
[Federal Register: November 28, 2008 (Volume 73, Number 230)]
[Notices]               
[Page 72536-72538]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28no08-127]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58999; File No. SR-BSE-2008-54]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Boston Stock Exchange, 
Inc. To Amend Certain BOX Rules Related to the PIP To Eliminate the 
Requirement That There Be at Least Three Market Makers Quoting in a 
Relevant Options Class in Order for a PIP To Commence

November 21, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 17, 2008, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. 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 certain Rules of the Boston Options 
Exchange Group, LLC (``BOX'') related to the Price Improvement Period 
(``PIP'') to eliminate the requirement that there be at least three 
market makers quoting in a relevant options class in order for a PIP to 
commence. The text of the proposed rule change is available from the 
principal office of the Exchange, at the Commission's Public Reference 
Room and also on the Exchange's Internet Web site at http://
nasdaqtrader.com/Trader.aspx?id=Boston_Stock_Exchange.

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 self-regulatory organization 
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 self-regulatory organization 
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
    In order to provide additional opportunities for price improvement, 
the Exchange proposes to expand the PIP. The PIP permits Participants 
to provide penny price improvement for Customer Orders.\3\ Current BOX 
rules require, among other things, that there are at least three Market 
Makers quoting in the relevant series before a PIP may commence. The 
Exchange is now proposing to eliminate this requirement.
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    \3\ See Section 18 of Chapter V of the BOX Rules.
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    The Exchange does not believe that orders should be denied the 
benefits of the PIP simply because there may be less than three Market 
Makers quoting in a relevant series. The BOX Rules provide for broad 
participation in a PIP auction. Allowing all types of Participants on 
BOX, including Market Makers, OFPs and Public Customers to compete 
within the PIP increases competition to provide price improvement, 
benefiting the Customer Order. Any concern regarding a PIP starting 
with a lower number of Market Makers quoting in the relevant series is 
offset by the broad participation and competition that is present in a 
PIP auction once commenced. The Exchange believes that this proposed 
rule change is a reasonable modification designed to provide additional 
flexibility for Participants to obtain executions on behalf of their 
customers while continuing to provide a meaningful, competitive 
auction.
    In support of its proposal, the Exchange notes that the Commission 
recently approved a similar proposal of the International Securities 
Exchange (``ISE'') to remove an identical requirement within its Price 
Improvement Mechanism (``PIM'') rules.\4\ The ISE PIM now permits price 
improvement in non-standard increments without the condition that there 
be a minimum number of market makers quoting in the particular 
series.\5\ The PIP and PIM share the same purpose and goal of providing 
opportunities for customer price improvement. The Exchange believes 
that the PIP, and in turn the customers that benefit from the PIP, 
would be disadvantaged if the three Market Maker

[[Page 72537]]

requirement remained as a condition to start a PIP.\6\ Because ISE is 
currently able to offer its customers price improvement in a non-
standard increment without a minimum quoter requirement in the PIM, the 
Exchange believes it is essential for competitive reasons to be able to 
offer the same opportunities for price improvement on BOX through the 
PIP.
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    \4\ See Securities Exchange Act Release No. 58710 (October 1, 
2008), 73 FR 59008 (October 8, 2008) (SR-ISE-2008-63).
    \5\ See ISE Rule 723.
    \6\ Both PIP and PIM have certain characteristics in common with 
each other. Both provide for the opportunity for customer price 
improvement, both have certain periods where the initial orders are 
exposed for potential price improvement, both have certain 
guidelines regarding the types of orders that may be eligible for 
this price improvement and both have certain defined rules related 
to the allocation of trades within these price improvement auctions.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\7\ in general, and Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to prevent fraudulent and manipulative acts, 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. In particular, the proposed rule change will allow 
Participants to guarantee executions and provide additional price 
improvement opportunities to their customers' orders. The Exchange 
believes that this proposed rule change is a reasonable modification 
designed to provide additional flexibility for Participants to obtain 
executions on behalf of their customers while continuing to provide a 
meaningful, competitive auction.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing 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 after the date of this filing, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) 
thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
under the Act requires that a self-regulatory organization submit to 
the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the date of filing 
of the proposed rule change, or such shorter time as designated by 
the Commission. The Exchange has satisfied this notice requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
filing.\11\ However, Rule 19b-4(f)(6)(iii) \12\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay. The 
Exchange asserts that waiver of the operative delay is appropriate in 
order to allow the Exchange to remain competitive with the ISE and to 
prevent delaying the benefits that the proposed rule change will confer 
to customers. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. The Commission notes that it recently approved a 
substantially similar rule change for ISE's PIM, and BSE's proposal 
raises no new regulatory issues.\13\ The Commission also notes that 
ISE's proposal was subject to full notice and comment, and the 
Commission received no comments on that proposal. Accordingly, the 
Commission designates that the proposed rule change become operative 
immediately.\14\
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ Id.
    \13\ See supra note 4.
    \14\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change the Commission may summarily abrogate 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.

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BSE-2008-54 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-BSE-2008-54. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-BSE-
2008-54 and should be submitted on or before December 19, 2008.


[[Page 72538]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-28243 Filed 11-26-08; 8:45 am]

BILLING CODE 8011-01-P
