

[Federal Register: March 13, 2007 (Volume 72, Number 48)]
[Notices]               
[Page 11411]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr07-90]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55415; File No. SR-BSE-2006-03]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order 
Granting Approval of Proposed Rule Change as Modified by Amendment No. 
1, Relating to the Treatment of Limit Orders That Are Submitted to the 
Boston Options Exchange During a Price Improvement Period

March 7, 2007.
    On December 8, 2006, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ to amend the rules of the Boston Options Exchange 
(``BOX'') relating to the treatment of Limit Orders that are submitted 
to the BOX during a Price Improvement Period (``PIP''). On January 4, 
2007, the BSE filed Amendment No. 1 to the proposal. The proposed rule 
change, as amended, was published for comment in the Federal Register 
on January 16, 2007.\3\ The Commission received no comments on the 
proposal. This order approves the proposed rule change as modified by 
Amendment No. 1.
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    \1\ 5 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 55050 (January 5, 
2007), 72 FR 1786 (SR-BSE-2006-03) (``Notice'').
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    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 \4\ and, in 
particular, the requirements of Section 6(b)(5) of the Act.\5\ 
Specifically, the Commission believes that the proposed rule change is 
consistent with the Act because it makes explicit how unrelated Limit 
Orders \6\ in the same series as a PIP Order, submitted to the BOX 
during the PIP,\7\ are treated, and specifies the circumstances under 
which Improvement Orders are not accepted by the BOX Trading Host.\8\ 
The Commission believes that these rule amendments are reasonable and 
consistent with the Act, and should help clarify for investors and 
market participants how their orders are executed in various 
situations.\9\
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    \4\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ An ``unrelated order,'' generally, is a non-Improvement 
Order entered into the BOX market while a PIP is in progress. See 
paragraph (a) of Section 18 of Chapter V of the BOX rules. An 
``Improvement Order,'' generally, is an order submitted to a PIP to 
compete for a ``PIP Order'' (a customer order submitted to the PIP 
for price improvement). See paragraph (e)(i) of Section 18 of 
Chapter V of the BOX Rules.
    \7\ As detailed in the Notice, certain unrelated Limit Orders on 
the same side of the market as a PIP Order terminate the PIP 
prematurely, while certain unrelated Limit Orders on the opposite 
side of the market immediately execute against the PIP Order (and 
allow the PIP to continue if the PIP Order has not been filled). The 
proposal clarifies the circumstances in which these early 
terminations and immediate executions take place, as well as the 
rules governing the prices that the PIP Order and unrelated Limit 
Order receive in each of these circumstances.
    \8\ The proposal specifies that the BOX Trading Host does not 
accept Improvement Orders that would lock or cross the BOX Book.
    \9\ In addition, the Commission notes that BSE is currently 
obligated to provide certain reports to the Commission that provide 
data about BOX-Top and Market Orders that terminate the PIP 
prematurely, as well as BOX-Top and Market Orders that immediately 
execute against a PIP Order. BSE represents that it will provide the 
same information for Limit Orders that terminate the PIP prematurely 
or immediately execute against a PIP Order.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-BSE-2006-03) as modified by 
Amendment No. 1, be, and hereby is approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-4503 Filed 3-12-07; 8:45 am]

BILLING CODE 8010-01-P
