80 FR 37698 - Self-Regulatory Organizations; NASDAQ OMX BX Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1, To Amend and Restate Certain Rules That Govern the NASDAQ OMX BX Equities Market

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 126 (July 1, 2015)

Page Range		37698-37700
FR Document		2015-16083

Federal Register, Volume 80 Issue 126 (Wednesday, July 1, 2015)

[Federal Register Volume 80, Number 126 (Wednesday, July 1, 2015)]
[Notices]
[Pages 37698-37700]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-16083]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75291; File No. SR-BX-2015-015]

Self-Regulatory Organizations; NASDAQ OMX BX Inc.; Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of
Proposed Rule Change, as Modified by Amendment No. 1, To Amend and
Restate Certain Rules That Govern the NASDAQ OMX BX Equities Market

June 24, 2015.

I. Introduction

On March 20, 2015, NASDAQ OMX BX, Inc. (``BX'' or the ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend and restate certain BX rules that govern the NASDAQ OMX BX
Equities Market in order to provide a clearer and more detailed
description of certain aspects of its functionality. The proposed rule
change was published for comment in the Federal Register on April 6,
2015.\3\ The Commission received no comment letters regarding the
proposed rule change. On May 12, 2015, the Commission extended to July
5, 2015, the time period in which to approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether the proposed rule change should be disapproved.\4\ On
June 22, 2015, the Exchange filed Amendment No. 1 to the proposed rule
change.\5\ This order approves the proposed rule change, as amended, on
an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 74617 (March 31,
2015), 80 FR 18473 (``Notice'').
\4\ See Securities Exchange Act Release No. 74934, 80 FR 28325
(May 18, 2015).
\5\ In Amendment No. 1, the Exchange proposed to correct
typographical errors in the original filing, further improve the
clarity of certain rule language, and include additional explanation
with regard to the purpose of the proposed rule change.
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II. Description of the Amended Proposal

The Exchange proposes to amend and restate certain rules governing
the NASDAQ OMX BX Equities Market in order to provide additional detail
and clarity regarding its order type functionality.\6\ This proposed
rule change is a response to Chair White's request that each equities
exchange conduct a comprehensive review of the operation of each of the
order types that it offers to members.\7\
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\6\ See Notice 80 FR at 18473.
\7\ See id.; see also Mary Jo White, Chair, Commission, Speech
at the Sandler O'Neill & Partners, L.P. Global Exchange and
Brokerage Conference (June 5, 2014), available at http://www.sec.gov/News/Speech/Detail/Speech/1370542004312.
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While the Exchange believes that its current rules and other public
disclosures provide a comprehensive description of the operation of the
NASDAQ OMX BX Equities Market and are sufficient for members and the
investing public to have an accurate understanding of its market
structure, it also acknowledges that a restatement of certain rules
will further clarify the operation of its system.\8\ For instance, BX
believes that adding examples of order type operation to its rules will
promote greater understanding of the Exchange's market structure.\9\ In
addition, BX asserts that certain functionality previously described as
an ``order type'' is more precisely characterized as an attribute that
may be added to a particular order.\10\ Accordingly, this proposed rule
change distinguishes between ``Order Types'' and ``Order Attributes,''
and provides descriptions of the Order Attributes that may be attached
to particular Order Types.\11\
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\8\ See Notice, 80 FR at 18474.
\9\ Id.
\10\ Id.
\11\ Id.
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Currently, BX Rule 4751 sets forth most of the rules governing
NASDAQ OMX BX Equities Market Order Types and Order Attributes, as well
as other defined terms that pertain to trading securities on the NASDAQ
OMX BX Equities Market.\12\ BX proposes to restate and amend Rule 4751
as new Rule 4701.\13\ BX also proposes to amend the definitions
pertaining to Order Types and Order Attributes and to relocate them
from Rule 4751 to new Rules 4702 (Order Types) and 4703 (Order
Attributes), respectively.\14\ In addition, BX proposes to delete Rule
4755 as the information contained therein is superseded by proposed
Rules 4702 and 4703.\15\ Lastly, BX proposes certain conforming and
technical changes to Rules 4756, 4757, and 4780.\16\
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\12\ See Rule 4751.
\13\ See proposed Rule 4701.
\14\ See proposed Rules 4702 and 4703.
\15\ See Rule 4755.
\16\ BX states that, in subsequent proposed rule changes, it
plans to restate the remainder of its Rules numbered 4752 through
4780 so that they appear sequentially following Rule 4703. See.
Notice, 80 FR at 18474.
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BX represents that, except where specifically stated otherwise, all
proposed rules are restatements of existing rules and are not intended
to reflect substantive changes to rule text or the operation of the
NASDAQ OMX BX Equities Market.\17\ Proposed Rule 4702 related to Order
Types contains definitions and descriptions of Price to Comply Orders,
Price to Display Orders (referred to as ``Price to Comply Post Orders''
in current Rule 4751),\18\ Non-Displayed Orders, Post-Only Orders,
Retail Price Improving Orders, and Retail Orders. Proposed Rule 4703
related to Order Attributes contains definitions and descriptions of
time-in-force (``TIF'') modifiers, order size, order price, pegging,
minimum quantity, routing, discretion, reserve size, attribution,
intermarket sweep order designation, and display.\19\
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\17\ See. Notice, 80 FR at 18474.
\18\ See Notice, 80 FR at 18477 n.29.
\19\ The Notice contains additional details related to proposed
Rules 4702 and 4703. See Notice, 80 FR at 18473-90.
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In Amendment No. 1, the Exchange proposes to add language further
explaining the operation of the following order types: Post-Only
Orders, orders with a TIF of IOC, including Routable Orders and Post-
Only Orders; orders with Midpoint Pegging, Primary Pegging or Market
Pegging; and orders designated with both Pegging and Routing
attributes.\20\ For example, the Exchange states that for Order Types
that list both Pegging and Routing as possible Order Attributes, the
two Order Attributes may be combined since Pegging serves to establish
the price of the order, while Routing establishes the market center(s)
to which the system's routing functionality may direct a routed order
if liquidity is available at that price.\21\ The Exchange also proposes
to add further specification regarding the availability of certain
order types only through certain communication protocols by stating
that a Post-Only Order with a TIF of IOC may not be entered through the
RASH or FIX protocols.\22\ In addition, the Exchange proposes to add
language stating that one or more Order

[[Page 37699]]

Attributes may be assigned to a single order, but if the use of
multiple Order Attributes would result in contradictory instructions,
the system will reject the order or remove non-conforming Order
Attributes.\23\
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\20\ See Amendment No. 1.
\21\ Id.
\22\ Id.
\23\ Id.
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III. Discussion and Commission Findings

After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\24\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\25\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest; and are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\24\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\25\ 15 U.S.C. 78f(b)(5).
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The Commission notes that the Exchange believes that the proposal
is consistent with Section 6(b)(5) of the Act because the reorganized
and enhanced descriptions of its Order Types, Order Attributes, and
related System functionality should promote just and equitable
principles of trade and perfect the mechanisms of a free and open
market and the national market system by providing greater clarity
concerning certain aspects of the System's operations.\26\ In addition,
the Commission notes that BX believes that the proposed rule change
should contribute to the protection of investors and the public
interest by making BX's rules easier to understand.\27\ Further, BX
believes that additional specificity in its rules will promote a better
understanding of the Exchange's operation, thereby facilitating fair
competition among brokers and dealers and among markets.\28\
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\26\ See Notice, 80 FR at 18488.
\27\ Id.
\28\ Id.
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The Commission notes that, according to the Exchange, the proposal
does not add any new functionality but instead re-organizes the
Exchange's order type rules and provides additional detail regarding
the order type functionality currently offered by the Exchange. Based
on the Exchange's representation, the Commission believes that the
proposed rule change does not raise any novel regulatory considerations
and should provide greater specificity, clarity and transparency with
respect to the order type functionality available on the Exchange. In
addition, the Commission notes that the Exchange's proposed rule
changes provide additional detail related to functionality for certain
order types and the handling of orders during initial entry and after
posting to the NASDAQ OMX BX Equities Market Book. Accordingly, the
Commission believes that this proposed rule change should provide
greater transparency with respect to the Exchange's order type
functionality. For these reasons, the Commission believes that the
proposal should help to prevent fraudulent and manipulative acts and
practices, promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, protect investors and the
public interest.
The Commission finds good cause to approve the filing, as amended
by Amendment No. 1 to the proposed rule change, prior to the thirtieth
day after the date of publication of notice of filing thereof in the
Federal Register. The proposed amendments should further increase the
Exchange's transparency with respect to the operation of various order
types and modifiers, and serve to enhance investors' understanding of
the tools available with respect to the handling of their orders.
Accelerated approval would allow the Exchange to update its rule text
immediately, thus providing users with greater clarity with respect to
the use and potential use of functionality offered by the Exchange. In
addition, the initial proposal was open for comment for twenty-one days
after publication and generated no comment. Accordingly, the Commission
believes that good cause exists, consistent with Sections 6(b)(5) and
19(b) of the Act,\29\ to approve the filing, as amended by Amendment
No. 1 to the proposed rule change, on an accelerated basis.
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\29\ 15 U.S.C. 78f(b)(5); 15 U.S.C. 78s(b).
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IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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 rule-comments@sec.gov. Please include
File Number SR-BX-2015-015 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-2015-015. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BX-2015-015 and should be
submitted on or before July 22, 2015.

V. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\30\ that the proposed rule change (SR-BX-2015-015) be, and it
hereby is, approved on an accelerated basis, as amended.
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\30\ 15 U.S.C. 78s(b)(2).
\31\ 17 CFR 200.30-3(a)(12).

[[Page 37700]]

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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-16083 Filed 6-30-15; 8:45 am]
BILLING CODE 8011-01-P

37698 Federal Register / Vol. 80, No. 126 / Wednesday, July 1, 2015 / Notices

For the Commission, by the Division of II. Description of the Amended therein is superseded by proposed Rules
Trading and Markets, pursuant to delegated Proposal 4702 and 4703.15 Lastly, BX proposes
authority.16 certain conforming and technical
The Exchange proposes to amend and
Robert W. Errett, restate certain rules governing the changes to Rules 4756, 4757, and
Deputy Secretary. NASDAQ OMX BX Equities Market in 4780.16
[FR Doc. 2015–16089 Filed 6–30–15; 8:45 am] order to provide additional detail and BX represents that, except where
clarity regarding its order type specifically stated otherwise, all
BILLING CODE 8011–01–P
functionality.6 This proposed rule proposed rules are restatements of
change is a response to Chair White’s existing rules and are not intended to
request that each equities exchange reflect substantive changes to rule text
SECURITIES AND EXCHANGE or the operation of the NASDAQ OMX
COMMISSION conduct a comprehensive review of the
operation of each of the order types that BX Equities Market.17 Proposed Rule
it offers to members.7 4702 related to Order Types contains
[Release No. 34–75291; File No. SR–BX– definitions and descriptions of Price to
While the Exchange believes that its
2015–015] Comply Orders, Price to Display Orders
current rules and other public
disclosures provide a comprehensive (referred to as ‘‘Price to Comply Post
Self-Regulatory Organizations; Orders’’ in current Rule 4751),18 Non-
description of the operation of the
NASDAQ OMX BX Inc.; Notice of Filing Displayed Orders, Post-Only Orders,
NASDAQ OMX BX Equities Market and
of Amendment No. 1 and Order Retail Price Improving Orders, and
are sufficient for members and the
Granting Accelerated Approval of Retail Orders. Proposed Rule 4703
investing public to have an accurate
Proposed Rule Change, as Modified by understanding of its market structure, it related to Order Attributes contains
Amendment No. 1, To Amend and also acknowledges that a restatement of definitions and descriptions of time-in-
Restate Certain Rules That Govern the certain rules will further clarify the force (‘‘TIF’’) modifiers, order size, order
NASDAQ OMX BX Equities Market operation of its system.8 For instance, price, pegging, minimum quantity,
BX believes that adding examples of routing, discretion, reserve size,
June 24, 2015. attribution, intermarket sweep order
order type operation to its rules will
I. Introduction designation, and display.19
promote greater understanding of the
In Amendment No. 1, the Exchange
Exchange’s market structure.9 In
On March 20, 2015, NASDAQ OMX proposes to add language further
addition, BX asserts that certain explaining the operation of the
BX, Inc. (‘‘BX’’ or the ‘‘Exchange’’) filed functionality previously described as an
with the Securities and Exchange following order types: Post-Only Orders,
‘‘order type’’ is more precisely orders with a TIF of IOC, including
Commission (‘‘Commission’’), pursuant characterized as an attribute that may be
to Section 19(b)(1) of the Securities Routable Orders and Post-Only Orders;
added to a particular order.10 orders with Midpoint Pegging, Primary
Exchange Act of 1934 (‘‘Act’’) 1 and Rule Accordingly, this proposed rule change Pegging or Market Pegging; and orders
19b–4 thereunder,2 a proposed rule distinguishes between ‘‘Order Types’’ designated with both Pegging and
change to amend and restate certain BX and ‘‘Order Attributes,’’ and provides Routing attributes.20 For example, the
rules that govern the NASDAQ OMX BX descriptions of the Order Attributes that Exchange states that for Order Types
Equities Market in order to provide a may be attached to particular Order that list both Pegging and Routing as
clearer and more detailed description of Types.11 possible Order Attributes, the two Order
certain aspects of its functionality. The Currently, BX Rule 4751 sets forth Attributes may be combined since
proposed rule change was published for most of the rules governing NASDAQ Pegging serves to establish the price of
comment in the Federal Register on OMX BX Equities Market Order Types the order, while Routing establishes the
April 6, 2015.3 The Commission and Order Attributes, as well as other market center(s) to which the system’s
received no comment letters regarding defined terms that pertain to trading routing functionality may direct a
the proposed rule change. On May 12, securities on the NASDAQ OMX BX routed order if liquidity is available at
2015, the Commission extended to July Equities Market.12 BX proposes to that price.21 The Exchange also
5, 2015, the time period in which to restate and amend Rule 4751 as new proposes to add further specification
approve the proposed rule change, Rule 4701.13 BX also proposes to amend regarding the availability of certain
disapprove the proposed rule change, or the definitions pertaining to Order order types only through certain
institute proceedings to determine Types and Order Attributes and to communication protocols by stating that
relocate them from Rule 4751 to new a Post-Only Order with a TIF of IOC
whether the proposed rule change
Rules 4702 (Order Types) and 4703 may not be entered through the RASH
should be disapproved.4 On June 22,
(Order Attributes), respectively.14 In or FIX protocols.22 In addition, the
2015, the Exchange filed Amendment
addition, BX proposes to delete Rule Exchange proposes to add language
No. 1 to the proposed rule change.5 This 4755 as the information contained
order approves the proposed rule stating that one or more Order
change, as amended, on an accelerated 6 See Notice 80 FR at 18473. 15 See Rule 4755.
basis. 7 See id.; see also Mary Jo White, Chair, 16 BX states that, in subsequent proposed rule
Commission, Speech at the Sandler O’Neill & changes, it plans to restate the remainder of its
1 15 U.S.C. 78s(b)(1). Partners, L.P. Global Exchange and Brokerage Rules numbered 4752 through 4780 so that they
2 17 Conference (June 5, 2014), available at http:// appear sequentially following Rule 4703. See.
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 74617
www.sec.gov/News/Speech/Detail/Speech/ Notice, 80 FR at 18474.
tkelley on DSK3SPTVN1PROD with NOTICES

1370542004312. 17 See. Notice, 80 FR at 18474.
(March 31, 2015), 80 FR 18473 (‘‘Notice’’). 8 See Notice, 80 FR at 18474.
18 See Notice, 80 FR at 18477 n.29.
4 See Securities Exchange Act Release No. 74934,
9 Id.
19 The Notice contains additional details related
80 FR 28325 (May 18, 2015). 10 Id.
5 In Amendment No. 1, the Exchange proposed to to proposed Rules 4702 and 4703. See Notice, 80
11 Id. FR at 18473–90.
correct typographical errors in the original filing,
12 See Rule 4751. 20 See Amendment No. 1.
further improve the clarity of certain rule language,
13 See proposed Rule 4701. 21 Id.
and include additional explanation with regard to
the purpose of the proposed rule change. 14 See proposed Rules 4702 and 4703. 22 Id.

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Federal Register / Vol. 80, No. 126 / Wednesday, July 1, 2015 / Notices 37699

Attributes may be assigned to a single re-organizes the Exchange’s order type change, as amended, is consistent with
order, but if the use of multiple Order rules and provides additional detail the Act. Comments may be submitted by
Attributes would result in contradictory regarding the order type functionality any of the following methods:
instructions, the system will reject the currently offered by the Exchange.
order or remove non-conforming Order Based on the Exchange’s representation, Electronic Comments
Attributes.23 the Commission believes that the • Use the Commission’s Internet
proposed rule change does not raise any comment form (http://www.sec.gov/
III. Discussion and Commission
novel regulatory considerations and rules/sro.shtml); or
Findings
should provide greater specificity,
After careful review, the Commission clarity and transparency with respect to • Send an email to rule-comments@
finds that the proposed rule change is the order type functionality available on sec.gov. Please include File Number SR–
consistent with the requirements of the the Exchange. In addition, the BX–2015–015 on the subject line.
Act and the rules and regulations Commission notes that the Exchange’s
thereunder applicable to a national Paper Comments
proposed rule changes provide
securities exchange.24 In particular, the additional detail related to functionality • Send paper comments in triplicate
Commission finds that the proposed for certain order types and the handling to Secretary, Securities and Exchange
rule change is consistent with Section of orders during initial entry and after Commission, 100 F Street NE.,
6(b)(5) of the Act,25 which requires, posting to the NASDAQ OMX BX Washington, DC 20549–1090.
among other things, that the rules of a Equities Market Book. Accordingly, the
national securities exchange be Commission believes that this proposed All submissions should refer to File
designed to prevent fraudulent and rule change should provide greater Number SR–BX–2015–015. This file
manipulative acts and practices, to transparency with respect to the number should be included on the
promote just and equitable principles of Exchange’s order type functionality. For subject line if email is used. To help the
trade, to foster cooperation and these reasons, the Commission believes Commission process and review your
coordination with persons engaged in that the proposal should help to prevent comments more efficiently, please use
facilitating transactions in securities, to fraudulent and manipulative acts and only one method. The Commission will
remove impediments to and perfect the practices, promote just and equitable post all comments on the Commission’s
mechanism of a free and open market principles of trade, remove Internet Web site (http://www.sec.gov/
and a national market system, and, in impediments to and perfect the rules/sro.shtml). Copies of the
general, to protect investors and the mechanism of a free and open market submission, all subsequent
public interest; and are not designed to and a national market system, and, in amendments, all written statements
permit unfair discrimination between general, protect investors and the public with respect to the proposed rule
customers, issuers, brokers, or dealers. interest. change that are filed with the
The Commission notes that the The Commission finds good cause to Commission, and all written
Exchange believes that the proposal is approve the filing, as amended by communications relating to the
consistent with Section 6(b)(5) of the Amendment No. 1 to the proposed rule proposed rule change between the
Act because the reorganized and change, prior to the thirtieth day after Commission and any person, other than
enhanced descriptions of its Order the date of publication of notice of filing those that may be withheld from the
Types, Order Attributes, and related thereof in the Federal Register. The public in accordance with the
System functionality should promote proposed amendments should further provisions of 5 U.S.C. 552, will be
just and equitable principles of trade increase the Exchange’s transparency available for Web site viewing and
and perfect the mechanisms of a free with respect to the operation of various printing in the Commission’s Public
and open market and the national order types and modifiers, and serve to Reference Room, 100 F Street NE.,
market system by providing greater enhance investors’ understanding of the Washington, DC 20549, on official
clarity concerning certain aspects of the tools available with respect to the business days between the hours of
System’s operations.26 In addition, the handling of their orders. Accelerated 10:00 a.m. and 3:00 p.m. Copies of the
Commission notes that BX believes that approval would allow the Exchange to filing also will be available for
the proposed rule change should update its rule text immediately, thus inspection and copying at the principal
contribute to the protection of investors providing users with greater clarity with office of the Exchange. All comments
and the public interest by making BX’s respect to the use and potential use of received will be posted without change;
rules easier to understand.27 Further, BX functionality offered by the Exchange. the Commission does not edit personal
believes that additional specificity in its In addition, the initial proposal was identifying information from
rules will promote a better open for comment for twenty-one days submissions. You should submit only
understanding of the Exchange’s after publication and generated no information that you wish to make
operation, thereby facilitating fair comment. Accordingly, the Commission available publicly. All submissions
competition among brokers and dealers believes that good cause exists, should refer to File Number SR–BX–
and among markets.28 consistent with Sections 6(b)(5) and 2015–015 and should be submitted on
The Commission notes that, according 19(b) of the Act,29 to approve the filing,
or before July 22, 2015.
to the Exchange, the proposal does not as amended by Amendment No. 1 to the
add any new functionality but instead proposed rule change, on an accelerated V. Conclusion
basis.
23 Id. It is therefore ordered, pursuant to
IV. Solicitation of Comments
tkelley on DSK3SPTVN1PROD with NOTICES

24 In approving this proposed rule change, the Section 19(b)(2) of the Act,30 that the
Commission has considered the proposed rule’s Interested persons are invited to proposed rule change (SR–BX–2015–
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f). submit written data, views, and 015) be, and it hereby is, approved on
25 15 U.S.C. 78f(b)(5). arguments concerning the foregoing, an accelerated basis, as amended.
26 See Notice, 80 FR at 18488. including whether the proposed rule
27 Id. 30 15 U.S.C. 78s(b)(2).
28 Id. 29 15 U.S.C. 78f(b)(5); 15 U.S.C. 78s(b). 31 17 CFR 200.30–3(a)(12).

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37700 Federal Register / Vol. 80, No. 126 / Wednesday, July 1, 2015 / Notices

For the Commission, by the Division of bears any qualifying notation giving submit orders to Floor Brokers likely are
Trading and Markets, pursuant to delegated discretion as to the price or time at seeking to rely on a Floor Broker’s
authority.31 which such order is to be executed.’’ expertise and discretion.6 The Exchange
Robert W. Errett, CBOE Rule 6.75 (Discretionary believes that customers place orders
Deputy Secretary. Transactions) further provides that with Floor Brokers because Floor
[FR Doc. 2015–16083 Filed 6–30–15; 8:45 am] ‘‘[u]nder normal market conditions, and Brokers can exercise discretion in
BILLING CODE 8011–01–P in the absence of a ‘not held’ executing a client’s order and can
instruction, a Floor Broker may not potentially provide higher execution
exercise time discretion on market or quality.7 The Exchange states that a
SECURITIES AND EXCHANGE marketable limit orders and shall customer would otherwise
COMMISSION immediately execute such orders at the electronically submit an order to the
[Release No. 34–75299; File No. SR–CBOE– best price or prices available.’’ Exchange for automatic handling and an
2015–047] CBOE now proposes to amend electronic execution.8
Exchange Rule 6.75, as well as Rules
Self-Regulatory Organizations; 6.53 and 6.73, to establish a different
Chicago Board Options Exchange, default status for orders sent to Floor III. Discussion and Commission
Incorporated; Order Approving Brokers. Specifically, CBOE proposes to Findings
Proposed Rule Change Relating to add a new Interpretation and Policy .06 After careful review, the Commission
Floor Broker Due Diligence to CBOE Rule 6.73 (Responsibilities of finds that the proposed rule change is
Floor Brokers) to specify that an order consistent with the Act and the rules
June 25, 2015. entrusted to a Floor Broker will be and regulations thereunder applicable to
I. Introduction considered a Not Held Order unless (i) a national securities exchange.9 In
a Floor Broker’s customer otherwise particular, the Commission finds that
On May 5, 2015, Chicago Board the proposed rule change is consistent
specifies or (ii) the order was
Options Exchange, Incorporated (the with Section 6(b)(5) of the Act,10 which
electronically received by the Exchange
‘‘Exchange’’ or ‘‘CBOE’’) filed with the requires that the rules of the exchange
and subsequently routed to a Floor
Securities and Exchange Commission be designed, among other things, to
Broker or PAR Official pursuant to the
(the ‘‘Commission’’), pursuant to prevent fraudulent and manipulative
order entry firm’s routing instructions.
Section 19(b)(1) 1 of the Securities acts and practices, to promote just and
The Exchange also proposes to add
Exchange Act of 1934 (the ‘‘Act’’),2 and equitable principles of trade, to remove
additional language to the Not Held
Rule 19b–4 thereunder,3 a proposed rule impediments to and perfect the
Order definition in CBOE Rule 6.53(g)
change to amend Exchange rules related mechanism of a free and open market
that mirrors the language it proposes to
to Floor Broker due diligence. The and a national market system, and, in
add to Rule 6.73. Finally, the Exchange
proposed rule change was published for general, to protect investors and the
proposes to amend CBOE Rule 6.75,
comment in the Federal Register on public interest.
which addresses a Floor Broker’s
May 22, 2015.4 The Commission The Commission believes that the
discretion in executing orders, to delete
received no comment letters on the Exchange has articulated a reasonable
the sentence that specifies that a Floor
proposed rule change. This order basis for changing the current default
Broker may not exercise time discretion
approves the proposed rule change. presumption of whether a customer
on an order under normal market
II. Description of the Proposal conditions unless the order was marked intends to provide a Floor Broker with
‘‘not held.’’ the ability to exercise time and price
CBOE proposes to amend several discretion on its behalf as long as the
rules to address certain order handling The consequence of these proposes
changes, taken together, will result in a order is not otherwise marked, or
obligations on the part of its Floor received electronically, in a manner to
Brokers. Specifically, whether orders change to the default order handling
obligations for orders sent to Floor suggest that the customer did not intend
sent to Floor Brokers are presumed to be for its order to be treated as Not Held.
‘‘Held’’ or ‘‘Not Held.’’ A ‘‘Not Held’’ Brokers. Whereas Floor Brokers are
currently obligated by CBOE Rule 6.75 Other than changing the default
order generally is one where the presumption to ‘‘Not Held’’ for most
customer gives the Floor Broker to immediately execute orders at the
best available prices under normal orders sent to Floor Brokers, CBOE is
discretion in executing the order, both not proposing to change any other order
market conditions unless the customer
with respect to the time of execution handling obligations applicable to Floor
provides a Not Held instruction on the
and the price (though the customer may Brokers. CBOE’s proposal responds to
order, CBOE’s proposal will consider all
specify a limit price), and the Floor its understanding of the changing role of
orders sent to Floor Brokers to be ‘‘Not
Broker works the order over a period of Floor Brokers on its trading floor since
Held’’ by default unless the customer
time to avoid market impact while it adopted Rule 6.75, and its
specifies or if the order is delivered to
seeking best execution of the order. A understanding of how customers today
CBOE electronically in such a manner
‘‘Held’’ order generally is one where the use, and intend to continue to use, the
as to suggest that the customer is
customer seeks a prompt execution at services of Floor Brokers on the CBOE
seeking a prompt execution of a
the best currently available price or exchange. Accordingly, the Commission
marketable order at the best available
prices. finds that the proposed rule change is
Currently, CBOE Rule 6.53 (Certain prices.
In its filing, the Exchange states that consistent with the Act and is designed
Order Types Defined) defines a ‘‘Not
CBOE Rules 6.73 and 6.75 were adopted
Held Order’’ as an order that is marked
tkelley on DSK3SPTVN1PROD with NOTICES

prior to electronic trading and thus did 6 See id.
as ‘‘not held’’ or ‘‘take time,’’ or ‘‘which 7 See id.
not contemplate the interaction between
8 See id.
1 15 U.S.C. 78s(b)(1).
an electronic trading environment and a
9 In approving this proposed rule change, the
2 15 U.S.C. 78a. manual trading floor.5 The Exchange Commission notes that it has considered the
3 17 CFR 240.19b–4. believes that, at present, customers who proposed rule’s impact on efficiency, competition,
4 See Securities Exchange Act Release No. 74990 and capital formation. See 15 U.S.C. 78c(f).
(May 18, 2015), 80 FR 29767 (‘‘Notice’’). 5 See Notice, supra note 4, 80 FR at 29768. 10 15 U.S.C. 78(b)(5).

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Document Created: 2015-12-15 13:19:06
Document Modified: 2015-12-15 13:19:06

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 37698