Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order Granting Approval to Proposed Rule Change To Implement a Quote Mitigation Plan, 2047-2048 [E7-526]

Download as PDF Federal Register / Vol. 72, No. 10 / Wednesday, January 17, 2007 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 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 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, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: mstockstill on PROD1PC61 with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Amex–2006–17 on the subject line. 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–Amex–2006–17 and should be submitted on or before February 7, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.13 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–538 Filed 1–16–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55073 File No. SR–BSE– 2006–48] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order Granting Approval to Proposed Rule Change To Implement a Quote Mitigation Plan January 9, 2007. I. Introduction On November 15, 2006, the Boston Stock Exchange, Inc. (‘‘BSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission Paper Comments (‘‘Commission’’), pursuant to Section • Send paper comments in triplicate 19(b)(1) of the Securities Exchange Act to Nancy M. Morris, Secretary, of 1934 (‘‘Act’’),1 and Rule 19b–4 Securities and Exchange Commission, thereunder,2 a proposed rule change to 100 F Street, NE., Washington, DC amend the Boston Options Exchange 20549–1090. (‘‘BOX’’) Rules to add a Quote All submissions should refer to File Mitigation Plan. The proposed rule Number SR–Amex–2006–17. This file change was published for comment in number should be included on the the Federal Register on November 27, subject line if e-mail is used. To help the 2006.3 The Commission received one Commission process and review your comment letter on the proposed rule comments more efficiently, please use change.4 This order approves the only one method. The Commission will proposed rule change. post all comments on the Commission’s 13 17 CFR 200.30–3(a)(12). Internet Web site (https://www.sec.gov/ 1 15 U.S.C. 78s(b)(1). rules/sro.shtml). Copies of the 2 17 CFR 240.19b–4. submission, all subsequent 3 See Securities Exchange Act Release No. 54779 amendments, all written statements (November 17, 2006), 71 FR 68655. with respect to the proposed rule 4 See letter to Nancy Morris, Secretary, change that are filed with the Commission, from Christopher Nagy, Chair, SIFMA Options Committee (‘‘SIFMA’’), dated December 20, Commission, and all written 2006. SIFMA supports BSE’s quote mitigation communications relating to the proposal discussed herein and recommends its proposed rule change between the implementation on an industry-wide basis. Commission and any person, other than Specifically, SIFMA believes that the adoption of an industry-wide, uniform ‘‘holdback timer’’ proposal, those that may be withheld from the like the strategy approved by this order, would public in accordance with the provide the most effective means of quote provisions of 5 U.S.C. 552, will be mitigation. SIFMA expressed concern that a lack of available for inspection and copying in uniformity among quote mitigation strategies implemented by the various options exchanges may the Commission’s Public Reference impose a burden on member firms and result in Room. Copies of the filing also will be confusion among market participants. Additional available for inspection and copying at concerns raised in SIFMA’s December 20, 2006 the principal office of the Exchange. All comment letter relating to other proposed rule changes filed by the options exchanges will be more comments received will be posted VerDate Aug<31>2005 13:58 Jan 16, 2007 Jkt 211001 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 2047 II. Description of the Proposal The purpose of the proposed rule change is to mitigate quote traffic and address quote capacity issues by, under certain circumstances, ‘‘bundling’’ quotes so that options data is submitted to the Options Price Reporting Authority (‘‘OPRA’’) over short intervals rather than on a continuous basis. Specifically, BOX proposes to mitigate quotes in the following manner: • BOX proposes to ‘‘let the market decide’’ which instruments would be considered to be ‘‘less interesting’’ by basing this determination on the open interest in contracts at the Options Clearing Corporation for each instrument. Those series with lower open interest are likely to be of less interest to options traders and investors. The precise threshold of open interest which will determine whether the broadcast of a series is subject to mitigation or not will vary according to the degree BOX is meeting its stated goals of reducing overall traffic. BOX anticipates that this threshold could be as high as 300 to 400 contracts, but that it will be no lower than 50 contracts. BOX does not propose to apply mitigation to instruments which have been listed for fewer than ten trading sessions, regardless of the open interest. • BOX would ‘‘bundle’’ at intervals of up to 1,000 milliseconds (and no less than 200 milliseconds) any changes to its broadcast for those instruments which have fallen below the threshold in the previous point. • BOX would use variable rates of ‘‘bundling’’ delays for the three different types of broadcast updates: changes in price, increases in quantity without a change in price, and decreases in quantity without a change in price. Under this proposal, changes in prices may be subject to less delay than changes to quantity at same price. For example, BOX may apply a ‘‘bundling interval’’ of 400 milliseconds to updates regarding a price change while using a figure of 1,000 milliseconds for updates concerning only a change in quantity at the same price. The appropriate mix will be determined by the relative success BOX is meeting in its overall goals of traffic reduction. The Exchange does not propose to apply the above-described bundling to message traffic relating to price improvement auctions or NBBO exposure mechanisms, nor to trade reporting messages. Furthermore, no bundling of quotes is proposed for inbound orders and quotes which are sent to BOX by users. Instead, fully addressed in any subsequent releases issued by the Commission. E:\FR\FM\17JAN1.SGM 17JAN1 2048 Federal Register / Vol. 72, No. 10 / Wednesday, January 17, 2007 / Notices messaging will be bundled only for outbound updates. The Exchange believes this proposal is an optimal trade-off between costs and benefits and that it is fully compliant with its firm quote obligations. BOX has indicated that its target reduction in outbound peak traffic is 15% to 20% of what the traffic would have been had no mitigation been applied. Box has also represented that the reduction in overall traffic, as opposed to peaks, will be lower, but still significant, with a target of 8% to 10%. III. Discussion After careful review of the proposal and consideration of the comment letter, 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.5 In particular, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,6 which requires, among other things, that the rules of an exchange be 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 Commission believes that the Exchange’s proposal to ‘‘bundle’’ quotes should reduce the volume of options quote traffic disseminated to OPRA and help to address capacity concerns on the Exchange. Because the contemplated delays in data transmission are very brief, the Commission does not believe that ‘‘bundling’’ quotes will adversely affect market transparency or negatively affect market participants or investors. Furthermore, the Commission believes that BOX’s quote mitigation proposal is designed to provide the Exchange with a mechanism, that should reduce overall peak market data traffic with a relatively small impact on the quality of information available to options market users. IV. Conclusion mstockstill on PROD1PC61 with NOTICES It is therefore ordered, pursuant to Section 19(b)(2) of the Act,7 that the proposed rule change (SR–BSE–2006– 48), be, and hereby is approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.8 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–526 Filed 1–16–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55062; File No. SR–CBOE– 2006–88] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval to Proposed Rule Change To Codify a Fee Schedule for the Sale of Open and Close Volume Data on CBOE Listed Options by Market Data Express, LLC January 8, 2007. On November 3, 2006, the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’ or ‘‘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 codify a fee schedule for the sale of open and close volume data on CBOE listed options by Market Data Express, LLC (‘‘MDX’’), a wholly-owned subsidiary of CBOE. The proposed rule change was published for comment in the Federal Register on November 27, 2006.3 The Commission received no comments regarding the proposal. This order approves the proposed rule change. In the Notice, the Exchange represented that it creates volume data for each CBOE listed option that consists of opening buys and opening sells and closing buys and closing sells (‘‘Open/Close Data’’). CBOE further represented that MDX offers this Open/ Close Data for sale to CBOE members and non-members and that the fees assessed by MDX for the Open/Close Data are set forth in the Price List on MDX’s Web site. CBOE members and non-members are charged the same fees for the Open/Close Data. Under the proposal, customers may purchase Open/Close Data on a subscription basis or by ad hoc request. Daily Open/Close Data covering all CBOE listed options 4 would be 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 54771 (November 16, 2006), 71 FR 68657 (the ‘‘Notice’’). 4 Although the proposed rule change refers to Open/Close Data covering all CBOE listed securities, the CBOE confirmed that the Open/Close 8 1 15 5 In approving this proposed rule change the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 6 15 U.S.C. 78f(b)(5). 7 15 U.S.C. 78s(b)(2). VerDate Aug<31>2005 13:58 Jan 16, 2007 Jkt 211001 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 available for purchase by subscribing to the Daily Update service at a cost of $600 per month. Subscribers to the Daily Update service would receive a daily data file via download from MDX’s Web site. Historical Open/Close Data covering all CBOE listed options may be purchased on an ad hoc request basis and is delivered via DVD. The charge for Historical Open/Close Data covering all CBOE listed options would be $7,200 per year for requests for one to four years of data. Requests for five or more years of Historical Open/Close Data would receive a 50% discount beginning with the fifth year of data (i.e., MDX charges $7,200 for each of the first four years of data and $3,600 for year five and for each subsequent year of data). Alternatively, a customer may purchase Historical Open/Close Data on an individual CBOE listed option at a cost of $4.50 per listed option per month. This data would be available via download from MDX’s Web site. A 50% discount would be applied for requests for ten or more years of data, beginning with the tenth year of data. The Commission has reviewed carefully the proposed rule change and finds that the proposedrule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange and, in particular, the requirements of Section 6(b)(4) of the Act,5 which requires, among other things, CBOE’s rules be designed to provide for the equitable allocation of reasonable dues, fees, and other charges among CBOE members and issuers and other persons using its facilities.6 It is therefore ordered, pursuant to Section 19(b)(2) of the Act,7 that the proposed rule change (SR–CBOE–2006– 88) is hereby approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.8 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–540 Filed 1–16–07; 8:45 am] BILLING CODE 8011–01–P Data is available solely for all CBOE listed options. Telephone conversation between Jaime Galvan, Assistant Secretary, CBOE and David Michehl, Special Counsel, Division of Market Regulation, Commission on January 8, 2007. 5 15 U.S.C. 78f(b)(4). 6 In approving this proposed rule change the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 7 15 U.S.C. 78s(b)(2). 8 17 CFR 200.30–3(a)(12). E:\FR\FM\17JAN1.SGM 17JAN1

Agencies

[Federal Register Volume 72, Number 10 (Wednesday, January 17, 2007)]
[Notices]
[Pages 2047-2048]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-526]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55073 File No. SR-BSE-2006-48]


Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order 
Granting Approval to Proposed Rule Change To Implement a Quote 
Mitigation Plan

January 9, 2007.

I. Introduction

    On November 15, 2006, the Boston Stock Exchange, Inc. (``BSE'' or 
``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 amend the Boston Options Exchange (``BOX'') 
Rules to add a Quote Mitigation Plan. The proposed rule change was 
published for comment in the Federal Register on November 27, 2006.\3\ 
The Commission received one comment letter on the proposed rule 
change.\4\ This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 54779 (November 17, 
2006), 71 FR 68655.
    \4\ See letter to Nancy Morris, Secretary, Commission, from 
Christopher Nagy, Chair, SIFMA Options Committee (``SIFMA''), dated 
December 20, 2006. SIFMA supports BSE's quote mitigation proposal 
discussed herein and recommends its implementation on an industry-
wide basis. Specifically, SIFMA believes that the adoption of an 
industry-wide, uniform ``holdback timer'' proposal, like the 
strategy approved by this order, would provide the most effective 
means of quote mitigation. SIFMA expressed concern that a lack of 
uniformity among quote mitigation strategies implemented by the 
various options exchanges may impose a burden on member firms and 
result in confusion among market participants. Additional concerns 
raised in SIFMA's December 20, 2006 comment letter relating to other 
proposed rule changes filed by the options exchanges will be more 
fully addressed in any subsequent releases issued by the Commission.
---------------------------------------------------------------------------

II. Description of the Proposal

    The purpose of the proposed rule change is to mitigate quote 
traffic and address quote capacity issues by, under certain 
circumstances, ``bundling'' quotes so that options data is submitted to 
the Options Price Reporting Authority (``OPRA'') over short intervals 
rather than on a continuous basis. Specifically, BOX proposes to 
mitigate quotes in the following manner:
     BOX proposes to ``let the market decide'' which 
instruments would be considered to be ``less interesting'' by basing 
this determination on the open interest in contracts at the Options 
Clearing Corporation for each instrument. Those series with lower open 
interest are likely to be of less interest to options traders and 
investors. The precise threshold of open interest which will determine 
whether the broadcast of a series is subject to mitigation or not will 
vary according to the degree BOX is meeting its stated goals of 
reducing overall traffic. BOX anticipates that this threshold could be 
as high as 300 to 400 contracts, but that it will be no lower than 50 
contracts. BOX does not propose to apply mitigation to instruments 
which have been listed for fewer than ten trading sessions, regardless 
of the open interest.
     BOX would ``bundle'' at intervals of up to 1,000 
milliseconds (and no less than 200 milliseconds) any changes to its 
broadcast for those instruments which have fallen below the threshold 
in the previous point.
     BOX would use variable rates of ``bundling'' delays for 
the three different types of broadcast updates: changes in price, 
increases in quantity without a change in price, and decreases in 
quantity without a change in price. Under this proposal, changes in 
prices may be subject to less delay than changes to quantity at same 
price. For example, BOX may apply a ``bundling interval'' of 400 
milliseconds to updates regarding a price change while using a figure 
of 1,000 milliseconds for updates concerning only a change in quantity 
at the same price. The appropriate mix will be determined by the 
relative success BOX is meeting in its overall goals of traffic 
reduction.
    The Exchange does not propose to apply the above-described bundling 
to message traffic relating to price improvement auctions or NBBO 
exposure mechanisms, nor to trade reporting messages. Furthermore, no 
bundling of quotes is proposed for inbound orders and quotes which are 
sent to BOX by users. Instead,

[[Page 2048]]

messaging will be bundled only for outbound updates.
    The Exchange believes this proposal is an optimal trade-off between 
costs and benefits and that it is fully compliant with its firm quote 
obligations. BOX has indicated that its target reduction in outbound 
peak traffic is 15% to 20% of what the traffic would have been had no 
mitigation been applied. Box has also represented that the reduction in 
overall traffic, as opposed to peaks, will be lower, but still 
significant, with a target of 8% to 10%.

III. Discussion

    After careful review of the proposal and consideration of the 
comment letter, 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.\5\ 
In particular, the Commission finds that the proposal is consistent 
with Section 6(b)(5) of the Act,\6\ which requires, among other things, 
that the rules of an exchange be 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.
---------------------------------------------------------------------------

    \5\ In approving this proposed rule change the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission believes that the Exchange's proposal to ``bundle'' 
quotes should reduce the volume of options quote traffic disseminated 
to OPRA and help to address capacity concerns on the Exchange. Because 
the contemplated delays in data transmission are very brief, the 
Commission does not believe that ``bundling'' quotes will adversely 
affect market transparency or negatively affect market participants or 
investors. Furthermore, the Commission believes that BOX's quote 
mitigation proposal is designed to provide the Exchange with a 
mechanism, that should reduce overall peak market data traffic with a 
relatively small impact on the quality of information available to 
options market users.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-BSE-2006-48), be, and hereby 
is approved.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-526 Filed 1-16-07; 8:45 am]
BILLING CODE 8011-01-P
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