
[Federal Register Volume 80, Number 206 (Monday, October 26, 2015)]
[Notices]
[Pages 65271-65274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27070]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76199; File No. SR-BX-2015-057]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Implement 
An Order Exposure Alert To Be Disseminated by the Exchange

October 20, 2015.
    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 October 6, 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, II, and III, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to implement an order exposure alert to be 
disseminated by the Exchange when a marketable order is placed on the 
book at a price that locks or crosses the national best bid or offer 
(``NBBO'') when the Exchange is not part of the NBBO.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxbx.cchwallstreet.com/, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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 Exchange is proposing to amend rulebook Chapter VI, Section 11 
to implement an order exposure alert in order to provide marketable 
orders an additional opportunity for execution on the Exchange when the 
Exchange is not part of the NBBO contra to the order and the order 
locks or crosses the away best bid or offer (``ABBO'').\3\
---------------------------------------------------------------------------

    \3\ Similar functionality currently exists on NASDAQ OMX PHLX. 
See Securities Exchange Act Release No. 68517 (December 21, 2012), 
77 FR 77134 (December 31, 2012) (SR-Phlx-2012-136).

---------------------------------------------------------------------------

[[Page 65272]]

    The Trading System provides two routing options, SEEK \4\ and SRCH, 
\5\ pursuant to which orders are sent to other available market centers 
for potential execution per the entering market participant's 
instructions. With SEEK and SRCH, an order will first check the System 
for available contracts for execution. After checking the System for 
available contracts, orders are sent to other available market centers 
for potential execution, per the entering firm's instructions. 
Alternatively, Participants can designate orders as not available for 
routing.
---------------------------------------------------------------------------

    \4\ SEEK is a routing option pursuant to which an order will 
first check the System for available contracts for execution. After 
checking the System for available contracts, orders are sent to 
other available market centers for potential execution, per the 
entering firm's instructions. When checking the book, the System 
will seek to execute at the price at which it would send the order 
to a destination market center. Eligible unexecuted orders continue 
to be routed as described in paragraph (a)(1)(C) of Chapter VI, 
Section 11. If contracts remain un-executed after routing, they are 
posted on the book at the order's limit price. While on the book at 
the limit price, should the order subsequently be locked or crossed 
by another market center, the system will not route the order to the 
locking or crossing market center. SEEK orders will not be eligible 
for routing until the next time the option series is subject to a 
new opening or reopening. See Chapter VI, Section 11(a)(1)(A).
    \5\ SRCH is a routing option pursuant to which an order will 
first check the System for available contracts for execution. After 
checking the System for available contracts, orders are sent to 
other available market centers for potential execution, per the 
entering firm's instructions. When checking the book, the System 
will seek to execute at the price at which it would send the order 
to a destination market center. Eligible unexecuted orders will 
continue to be routed as described in paragraph (a)(1)(C) of Chapter 
VI, Section 11. If contracts remain un-executed after routing, they 
are posted on the book. Once on the book, should the order 
subsequently be locked or crossed by another market center, it will 
re-route. See Chapter VI, Section 11(a)(1)(B).
---------------------------------------------------------------------------

    Currently, when the Exchange's disseminated bid or offer is 
inferior to the ABBO and an order that is marketable against the ABBO 
is received, it is matched against any possible contra side orders 
available in the Trading System. If a routable order is still 
unexecuted, or if only partially executed, it is then routed away to 
the market or markets at the ABBO, cancelled back to the entering party 
or posted on the book and displayed at a non-locking price according to 
the instructions on the order.\6\
---------------------------------------------------------------------------

    \6\ Because the System routes the lesser of the disseminated 
size of the away markets or the order size, it is possible for a 
portion of an order to be routed rather than the entire order. Also, 
respecting the part of an order that is routed, that order can 
either be executed in full, in part, or not at all on the 
destination exchange.
---------------------------------------------------------------------------

    The Exchange is now proposing to amend rulebook Chapter VI, Section 
11 to implement an order exposure alert in order to provide marketable 
orders an additional opportunity for execution on the Exchange when the 
Exchange is not part of the NBBO and the order locks or crosses the 
ABBO. The order exposure alert will apply to both SEEK and SRCH orders 
and is similar to the order exposure alert process already in place on 
NASDAQ OMX PHLX (``Phlx'').\7\ The Exchange has recently amended its 
rules to specify that after an order is initially routed, the order 
will post to the book and will be routed after a time period (``Route 
Timer'') not to exceed one second as specified by the Exchange on its 
Web site, provided that the order's price would not lock or cross other 
market centers.\8\ The proposed amendments would permit the Exchange to 
apply the Route Timer prior to the initial routing of the order.
---------------------------------------------------------------------------

    \7\ See Phlx Rule 1080(m), Away Markets and Order Routing, 
Section (iv).
    \8\ See Securities Exchange Act Release No. 73541 (November 6, 
2014) 79 FR 67526 (November 13, 2014) (SR-BX-2014-055). The Exchange 
is proposing to amend Section (a)(1)(C) by redesignating it as 
Section (a)(1)(D), and by clarifying in the first and last sentences 
of that Section that the order will be exposed prior to routing 
pursuant to that Section. This amendment reflects the fact that 
order exposure occurs (during open trading) every time an order 
becomes marketable against the ABBO.
---------------------------------------------------------------------------

    The Exchange proposes to amend Chapter VI, Section 11(1)(A) to 
provide that a SEEK order remaining on the book after the opening 
process or received during open trading that is marketable against the 
ABBO when the ABBO is better than the displayed Exchange BBO will 
initiate a Route Timer not to exceed one second, and expose the SEEK 
order at the NBBO to allow market participants an opportunity to 
interact with the SEEK order. During the Route Timer, the SEEK order 
will be included in the displayed Exchange BBO at the better of a price 
one MPV away from the ABBO or the established Exchange BBO. If, during 
the Route Timer, any new interest arrives opposite the SEEK order that 
is equal to or better than the ABBO price, the SEEK order will trade 
against such new interest at the ABBO price.\9\ While on the book at 
the limit price, should a SEEK order subsequently be locked or crossed 
by another market center, the System will not re-expose the order. An 
order exposure alert may be sent if the order size is modified.
---------------------------------------------------------------------------

    \9\ The rule currently states that ``[a]fter checking the System 
for available contracts, orders are sent to other available market 
centers for potential execution per the entering firm's 
instructions.'' This general sentence is being deleted in view of 
the greater specificity of the proposed new language, and to conform 
the Exchange's rule language more closely to that of Phlx. The 
preceding sentence, for clarity, is then amended to provide that 
after checking the System an order is sent to other available market 
centers for potential execution.
---------------------------------------------------------------------------

    The Exchange also proposes to amend Chapter VI, Section 11(1)(B), 
to provide that a SRCH order remaining on the book after the opening 
process or received during open trading that is marketable against the 
ABBO when the ABBO is better than the displayed Exchange BBO will 
initiate a Route Timer not to exceed one second, and expose the SRCH 
order at the NBBO to allow market participants an opportunity to 
interact with the remainder of the SRCH order. During the Route Timer, 
the SRCH order will be included in the displayed Exchange BBO at the 
better of a price one MPV away from the ABBO or the established 
Exchange BBO. If, during the Route Timer, any new interest arrives 
opposite the SRCH order that is equal to or better than the ABBO price, 
the SRCH order will trade against such new interest at the ABBO 
price.\10\ Once on the book, should a SRCH order subsequently be locked 
or crossed by another market center, it will be re-exposed, provided it 
is not on the book at its limit price, and re-route. An order exposure 
alert may be sent if the order size is modified.
---------------------------------------------------------------------------

    \10\ Id.
---------------------------------------------------------------------------

    The Exchange proposes to redesignate existing Section 11(a)(1)(C) 
as Section 11(a)(1)(D) and to add new Section 11(a)(1)(C) dealing with 
Do Not Route or ``DNR'' Orders. Currently, Section 11(a) provides that 
Participants can designate orders as not available for routing. The new 
rule provides additional specificity regarding the Exchange's treatment 
of such orders, known as DNR orders, tracking language regarding DNR 
orders from the Phlx rules.\11\ The new language clarifies that DNR 
orders will never be routed outside of the Exchange regardless of the 
prices displayed by away markets. It specifies that a DNR order may 
execute on the Exchange at a price equal to or better than, but not 
inferior to, the best away market price but, if that best away market 
remains, the DNR order will remain in the Exchange book and be 
displayed at the better of a price one minimum price variation away 
from that away best bid/offer or the established Exchange BBO. The new 
rule states that a DNR order remaining on the book after the opening 
process or received during open trading that is marketable against the 
ABBO when the ABBO is better than the Exchange BBO will be exposed at 
the NBBO to market participants and that any incoming order interacting 
with such a resting DNR order will receive the best away market price. 
Should the

[[Page 65273]]

best away market change its price, or move to an inferior price level, 
the DNR order will automatically re-price from its one minimum price 
variation away from the original away best bid/offer price to one 
minimum trading increment away from the new away best bid/offer price 
or its original limit price, and expose such orders at the NBBO to 
market participants only if the re-priced order locks or crosses the 
ABBO and is not already displayed at its limit price. Should the best 
away market improve its price such that it locks or crosses the DNR 
order limit price, the Exchange will execute the resulting incoming 
order that is routed from the away market that locked or crossed the 
DNR order limit price. An order exposure alert may be sent if the order 
size is modified.
---------------------------------------------------------------------------

    \11\ See Phlx Rule 1080(m)(iv)(a).
---------------------------------------------------------------------------

    The Exchange proposes to amend existing paragraph 11(a)(1)(C) which 
is being redesignated as paragraph 11(a)(1)(D). The amendments state 
that SEEK and SRCH orders will also be exposed prior to being re-routed 
at the end of the Route Timer provided for in that paragraph. Thus, the 
first sentence of that paragraph will be revised to provide that after 
an order is initially routed, pursuant to either the SEEK or SRCH 
routing option the order will post to the book and will be exposed and 
routed after a time period (``Route Timer'') not to exceed one second 
as specified by the Exchange on its Web site provided that the order's 
limit price would lock or cross other market center(s). Similarly, the 
final sentence of the paragraph will be amended to state that if an 
order was routed with either the SEEK or SRCH routing option, and has 
size after such routing, it will execute against contra side interest 
in the book, post in the book, and be exposed and route again pursuant 
to the process described above, if applicable, if the order's limit 
price would lock or cross another market center(s).
    Finally, the Exchange is amending Chapter VI, Trading Systems, 
Section 1, Definitions, subsection (g)(2) which defines ``Immediate or 
Cancel'' or ``IOC'' as a time in force which means, for orders so 
designated, that if after entry into the System a marketable order (or 
unexecuted portion thereof) becomes non-marketable, the order (or 
unexecuted portion thereof, is canceled and returned to the entering 
participant. The Exchange is deleting the last sentence of the 
definition, which currently states that ``IOC orders can be routed if 
designated as routable.'' The Exchange has determined that IOC orders 
will be cancelled immediately if not executed, and will not be routed. 
IOC orders are currently handled in this manner on Phlx.\12\
---------------------------------------------------------------------------

    \12\ See Phlx Rule 1080(m), Away Markets and Order Routing, the 
second sentence of the introductory paragraph.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \14\ 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 open market and a national 
market system, and, in general to protect investors and the public 
interest. The Exchange believes that exposing certain orders has the 
potential to result in more efficient executions for customers as 
responses to exposed orders could result in faster executions. Exposing 
the order to all market participants should promote broader awareness 
of, and provide increased opportunities for greater participation in, 
these executions, facilitating the ability of the Exchange to bring 
together participants and encourage more robust competition for these 
orders. In addition, the proposal would continue to guarantee that 
orders will receive an execution that is at a price at least as good as 
the price disseminated by the best away market at the time the order 
was received. The Exchange believes that because all Exchange 
participants have the ability to subscribe to a data feed to provide 
them with the notifications exposing the orders, all market 
participants may avail themselves of the same information.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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. The proposal should facilitate 
the ability of the Exchange to bring together market participants and 
encourage more robust competition.

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)(iii) of the Act \15\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\16\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \16\ 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 Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule 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 rule-comments@sec.gov. Please include 
File Number SR-BX-2015-057 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BX-2015-057. 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/

[[Page 65274]]

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-
2015-057 and should be submitted on or before November 16, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-27070 Filed 10-23-15; 8:45 am]
 BILLING CODE 8011-01-P


