Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 5, To Amend the Rules of the Boston Options Exchange Related to Obvious Error Procedures, 11452-11454 [E8-3959]
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Federal Register / Vol. 73, No. 42 / Monday, March 3, 2008 / Notices
Assistant Director, at (202) 551–6821
(Division of Investment Management,
Office of Investment Company
Regulation).
The
following is a summary of the
application. The complete application
may be obtained for a fee at the
Commission’s Public Reference Branch,
100 F Street, NE., Washington, DC
20549–1520 (telephone (202) 551–8090).
SUPPLEMENTARY INFORMATION:
Applicants’ Representations
1. The Trusts are organized as
Massachusetts business trusts and are
registered under the Act as open-end
management investment companies.
Applicants request an exemption to the
extent necessary to permit any existing
or future series of the Trusts and any
other registered open-end investment
company advised by the Advisers or any
person controlling, controlled by or
under common control with the
Advisers, that may rely on rule 12d1–2
under the Act (each a ‘‘ Fund’’) to also
invest to the extent consistent with its
investment objective, policies, strategies
and limitations, in futures contracts,
options on futures contracts, swap
agreements, other derivatives, and other
financial instruments that may not be
securities within the meaning of section
2(a)(36) of the Act (‘‘Other
Investments’’) in addition to registered
investment companies (‘‘Underlying
Funds’’) and other securities.
2. The Advisers, both Massachusetts
business trusts registered under the
Investment Advisers Act of 1940, serve
as investment advisers to the Funds.
EVM is a wholly-owned subsidiary of
Eaton Vance Corporation, a publicly
held Maryland corporation, and BMR is
a subsidiary of EVM. The Distributor, an
indirect wholly-owned subsidiary of
Eaton Vance Corporation, is registered
as a broker-dealer under the Securities
Exchange Act of 1934 Act (‘‘Exchange
Act’’), and serves as the principal
underwriter for the Funds.
rmajette on PROD1PC64 with NOTICES
Applicants’ Legal Analysis
1. Section 12(d)(1)(A) of the Act
provides that no registered investment
company (‘‘acquiring company’’) may
acquire securities of another investment
company (‘‘acquired company’’) if such
securities represent more than 3% of the
acquired company’s outstanding voting
stock or more than 5% of the acquiring
company’s total assets, or if such
securities, together with the securities of
other investment companies, represent
more than 10% of the acquiring
company’s total assets. Section
12(d)(1)(B) of the Act provides that no
registered open-end investment
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15:33 Feb 29, 2008
Jkt 214001
company may sell its securities to
another investment company if the sale
will cause the acquiring company to
own more than 3% of the acquired
company’s voting stock, or cause more
than 10% of the acquired company’s
voting stock to be owned by investment
companies.
2. Section 12(d)(1)(G) of the Act
provides that section 12(d)(1) will not
apply to securities of an acquired
company purchased by an acquiring
company if: (i) The acquiring company
and acquired company are part of the
same group of investment companies;
(ii) the acquiring company holds only
securities of acquired companies that
are part of the same group of investment
companies, government securities, and
short-term paper; (iii) the aggregate sales
loads and distribution-related fees of the
acquiring company and the acquired
company are not excessive under rules
adopted pursuant to section 22(b) or
section 22(c) of the Act by a securities
association registered under section 15A
of the Exchange Act or by the
Commission; and (iv) the acquired
company has a policy that prohibits it
from acquiring securities of registered
open-end management investment
companies or registered unit investment
trusts in reliance on section 12(d)(1)(F)
or (G) of the Act.
3. Rule 12d1–2 under the Act permits
a registered open-end investment
company or a registered unit investment
trust that relies on section 12(d)(1)(G) of
the Act to acquire, in addition to
securities issued by another registered
investment company in the same group
of investment companies, government
securities, and short-term paper: (1)
Securities issued by an investment
company that is not in the same group
of investment companies, when the
acquisition is in reliance on section
12(d)(1)(A) or 12(d)(1)(F) of the Act; (2)
securities (other than securities issued
by an investment company); and (3)
securities issued by a money market
fund, when the investment is in reliance
on rule 12d1–1 under the Act. For the
purposes of rule 12d1–2, ‘‘securities’’
means any security as defined in section
2(a)(36) of the Act.
4. Section 6(c) of the Act provides that
the Commission may exempt any
person, security, or transaction from any
provision of the Act, or from any rule
under the Act, if such exemption is
necessary or appropriate in the public
interest and consistent with the
protection of investors and the purposes
fairly intended by the policies and
provisions of the Act.
5. Applicants state that the proposed
arrangement would comply with the
provisions of rule 12d1–2 under the Act,
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Sfmt 4703
but for the fact that the Funds may
invest a portion of their assets in Other
Investments. Applicants request an
order under section 6(c) of the Act for
an exemption from rule 12d1–2(a) to
allow the Funds to invest in Other
Investments. Applicants assert that
permitting the Funds to invest in Other
Investments as described in the
application would not raise any of the
concerns that the requirements of
section 12(d)(1) were designed to
address.
Applicants’ Conditions
Applicants agree that the order
granting the requested relief will be
subject to the following conditions:
1. Prior to approving any investment
advisory agreement under section 15 of
the Act, the board of trustees of the
appropriate Fund, including a majority
of the trustees who are not ‘‘interested
persons’’ as defined in section 2(a)(19)
of the Act, will find that the advisory
fees, if any, charged under the
agreement are based on services
provided that are in addition to, rather
than duplicative of, services provided
pursuant to any Underlying Fund’s
advisory agreement. Such finding, and
the basis upon which the finding is
made, will be recorded fully in the
minute books of the appropriate Fund.
2. Applicants will comply with all
provisions of rule 12d1–2 under the Act,
except for paragraph (a)(2), to the extent
that it restricts any Fund from investing
in Other Investments as described in the
application.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–3960 Filed 2–29–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57383; File No. SR-BSE–
2008–05]
Self-Regulatory Organizations; Boston
Stock Exchange, Inc.; Notice of Filing
of a Proposed Rule Change, as
Modified by Amendment No. 5, To
Amend the Rules of the Boston
Options Exchange Related to Obvious
Error Procedures
February 26, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 73, No. 42 / Monday, March 3, 2008 / Notices
notice is hereby given that on January
29, 2008, the Boston Stock Exchange,
Inc. (‘‘BSE’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been substantially prepared by the
Exchange. On February 21, 2008, the
Exchange filed Amendment No. 1 to the
proposal. On February 22, 2008, the
Exchange submitted Amendment Nos.
2, 3, and 4, and withdrew Amendment
Nos. 1, 2, and 3 to the proposal. On
February 26, 2008, the exchange
withdrew Amendment No. 4 and
submitted Amendment No. 5 to the
proposal.3 The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes amending the
Boston Options Exchange (‘‘BOX’’)
Rules related to Obvious Error
procedures. The text of the proposed
rule change is available at the Exchange,
the Commission’s Public Reference
Room, and https://www.bostonstock.com.
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
rmajette on PROD1PC64 with NOTICES
The BSE seeks to amend the BOX
Rules 4 to modify the process for
determining whether to ‘‘adjust or bust’’
certain trades on the BOX market. The
Exchange believes that modifying this
process will help to better ensure a fair
and orderly market.
3 Amendment No. 5 replaces and supersedes the
original filing and all previous amendments in their
entirety.
4 Capitalized terms not otherwise defined herein
shall have the meanings prescribed under the BOX
Rules.
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Currently, BOX has an established
process whereby, in the event that a
suspected Obvious Error has occurred
during trading on the BOX market, a
request for review may be made by one
or both of the parties involved. This
request for review notifies the Market
Regulation Center (‘‘MRC’’) of the
existence of a suspected erroneous
transaction and initiates a review
process. If the MRC determines that the
transaction does in fact represent an
Obvious Error, the transaction is either
adjusted or busted. Depending on the
parties involved in the transaction, the
adjustments are either set according to
pre-determined increments or by mutual
agreement between the parties.
The Exchange states that, currently,
the MRC, as defined in the BOX Rules 5
as the ‘‘Exchange’s facilities for
surveilling and regulating the conduct
of business for options on BOX,’’ is
involved in these Obvious Error
requests and determinations. This
amendment to the BOX Rules will
substitute the BOX Market Operations
Center (‘‘MOC’’) 6 for the MRC as the
entity that first receives these Obvious
Error requests. The MOC is already the
primary contact for Options Participants
when communicating with the BOX
market regarding trading matters. Under
this proposal, the MOC, as the primary
contact, will promptly notify the MRC
when an Obvious Error request is
received, since the MRC will continue
to be the body that makes adjust or bust
decisions.
Additionally, the current BOX
Obvious Error rules refer to transactions
involving Market Makers ‘‘on BOX.’’
The proposed amendment to the BOX
Rules will remove the language ‘‘on
BOX.’’ This proposed change would
provide an additional avenue of relief
for non-BOX market makers, resulting in
the Obvious Error Rules applying not
only to BOX Market Makers, but also to
market makers on other exchanges
whose orders are designated with a
market maker account type in the BOX
Trading Host. Currently, according to
Section 20(d)(ii)(1) of Chapter V of the
BOX Rules, only BOX Market Makers
involved in an erroneous transaction
with another BOX Market Maker may
avail themselves to the pre-determined
obvious error Theoretical Price plus or
minus adjustment levels. This
5 See
Section 1 of Chapter I of the BOX Rules.
proposal will also add the MOC to the
definitions section of the BOX Rules. See, Section
1 of Chapter I of the BOX Rules. The remainder of
the changes to the definition section fall into two
categories. The first is switching the current
Sections 31 and 32 so that they are in alphabetical
order. The second is, after inserting the MOC as a
definition, renumbering the remaining definitions.
6 This
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Sfmt 4703
11453
amendment, if approved, would
maintain and expand the choices
available to a non-BOX market maker
involved in an erroneous transaction.
Just as a BOX Market Maker, a non-BOX
market maker would have the choice of
agreeing with the counter party to bust
the transaction, agreeing to adjust to an
agreed upon price for the transaction, or
now having the transaction adjusted to
the pre-determined levels.
This amendment to the BOX Rules
will also establish an additional course
of action if it is determined that an
Obvious Error has occurred. The current
BOX Rules allow for an adjustment in
the transaction price where both parties
to the transaction are market makers.
Alternatively, the BOX Rules call for a
bust of the transaction if at least one
party to the transaction is a market
maker on BOX, unless both parties agree
to an adjustment price and notify the
MRC. The proposed amendment to the
Obvious Error Rule will render this
particular scenario applicable only
when ‘‘neither’’ party to the transaction
is a market maker. Under the scenario
where neither of the parties involved in
the obviously erroneous transaction is a
market maker, a bust of the transaction
is believed to be the proper course of
action, absent an agreement to an
adjusted price for the transaction.
The additional course of action, as
proposed, will now be available to the
MRC when one party to the transaction
is not a market maker and the other
party is a market maker. The Exchange
believes that affording a non-market
maker party the opportunity to choose
between busting the transaction or
adjusting it according to the predetermined increments, as set forth in
the Obvious Error Rule, will better
protect the non-market maker party in
the event of obviously erroneous
transactions. The establishment of this
option is intended to protect against
scenarios where a non-market making
party, perhaps a Public Customer, enters
into a transaction with a market maker.
Under the current rules, if this
transaction is determined to be an
Obvious Error, the trade will be busted
unless the parties agree to an adjustment
price. If the Public Customer does not
want the trade busted but, nonetheless,
cannot agree to an adjusted price with
the market maker, then the trade will
still be busted. The Exchange believes
that this could expose the Public
Customer to unintended positions and
risk, perhaps in the equities markets,
where this particular options
transaction was intended to hedge
against. The Exchange believes that, by
providing access to the pre-established
Obvious Error adjustment increments,
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11454
Federal Register / Vol. 73, No. 42 / Monday, March 3, 2008 / Notices
some of this risk should be alleviated or
eliminated for the non-market maker
party by allowing the transaction to be
adjusted rather than busted.
The Exchange believes that the
availability of the pre-determined
adjustment increments should provide
non-market maker parties with added
assurances that, in the case of an
obviously erroneous transaction and at
their election, the transaction will be
adjusted rather than automatical busted,
as provided in the current Rule. While
this should provide an added protective
feature for non-market makers, it should
not expose market makers to any
additional risk or decrease the
protections that they are already
afforded in the BOX Rules. A market
maker’s transaction already has these
pre-determined adjustment increments
applied to their trades with other market
makers. Thus, this proposal would
merely extend the application of the
pre-determined adjustment increments
to another party that a market maker
could trade with via the BOX Trading
Host.
2. Statutory Basis
The Exchange believes that the
proposed amendment to the BOX Rules
would result in greater flexibility in
determining the outcome of erroneous
transactions within the BOX Trading
Host. Accordingly, the Exchange
believes that the proposed rule change
is consistent with Section 6(b) of the
Act,7 in general, and furthers the
objectives of Section 6(b)(5) of the Act,8
in particular, in that it is designed to
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, protect
investors and the public interest.
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.
rmajette on PROD1PC64 with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received by the Exchange with
respect to the proposed rule change.
7 15
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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15:33 Feb 29, 2008
Jkt 214001
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 the 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–BSE–2008–05 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–BSE–2008–05. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
PO 00000
Frm 00074
Fmt 4703
Sfmt 4703
Copies of such 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–BSE–2008–05 and should
be submitted on or before March 24,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–3959 Filed 2–29–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57382; File No. SR–BSE–
2008–11]
Self-Regulatory Organizations; Boston
Stock Exchange, Incorporated; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change Relating to
the Substitution of a Term in the Rules
of the Boston Options Exchange
February 26, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
21, 2008, the Boston Stock Exchange,
Incorporated (‘‘Exchange’’ or ‘‘BSE’’)
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 substantially prepared by the
BSE. The BSE has designated this
proposal as one that neither
significantly affects the protection of
investors or the public interest nor
imposes any significant burden on
competition, under Section
19(b)(3)(A)(ii) of the Act,3 and Rule
19b–4(f)(6) thereunder,4 which renders
the proposal effective upon filing with
the Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
9 17
CFR 200.30–3(a)(12).
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)(6).
1 15
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]]>Agencies
[Federal Register Volume 73, Number 42 (Monday, March 3, 2008)]
[Notices]
[Pages 11452-11454]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-3959]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57383; File No. SR-BSE-2008-05]
Self-Regulatory Organizations; Boston Stock Exchange, Inc.;
Notice of Filing of a Proposed Rule Change, as Modified by Amendment
No. 5, To Amend the Rules of the Boston Options Exchange Related to
Obvious Error Procedures
February 26, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\
[[Page 11453]]
notice is hereby given that on January 29, 2008, the Boston Stock
Exchange, Inc. (``BSE'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been
substantially prepared by the Exchange. On February 21, 2008, the
Exchange filed Amendment No. 1 to the proposal. On February 22, 2008,
the Exchange submitted Amendment Nos. 2, 3, and 4, and withdrew
Amendment Nos. 1, 2, and 3 to the proposal. On February 26, 2008, the
exchange withdrew Amendment No. 4 and submitted Amendment No. 5 to the
proposal.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 5 replaces and supersedes the original filing
and all previous amendments in their entirety.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes amending the Boston Options Exchange
(``BOX'') Rules related to Obvious Error procedures. The text of the
proposed rule change is available at the Exchange, the Commission's
Public Reference Room, and https://www.bostonstock.com.
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 BSE seeks to amend the BOX Rules \4\ to modify the process for
determining whether to ``adjust or bust'' certain trades on the BOX
market. The Exchange believes that modifying this process will help to
better ensure a fair and orderly market.
---------------------------------------------------------------------------
\4\ Capitalized terms not otherwise defined herein shall have
the meanings prescribed under the BOX Rules.
---------------------------------------------------------------------------
Currently, BOX has an established process whereby, in the event
that a suspected Obvious Error has occurred during trading on the BOX
market, a request for review may be made by one or both of the parties
involved. This request for review notifies the Market Regulation Center
(``MRC'') of the existence of a suspected erroneous transaction and
initiates a review process. If the MRC determines that the transaction
does in fact represent an Obvious Error, the transaction is either
adjusted or busted. Depending on the parties involved in the
transaction, the adjustments are either set according to pre-determined
increments or by mutual agreement between the parties.
The Exchange states that, currently, the MRC, as defined in the BOX
Rules \5\ as the ``Exchange's facilities for surveilling and regulating
the conduct of business for options on BOX,'' is involved in these
Obvious Error requests and determinations. This amendment to the BOX
Rules will substitute the BOX Market Operations Center (``MOC'') \6\
for the MRC as the entity that first receives these Obvious Error
requests. The MOC is already the primary contact for Options
Participants when communicating with the BOX market regarding trading
matters. Under this proposal, the MOC, as the primary contact, will
promptly notify the MRC when an Obvious Error request is received,
since the MRC will continue to be the body that makes adjust or bust
decisions.
---------------------------------------------------------------------------
\5\ See Section 1 of Chapter I of the BOX Rules.
\6\ This proposal will also add the MOC to the definitions
section of the BOX Rules. See, Section 1 of Chapter I of the BOX
Rules. The remainder of the changes to the definition section fall
into two categories. The first is switching the current Sections 31
and 32 so that they are in alphabetical order. The second is, after
inserting the MOC as a definition, renumbering the remaining
definitions.
---------------------------------------------------------------------------
Additionally, the current BOX Obvious Error rules refer to
transactions involving Market Makers ``on BOX.'' The proposed amendment
to the BOX Rules will remove the language ``on BOX.'' This proposed
change would provide an additional avenue of relief for non-BOX market
makers, resulting in the Obvious Error Rules applying not only to BOX
Market Makers, but also to market makers on other exchanges whose
orders are designated with a market maker account type in the BOX
Trading Host. Currently, according to Section 20(d)(ii)(1) of Chapter V
of the BOX Rules, only BOX Market Makers involved in an erroneous
transaction with another BOX Market Maker may avail themselves to the
pre-determined obvious error Theoretical Price plus or minus adjustment
levels. This amendment, if approved, would maintain and expand the
choices available to a non-BOX market maker involved in an erroneous
transaction. Just as a BOX Market Maker, a non-BOX market maker would
have the choice of agreeing with the counter party to bust the
transaction, agreeing to adjust to an agreed upon price for the
transaction, or now having the transaction adjusted to the pre-
determined levels.
This amendment to the BOX Rules will also establish an additional
course of action if it is determined that an Obvious Error has
occurred. The current BOX Rules allow for an adjustment in the
transaction price where both parties to the transaction are market
makers. Alternatively, the BOX Rules call for a bust of the transaction
if at least one party to the transaction is a market maker on BOX,
unless both parties agree to an adjustment price and notify the MRC.
The proposed amendment to the Obvious Error Rule will render this
particular scenario applicable only when ``neither'' party to the
transaction is a market maker. Under the scenario where neither of the
parties involved in the obviously erroneous transaction is a market
maker, a bust of the transaction is believed to be the proper course of
action, absent an agreement to an adjusted price for the transaction.
The additional course of action, as proposed, will now be available
to the MRC when one party to the transaction is not a market maker and
the other party is a market maker. The Exchange believes that affording
a non-market maker party the opportunity to choose between busting the
transaction or adjusting it according to the pre-determined increments,
as set forth in the Obvious Error Rule, will better protect the non-
market maker party in the event of obviously erroneous transactions.
The establishment of this option is intended to protect against
scenarios where a non-market making party, perhaps a Public Customer,
enters into a transaction with a market maker. Under the current rules,
if this transaction is determined to be an Obvious Error, the trade
will be busted unless the parties agree to an adjustment price. If the
Public Customer does not want the trade busted but, nonetheless, cannot
agree to an adjusted price with the market maker, then the trade will
still be busted. The Exchange believes that this could expose the
Public Customer to unintended positions and risk, perhaps in the
equities markets, where this particular options transaction was
intended to hedge against. The Exchange believes that, by providing
access to the pre-established Obvious Error adjustment increments,
[[Page 11454]]
some of this risk should be alleviated or eliminated for the non-market
maker party by allowing the transaction to be adjusted rather than
busted.
The Exchange believes that the availability of the pre-determined
adjustment increments should provide non-market maker parties with
added assurances that, in the case of an obviously erroneous
transaction and at their election, the transaction will be adjusted
rather than automatical busted, as provided in the current Rule. While
this should provide an added protective feature for non-market makers,
it should not expose market makers to any additional risk or decrease
the protections that they are already afforded in the BOX Rules. A
market maker's transaction already has these pre-determined adjustment
increments applied to their trades with other market makers. Thus, this
proposal would merely extend the application of the pre-determined
adjustment increments to another party that a market maker could trade
with via the BOX Trading Host.
2. Statutory Basis
The Exchange believes that the proposed amendment to the BOX Rules
would result in greater flexibility in determining the outcome of
erroneous transactions within the BOX Trading Host. Accordingly, the
Exchange believes that the proposed rule change is consistent with
Section 6(b) of the Act,\7\ in general, and furthers the objectives of
Section 6(b)(5) of the Act,\8\ in particular, in that it is designed to
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and, in general, protect investors and the public
interest.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received by the Exchange with
respect to the proposed rule change.
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 the 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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-BSE-2008-05 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BSE-2008-05. 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 (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such 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-BSE-2008-05 and should be
submitted on or before March 24, 2008.
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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-3959 Filed 2-29-08; 8:45 am]
BILLING CODE 8011-01-P
