Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Non-Display of Primary Pegged Orders With an Offset Amount, 20671-20672 [2012-8169]

Download as PDF Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices 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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Tkelley on DSK3SPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2012–045 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–NASDAQ–2012–045. 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 (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 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 the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from VerDate Mar<15>2010 16:20 Apr 04, 2012 Jkt 226001 submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NASDAQ–2012–045 and should be submitted on or before April 26, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–8205 Filed 4–4–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–66698; File No. SR–BX– 2012–022] Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to NonDisplay of Primary Pegged Orders With an Offset Amount March 30, 2012. 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 March 23, 2012, NASDAQ OMX BX, Inc. (‘‘BX’’ 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 prepared by the Exchange. The Exchange has designated the proposed rule change as constituting a rule change under Rule 19b–4(f)(6) under the Act,3 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Exchange Rule 4751(f)(4) to provide that Primary Pegged Orders with an offset amount will never be displayed. The text of the proposed rule change is available at nasdaqomxbx.cchwallstreet.com, at the Exchange’s principal office, and at the Commission’s Public Reference Room. 13 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 1 15 PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 20671 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 those 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 parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose BX proposes to amend Rule 4751(f)(4) to provide that Primary Pegged Orders with an offset amount will be nondisplayed, a change that will improve system and inter-market price stability. Pegged Orders are orders that, once entered, adjust in price automatically, in response to changes in the inside bids or offers of the BX Equities Market or the national market system, depending upon the type of pegged order. A Primary Pegged Order specifies that its price will equal the inside quote on the same side of the market; a Market Pegged Order will equal the inside quote on the opposite side of the market. A Midpoint Peg Order will equal the midpoint of the national best bid and offer (‘‘NBBO’’), excluding the effect that the Midpoint Peg Order itself has on the inside bid or inside offer. As the bids and offers change, so move the pegged orders. A Pegged Order may have a limit price beyond which the order shall not be executed. Primary Pegged Orders and Market Pegged Orders may establish their pricing relative to the appropriate bids or offers by selecting one or more offset amounts that will adjust the price of the order by the offset amount selected. Under the Exchange’s current rule, Midpoint Pegged Orders are not displayed, while Primary and Market Pegged Orders may be displayed or not displayed, at the option of the person placing the order. The display of Primary Pegged Orders with an offset amount can potentially result in excessive messaging when multiple venues display pegged non-marketable orders. In these scenarios, it is possible for the Primary Pegged Orders on each venue to react to and change in relation to each other, resulting in excessive messaging and ‘‘quote flickering.’’ A E:\FR\FM\05APN1.SGM 05APN1 20672 Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices rule change to eliminate display of Primary Pegged Orders with an offset amount will prevent this feedback loop, adding to system stability and improving market quality. Market participants retain the ability to display orders through other order options available under the Exchange rules, including by using Primary Pegged Orders without an offset amount or Market Pegged Orders. Because Primary Pegged orders without an offset amount are priced at the inside quote, they do not present the same messaging problem. Rapid updates to displayed Primary Pegged Orders may still occur, but are more likely to be the result of rapid trading. Market Pegged Orders, in contrast to Primary Pegs with an offset amount, are typically priced to execute and rarely post, and thus also do not present the excessive messaging problem. The Commission approved the nondisplay of Pegged Orders when it approved the application of BATS Exchange, Inc. (‘‘BATS’’), for registration as a national securities exchange and found BATS’ proposed rules consistent with Section 6 of the Act.4 BATS Rule 11.9(c)(8) provides that Pegged Orders ‘‘are not displayed on the Exchange.’’ 5 Tkelley on DSK3SPTVN1PROD with NOTICES 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act,6 in general, and furthers the objectives of Section 6(b)(5),7 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. Non-display of Primary Pegged Orders with an offset amount will minimize excess messaging that distracts from, rather than improves transparency and stability. Market participants can elect to display orders by using other available order types. The Exchange believes that the proposed change to Rule 4751(f)(4) meets the requirements of Section 6(b)(5) of the Act 8 in that it will improve the stability, quality and 4 Securities Exchange Act Release No. 58375 (August 18, 2008) 73 FR 49498 (August 21, 2008); see also Securities Exchange Act Release No. 57322 (February 13, 2008), 73 FR 9370 (February 20, 2008). 5 BATS Rule 11.9(c)(8). 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). 8 Id. VerDate Mar<15>2010 16:20 Apr 04, 2012 Jkt 226001 transparency of the national market system. 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 that is not necessary or appropriate in furtherance of the purposes of the Act. Specifically, the Exchange believes that providing for non-display of Primary Pegged Orders will not burden competition since at least one other exchange currently offers the same attribute for pegged orders. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 9 and Rule 19b– 4(f)(6) 10 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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 9 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 10 17 PO 00000 Frm 00063 Fmt 4703 Sfmt 9990 Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–BX–2012–022 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–2012–022. 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 (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 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 the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BX–2012–022 and should be submitted on or before April 26, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–8169 Filed 4–4–12; 8:45 am] BILLING CODE 8011–01–P 11 17 E:\FR\FM\05APN1.SGM CFR 200.30–3(a)(12). 05APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 66 (Thursday, April 5, 2012)]
[Notices]
[Pages 20671-20672]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8169]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66698; File No. SR-BX-2012-022]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Related to
Non-Display of Primary Pegged Orders With an Offset Amount

March 30, 2012.
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 March 23, 2012, NASDAQ OMX BX, Inc. (``BX'' 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 prepared by the Exchange. The Exchange has designated
the proposed rule change as constituting a rule change under Rule 19b-
4(f)(6) under the Act,\3\ 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.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

The Exchange proposes to amend Exchange Rule 4751(f)(4) to provide
that Primary Pegged Orders with an offset amount will never be
displayed. The text of the proposed rule change is available at
nasdaqomxbx.cchwallstreet.com, at the Exchange's principal office, and
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of those 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 parts of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
BX proposes to amend Rule 4751(f)(4) to provide that Primary Pegged
Orders with an offset amount will be non-displayed, a change that will
improve system and inter-market price stability. Pegged Orders are
orders that, once entered, adjust in price automatically, in response
to changes in the inside bids or offers of the BX Equities Market or
the national market system, depending upon the type of pegged order. A
Primary Pegged Order specifies that its price will equal the inside
quote on the same side of the market; a Market Pegged Order will equal
the inside quote on the opposite side of the market. A Midpoint Peg
Order will equal the midpoint of the national best bid and offer
(``NBBO''), excluding the effect that the Midpoint Peg Order itself has
on the inside bid or inside offer. As the bids and offers change, so
move the pegged orders. A Pegged Order may have a limit price beyond
which the order shall not be executed. Primary Pegged Orders and Market
Pegged Orders may establish their pricing relative to the appropriate
bids or offers by selecting one or more offset amounts that will adjust
the price of the order by the offset amount selected.
Under the Exchange's current rule, Midpoint Pegged Orders are not
displayed, while Primary and Market Pegged Orders may be displayed or
not displayed, at the option of the person placing the order. The
display of Primary Pegged Orders with an offset amount can potentially
result in excessive messaging when multiple venues display pegged non-
marketable orders. In these scenarios, it is possible for the Primary
Pegged Orders on each venue to react to and change in relation to each
other, resulting in excessive messaging and ``quote flickering.'' A

[[Page 20672]]

rule change to eliminate display of Primary Pegged Orders with an
offset amount will prevent this feedback loop, adding to system
stability and improving market quality.
Market participants retain the ability to display orders through
other order options available under the Exchange rules, including by
using Primary Pegged Orders without an offset amount or Market Pegged
Orders. Because Primary Pegged orders without an offset amount are
priced at the inside quote, they do not present the same messaging
problem. Rapid updates to displayed Primary Pegged Orders may still
occur, but are more likely to be the result of rapid trading. Market
Pegged Orders, in contrast to Primary Pegs with an offset amount, are
typically priced to execute and rarely post, and thus also do not
present the excessive messaging problem.
The Commission approved the non-display of Pegged Orders when it
approved the application of BATS Exchange, Inc. (``BATS''), for
registration as a national securities exchange and found BATS' proposed
rules consistent with Section 6 of the Act.\4\ BATS Rule 11.9(c)(8)
provides that Pegged Orders ``are not displayed on the Exchange.'' \5\
---------------------------------------------------------------------------

\4\ Securities Exchange Act Release No. 58375 (August 18, 2008)
73 FR 49498 (August 21, 2008); see also Securities Exchange Act
Release No. 57322 (February 13, 2008), 73 FR 9370 (February 20,
2008).
\5\ BATS Rule 11.9(c)(8).
---------------------------------------------------------------------------

2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\6\ in general, and furthers the objectives of Section 6(b)(5),\7\
in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. Non-display of Primary Pegged
Orders with an offset amount will minimize excess messaging that
distracts from, rather than improves transparency and stability. Market
participants can elect to display orders by using other available order
types. The Exchange believes that the proposed change to Rule
4751(f)(4) meets the requirements of Section 6(b)(5) of the Act \8\ in
that it will improve the stability, quality and transparency of the
national market system.
---------------------------------------------------------------------------

\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ Id.
---------------------------------------------------------------------------

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 that is not necessary or appropriate
in furtherance of the purposes of the Act. Specifically, the Exchange
believes that providing for non-display of Primary Pegged Orders will
not burden competition since at least one other exchange currently
offers the same attribute for pegged orders.

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

Written comments were neither solicited nor received.

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

Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6)
\10\ thereunder.
---------------------------------------------------------------------------

\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BX-2012-022 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-2012-022. 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 (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 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 the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.
All submissions should refer to File Number SR-BX-2012-022 and
should be submitted on or before April 26, 2012.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-8169 Filed 4-4-12; 8:45 am]
BILLING CODE 8011-01-P

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