[Federal Register Volume 76, Number 125 (Wednesday, June 29, 2011)]
[Notices]
[Pages 38226-38231]
[FR Doc No: 2011-16293]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64734; File No. SR-BX-2011-034]

 Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing of Proposed Rule Change Relating to Amending the BOX Trading
Rules To Establish Facilitation and Solicitation Auction Mechanisms

 June 23, 2011.
    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 June 17, 2011, NASDAQ OMX BX, Inc. (the ``Exchange'') filed with the
Securities and Exchange Commission

(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule 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 Chapter V, (Doing Business on BOX),
Section 31 (Block Trading) of the Rules of the Boston Options Exchange
Group, LLC (``BOX'') to establish Facilitation and Solicitation auction
mechanisms. 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://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.

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
    Currently, BOX offers only one execution mechanism for the
execution of two-sided crossing transactions--the Price Improvement
Period auction.\3\ Competitor options exchanges offer multiple
mechanisms to execute two-sided orders, including facilitation and
solicitation mechanisms for large block orders.\4\ To remain
competitive with other options exchanges for block-size facilitation
and solicitation transactions, BOX has developed additional auction
mechanisms. This rule change proposes implementation on BOX of a
Facilitation Auction mechanism and a Solicitation Auction mechanism.
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    \3\ Capitalized terms not otherwise defined herein shall have
the meanings prescribed within the BOX Rules.
    \4\ See, e.g., International Securities Exchange Rule 716 and
Chicago Board Options Exchange Rule 6.74B.
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Facilitation Auction
    The Facilitation Auction will allow Order Flow Providers (``OFPs'')
to enter crossing transactions where the OFP represents a block-size
order as agent (``Agency Order'') and (1) Is trading against the Agency
Order as principal (i.e., facilitating the Agency Order) and/or (2) has
solicited an order to take the opposite side of the Agency Order. Thus,
the Facilitation Auction will allow block-size order executions against
facilitated or solicited orders, or against a combination of
facilitated and solicited orders. This auction will give OFPs the added
flexibility to execute a transaction where the OFP facilitates only a
portion of the order opposite its Agency Order, and has solicited
interest from other parties for the remaining size of the order
opposite its Agency Order. The Facilitation Auction will be limited to
orders of fifty (50) contracts or more.
    OFPs must be willing to execute the entire size of Agency Orders
entered into the Facilitation Auction through the submission of a
contra ``Facilitation Order.'' Upon the entry of an Agency Order and
Facilitation Order into the Facilitation Auction, a broadcast message
will be sent to Options Participants, giving them one second to enter
responses with the prices and sizes at which they would be willing to
participate in the facilitation opposite the Agency Order
(``Responses''). Responses may be priced at the price of the Agency
Order or at a better price and must not exceed the size of the Agency
Order to be facilitated. At the end of the one second period for the
entry of Responses, the Facilitation Order will be automatically
executed with the Agency Order.
    Unless there is sufficient size to execute the entire Agency Order
at a better price, Public Customer bids (offers) and Public Customer
Responses on BOX at the time the Agency Order is executed that are
priced higher (lower) than the facilitation price will be executed at
the facilitation price. Non-Public Customer and Market Maker bids
(offers) and Non-Public Customer and Market Maker Responses on BOX at
the time the Agency Order is executed that are priced higher (lower)
than the facilitation price will be executed against the Agency Order
at their stated price, providing the Agency Order execution at a better
price for the number of contracts associated with such higher bids
(lower offers) and Responses.
    The facilitating OFP will execute at least forty percent (40%) of
the original size of the Facilitation Order, but only after better-
priced bids (offers) and Responses on BOX, as well as Public Customer
bids (offers) and Responses at the facilitation price, are executed in
full. After the facilitating OFP has executed his forty percent (40%),
Non-Public Customer and Market Maker bids (offers) and Responses on BOX
at the facilitation price will participate in the execution of the
Agency Order based upon price and time priority.
    The following example illustrates the execution priority within the
Facilitation Auction. An OFP submits a Facilitation Order to buy and
Agency Order to sell 100 contracts at a proposed execution price of
$2.00. At the end of the auction, the NBBO is bid $2.00--offer $2.10.
During the one second auction, BOX receives the following bids (offers)
in time priority:
    (1) Market Maker offer on the Book to buy 100 contracts at $2.00.
    (2) Public Customer Response to buy 50 contracts at $2.00.
    Since there are no bids (offers) or Responses at an improved price,
the Public Customer would execute 50 contracts against the Agency
Order; the Facilitation Order will execute 40 contracts (40% of 100)
against the Agency Order; and the Market Maker on the Book would
execute the remaining 10 contracts against the Agency Order; all at
$2.00.
Solicitation Auction
    To better compete for block-size solicited transactions, BOX has
developed a Solicitation Auction. The Solicitation Auction is a process
by which an OFP can attempt to execute orders of 500 or more contracts
it represents as agent (the ``Agency Order'') against contra orders
that the OFP has solicited (``Solicited Order'').\5\ The proposed rule
change will allow OFPs to enter both sides of a proposed solicited
cross (the Agency and Solicited Orders). These solicitation
transactions will be required to be for at least 500 contracts and will
be executed only if the price is at or between the national best bid or
offer (``NBBO''). Each Agency Order entered into the Solicitation
Auction shall be all-or-none.
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    \5\ Although orders solicited from Public Customers are not
subject to the exposure requirement of Supplementary Material .02 to
Section 17 of Chapter V of the BOX Rules, they would be permitted to
be entered into the Solicitation Auction should OFPs choose this
alternative.
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    When a proposed solicited cross is entered into the Solicitation
Auction, BOX will broadcast a message to Options Participants and they
will have

one second to respond with the prices and sizes at which they would be
willing to participate in the execution of the Agency Order
(``Responses''). At the end of the period for Responses, the Agency
Order will be automatically executed in full or cancelled. The Agency
Order will be executed against the Solicited Order at the proposed
execution price unless there is sufficient size to execute the entire
Agency Order at a better price or prices, or there is a Public Customer
Order (A) at a price equal to or better than the proposed execution
price; and (B) on the BOX Book within a depth of the BOX Book so that
it would otherwise trade with the Agency Order if the Agency Order had
been submitted to the BOX Book, (a ``Book Priority Public Customer
Order'').\6\
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    \6\ In contrast to the Facilitation Mechanism, only Public
Customer Orders that are within a depth of the BOX Book so that they
would otherwise trade with the Agency Order if it were submitted to
the BOX Book are eligible to trade with the Agency Order in the
Solicitation Mechanism. Options Participants' orders submitted to
BOX are ranked and maintained in the BOX Book according to price/
time priority, such that within each price level, all orders are
organized by time of order entry. No distinction is made to this
priority with regard to account designation (Public Customer,
Broker/Dealer, or Market Maker). BOX believes that price/time
priority provides an incentive for all market participants to post
their best prices quickly. As such, BOX will consider only these
Priority Public Customer Orders based on price/time priority. Stated
otherwise, if an Agency Order of the same block size was executed on
the BOX Book rather than through the Solicitation Auction, only
those orders with price/time priority would execute against the
Agency Order. Those Public Customer Orders on the BOX Book beyond
the depth equal to the Agency Order size would not be executed
against the Agency Order.
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    If at the time of execution there is sufficient size to execute the
entire Agency Order at an improved price (or prices), the Agency Order
will be executed at the improved price(s) and the Solicited Order will
be cancelled.\7\ For example, an OFP starts a Solicitation Auction by
submitting to BOX an Agency Order to buy and a Solicited Order to sell
1,000 contracts with a proposed execution price of $2.10. At the end of
the one second auction, the NBBO is bid $2.00--offer $2.10. During the
auction, BOX received the following bids (offers) in time priority:
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    \7\ The aggregate size of all bids (offers) and Responses at
each price will be used to determine whether the entire Agency Order
can be executed at an improved price (or prices).
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    (1) Market Maker Response to sell 400 contracts at $2.08;
    (2) Market Maker offer on the Book to sell 300 contracts at $2.08;
    (3) Public Customer Response to sell 200 contracts at $2.08;
    (4) Public Customer Order on the Book to sell 300 contracts at
$2.08.
    Since there is sufficient size to execute the entire Agency Order
at an improved price, the Agency Order will execute in time priority
against each of the bids (offers) and Responses at $2.08, and the
Solicited Order would be cancelled. The Agency Order would execute 400
contracts against the Market Maker Response; 300 contracts against the
Market Maker offer on the Book; 200 contracts against the Public
Customer Response; and 100 contracts against the Public Customer Order
on the Book. The remaining 200 contracts of the Public Customer Order
on the Book would remain unexecuted.
    If at the time of execution, there are one or more Book Priority
Public Customer Orders on the BOX Book, the Agency Order will be
executed against the BOX Book if there is sufficient size available to
execute the entire Agency Order, and the Solicited Order will be
cancelled. In this instance, the aggregate size of all bids (offers) on
the BOX Book at or better than the proposed execution price will be
used to determine whether there is sufficient size available to execute
the entire Agency Order. Responses are excluded when determining
whether sufficient size exists to execute the Agency Order at its
proposed price.\8\ For example, an OFP starts a Solicitation Auction by
submitting to BOX an Agency Order to buy and a Solicited Order to sell
1,000 contracts with a proposed execution price of $2.10. At the end of
the one second auction, the NBBO is bid $2.00--offer $2.10. During the
auction, BOX received the following bids (offers) in time priority:
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    \8\ As set forth in proposed Supplementary Material .03 to
Chapter V, Section 31, Responses are sent by Options Participants in
response to a Facilitation or Solicitation Auction broadcast
message. Responses represent non-firm interest that can be canceled
or decremented as to price or size at any time prior to execution
and are not displayed to any market participants.
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    (1) Market Maker offer on the Book to sell 700 contracts at $2.09;
    (2) Public Customer Order on the Book to sell 400 contracts at
$2.10.
    There is a Book Priority Public Customer Order on the Book and
there is sufficient size on the Book to execute the entire Agency
Order. As such, the Agency Order will be executed against the orders on
the BOX Book based upon price/time priority, and the Solicited Order
will be cancelled. In this example, the Agency Order will execute 700
contracts against the Market Maker on the Book at $2.09, and 300
contracts against the Book Priority Public Customer Order. The
remaining 100 contracts of the Public Customer Order on the Book would
remain unexecuted.
    Similar to the example above, assume during the auction BOX
received the following bids (offers) in time priority:
    (1) Public Customer Order on the Book to sell 400 contracts at
$2.09;
    (2) Market Maker offer on the Book to sell 600 contracts at $2.10.
    Then, the Agency Order will also be executed against the orders on
the Book based upon price/time priority and the Solicited Order will be
cancelled. In this example, the Agency Order will execute 400 contracts
against the Public Customer Order at $2.09, and 600 contracts against
the Market Maker at $2.10.
    BOX determines whether sufficient size exists on the BOX Book to
execute the Agency Order so as to prevent (i) Any trade-through of the
BOX Book and (ii) any Book Priority Public Customer Order from being
bypassed by a Solicitation Auction execution. If the Agency Orders in
these two examples above had been sent directly to the BOX Book rather
than the Solicitation Auction, the resulting execution against the
Agency Order would have been the same.
    If there is a Book Priority Public Customer Order on the BOX Book,
but there is insufficient size to execute the entire Agency Order at
the proposed execution price, however; both the Agency and Solicited
Orders will be cancelled. For example, an OFP starts a Solicitation
Auction by submitting to BOX an Agency Order to buy and a Solicited
Order to sell 1,000 contracts with a proposed execution price of $2.10.
At the end of the one second auction, the NBBO is bid $2.00--offer
$2.10. During the auction, BOX received the following bids (offers) in
time priority:
    (1) Public Customer Order on the Book to sell 400 contracts at
$2.10;
    (2) Market Maker offer on the Book to sell 300 contracts at $2.10.
    In this example, there is a Book Priority Public Customer Order on
the BOX Book, but there is insufficient size on the Book to execute the
entire Agency Order at the proposed execution price. As such, both the
Solicited Order and Agency Order will be cancelled, except under the
Surrender Quantity conditions described below.
Surrender Quantity
    To increase the successful execution of block Solicitation Auction
trades and Public Customer Orders on BOX while protecting the BOX Book,
BOX has developed the ``Surrender Quantity'' function for Solicitation
Auctions. When starting a Solicitation Auction, the OFP may designate,
for the Solicited Order, the quantity of contracts of the

Agency Order for which the OFP is willing to `surrender' interest to
the BOX Book (``Surrender Quantity''). The Surrender Quantity will
apply at the time of execution only if there are (1) Book Priority
Public Customer Orders on the BOX Book, or (2) any bids (offers) on the
BOX Book at any price better than the proposed execution price. Only
these orders on the BOX Book will be eligible for execution utilizing
the Surrender Quantity.
    With the Surrender Quantity function, BOX seeks to protect Public
Customer Orders that would have traded with the Agency Order if the
Agency Order had been submitted to the BOX Book. When the aggregate
size of (1) Book Priority Public Customer Orders and (2) all bids
(offers) on the BOX Book at prices better than the proposed execution
price, is equal to or less than the Surrender Quantity, the Agency
Order will first execute against all such Book Priority Public Customer
Orders and all such bids (offers), and then against the Solicited
Order. If the aggregate size of all such Book Priority Public Customer
Orders and all such bids (offers) exceeds the Surrender Quantity, but
there is insufficient size to execute the entire Agency Order, then
both the Solicited Order and the Agency Order will be cancelled.

    Example: The OFP starts a Solicitation Auction by submitting to
BOX an Agency Order to buy and a Solicited Order to sell 1,000
contracts with a proposed execution price of $2.10. The OFP also
designates 200 contracts as the Surrender Quantity. At the end of
the one second auction the NBBO is bid $2.00--offer $2.10. During
the auction, BOX received the following bids (offers) in time
priority:
    (1) Public Customer Order on the Book to sell 200 contracts at
$2.10;
    (2) Market Maker offer on the Book to sell 800 contracts at
$2.10.

    Without the Surrender Quantity, the Agency Order would execute
against the Public Customer Order on the Book for 200 contracts at
$2.10 and against the Market Maker on the Book for 800 contracts at
$2.10. Using the Surrender Quantity, however, the Agency Order would
still execute against the Public Customer Order on the Book, but would
then execute against the Solicited Order for 800 contracts at $2.10.
    Additionally, use of the Surrender Quantity function will allow
block-size Solicitation Auction trades in certain instances in which
there would otherwise be no execution. In these instances, use of the
Surrender Quantity will also prevent (i) a trade-through of the BOX
Book and any Book Priority Public Customer Order from being bypassed
upon a Solicitation Auction execution. Under the proposed rule change
there are other situations when, absent use of the Surrender Quantity,
the Solicitation Auction would result in no trade. The first is when a
Book Priority Public Customer Order is on the BOX Book and there is
insufficient quantity on BOX, other than the Solicited Order, to
execute the entire Agency Order. Without the Surrender Quantity
function, both the Solicited Order and Agency Order would be cancelled
and the Public Customer Order would remain unexecuted, keeping the
Public Customer Order on the Book from being bypassed upon a
Solicitation Auction execution. The second instance is when the
proposed execution price is inferior to the best bid or offer on BOX
(meaning there is a better priced bid (offer) on BOX) or inferior to
the NBBO. Again, without the Surrender Quantity function, no execution
would occur, keeping the better priced bids (offers) on the BOX Book
from being bypassed upon a Solicitation Auction execution. In both
instances, Public Customer Orders, the better priced bids (offers), the
Solicited Order and the Agency Order remain unexecuted. Under this
proposed rule change, however, if the Surrender Quantity is utilized
and is of sufficient size, then the orders are executed against the
Agency Order as follows: Public Customer Orders, better priced bids
(offers), and the Solicited Order. If the Surrender Quantity is of
insufficient size, then no execution occurs and again any trade-through
of the BOX Book or execution ahead of a Book Priority Public Customer
Order is prevented. The Surrender Quantity provides the potential for
various market participants to benefit from the execution they desire.
The following examples illustrate the proposed Surrender Quantity
concept:

    Example: The OFP starts a Solicitation Auction by submitting to
BOX an Agency Order to buy and a Solicited Order to sell 1,000
contracts with a proposed execution price of $2.10. The OFP also
designates 200 contracts as the Surrender Quantity. At the end of
the one second auction the NBBO is bid $2.00--offer $2.10. During
the auction, BOX received the following bids (offers) in time
priority:
    (1) Response of 150 contracts to sell at $2.08;
    (2) Market Maker offer on the Book of 200 contracts at $2.10;
    (3) Response of 100 contracts to sell at $2.10;
    (4) Public Customer Order offer on the Book of 100 contracts at
$2.10;
    (5) Response of 50 contracts to sell at $2.10.

    Since there is insufficient size to execute the entire Agency Order
and the Surrender Quantity of 200 is greater than the total size of
Book Priority Public Customer Orders (100), the Agency Order will
execute 100 contracts against the Book Priority Public Customer Order
at $2.10 and the remaining 900 contracts against the Solicited Order at
$2.10.\9\ In this example, without the use of the Surrender Quantity,
the Priority Public Customer Order would force the Agency Order and
Solicited Order to be cancelled while the Public Customer Order
remained unexecuted.
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    \9\ As noted at the beginning of this section regarding
Surrender Quantity, the only orders eligible for execution utilizing
the Surrender Quantity are (1) Book Priority Public Customer Orders
and (2) any bids (offers) on the BOX Book at any price better than
the proposed execution price. Responses are not eligible for
execution utilizing the Surrender Quantity.

    Example: The OFP starts a Solicitation Auction by submitting to
BOX an Agency Order to buy and a Solicited Order to sell 1,000
contracts with a proposed execution price of $2.10. The OFP also
designates 200 contracts as the Surrender Quantity. At the end of
the one second auction the NBBO is bid $2.00--offer $2.10. During
the auction, BOX received the following bids (offers) in time
priority:
    (1) Response of 150 contracts to sell at $2.08;
    (2) Market Maker offer on the Book of 100 contracts at $2.08;
    (3) Response of 100 contracts to sell at $2.10;
    (4) Public Customer Order on the Book of 50 contracts to sell at
$2.08;
    (5) Public Customer Order on the Book of 50 contracts to sell at
$2.10
    (6) Response of 50 contracts to sell at $2.10.

    Since there is insufficient size to execute the entire Agency
Order, and the Surrender Quantity of 200 is equal to the total size of
Public Customer Orders (100) and the better priced offers (Market Maker
offer of 100 at $2.08), the Agency Order will execute 100 contracts at
$2.10 against the Public Customer Orders, 100 contracts against the
Market Maker offer at $2.08, and the remaining 800 contracts against
the Solicited Order at $2.10. The Public Customer Order of 50 contracts
to sell at $2.08 executes at the proposed solicitation execution price
of $2.10. The Agency Order executes at $2.08 for the 100 contracts
against the Market Maker offer. Without the Surrender Quantity
function, the Book Priority Public Customer Order and the market maker
offer on BOX at a better price would result in the Agency Order and
Solicited Order being cancelled while the Public Customer Orders
remained unexecuted.
    Public Customer bids (offers) on the BOX Book at the time of an
execution that includes a Surrender Quantity, and

that are priced higher (lower) than the proposed Solicitation Auction
execution price, will be executed against the Agency Order at the
proposed execution price. BOX believes this will provide Public
Customers the benefit of a better price for the number of contracts
associated with such higher bids (lower offers). Non-Public Customer
and Market Maker bids (offers) on the BOX Book at the time of a
Surrender Quantity execution that are priced higher (lower) than the
proposed execution price will be executed at their stated price. BOX
believes this will provide the Agency Order a better execution price
for those contracts.
    Additionally, the proposed rule change would require OFPs to
deliver to customers a written notification describing the terms and
conditions of the Solicitation Auction prior to executing Agency Orders
using the Solicitation Auction. Such written notification would be
required to be in a form approved by the Exchange.
Supplementary Material to Section 31
    Further, the proposed rule change specifies in Supplementary
Material to Chapter V, Section 31 that it will be a violation of an
Options Participant's duty of best execution to its customer if it were
to cancel a Facilitation Order to avoid execution of the order at a
better price. The availability of the Facilitation Auction does not
alter an Options Participant's best execution duty to obtain the best
price for its customer. Accordingly, while Facilitation Orders may be
canceled during the time period given for the entry of Responses, if an
Options Participant were to cancel a Facilitation Order when there was
a better price available on BOX and subsequently re-enter the
Facilitation Order at the same facilitation price after the better
price was no longer available without attempting to obtain that better
price for its customer, there would be a presumption that the Options
Participant did so to avoid execution of its customer order in whole or
in part by other brokers at the better price.
    In addition, Options Participants will be prohibited from using the
Solicitation Auction to circumvent Section 17 of Chapter V which limits
principal transactions. Prohibited actions may include, but be not
limited to, Options Participants entering Solicitation Orders that are
solicited from (1) Affiliated broker-dealers, or (2) broker-dealers
with which the Options Participant has an arrangement that allows the
Options Participant to realize similar economic benefits from the
solicited transaction as it would achieve by executing the customer
order in whole or in part as principal. Moreover, any Solicited Orders
entered by Options Participants to trade against Agency Orders may not
be for the account of a BOX market maker that is assigned to the
options class.
    Additionally, the proposed rule change would allow Orders and
Responses to be entered into the BOX Facilitation and Solicitation
Auctions and receive executions at penny increments. Any BOX OFP may
enter Orders into the Facilitation and Solicitation Auctions, and any
BOX Participant may enter a Response within the proposed auction
mechanisms. BOX believes that auction competition and executions at
penny increments will provide greater flexibility in pricing for block-
size orders and provide enhanced opportunities for block-size orders to
benefit from price improvement.
    Finally, the proposed rule change also adds references to the
Facilitation and Solicitation Auction mechanisms to Chapter V, Section
17 (Customer Orders and Order Flow Providers), and to Chapter III,
Section 4(f) (Prevention of the Misuse of Material Nonpublic
Information).
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\10\ in general, and Section
6(b)(5) of the Act,\11\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, 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.
In particular, the Exchange believes that the proposed rule change to
implement a Facilitation Auction and Solicitation Auction on BOX is
designed to help BOX remain competitive among options exchanges and
provide market participants additional opportunities to execute block-
size crossing transactions.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    BOX believes the proposed rule change is consistent with the Act
because executions based upon price/time priority provide an incentive
for all market participants to post their best prices quickly to the
market. BOX does not believe that customers' electronic orders must be
accorded priority over market makers who are not acting as agent with
respect to those customers. These market makers are not required to
yield priority to Public Customer Orders if the market maker has time
priority at a particular price level. In this way, BOX places all of
its market participants on the same footing, with no participant
enjoying any special or unique control over the timing of execution or
order handling advantages. All orders are processed for execution by an
electronic computer system--the BOX Trading Host. Specifically, orders
sent to BOX are transmitted directly from remote electronic terminals
to the trading system. Once an order is submitted to BOX, the order is
executed against another order based on the established matching
algorithm. The execution does not depend on the Options Participant but
rather upon what other orders are entered into BOX at or around the
same time as the subject order, what orders are on the BOX Book, and
where the order is ranked based on the price/time priority ranking
algorithm. Accordingly, Options Participants do not control or
influence the result or timing of orders submitted to BOX. The
Commission has repeatedly found this price/time priority model
consistent with the Act \12\ regarding exchanges' electronic trading
mechanisms. The proposed Solicitation Auction mechanism will not
execute any order ahead of any Public Customer order on BOX where that
customer order would have otherwise traded with the Agency Order
(``Book Priority Public Customer Order''). As such, BOX believes the
principles of price/time priority for matching orders within its
proposed Solicitation Auction are consistent with the Act.
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    \12\ See Securities Exchange Act Release Nos. 49068 (January 13,
2004), 69 FR 2775 (January 20, 2004) (SR-BSE-2002-15) (Order
Approving BOX Facility); 61419 (January 26, 2010), 75 FR 5157
(February 1, 2010) (SR-BATS-2009-031) (Order Approving BATS Options
Rules); 57478 (March 12, 2008), 73 FR 14521 (March 18, 2008) (SR-
NASDAQ-2007-004) (Order Approving NASDAQ Options Market).
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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

    Within 45 days of the date of publication of this notice in the
Federal

Register or within such longer period (i) As the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule
change should be 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 e-mail to<EMAIL_ADDRESS>Please include
File Number SR-BX-2011-034 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2011-034. 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 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
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of BX. 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 publicly available. All
submissions should refer to File Number SR-BX-2011-034 and should be
submitted on or before July 20, 2011.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-16293 Filed 6-28-11; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 5 (Tuesday, January 8, 2013)]
[Notices]
[Pages 1292-1293]
[FR Doc No: 2013-00083]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68562; File No. SR-NSCC-2012-11]

Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Revise Its Fee Structure as It Relates to Certain
Insurance and Retirement Processing Services and To Remove Reference to
and the Fees Related to FundSPEED, a Discontinued Service

January 2, 2013.
    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 December 21, 2012, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared primarily by NSCC. NSCC
filed the proposed rule change pursuant to Section 19(b)(3)(A)(ii) \3\
of the Act and Rule 19b-4(f)(2) \4\ thereunder, so that the proposed
rule change was effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The proposed rule change is to revise Addendum A (Fee Structure) of
NSCC's Rules & Procedures (``Rules'') as it relates to certain
Insurance and Retirement Services (``I&RS'') fees and remove reference
to FundSPEED, a discontinued service.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

    In its filing with the Commission, NSCC 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. NSCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\5\
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    \5\ The Commission has modified the text of the summaries
prepared by NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

(a) Proposal Overview
    The purpose of the proposed rule change is to revise NSCC's fee
schedule (as listed in Addendum A of the Rules), as it relates to
certain I&RS, to replace the current fee structure with a tiered fee
structure. This change is being made in order to simplify the fee
schedule with respect to these services. In connection with this
change, certain I&RS fees have been changed in order to align those
fees with the costs of delivering the related services, with the
expectation that the fee changes, in the aggregate, will be revenue
neutral to NSCC.
    The Addendum A I&RS fee schedule changes are:
     Eliminating the Business Attachment subpart and associated
fees;
     Eliminating the Licensing and Appointments subpart and
associated fees;
     Eliminating the Request for Replacement subpart and
associated fees;
     Eliminating the Request for Replacement Status (including
incremental statuses) subpart and associated fees;
     Eliminating the Inforce Transaction Fees section and
associated fees; and
     Adding an Other Services Fees section, comprised of the
following five tiers and associated fees and services:
    1. TIER 1--$0.05--All Attachments (per attachment, per side);
    2. TIER 2--$0.15--Licensing and Appointments (L&A) Periodic
Reconciliation (per item);
    3. TIER 3--$0.35--Licensing and Appointments (L&A) Transaction (per
item), Registered Representative Change Confirm (per transaction, per
side), Brokerage Identification Number Change Request (per transaction,
per side), Brokerage Identification Number Change Confirm (per
transaction, per side), Values Inquiry (per inquiry, includes response,
per side);
    4. TIER 4--$0.65--Customer Account Transfer Output (per
transaction, charged to Insurance Carrier/Retirement Services Member
only), Customer Account Transfer Confirm (per transaction, per side),
Settlement Processing (per transaction, per side), Request for
Replacement Status (a/k/a Pending Case Status)--Receiving Carrier (per
Request for Replacement Status), Request for Replacement Status (a/k/a
Pending Case Status)--Deliverer (per Request for Replacement Status),
Registered Representative Change Request (per transaction, per side),
Time Expired Transaction (per transaction, per side); and
    5. TIER 5--$1.25--Fund Transfer (per request, per side),
Withdrawals (per request, per side), Arrangements (per request, per
side), Request for Replacement--Delivering Carrier (per request),
Request for Replacement--Receiving Carrier (per request). NSCC is also
removing reference to the I&RS ``Beneficiary Update Request'' and
``Beneficiary Confirm'' in Addendum A of the Rules. These functions do
not require a line item in the fee schedule because there is no charge
for these services.
    In addition, NSCC is making a technical change to remove from
Addendum A of the Rules reference to and the fees related to FundSPEED,
as this service was discontinued.
    The above changes took effect on January 1, 2013.
(b) Statutory Basis
    NSCC believes the proposed rule is consistent with the requirements
of the Act, specifically Section 17A(b)(3)(F),\6\ and the rules and
regulations thereunder applicable to NSCC because it updates NSCC's fee
schedule to align fees with the costs of delivering services. As such,
it provides for the equitable allocation of fees among NSCC's Members.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will have any
impact, or impose any burden, on competition.

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

    Written comments relating to the proposed rule change have not yet
been solicited or received. NSCC will notify the Commission of any
written comments received by NSCC.

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

    The forgoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \7\ and Rule 19b-4(f)(2) \8\ thereunder. 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 necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \8\ 17 CFR 240.19b-4(f)(2).
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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 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<EMAIL_ADDRESS>Please include
File No. SR-NSCC-2012-11 on the subject line.

Paper Comments

     Send in triplicate to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission, 100 F Street NE., Washington, DC,
20549-1090.

All submissions should refer to File Number SR-NSCC-2012-11. 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 such filings will also be available
for inspection and copying at the principal office of NSCC and on
NSCC's Web site at http://www.dtcc.com/downloads/legal/rule_filings/2012/nscc/SRO-NSCC-2012-11.pdf.
    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-NSCC-2012-11
and should be submitted on or before January 29, 2013.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00083 Filed 1-7-13; 8:45 am]
BILLING CODE 8011-01-P