
[Federal Register: April 2, 2009 (Volume 74, Number 62)]
[Notices]               
[Page 15020]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02ap09-93]                         


[[Page 15020]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59638; File No. SR-BX-2009-015]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order 
Granting Accelerated Approval of Proposed Rule Change Relating to 
Reduction of Certain Order Handling and Exposure Periods on the Boston 
Options Exchange Facility From Three Seconds to One Second

March 27, 2009.

I. Introduction

    On February 27, 2009, NASDAQ OMX BX, Inc. (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 reduce 
certain order exposure periods on the Boston Options Exchange Facility 
from three seconds to one second. The proposed rule change was 
published for comment in the Federal Register on March 11, 2009.\3\ The 
Commission received no comments on the proposal. This order approves 
the proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59497 (March 4, 
2009), 74 FR 10634 (``Notice'').
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II. Description of the Proposal

    The purpose of the proposed rule change is to reduce certain order 
handling and exposure periods in the rules of the Boston Options 
Exchange (``BOX'') from three seconds to one second. Specifically, BOX 
rules provide that an Options Participant may not cause the execution 
of an order it represents as agent on BOX through the use of orders it 
solicited unless the agency order is first exposed to the BOX Book for 
at least three seconds.\4\ BOX rules also provide that an order flow 
provider (``OFP'') may not execute as principal an order it represents 
as agent unless the OFP (i) exposes the order to the BOX Book for three 
seconds; (ii) has been bidding or offering on BOX for at least three 
seconds prior to receiving an agency order that is executable against 
such bid or offer; or (iii) sends the agency order to the Price 
Improvement Period (``PIP'') or Universal Price Improvement Period 
(``UPIP'').\5\ Finally, the duration of the PIP, which allows Options 
Participants to designate certain orders for price improvement and 
submit such orders to the PIP with a matching contra order, is three 
seconds.\6\ Under the proposal, these time periods would be reduced to 
one second.
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    \4\ See BOX Rules, Chapter V, Section 17, Supplementary Material 
.02.
    \5\ See BOX Rules, Chapter V, Section 17, Supplementary Material 
.03.
    \6\ See BOX Rules, Chapter V, Section 18(e)(i).
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III. Discussion and Commission Findings

    After carefully reviewing the proposed rule change, the Commission 
finds that the proposal is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\7\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\8\ 
which, among other things, requires that the rules of a national 
securities exchange be designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating 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. The Commission also finds that the proposed rule 
change is consistent with Section 6(b)(8) of the Act,\9\ which requires 
that the rules of an exchange not impose any burden on competition that 
is not necessary or appropriate in furtherance of the purposes of the 
Act.
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    \7\ 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).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(8).
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    The Commission believes that, given the electronic environment of 
BOX, reducing each of these exposure periods from three seconds to one 
second could facilitate the prompt execution of orders, while 
continuing to provide market participants with an opportunity to 
compete for exposed bids and offers. To substantiate that BOX Options 
Participants could receive, process, and communicate a response back to 
BOX within one second, BOX stated that it distributed a survey to its 
members that would be affected by this proposal or that regularly 
participate in the PIP. BOX stated that the survey indicated that it 
typically takes at most 110 milliseconds for Participants to receive, 
process, and respond to broadcast messages related to the PIP or 
facilitation or solicitation related broadcasts and for such responses 
to reach BOX.\10\ BOX also stated that the Participants indicated that 
reducing the order exposure period to one second would not impair their 
ability to participate in solicitation or facilitation orders or orders 
executed through the PIP.\11\ Based on BOX's statements regarding the 
survey results, the Commission believes that market participants should 
continue to have opportunities to compete for exposed bids and offers 
within a one second exposure period. Accordingly, the Commission 
believes that it is consistent with the Act for the Exchange to reduce 
the order handling and exposure times discussed herein from three 
seconds to one second.
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    \10\ See Notice.
    \11\ Id.
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    The Commission finds good cause to approve the proposed rule change 
prior to the thirtieth day after publication for comment in the Federal 
Register. The Commission notes that the proposed rule change was 
noticed for a fifteen-day comment period, and no comments were 
received. The Commission believes that the Exchange has provided 
reasonable support for its belief that its market participants would 
continue to have an opportunity to compete for exposed bids and offers 
if the exposure periods were reduced to one second as proposed. 
Finally, the Commission also notes that the proposed rule change is 
similar to recently approved proposals submitted by other 
exchanges.\12\ Therefore, the Commission finds good cause, consistent 
with Section 19(b)(2) of the Act,\13\ to approve the proposed rule 
change on an accelerated basis.
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    \12\ See e.g., Securities Exchange Act Release Nos. 58088 (July 
2, 2008), 73 FR 39747 (July 10, 2008) (SR-CBOE-2008-16); 58224 (July 
25, 2008), 73 FR 44303 (July 30, 2008) (SR-ISE-2007-94); and 59081 
(December 11, 2008), 73 FR 76432 (December 16, 2008) (SR-Phlx-2008-
79).
    \13\ 15 U.S.C. 78s(b)(2).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-BX-2009-015), be, and hereby 
is, approved on an accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).

    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,
Deputy Secretary.
[FR Doc. E9-7353 Filed 4-1-09; 8:45 am]

BILLING CODE 8010-01-P
