80_FR_36993 80 FR 36870 - Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to a Proposal To Amend Chapter VI, Section 18 of the Exchange's Options Rules

80 FR 36870 - Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to a Proposal To Amend Chapter VI, Section 18 of the Exchange's Options Rules

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 123 (June 26, 2015)

Page Range36870-36872
FR Document2015-15692

Federal Register, Volume 80 Issue 123 (Friday, June 26, 2015)
[Federal Register Volume 80, Number 123 (Friday, June 26, 2015)]
[Notices]
[Pages 36870-36872]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-15692]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75259; File No. SR-BX-2015-034]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to a 
Proposal To Amend Chapter VI, Section 18 of the Exchange's Options 
Rules

June 22, 2015.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that, on June 12, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend chapter VI, section 18 of the 
Exchange's options rules.
    The text of the proposed rule change is set forth below.
    Proposed new language is italicized. Proposed deletions are 
enclosed in [brackets].
* * * * *
NASDAQ OMX BX Rules
* * * * *
Options Rules
* * * * *
Chapter VI Trading Systems
* * * * *
Sec. 18 Order Price Protection
    Order Price Protection (``OPP'') is a feature of the System that 
prevents certain day limit, good til cancelled, and immediate or cancel 
orders at prices outside of pre-set standard limits from being accepted 
by the System. OPP

[[Page 36871]]

applies to all options but does not apply to market orders or 
Intermarket Sweep Orders.
    (a) OPP is operational each trading day after the opening until the 
close of trading, except during trading halts. [The Exchange may also 
temporarily deactivate OPP from time to time on an intraday basis at 
its discretion if it determines that volatility warrants deactivation. 
Participants will be notified of intraday OPP deactivation due to 
volatility and any subsequent intraday reactivation by the Exchange 
through the issuance of system status messages.]
    (b) OPP will reject incoming orders that exceed certain parameters 
according to the following algorithm:
    (i) If the better of the NBBO or the internal market BBO (the 
``Reference BBO'') on the contra-side of an incoming order is greater 
than $1.00, orders with a limit more than 50% through such contra-side 
[NBBO] Reference BBO will be rejected by the System upon receipt. For 
example, if the [NBBO] Reference BBO on the offer side is $1.10, an 
order to buy options for more than $1.65 would be rejected. Similarly, 
if the [NBBO] Reference BBO on the bid side is $1.10, an order to sell 
options for less than $0.55 will be rejected.
    (ii) If the [NBBO] Reference BBO on the contra-side of an incoming 
order is less than or equal to $1.00, orders with a limit more than 
100% through such contra-side [NBBO] Reference BBO will be rejected by 
the System upon receipt. For example, if the [NBBO] Reference BBO on 
the offer side is $1.00, an order to buy options for more than $2.00 
would be rejected. However, if the [NBBO] Reference BBO of the bid side 
of an incoming order to sell is less than or equal to $1.00, the OPP 
limits set forth above will result in all incoming sell orders being 
accepted regardless of their limit.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend and correct 
chapter VI, section 18 of the BX Options rules which describes Order 
Price Protection (``OPP''), a feature of the BX Options trading system 
that prevents certain day limit, good till cancelled, and immediate or 
cancel orders at prices outside of pre-set standard limits from being 
accepted by the System. The amendments also remove language providing 
for the temporary deactivation of OPP from time to time on an intraday 
basis at the Exchange's discretion if the Exchange determines that 
volatility warrants deactivation.
    OPP applies to all options but does not apply to market orders or 
Intermarket Sweep Orders. OPP is operational each trading day after the 
opening until the close of trading, except during trading halts. 
Chapter VI, section 18 also currently provides that the Exchange may 
temporarily deactivate OPP from time to time on an intraday basis at 
its discretion if it determines that volatility warrants deactivation. 
Participants are notified of intraday OPP deactivation due to 
volatility and any subsequent intraday reactivation by the Exchange 
through the issuance of system status messages.
    OPP rejects incoming orders that exceed certain parameters. 
Currently, chapter VI, section 18(b) establishes those parameters with 
reference to the NBBO. It states that if the NBBO on the contra-side of 
an incoming order is greater than $1.00, orders with a limit more than 
50% through such contraside NBBO will be rejected by the system upon 
receipt. For example, the rule provides that if the NBBO on the offer 
side is $1.10, an order to buy options for more than $1.65 would be 
rejected. Similarly, the rule states that if the NBBO on the bid side 
is $1.10, an order to sell options for less than $0.55 will be 
rejected. The rule provides that if the NBBO on the contra-side of an 
incoming order is less than or equal to $1.00, orders with a limit more 
than 100% through such contra-side NBBO will be rejected by the system 
upon receipt. For example, under the rule if the NBBO on the offer side 
is $1.00, an order to buy options for more than $2.00 would be 
rejected. However, the rule provides that if the NBBO of the bid side 
of an incoming order to sell is less than or equal to $1.00, the OPP 
limits set forth above will result in all incoming sell orders being 
accepted regardless of their limit.
    The Exchange has determined that a discrepancy exists between this 
rule description of how the OPP process works and how the system 
actually functions in cases where Price Improving Orders are present. 
Price Improving Orders may be submitted in $0.01 increments on BX 
Options rather than at the minimum price variation (``MPV'').\3\ These 
Price Improving Orders are considered part of the Exchange's internal 
market BBO at their non-MPV limit and are displayed at the allowable 
MPV price as part of the NBBO. While chapter VI, section 18 states that 
the NBBO is used for OPP determinations as described above, the system 
is actually basing OPP determinations on the better of (a) the NBBO, or 
(b) the Exchange's internal market BBO, which may differ from the NBBO 
due to the presence of Price Improving Orders. The Exchange is 
proposing to correct this discrepancy by deleting the term ``NBBO'' in 
each instance where it appears in chapter VI, section 18 and replacing 
it with the term ``Reference BBO'' which will be defined in the rule as 
the better of the NBBO or the internal market BBO.
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    \3\ See chapter VI, sction 1, which provides that Price 
Improving Orders are orders to buy or sell an option at a specified 
price at an increment smaller than the minimum price variation in 
the security. Price Improving Orders may be entered in increments as 
small as one cent. Price Improving Orders that are available for 
display shall be displayed at the minimum price variation in that 
security and shall be rounded up for sell orders and rounded down 
for buy orders.
---------------------------------------------------------------------------

    Finally, the Exchange is removing from chapter VI, section 18 the 
statements that the Exchange may temporarily deactivate OPP from time 
to time on an intraday basis at its discretion if it determines that 
volatility warrants deactivation, and that members will be notified of 
intraday OPP deactivation due to volatility and any subsequent intraday 
reactivation by the Exchange through the issuance of system status 
messages. The Exchange currently lacks the technology to implement 
intraday OPP deactivation and is deleting the language which suggests 
that it has such capability.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) \4\ of the Act in general, and furthers the objectives of section 
6(b)(5) \5\ of the Act in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and

[[Page 36872]]

open market and a national market system, and, in general to protect 
investors and the public interest, by amending and correcting the rule 
text to that it accurately reflects the functioning of the trading 
system. The amendments concerning the Reference BBO and the elimination 
of references to intraday deactivation of the OPP are both intended to 
improve the accuracy of the rule. The Exchange believes that the 
amendments should promote just and equitable principles of trade as 
well as protect investors and the public interest by making clear how 
OPP determinations are actually made on the Exchange and by eliminating 
the potential for confusion inherent in the statement that the Exchange 
may temporarily deactivate OPP on an intraday basis when in fact it 
lacks the technical capacity to do so. Calculating OPP on the basis of 
the better of the NBBO or the internal market BBO rather than solely on 
the basis of the NBBO protects investors and the public interest by 
extending the benefits of OPP to orders received in instances where the 
internal market BBO is better than the NBBO.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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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, as the amendments to chapter 
VI, section 18 will apply uniformly to all market participants availing 
themselves of the OPP feature. Nor will the proposal impose a burden on 
competition among the options exchanges, because of the vigorous 
competition for order flow among the options exchanges. To the extent 
that market participants disagree with the particular approach taken by 
the Exchange herein, market participants can easily and readily direct 
order flow to competing venues.

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 \6\ and Rule 19b-
4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Commission has determined to waive the five-day pre-filing 
period in this case.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \8\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) \9\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because it would allow 
the Exchange to immediately correct the inaccuracy with respect to the 
NBBO described above, as well as eliminate language suggesting the 
Exchange possesses the capability to temporarily deactivate OPP on an 
intraday basis when in fact this is not the case. The Exchange believes 
that the public interest would not be served by preserving these 
inaccuracies in its rules during a notice and comment period for this 
proposed rule change. The Commission believes that waiving the 30-day 
operative delay \10\ is consistent with the protection of investors and 
the public interest and designates the proposal operative on filing.
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    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change 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-2015-034 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BX-2015-034. 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 office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BX-2015-034 and should be 
submitted on or before July 17, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-15692 Filed 6-25-15; 8:45 am]
 BILLING CODE 8011-01-P



                                              36870                            Federal Register / Vol. 80, No. 123 / Friday, June 26, 2015 / Notices

                                              prompt and accurate clearance and                       IV. Solicitation of Comments                              For the Commission, by the Division of
                                              settlement of securities transactions.                                                                          Trading and Markets, pursuant to delegated
                                              This proposed rule change is also                         Interested persons are invited to                     authority.13
                                              consistent with Rule 17Ad–22(d)(8) 10                   submit written data, views and                          Robert W. Errett,
                                              because it would promote the                            arguments concerning the foregoing,                     Deputy Secretary.
                                              effectiveness of OCC’s risk management                  including whether the proposed rule                     [FR Doc. 2015–15688 Filed 6–25–15; 8:45 am]
                                              procedures by better ensuring that the                  change is consistent with the Act.                      BILLING CODE 8011–01–P
                                              Risk Committee is provided with                         Comments may be submitted by any of
                                              appropriate information in a timely                     the following methods:
                                              manner to discharge its responsibilities                                                                        SECURITIES AND EXCHANGE
                                                                                                      Electronic Comments
                                              as a committee of OCC’s Board of                                                                                COMMISSION
                                              Directors.11 The proposed rule change is                  • Use the Commission’s Internet                       [Release No. 34–75259; File No. SR–BX–
                                              not inconsistent with the existing rules                comment form (http://www.sec.gov/                       2015–034]
                                              of OCC, including any other rules                       rules/sro.shtml); or
                                              proposed to be amended.                                                                                         Self-Regulatory Organizations;
                                                                                                        • Send an email to rule-comments@
                                              (B) Clearing Agency’s Statement on                                                                              NASDAQ OMX BX, Inc.; Notice of Filing
                                                                                                      sec.gov. Please include File Number SR–
                                              Burden on Competition                                                                                           and Immediate Effectiveness of
                                                                                                      OCC–2015–012 on the subject line.
                                                                                                                                                              Proposed Rule Change to a Proposal
                                                 OCC does not believe that the                        Paper Comments                                          To Amend Chapter VI, Section 18 of
                                              proposed rule change would impose any                                                                           the Exchange’s Options Rules
                                              burden on competition.12 OCC believes                      • Send paper comments in triplicate
                                              that the proposed rule change would not                 to Secretary, Securities and Exchange                   June 22, 2015.
                                              unfairly inhibit access to OCC’s services               Commission, 100 F Street NE.,                              Pursuant to section 19(b)(1) of the
                                              or disadvantage or favor any particular                 Washington, DC 20549–1090.                              Securities Exchange Act of 1934
                                              user in relationship to another user                                                                            (‘‘Act’’),1 and Rule 19b–4 2 thereunder,
                                                                                                      All submissions should refer to File                    notice is hereby given that, on June 12,
                                              because the proposed rule solely
                                                                                                      Number SR–OCC–2015–012. This file                       2015, NASDAQ OMX BX, Inc. (‘‘BX’’ or
                                              concerns administrative matters, mainly
                                                                                                      number should be included on the                        ‘‘Exchange’’) filed with the Securities
                                              the manner in which Dashboard Reports
                                                                                                      subject line if email is used. To help the              and Exchange Commission (‘‘SEC’’ or
                                              are disseminated to OCC’s senior
                                                                                                      Commission process and review your                      ‘‘Commission’’) the proposed rule
                                              management and Risk Committee, and
                                              does not concern any particular user, or                comments more efficiently, please use                   change as described in Items I and II
                                              clearing member, of OCC.                                only one method. The Commission will                    below, which Items have been prepared
                                                 For the foregoing reasons, OCC                       post all comments on the Commission’s                   by the Exchange. The Commission is
                                              believes that the proposed rule change                  Internet Web site (http://www.sec.gov/                  publishing this notice to solicit
                                              is in the public interest, would be                     rules/sro.shtml). Copies of the                         comments on the proposed rule change
                                              consistent with the requirements of the                 submission, all subsequent                              from interested persons.
                                              Act applicable to clearing agencies, and                amendments, all written statements
                                                                                                      with respect to the proposed rule                       I. Self-Regulatory Organization’s
                                              would not impose a burden on
                                                                                                      change that are filed with the                          Statement of the Terms of Substance of
                                              competition.
                                                                                                      Commission, and all written                             the Proposed Rule Change
                                              (C) Clearing Agency’s Statement on                      communications relating to the                             The Exchange proposes to amend
                                              Comments on the Proposed Rule                           proposed rule change between the                        chapter VI, section 18 of the Exchange’s
                                              Change Received From Members,                           Commission and any person, other than                   options rules.
                                              Participants, or Others                                 those that may be withheld from the                        The text of the proposed rule change
                                                Written comments on the proposed                      public in accordance with the                           is set forth below.
                                              rule change were not and are not                        provisions of 5 U.S.C. 552, will be                        Proposed new language is italicized.
                                              intended to be solicited with respect to                available for Web site viewing and                      Proposed deletions are enclosed in
                                              the proposed rule change and none have                  printing in the Commission’s Public                     [brackets].
                                              been received.                                          Reference Room, 100 F Street NE.,                       *      *     *    *    *
                                              III. Date of Effectiveness of the                       Washington, DC 20549 on official
                                                                                                                                                              NASDAQ OMX BX Rules
                                              Proposed Rule Change and Timing for                     business days between the hours of
                                              Commission Action                                       10:00 a.m. and 3:00 p.m. Copies of the                  *          *       *      *    *
                                                                                                      filing also will be available for                       Options Rules
                                                 The foregoing rule change has become                 inspection and copying at the principal
                                              effective pursuant to section 19(b)(3)(A)               office of OCC and on OCC’s Web site at                  *          *       *      *    *
                                              of the Act and paragraph (f) of Rule                    http://www.theocc.com/components/
                                              19b–4 thereunder. At any time within                                                                            Chapter VI             Trading Systems
                                                                                                      docs/legal/rules_and_bylaws/sr_occ_15_
                                              60 days of the filing of the proposed rule                                                                      *          *       *      *    *
                                                                                                      012.pdf. All comments received will be
                                              change, the Commission summarily may
                                                                                                      posted without change; the Commission                   Sec. 18         Order Price Protection
                                              temporarily suspend such rule change if
                                                                                                      does not edit personal identifying                        Order Price Protection (‘‘OPP’’) is a
                                              it appears to the Commission that such
                                                                                                      information from submissions. You                       feature of the System that prevents
                                              action is necessary or appropriate in the
                                                                                                      should submit only information that
tkelley on DSK3SPTVN1PROD with NOTICES




                                              public interest, for the protection of                                                                          certain day limit, good til cancelled, and
                                              investors, or otherwise in furtherance of               you wish to make available publicly. All                immediate or cancel orders at prices
                                              the purposes of the Act.                                submissions should refer to File                        outside of pre-set standard limits from
                                                                                                      Number SR–OCC–2015–012 and should                       being accepted by the System. OPP
                                                10 17 CFR 240.17Ad–22(d)(8).                          be submitted on or before July 17, 2015.
                                                11 See Footnote 7.                                                                                                1 15   U.S.C. 78s(b)(1).
                                                12 15 U.S.C. 78q–1(b)(3)(I).                            13 17   CFR 200.30–3(a)(12).                              2 17   CFR 240.19b–4.



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                                                                              Federal Register / Vol. 80, No. 123 / Friday, June 26, 2015 / Notices                                                    36871

                                              applies to all options but does not apply               A. Self-Regulatory Organization’s                      orders being accepted regardless of their
                                              to market orders or Intermarket Sweep                   Statement of the Purpose of, and                       limit.
                                              Orders.                                                 Statutory Basis for, the Proposed Rule                    The Exchange has determined that a
                                                 (a) OPP is operational each trading                  Change                                                 discrepancy exists between this rule
                                              day after the opening until the close of                                                                       description of how the OPP process
                                                                                                      1. Purpose                                             works and how the system actually
                                              trading, except during trading halts.
                                              [The Exchange may also temporarily                         The purpose of the proposed rule                    functions in cases where Price
                                              deactivate OPP from time to time on an                  change is to amend and correct chapter                 Improving Orders are present. Price
                                              intraday basis at its discretion if it                  VI, section 18 of the BX Options rules                 Improving Orders may be submitted in
                                              determines that volatility warrants                     which describes Order Price Protection                 $0.01 increments on BX Options rather
                                              deactivation. Participants will be                      (‘‘OPP’’), a feature of the BX Options                 than at the minimum price variation
                                              notified of intraday OPP deactivation                   trading system that prevents certain day               (‘‘MPV’’).3 These Price Improving
                                              due to volatility and any subsequent                    limit, good till cancelled, and                        Orders are considered part of the
                                              intraday reactivation by the Exchange                   immediate or cancel orders at prices                   Exchange’s internal market BBO at their
                                              through the issuance of system status                   outside of pre-set standard limits from                non-MPV limit and are displayed at the
                                              messages.]                                              being accepted by the System. The                      allowable MPV price as part of the
                                                                                                      amendments also remove language                        NBBO. While chapter VI, section 18
                                                 (b) OPP will reject incoming orders                                                                         states that the NBBO is used for OPP
                                              that exceed certain parameters                          providing for the temporary
                                                                                                      deactivation of OPP from time to time                  determinations as described above, the
                                              according to the following algorithm:                                                                          system is actually basing OPP
                                                                                                      on an intraday basis at the Exchange’s
                                                 (i) If the better of the NBBO or the                 discretion if the Exchange determines                  determinations on the better of (a) the
                                              internal market BBO (the ‘‘Reference                    that volatility warrants deactivation.                 NBBO, or (b) the Exchange’s internal
                                              BBO’’) on the contra-side of an incoming                   OPP applies to all options but does                 market BBO, which may differ from the
                                              order is greater than $1.00, orders with                not apply to market orders or                          NBBO due to the presence of Price
                                              a limit more than 50% through such                      Intermarket Sweep Orders. OPP is                       Improving Orders. The Exchange is
                                              contra-side [NBBO] Reference BBO will                   operational each trading day after the                 proposing to correct this discrepancy by
                                              be rejected by the System upon receipt.                 opening until the close of trading,                    deleting the term ‘‘NBBO’’ in each
                                              For example, if the [NBBO] Reference                    except during trading halts. Chapter VI,               instance where it appears in chapter VI,
                                              BBO on the offer side is $1.10, an order                section 18 also currently provides that                section 18 and replacing it with the term
                                              to buy options for more than $1.65                                                                             ‘‘Reference BBO’’ which will be defined
                                                                                                      the Exchange may temporarily
                                              would be rejected. Similarly, if the                                                                           in the rule as the better of the NBBO or
                                                                                                      deactivate OPP from time to time on an
                                              [NBBO] Reference BBO on the bid side                                                                           the internal market BBO.
                                                                                                      intraday basis at its discretion if it                    Finally, the Exchange is removing
                                              is $1.10, an order to sell options for less             determines that volatility warrants
                                              than $0.55 will be rejected.                                                                                   from chapter VI, section 18 the
                                                                                                      deactivation. Participants are notified of             statements that the Exchange may
                                                 (ii) If the [NBBO] Reference BBO on                  intraday OPP deactivation due to
                                              the contra-side of an incoming order is                                                                        temporarily deactivate OPP from time to
                                                                                                      volatility and any subsequent intraday                 time on an intraday basis at its
                                              less than or equal to $1.00, orders with                reactivation by the Exchange through
                                              a limit more than 100% through such                                                                            discretion if it determines that volatility
                                                                                                      the issuance of system status messages.                warrants deactivation, and that
                                              contra-side [NBBO] Reference BBO will                      OPP rejects incoming orders that
                                              be rejected by the System upon receipt.                                                                        members will be notified of intraday
                                                                                                      exceed certain parameters. Currently,                  OPP deactivation due to volatility and
                                              For example, if the [NBBO] Reference                    chapter VI, section 18(b) establishes
                                              BBO on the offer side is $1.00, an order                                                                       any subsequent intraday reactivation by
                                                                                                      those parameters with reference to the                 the Exchange through the issuance of
                                              to buy options for more than $2.00                      NBBO. It states that if the NBBO on the
                                              would be rejected. However, if the                                                                             system status messages. The Exchange
                                                                                                      contra-side of an incoming order is                    currently lacks the technology to
                                              [NBBO] Reference BBO of the bid side                    greater than $1.00, orders with a limit
                                              of an incoming order to sell is less than                                                                      implement intraday OPP deactivation
                                                                                                      more than 50% through such contraside                  and is deleting the language which
                                              or equal to $1.00, the OPP limits set                   NBBO will be rejected by the system
                                              forth above will result in all incoming                                                                        suggests that it has such capability.
                                                                                                      upon receipt. For example, the rule
                                              sell orders being accepted regardless of                provides that if the NBBO on the offer                 2. Statutory Basis
                                              their limit.                                            side is $1.10, an order to buy options for                The Exchange believes that its
                                              *       *     *     *     *                             more than $1.65 would be rejected.                     proposal is consistent with section 6(b) 4
                                              II. Self-Regulatory Organization’s                      Similarly, the rule states that if the                 of the Act in general, and furthers the
                                              Statement of the Purpose of, and                        NBBO on the bid side is $1.10, an order                objectives of section 6(b)(5) 5 of the Act
                                              Statutory Basis for, the Proposed Rule                  to sell options for less than $0.55 will               in particular, in that it is designed to
                                              Change                                                  be rejected. The rule provides that if the             promote just and equitable principles of
                                                                                                      NBBO on the contra-side of an incoming                 trade, to remove impediments to and
                                                In its filing with the Commission, the                order is less than or equal to $1.00,                  perfect the mechanism of a free and
                                              Exchange included statements                            orders with a limit more than 100%
                                              concerning the purpose of and basis for                 through such contra-side NBBO will be                    3 See chapter VI, sction 1, which provides that

                                              the proposed rule change and discussed                  rejected by the system upon receipt. For               Price Improving Orders are orders to buy or sell an
                                                                                                                                                             option at a specified price at an increment smaller
                                              any comments it received on the                         example, under the rule if the NBBO on                 than the minimum price variation in the security.
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                                              proposed rule change. The text of these                 the offer side is $1.00, an order to buy               Price Improving Orders may be entered in
                                              statements may be examined at the                       options for more than $2.00 would be                   increments as small as one cent. Price Improving
                                              places specified in Item IV below. The                  rejected. However, the rule provides                   Orders that are available for display shall be
                                                                                                                                                             displayed at the minimum price variation in that
                                              Exchange has prepared summaries, set                    that if the NBBO of the bid side of an                 security and shall be rounded up for sell orders and
                                              forth in sections A, B, and C below, of                 incoming order to sell is less than or                 rounded down for buy orders.
                                              the most significant aspects of such                    equal to $1.00, the OPP limits set forth                 4 15 U.S.C. 78f(b).

                                              statements.                                             above will result in all incoming sell                   5 15 U.S.C. 78f(b)(5).




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                                              36872                           Federal Register / Vol. 80, No. 123 / Friday, June 26, 2015 / Notices

                                              open market and a national market                       as the Commission may designate, it has                   Comments may be submitted by any of
                                              system, and, in general to protect                      become effective pursuant to section                      the following methods:
                                              investors and the public interest, by                   19(b)(3)(A) of the Act 6 and Rule 19b–
                                              amending and correcting the rule text to                4(f)(6) thereunder.7                                      Electronic Comments
                                              that it accurately reflects the functioning                A proposed rule change filed                             • Use the Commission’s Internet
                                              of the trading system. The amendments                   pursuant to Rule 19b–4(f)(6) under the                    comment form (http://www.sec.gov/
                                              concerning the Reference BBO and the                    Act 8 normally does not become                            rules/sro.shtml); or
                                              elimination of references to intraday                   operative for 30 days after the date of its
                                              deactivation of the OPP are both                                                                                    • Send an email to rule-comments@
                                                                                                      filing. However, Rule 19b–4(f)(6) 9
                                              intended to improve the accuracy of the                 permits the Commission to designate a                     sec.gov. Please include File Number SR–
                                              rule. The Exchange believes that the                    shorter time if such action is consistent                 BX–2015–034 on the subject line.
                                              amendments should promote just and                      with the protection of investors and the                  Paper Comments
                                              equitable principles of trade as well as                public interest. The Exchange believes
                                              protect investors and the public interest               that waiving the 30-day operative delay                     • Send paper comments in triplicate
                                              by making clear how OPP                                 is consistent with the protection of                      to Secretary, Securities and Exchange
                                              determinations are actually made on the                 investors and the public interest                         Commission, 100 F Street NE.,
                                              Exchange and by eliminating the                         because it would allow the Exchange to                    Washington, DC 20549–1090.
                                              potential for confusion inherent in the                 immediately correct the inaccuracy with
                                              statement that the Exchange may                         respect to the NBBO described above, as                   All submissions should refer to File
                                              temporarily deactivate OPP on an                        well as eliminate language suggesting                     Number SR–BX–2015–034. This file
                                              intraday basis when in fact it lacks the                the Exchange possesses the capability to                  number should be included on the
                                              technical capacity to do so. Calculating                temporarily deactivate OPP on an                          subject line if email is used. To help the
                                              OPP on the basis of the better of the                   intraday basis when in fact this is not                   Commission process and review your
                                              NBBO or the internal market BBO rather                  the case. The Exchange believes that the                  comments more efficiently, please use
                                              than solely on the basis of the NBBO                    public interest would not be served by                    only one method. The Commission will
                                              protects investors and the public                       preserving these inaccuracies in its rules                post all comments on the Commission’s
                                              interest by extending the benefits of                   during a notice and comment period for                    Internet Web site (http://www.sec.gov/
                                              OPP to orders received in instances                     this proposed rule change. The                            rules/sro.shtml). Copies of the
                                              where the internal market BBO is better                 Commission believes that waiving the                      submission, all subsequent
                                              than the NBBO.                                          30-day operative delay 10 is consistent                   amendments, all written statements
                                              B. Self-Regulatory Organization’s                       with the protection of investors and the                  with respect to the proposed rule
                                              Statement on Burden on Competition                      public interest and designates the                        change that are filed with the
                                                The Exchange does not believe that                    proposal operative on filing.                             Commission, and all written
                                              the proposed rule change will impose                       At any time within 60 days of the                      communications relating to the
                                              any burden on competition not                           filing of the proposed rule change, the                   proposed rule change between the
                                              necessary or appropriate in furtherance                 Commission summarily may                                  Commission and any person, other than
                                              of the purposes of the Act, as the                      temporarily suspend such rule change if                   those that may be withheld from the
                                              amendments to chapter VI, section 18                    it appears to the Commission that such                    public in accordance with the
                                              will apply uniformly to all market                      action is necessary or appropriate in the                 provisions of 5 U.S.C. 552, will be
                                              participants availing themselves of the                 public interest, for the protection of                    available for Web site viewing and
                                              OPP feature. Nor will the proposal                      investors, or otherwise in furtherance of                 printing in the Commission’s Public
                                              impose a burden on competition among                    the purposes of the Act. If the                           Reference Room, 100 F Street NE.,
                                              the options exchanges, because of the                   Commission takes such action, the                         Washington, DC 20549, on official
                                              vigorous competition for order flow                     Commission will institute proceedings                     business days between the hours of
                                              among the options exchanges. To the                     to determine whether the proposed rule                    10:00 a.m. and 3:00 p.m. Copies of such
                                              extent that market participants disagree                change should be approved or                              filing also will be available for
                                              with the particular approach taken by                   disapproved.                                              inspection and copying at the principal
                                              the Exchange herein, market                             IV. Solicitation of Comments                              office of the Exchange. All comments
                                              participants can easily and readily                                                                               received will be posted without change;
                                              direct order flow to competing venues.                    Interested persons are invited to                       the Commission does not edit personal
                                                                                                      submit written data, views, and                           identifying information from
                                              C. Self-Regulatory Organization’s                       arguments concerning the foregoing,
                                              Statement on Comments on the                                                                                      submissions. You should submit only
                                                                                                      including whether the proposed rule
                                              Proposed Rule Change Received From                                                                                information that you wish to make
                                                                                                      change is consistent with the Act.
                                              Members, Participants, or Others                                                                                  available publicly. All submissions
                                                No written comments were either                         6 15
                                                                                                                                                                should refer to File Number SR–BX–
                                                                                                              U.S.C. 78s(b)(3)(A).
                                              solicited or received.                                    7 17  CFR 240.19b–4(f)(6). In addition, Rule 19b–
                                                                                                                                                                2015–034 and should be submitted on
                                                                                                      4(f)(6) requires a self-regulatory organization to give   or before July 17, 2015.
                                              III. Date of Effectiveness of the                       the Commission written notice of its intent to file
                                              Proposed Rule Change and Timing for                     the proposed rule change at least five business days
                                                                                                                                                                  For the Commission, by the Division of
                                              Commission Action                                       prior to the date of filing of the proposed rule          Trading and Markets, pursuant to delegated
                                                                                                      change, or such shorter time as designated by the         authority.11
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                                                 Because the foregoing proposed rule                  Commission. The Commission has determined to              Robert W. Errett,
                                              change does not: (i) Significantly affect               waive the five-day pre-filing period in this case.
                                              the protection of investors or the public                 8 17 CFR 240.19b–4(f)(6).                               Deputy Secretary.
                                                                                                        9 17 CFR 240.19b–4(f)(6).                               [FR Doc. 2015–15692 Filed 6–25–15; 8:45 am]
                                              interest; (ii) impose any significant                     10 For purposes only of waiving the 30-day
                                              burden on competition; and (iii) become                 operative delay, the Commission has considered the
                                                                                                                                                                BILLING CODE 8011–01–P
                                              operative for 30 days from the date on                  proposed rule’s impact on efficiency, competition,
                                              which it was filed, or such shorter time                and capital formation. See 15 U.S.C. 78c(f).                11 17   CFR 200.30–3(a)(12).



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Document Created: 2015-12-15 14:15:27
Document Modified: 2015-12-15 14:15:27
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation80 FR 36870 

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