination and the dissemination the BX Opening Cross shall occur at the subparagraph reference from (B) to (A) as current
interval on its Web site. The Exchange subparagraph (B) is being deleted and expanded
price that is closest to the midpoint upon with new subparagraphs (B) and (C).
16 In the case of a crossed ABBO, the conditions
price of (1) the National Best Bid or the 20 The Exchange notes that rounding will be

set forth in new proposed Section (8)(b)(1) and last offer on BX Options against which applied, if needed, in the following manner: If the
(b)(2) will become operative when the ABBO contracts will be traded whichever is previous closing price is less than the midpoint,
becomes uncrossed. then the opening price rounds down; and if the
higher, and (2) the National Best Offer previous closing price is greater than the midpoint,
17 ‘‘Order Imbalance Indicator’’ means a message
or the last bid on BX Options against or if there is no closing price, then the opening
asabaliauskas on DSK5VPTVN1PROD with NOTICES

disseminated by electronic means containing
information about Eligible Interest and the price in price rounds up. For example, if there is a midpoint
penny increments at which such interest would 18 Current Section 8(b)(2)(B) currently states that of 1.045, the opening price would be rounded to
execute at the time of dissemination. For the if more than one price exists under subparagraph 1.04 if the previous closing price was 1.00, and
information disseminated by the Order Imbalance (A), the BX Opening Cross shall occur at the entered would be rounded to 1.05 if the previous closing
Indicator (e.g. Current Reference Price, number of price at which contracts will remain unexecuted in price was 1.10.
21 A reference to BX OPTIONS is being corrected
paired contracts, size and buy/sell direction of the cross. Subparagraph (A) states that the BX
Imbalance, indicative prices), see Chapter VI, Opening Cross shall occur at the price that to read BX Options. No change in meaning is
Section 8(a)(2). The term ‘‘order’’ means a firm maximizes the number of contracts of Eligible intended.
commitment to buy or sell options contracts. Interest in BX Options to be executed at or within 22 The Exchange notes that the system will also

Chapter 1, Section 1(a)(5). the National Best Bid and Offer. calculate a defined range to limit the range of prices

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Federal Register / Vol. 80, No. 37 / Wednesday, February 25, 2015 / Notices 10183

NBBO on the contra side of the with 10 contracts executing and BX BX Options 1.15–1.20 quote. There is
imbalance that would not trade through BBO disseminated as .99–1.15. more than one price at which the
the ABBO. Where there is more than Example 5 (no imbalance and more Exchange can maximize the number of
one price and there is an imbalance, in than one possible price). Assume a contracts executed, 10 contracts, during
Section 8(b)(4)(C) the Exchange is Valid Width NBBO bid/ask differential the Opening Cross and there exist
proposing that the Opening Cross price allowance of .10 and a defined range of multiple prices at which 20 contracts
also be within a defined range of the .10. Assume the ABBO is 1.00–1.10 will remain unexecuted in the Opening
Valid Width NBBO on the contra side of (10x10 contracts) and the BX BBO is Cross. Thus, the Opening Cross price
the imbalance, to help ensure that the .99–1.11 (10x10 contracts) which will be determined under proposed
opening price does not stray too far from represents a quote from MM1. Assume Section 8(b)(4)(C). In this example, the
the best prices available and that the that a Customer Order 1 comes in to Buy Valid Width NBBO is 1.15–1.20 which
opening price is rational. In addition, 10 contracts for 1.08, and a Customer is the best bid and best offer of the MM1
the Opening Cross price will be the Order 2 comes in to Sell 10 contracts at quote and the ABBO and is tighter than
highest price, in the case of a buy 1.00. Once regular markets hours have the allowed differential of .10. With a
imbalance, where the maximum number begun and the underlying security has defined range of .10 of the Valid Width
of contracts can trade which is equal to opened, the system determines if there NBBO on the contra side of the
or within the defined range of the Valid is a Valid Width Quote present. While imbalance (1.20 +.10), and a buy
Width NBBO. Similarly, in the case of the BX BBO of .99–1.11 is wider than imbalance, the Opening Cross price will
a sell imbalance, the Opening Cross the allowed bid/ask differential to be 1.30 with Order 1 buying 10
price will be the lowest price at which qualify as a Valid Width NBBO on its contracts from MM1. The Opening Cross
the maximum number of contracts can own, the ABBO market of 1.00–1.10 price of 1.30 represents the highest price
trade which is equal to or within the does qualify as a Valid Width NBBO. In at which the maximum number of
defined range of the Valid Width NBBO. this scenario, there is not an imbalance contracts, 10 contracts, can trade which
This serves to provide opening as there are 10 contracts to buy and 10 is equal to or within the defined range
execution price protections as well as an contracts to sell, however, there exist of the Valid Width NBBO on the contra
Opening Cross price which will not multiple price points at which those 10 side of the imbalance that would not
have residual unexecuted interest contracts could execute within the trade through the ABBO. The remaining
reflected in the marketplace, after the ABBO and within a .10 range of the unexecuted contracts will be posted on
Opening Cross execution, at a price Valid Width NBBO. Thus, the Opening the book and reflected in the BX
which crosses the Opening Cross Cross will follow the rules set forth in Options quote as a 1.30 bid with BX
execution price. proposed Section 8(b)(4)(B) and the BBO disseminated as 1.30–150 [sic]
The following examples illustrate, Opening Cross will occur with 10 with offer as non-firm, as proposed in
among other things, the determination contracts executing at 1.04. 1.04 Section 8(b)(4)(C)(iii). If this example
of the Opening Cross price. represents the midpoint of 1.00 (the last were changed slightly such that the
Example 4 (no imbalance and one offer on BX Options against which ABBO was 1.05–1.25, the opening price
possible price). Assume a Valid Width contracts will be traded or the National would be 1.25 since the Opening Cross
NBBO bid/ask differential allowance of Best Bid since the two are equal) and cannot occur at a price outside of the
.10 and a defined range of .10. Also, 1.08 (the last bid on BX Options against ABBO.
assume that the ABBO is 1.00–1.10 which contracts will be traded). If the Because new proposed subsections
(10x10 contracts) and the BX BBO is example is changed slightly such that (b)(1) and (b)(2) are added, current
.99–1.15 (10x10 contracts) which Order 1 is a market order to Buy 10 subsections (b)(1) through (b)(5) are re-
represents a quote from MM1. Assume contracts, the Opening Cross will occur numbered to (b)(3) through (b)(7), and
that a Customer Order 1 comes in to Buy with 10 contracts executing at 1.05 the reference to (b)(2) in current (b)(7)
10 contracts for 1.05 and a Customer which represents the midpoint of 1.00 is re-numbered to (b)(4).
Order 2 comes in to Sell 10 contracts at (the last offer on BX Options against Sixth, the Exchange is proposing new
1.05. Once regular markets hours have which contracts will be traded or the language to indicate the price at which
begun and the underlying security has National Best Bid since the two are remaining unexecuted contracts will be
opened, the system determines if there equal) and 1.10 (the National Best Offer posted. Specifically, in proposed
is a Valid Width Quote present. While against which contracts will be traded). Section 8(b)(4)(C), formerly covered in
the BX BBO of .99–1.15 is wider than The market order is considered to be a (b)(2), the Exchange proposes to state
the allowed bid/ask differential to price higher than the National Best Offer that if more than one price exists under
qualify as a Valid Width NBBO on its and outside of the NBBO therefore, the subparagraph (A), and contracts would
own, the ABBO market of 1.00–1.10 National Best Offer is used in remain unexecuted in the cross, then
does qualify as a Valid Width NBBO. In determining the Opening Cross price. the opening price will be the price at
this scenario, there is not an opening The BX BBO disseminated after the which the maximum number of
imbalance since there are 10 contracts opening in either case will be .99–1.11. contracts can trade that are equal to or
on both the buy and sell side which Example 6 (imbalance and more than within the defined range of the Valid
could possibly trade. Thus, the Opening one possible price). Assume that the Width NBBO on the contra side of the
Cross will follow the rules set forth in ABBO is 1.05–1.50 (10x10 contracts) imbalance that would not trade through
proposed Section 8(b)(4)(A). Under this and MM1 is quoting on BX Options the ABBO. New proposed subsections
1.15–1.20 (10x10 contracts) as well as (i)–(iv) to Section 8(b)(4)(C) indicate the
asabaliauskas on DSK5VPTVN1PROD with NOTICES

rule, the Opening Cross will occur at the
price which maximizes the number of MM2 is quoting on BX Options 1.05– price at which unexecuted contracts
contracts of Eligible Interest at or within 1.50 (10x10 contracts). Also assume that will be posted on the book following the
the ABBO and within a defined range of the Valid Width NBBO bid/ask Opening Cross and the subsequent
the Valid Width NBBO. In this scenario, differential allowance and defined range handling of the residual unexecuted
the Opening Cross price will be 1.05 are each .10. Also assume a Customer contracts, as follows: (i) If unexecuted
Order 1 is entered to Buy 30 contracts contracts remain with a limit price that
at which an order will be allowed to execute. for 1.45. In this example, the Valid is equal to the opening price, then the
Chapter VI, Section 10 (7). Width NBBO is comprised solely of the remaining unexecuted contracts will be

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10184 Federal Register / Vol. 80, No. 37 / Wednesday, February 25, 2015 / Notices

posted at the opening price, displayed to access the next allowable range of maximum number of contracts (10) can
one minimum price variation (MPV) prices. execute equal to or within the ABBO
away if displaying at the opening price Following are examples illustrating and within a defined range of the Valid
would lock or cross the ABBO, with the the proposed rule text regarding the Width NBBO without trading through
contra-side BX BBO reflected as firm; handling of unexecuted contracts. the ABBO, the Opening Cross will occur
(ii) if unexecuted contracts remain with Example 7 (proposed Section at a price determined under Section
a limit price that is through the opening 8(b)(4)(C)(i)). Assume the ABBO is 1.00– 8(b)(4)(C). The Opening Cross would
price, and there is a contra side ABBO 1.10 (10x10 contracts), and the BX BBO result in 10 contracts being executed at
at the opening price, then the remaining is .99–1.11 (10x10 contracts). Assume 1.00. The 40 remaining unexecuted
unexecuted contracts will be posted at there is a Customer order to Buy 10 contracts will be posted as a 1.00 offer
contracts at the market and a Customer and be displayed at 1.01 so as not to
the opening price, displayed one
order to Sell 50 contracts at 1.00. lock the away market bid under
minimum price variation (MPV) away
Further assume the Valid Width NBBO proposed Section 8(b)(4)(C)(ii). Since
from the ABBO, with the contra side BX
is defined as .10 and the defined range the residual interest is posted at a price
BBO reflected as firm and order is also .10. The Valid Width NBBO in
handling of any remaining interest will which internally locks the ABBO and
this example is comprised solely of the therefore would not be permitted to
be done in accordance with the routing ABBO which has a bid/ask differential
and time-in-force instructions of such execute at more aggressive prices until
equal to the allowance of .10. Since the ABBO moves, the contra-side BX
interest and shall follow the Acceptable there is (1) an imbalance, (2) multiple
Trade Range mechanism set forth in BBO is reflected as firm. The resulting
prices at which the maximum number displayed BX BBO would be .99–1.01,
Chapter VI, Section 10; (iii) if of contracts (10) can execute equal to or
unexecuted contracts remain with a reflected as firm on both sides of the
within the ABBO and, (3) multiple market, and the remaining interest
limit price that is through the opening prices at which the maximum number
price, and there is no contra side ABBO would be handled in accordance with
of contracts can execute equal to or the routing and time-in-force
at the opening price, then the remaining within a defined range of the Valid instructions of the residual interest and
contracts will be posted at the opening Width NBBO on the contra side of the in accordance with Chapter VI, Section
price, with the contra-side BX BBO imbalance that would not trade through 10 of the BX Options rules, and the
reflected as non-firm; and (iv) order the ABBO, the Opening Cross will occur contra-side BBO will be marked as firm
handling of any residual unexecuted at a price determined under Section or non-firm in accordance with the same
contracts will be done in accordance 8(b)(4)(C). The Opening Cross will result Section 10 rule.
with the reference price set forth in in 10 contracts being executed at 1.00.
Chapter VI, Section 10, with the The 40 remaining unexecuted contracts Example 9 (proposed Section
opening price representing the reference will be posted as a 40 contract offer at 8(b)(4)(C)(iii)). Assume the ABBO is
price. This proposed behavior ensures 1.00 and displayed at 1.01 (one MPV .00–5.00 (0x10 contracts). Also assume
away from the away market bid of 1.00) the Valid Width NBBO bid/ask
that residual unexecuted contracts from
in order to not display at a price which differential is defined as 0.10 and the
the Opening Cross, regardless of their
locks the ABBO under proposed Section defined range as described in proposed
limit prices, are posted on the book at
8(b)(4)(C)(i). The resulting displayed BX Section 8(b)(4)(C) is .10. Further,
the opening price before subsequently
BBO would be .99–1.01, reflected as assume BX Options has received a quote
being routed pursuant to Chapter VI,
firm on both sides of the market, and the of .99–1.09 (10x10), a Customer order to
Section 11 or walked to the next Buy 10 contracts at the market, a
potential execution price(s) under the remaining interest would be handled in
accordance with the routing and time Customer order to Buy 10 contracts for
Acceptable Trade Range set forth in .70, and a Customer order to Sell 50
Chapter VI, Section 10(7), with the in-force instructions of the residual
interest.23 Since the residual interest is contracts at .85. There is a Valid Width
opening price representing the NBBO present with the BX Options
‘‘reference price’’ of that rule. This posted at its limit and therefore would
not be permitted to execute at more quote of .99–1.09, which is equal to the
enhancement to the BX Opening Cross defined bid/ask differential of .10. The
aggressive prices, the contra-side BX
ensures that aggressively priced interest Opening Cross has an imbalance on the
BBO is reflected as firm.
does not immediately post at prices Example 8 (proposed Section sell side. Since there is more than one
which may be considered to be 8(b)(4)(C)(ii)). Assume the ABBO is price at which contracts would remain
egregious if the interest were to post and 1.00–1.10 (10x10 contracts), and the BX unexecuted in the cross, the Opening
execute immediately following the BBO is .99–1.11 (10x10 contracts). Cross price is determined using the
Opening Cross. The ‘firm’ versus ‘non- Assume there is a Customer order to logic included in proposed Section
firm’ tagging of contra-side interest Buy 10 contracts at the market and a 8(b)(4)(C). This will result in an
when residual Opening Cross interest is Customer order to Sell 50 contracts at execution of 20 contracts at .89, since
posted follows the construct currently .85. Further assume the Valid Width the Valid Width NBBO on the bid side
in place on the Exchange when NBBO is defined as .10 and the defined (contra to the imbalance side) is .99 less
aggressive interest is received and range is also .10. The Valid Width the defined range of .10, with the
triggers an Acceptable Trade Range NBBO in this example is comprised residual contracts of the .85 Sell Order
(ATR) process. Contra-side BX BBO solely of the ABBO which has a bid/ask posted on the book at .89. The resulting
interest is reflected as non-firm when differential equal to the allowance of BX BBO would be reflected as .70–.89,
asabaliauskas on DSK5VPTVN1PROD with NOTICES

the Exchange has interest with a limit .10. Since there is an imbalance and reflected as non-firm on the bid, firm on
price (or market order) that is more multiple prices exist at which the the offer, and the remaining unexecuted
aggressive than the Opening Cross price. interest would be handled in
The purpose behind this is to ensure 23 As set forth in proposed Section 8(b)(4)(C)(iv), accordance with the routing and time-
that aggressively priced residual interest order handling of any residual interest in the in-force instructions of the residual
Opening Cross will also be done in accordance with
maintains priority should other the reference price set forth in Chapter VI, Section
interest. The .70 bid is reflected as non-
aggressively priced interest be entered 10, with the opening price representing the firm to ensure that incoming interest
before the residual interest is permitted reference price. will not be permitted to immediately

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Federal Register / Vol. 80, No. 37 / Wednesday, February 25, 2015 / Notices 10185

execute ahead of the more aggressively each other. The deleted provisions are Cross. The proposal would also, as
priced Opening Cross residual interest. now being more thoroughly described in discussed, make changes in Section 8
The residual interest from the Opening proposed Section 8(b). regarding: The criteria for opening of
Cross will been handled in accordance The Exchange believes that the trading or resumption of trading after a
with Chapter VI, Section 10 of the BX proposed changes significantly improve halt; BX posting on its Web site any
Options rules, and the contra-side BBO the quality of execution of BX Options’ changes to the dissemination interval or
will be marked as firm or non-firm in opening. The proposed changes give prior Order Imbalance Indicator; the
accordance with the same Section 10 participants more choice about where, procedure if more than one price exists;
rule. and when, they can send orders for the the procedure if there are unexecuted
Seventh, the Exchange is proposing opening that would afford them the best contracts; and the ability of firms to
new language to indicate the use of experience. The Exchange believes that elect that orders be returned in symbols
execution algorithms assigned to the this should attract new order flow. The that were not opened on BX Options
underlying options. Specifically, in proposed changes should prove to be before the conclusion of the Opening
proposed Section 8(b)(5) (formerly very helpful to market participants, Order Cancel Timer.
(b)(3)), the Exchange proposes to delete particularly those that are involved in The proposal is designed to remove
price/time priority and add the use of adding liquidity during the Opening impediments to and perfect the
execution algorithms by stating that if Cross. Absent these proposed mechanism of a free and open market
the BX Opening Cross price is selected enhancements, BX Options’ opening and a national market system. In
and fewer than all contracts of Eligible quality will remain less robust than on particular, the Exchange proposes in
Interest that are available in BX Options other exchanges.
Chapter VI, Section 8(b) to remove the
would be executed, all Eligible Interest
2. Statutory Basis class-by-class quote or trade
shall be executed at the BX Opening
The Exchange believes that its characteristic because for the Opening
Cross price in accordance with the
proposal is consistent with Section 6(b) Cross the Exchange will use a regular
execution algorithm assigned to the
of the Act 25 in general, and furthers the market hours quote or trade (as
associated underlying option. By
objectives of Section 6(b)(5) of the Act 26 determined by the Exchange) for all
substituting language indicating use of
in particular, in that the proposal is underylings [sic] on the Exchange,
execution algorithms rather than price/
designed to promote just and equitable without distinguishing among
time priority, the Exchange recognizes
principles of trade, to remove underlying symbols, or, in the case of a
that there are now multiple execution
allocation models,24 and these are impediments to and perfect the trading halt the Opening Cross shall
factored into the Opening Cross. mechanism of a free and open market occur when trading resumes pursuant to
Lastly, the Exchange proposes to add and a national market system, and, in Chapter V, Section 4. The Exchange
a provision regarding the return of general to protect investors and the proposes to set forth in Section 8(b)
orders in un-opened symbols in the public interest. clear language describing under what
absence of an Opening Cross. Proposed The proposal is consistent with the circumstances an Opening Cross will
new Section 8(c) is substituted for goals of the Act because it will enhance occur, and how the Opening Cross will
current Section 8(c) and provides the and clarify the Opening Cross process, occur if more than one price exists
procedure if an Opening Cross in a minimize or negate unnecessary under certain circumstances. Thus, for
symbol is not initiated before the complexity, and encourage liquidity at example, proposed Section 8(b)(4)
conclusion of the Opening Order Cancel the crucial time of market open. The specifies that if more than one price
Timer. Specifically, proposed new proposed change will also enhance the exists under subparagraph (A), and
Section 8(c) states that if an Opening price discovery mechanism in the contracts would remain unexecuted in
Cross is not initiated under such opening process to include not only the cross, then the opening price will be
circumstances, a firm may elect to have Market Maker orders and quotes but the highest/lowest price, in the case of
orders returned by providing written also away market interest as represented a buy/sell imbalance, at which the
notification to the Exchange. These by quotes. The Exchange believes this maximum number of contracts can trade
orders include all non GTC orders change will make the transition from the which is equal to or within a defined
received over the FIX protocol. The Opening Cross period to regular market range, as established and published by
Opening Order Cancel Timer represents trading more efficient and thus promote the Exchange, of the Valid Width NBBO
a period of time since the underlying just and equitable principles of trade on the contra side of the imbalance that
market has opened, and shall be and serve to protect investors and the would not trade through the ABBO. The
established and disseminated by BX on public interest. Exchange proposes, in Section
its Web site. Proposed Section 8(c) will The proposal is designed to promote 8(b)(4)(C), three alternatives for how
provide participants the ability to have just and equitable principles of trade by remaining unexecuted contracts will be
their orders returned to them if BX updating and clarifying the rules handled. These include: If unexecuted
Options is unable to initiate an Opening regarding the BX Opening and Halt contracts remain with a limit price that
Cross within a reasonable time of the Cross. In particular, the proposal would is equal to the opening price, if
opening of the underlying market. In update or add Chapter VI, Section 8 unexecuted contracts remain with a
addition, proposed Section 8(c) deletes definitions regarding BX Opening Cross, limit price that is through the opening
language which is present in current Eligible Interest, NBBO, and ABBO in price and there is a contra side ABBO
Section 8(c) regarding how the Opening at the opening price, and if unexecuted
asabaliauskas on DSK5VPTVN1PROD with NOTICES

respect of the Opening Cross and
Cross operates in relation to the resuming options trading after a halt. contracts remain with a limit price that
presence or absence of a regular market The Exchange would add to Chapter VI, is through the opening price and there
hour quote or trade by the Market for Section 1 the definition of ‘‘On the is no contra side ABBO at the opening
the Underlying and the process of the Opening Order’’ (OPG) as used in price. The Exchange also proposes to
Opening Cross in relation to opening Section 8 in respect of the Opening clarify what happens if an Opening
quotes or orders which lock or cross Cross in a symbol is not initiated before
25 15 U.S.C. 78f(b). the conclusion of the Opening Order
24 See, e.g., Chapter VI, Section 10(1). 26 15 U.S.C. 78f(b)(5). Cancel Timer. In that case, proposed

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10186 Federal Register / Vol. 80, No. 37 / Wednesday, February 25, 2015 / Notices

Section 8(c)(2) [sic] indicates that a firm experience. The Exchange believes that At any time within 60 days of the
may elect to have orders returned by this should attract new order flow. The filing of the proposed rule change, the
providing written notification to the proposed changes should prove to be Commission summarily may
Exchange. These orders include all non more robust and helpful to market temporarily suspend such rule change if
GTC orders received over the FIX participants, particularly those that are it appears to the Commission that such
protocol. The Opening Order Cancel involved in adding liquidity during the action is: (i) Necessary or appropriate in
Timer represents a period of time since Opening Cross. the public interest; (ii) for the protection
the underlying market has opened, and of investors; or (iii) otherwise in
B. Self-Regulatory Organization’s
shall be established and disseminated furtherance of the purposes of the Act.
Statement on Burden on Competition
by the Exchange on its Web site. If the Commission takes such action, the
The proposal is designed in general to The Exchange does not believe that Commission shall institute proceedings
protect investors and the public interest. the proposed rule change will impose to determine whether the proposed rule
The Exchange proposes to add certain any burden on competition not should be approved or disapproved.
criteria to current Section 8(b), in order necessary or appropriate in furtherance
to describe how the opening process of the purposes of the Act. While the IV. Solicitation of Comments
will differ depending on whether a trade Exchange does not believe that the Interested persons are invited to
is possible or not on BX Options. proposal should have any direct impact submit written data, views, and
Assuming that ABBO is not crossed, on competition, it believes the proposal arguments concerning the foregoing,
proposed new Chapter VI, Section should help to further clarify the including whether the proposed rule
8(b)(1) states that if there is a possible Opening Cross process and make it change is consistent with the Act.
trade on BX, a Valid Width NBBO must more efficient, reduce order entry Comments may be submitted by any of
be present. Assuming that ABBO is not complexity, enhance market liquidity, the following methods:
crossed, proposed Section 8(b)(2) states and be beneficial to market participants.
Electronic Comments
that if no trade is possible on BX, then Moreover, the Exchange believes that
BX will open dependent upon one of the proposed changes significantly • Use the Commission’s Internet
the following: A Valid Width NBBO is improve the quality of execution of the comment form (http://www.sec.gov/
present; a certain number of other BX Options opening. The proposed rules/sro.shtml); or
options exchanges (as determined by the changes give participants more choice • Send an email to rule-comments@
Exchange) have disseminated a firm about where, and when, they can send sec.gov. Please include File Number SR–
quote on OPRA; or a certain period of orders for the opening that would afford BX–2015–010 on the subject line.
time (as determined by the Exchange) them the best experience. The Exchange Paper Comments
has elapsed. The Exchange proposes to believes that this should attract new
order flow. Absent these proposed • Send paper comments in triplicate
further enhance price discovery and
enhancements, BX Options’ opening to Brent J. Fields, Secretary, Securities
disclosure regarding the Opening Cross
quality will remain less robust than on and Exchange Commission, 100 F Street
process, by proposing in current Section
other exchanges, and the Exchange will NE., Washington, DC 20549–1090.
(b)(1) (renumbered to be (b)(3)) that BX
may choose to establish a dissemination remain at a competitive disadvantage. All submissions should refer to File
interval that is shorter than every 5 Number SR–BX–2015–010. This file
C. Self-Regulatory Organization’s number should be included on the
seconds; and that the Exchange will Statement on Comments on the
indicate the interval on its Web site in subject line if email is used. To help the
Proposed Rule Change Received From Commission process and review your
conjunction to other information Members, Participants, or Others
regarding the Opening Process. comments more efficiently, please use
Moreover, the Exchange proposes to add No written comments were either only one method. The Commission will
language in current Section 8(c)(2) solicited or received. post all comments on the Commission’s
regarding the return of orders in un- Internet Web site (http://www.sec.gov/
III. Date of Effectiveness of the
opened symbols in the absence of an rules/sro.shtml). Copies of the
Proposed Rule Change and Timing for
Opening Cross. Thus, if an Opening submission, all subsequent
Commission Action
Cross in a symbol is not initiated before amendments, all written statements
the conclusion of the Opening Order Because the foregoing proposed rule with respect to the proposed rule
Cancel Timer, a firm may elect to have change does not: (i) Significantly affect change that are filed with the
orders returned by providing written the protection of investors or the public Commission, and all written
notification to the Exchange. These interest; (ii) impose any significant communications relating to the
orders include all non GTC orders burden on competition; and (iii) become proposed rule change between the
received over the FIX protocol. The operative for 30 days from the date on Commission and any person, other than
Opening Order Cancel Timer represents which it was filed, or such shorter time those that may be withheld from the
a period of time since the underlying as the Commission may designate, it has public in accordance with the
market has opened, and shall be become effective pursuant to Section provisions of 5 U.S.C. 552, will be
established and disseminated by BX on 19(b)(3)(A) of the Act 27 and available for Web site viewing and
its Web site. subparagraph (f)(6) of Rule 19b–4 printing in the Commission’s Public
For the above reasons, BX believes the thereunder.28 Reference Room, 100 F Street NE.,
proposed rule change is consistent with Washington, DC 20549, on official
asabaliauskas on DSK5VPTVN1PROD with NOTICES

27 15 U.S.C. 78s(b)(3)(a).
the requirements of Section 6(b)(5) of 28 17
business days between the hours of
CFR 240.19b–4(f)(6). In addition, Rule 19b–
the Act. The Exchange believes that the 4(f)(6)(iii) requires a self-regulatory organization to
10:00 a.m. and 3:00 p.m. Copies of such
proposed changes significantly improve give the Commission written notice of its intent to filing also will be available for
the quality of execution of BX Options’ file the proposed rule change, along with a brief inspection and copying at the principal
opening. The proposed changes give description and the text of the proposed rule offices of the Exchange. All comments
change, at least five business days prior to the date
participants more choice about where, of filing of the proposed rule change, or such
received will be posted without change;
and when, they can send orders for the shorter time as designated by the Commission. The the Commission does not edit personal
opening that would afford them the best Exchange has satisfied this requirement. identifying information from

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Federal Register / Vol. 80, No. 37 / Wednesday, February 25, 2015 / Notices 10187

submissions. You should submit only II. Self-Regulatory Organization’s Amendment’’).5 The purpose of this
information that you wish to make Statement of the Purpose of, and proposed extension is to provide time
available publicly. All submissions Statutory Basis for, the Proposed Rule for the Participants to prepare a
should refer to File Number SR–BX– Change supplemental assessment and
2015–010, and should be submitted on In its filing with the Commission, the recommendation regarding the Plan and
or before March 18, 2015. self-regulatory organization included for the public to comment on such
statements concerning the purpose of, assessment for the purpose of
For the Commission, by the Division of
and basis for, the proposed rule change determining whether there should be
Trading and Markets, pursuant to delegated
and discussed any comments it received any modifications to the Plan.
authority.29
on the proposed rule change. The text In order to align the pilot period for
Brent J. Fields, Rule 6.65A(c) with the proposed pilot
of those statements may be examined at
Secretary. the places specified in Item IV below. period for the Plan, the Exchange
[FR Doc. 2015–03819 Filed 2–24–15; 8:45 am] The Exchange has prepared summaries, similarly proposes to extend the pilot
BILLING CODE 8011–01–P set forth in sections A, B, and C below, period until October 23, 2015. The
of the most significant parts of such Exchange believes the benefits afforded
statements. to market participants under Rule
SECURITIES AND EXCHANGE 6.65A(c) should continue on a pilot
COMMISSION A. Self-Regulatory Organization’s basis during the same period as the Plan
Statement of the Purpose of, and pilot. The Exchange continues to believe
Statutory Basis for, the Proposed Rule that adding certainty to the execution of
[Release No. 34–74308; File No. SR– Change
NYSEArca–2015–07] orders in Limit or Straddle States would
1. Purpose encourage market participants to
Self-Regulatory Organizations; NYSE The Exchange proposes to extend the continue to provide liquidity to the
Arca, Inc.; Notice of Filing and pilot period applicable to Rule 6.65A(c), Exchange, and thus, promote a fair and
Immediate Effectiveness of Proposed which addresses how the Exchange orderly market during those periods.
Rule Change Extending the Pilot treats Obvious and Catastrophic Errors Thus, the Exchange believes that the
Period Applicable to Rule 6.65A(c), during periods of extreme market protections of current Rule 6.65A(c)
Obvious and Catastrophic Errors, Until volatility, until October 23, 2015. The should continue while the industry
October 23, 2015 pilot period is currently set to expire on gains further experience operating the
February 20, 2015. Plan. In addition, the Exchange believes
February 19, 2015. In April 2013, in connection with the that extending the pilot period for Rule
Pursuant to Section 19(b)(1) of the Plan to Address Extraordinary Market 6.65A(c) would allow the Exchange to
Volatility Pursuant to Rule 608 of continue to collect and evaluate data, as
Securities Exchange Act of 1934 (the
Regulation NMS (the ‘‘Plan’’),3 the well as to conduct further data analyses,
‘‘Act’’),1 and Rule 19b–4 thereunder,2
Exchange adopted Rule 6.65A(c) to related to this provision.
notice is hereby given that on February
provide that options executions would Specifically, in connection with the
18, 2015, NYSE Arca, Inc. (the
not be adjusted or nullified if the adoption of Rule 6.65A(c), the Exchange
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
execution occurs during periods of committed to review the operation of
the Securities and Exchange this provision and to analyze the impact
Commission (‘‘Commission’’) the extreme market volatility.4 Specifically,
Rule 6.65A(c) provides that, during the of Limit and Straddle States
proposed rule change as described in accordingly.6 The Exchange agreed to
Items I and II below, which Items have pilot period, electronic transactions in
options that overlay an NMS Stock that and has been providing to the
been prepared by the self-regulatory Commission and the public data for
occur during a Limit State or a Straddle
organization. The Commission is each Straddle State and Limit State in
State (as defined by the Plan) are not
publishing this notice to solicit NMS Stocks underlying options traded
subject to review under Rule 6.87(a) for
comments on the proposed rule change Obvious Errors or Rule 6.87(d) for on the Exchange beginning in April
from interested persons. Catastrophic Errors. Nothing in Rule 2013, limited to those option classes
I. Self-Regulatory Organization’s 6.65A(c) prevents electronic that have at least one (1) trade on the
Statement of the Terms of the Substance transactions in options that overlay an Exchange during a Straddle State or
of the Proposed Rule Change NMS Stock that occur during a Limit Limit State.7 For each of those option
State or a Straddle State from being classes affected, each data record
The Exchange proposes to extend the reviewed on Exchange motion pursuant contains the following information:
pilot period applicable to Rule 6.65A(c), to 6.87(b)(3). • Stock symbol, option symbol, time
which addresses how the Exchange The Plan has been amended several at the start of the Straddle or Limit
treats Obvious and Catastrophic Errors times since inception and was not
during periods of extreme market implemented until February 24, 2014. 5 See Securities Exchange Act Release No. 74110

The Participants to the Plan recently (January 21, 2015), 80 FR 4321 (January 27, 2015)
volatility, until October 23, 2015. The (File No. 4–631) (notice of proposed Eighth
pilot period is currently set to expire on filed to extend the Plan’s pilot period Amendment to the Plan).
February 20, 2015. The text of the until October 23, 2015 (the ‘‘Eighth 6 Specifically, the Exchange committed to: ‘‘(1)

proposed rule change is available on the Evaluate the options market quality during Limit
asabaliauskas on DSK5VPTVN1PROD with NOTICES

3 See Securities Exchange Act Release No. 67091 States and Straddle States; (2) assess the character
Exchange’s Web site at www.nyse.com,
(May 31, 2012), 77 FR 33498 (June 6, 2012) (File of incoming order flow and transactions during
at the principal office of the Exchange, No. 4–631) (Order Approving, on a Pilot Basis, the Limit States and Straddle States; and (3) review any
and at the Commission’s Public Plan). The Plan is designed to prevent trades in complaints from members and their customers
Reference Room. individual NMS Stocks from occurring outside of concerning executions during Limit States and
specified Price Bands, which are described in more Straddle States.’’ See Approval Order, 78 FR at
detail in the Plan. 22008.
29 17 CFR 200.30–3(a)(12). 4 See Securities and Exchange Act Release No. 7 See Securities Exchange Act Release No. 71869
1 15 U.S.C. 78s(b)(1). 69340 (April 8, 2013), 78 FR 22004 (April 12, 2013) (April 4, 2014), 79 FR 19689 (April 9, 2014) (SR–
2 17 CFR 240.19b–4. (SR–NYSEArca–2013–10) (‘‘Approval Order’’). NYSEArca–2014–36).

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Document Created: 2015-12-18 13:08:55
Document Modified: 2015-12-18 13:08:55
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 10179