Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Elimination of Market Maker Pre-Opening Obligations on BX Options, 66204-66207 [2012-26858]

Download as PDF 66204 Federal Register / Vol. 77, No. 213 / Friday, November 2, 2012 / Notices American High Yield Index Series 11, 12, 13, 14, 15, 16, 17, 18 and 19. The proposed rule changes would expand CME’s Markit CDX North American Investment Grade (‘‘CDX IG’’) Index product offerings by adding Series 8 to the current product set. The proposed rule changes are immediately effective upon filing but will become operational on October 15, 2012. CME notes that it will also certify the proposed rule changes that are the subject of this filing to its primary regulator, the Commodity Futures Trading Commission (‘‘CFTC’’). The text of the CME proposed rule amendments is included above, with additions italicized and deletions in brackets. The proposed CME rule amendments merely incorporate one additional series to CME’s existing offering of broadbased Markit CDX North American Investment Grade credit default swaps. As such, the proposed amendments simply effect changes to an existing service of a registered clearing agency that (1) do not adversely affect the safeguarding of securities or funds in the custody or control of the clearing agency or for which it is responsible and (2) do not significantly affect the respective rights or obligations of the clearing agency or persons using its clearing agency services. Therefore, the proposed rule change is properly filed under Section 19(b)(3)(A) and Rule 19b– 4(f)(4)(i) thereunder. B. Self-Regulatory Organization’s Statement on Burden on Competition CME does not believe that the proposed rule change will have any impact, or impose any burden, on competition. emcdonald on DSK67QTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others CME has not solicited, and does not intend to solicit, comments regarding this proposed rule change. CME has not received any unsolicited written comments from interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has become effective upon filing pursuant to Section 19(b)(3)(A) 5 of the Act and Rule 19b–4(f)(4)(i) 6 thereunder because it effects a change in an existing service of a registered clearing agency that (1) does not adversely affect the safeguarding of securities or funds in 5 15 U.S.C. 78s(b)(3)(A). 6 17 CFR 240.19b–4(f)(4)(i). VerDate Mar<15>2010 12:56 Nov 01, 2012 Jkt 229001 the custody or control of the clearing agency or for which it is responsible and (2) does not significantly affect the respective rights or obligations of the clearing agency or persons using the service. 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. 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 rulecomments@sec.gov. Please include File Number SR–CME–2012–40 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–CME–2012–40. 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 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of CME and on CME’s Web site at PO 00000 Frm 00027 Fmt 4703 Sfmt 4703 https://www.cmegroup.com/marketregulation/files/sec_19b–4_12–40.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–CME–2012–40 and should be submitted on or before November 23, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Kevin M. O’Neill, Deputy Secretary . [FR Doc. 2012–26852 Filed 11–1–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68116; File No. SR–BX– 2012–069] Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Elimination of Market Maker PreOpening Obligations on BX Options October 26, 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 October 16, 2012, NASDAQ OMX BX, Inc. (‘‘BX’’ or ‘‘BX Options’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change BX is filing with the Commission a proposal to modify Chapter VII, Section 6 (Market Maker Quotations), to eliminate market maker pre-opening obligations on BX Options. The Exchange also proposes to modify Chapter VII, Section 5 (Obligations of Market Makers) to conform it to Section 6. The Exchange requests that the Commission waive the 30-day operative 7 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\02NON1.SGM 02NON1 Federal Register / Vol. 77, No. 213 / Friday, November 2, 2012 / Notices delay period contained in Rule 19b– 4(f)(6)(iii) of the Act.3 The text of the proposed rule change is available at https:// nasdaqomxbx.cchwallstreet.com/, at BX’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 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 purpose of the proposed rule change is to modify Chapter VII, Section 6 of the BX Options rulebook to remove obligations imposed on BX Options market makers (‘‘Market Makers’’) 4 to participate in the pre-opening phase in terms of continuous quotes; and to conform Section 5 to Section 6 as modified. This is done to put Market Makers on par with the market makers on other options exchanges that have not had pre-market continuous quoting obligations.5 The Exchange notes that its proposal is similar to a recent rule change to Chapter VII, Section 6 of the NASDAQ Options Market (‘‘NOM’’) rulebook.6 3 17 CFR 240.19b–4(f)(6)(iii). Market Maker is a BX Options participant that is registered with the Exchange as a Market Maker and has certain rights and bears certain responsibilities beyond those of other Options Participants. All Market Makers are designated as specialists on BX Options. See Chapter VII, Section 2. 5 NASDAQ OMX PHLX LLC (‘‘Phlx’’), and International Securities Exchange, LLC (‘‘ISE’’) have market pre-opening phases. However, Phlx and ISE do not, as discussed in the proposal, impose preopening obligations on their respective options market makers; none of the exchanges require continuous quoting prior to the regular options trading market. Moreover, as discussed in the proposal, NOM has filed an immediately effective filing similarly eliminating pre-opening obligations on their options market makers. See Securities Exchange Act Release No. 67722 (August 23, 2012), 77 FR 52375 (August 29, 2012)(SR–NASDAQ– 2012–095)(notice of filing and immediate effectiveness). 6 See Securities Exchange Act Release No. 67722 (August 23, 2012), 77 FR 52375 (August 29, 2012) emcdonald on DSK67QTVN1PROD with NOTICES 4A VerDate Mar<15>2010 12:56 Nov 01, 2012 Jkt 229001 The proposed rule change language to Chapter VII, Section 6 of the BX Options rulebook is identical in all respects to that of the rule change language to Chapter VII, Section 6 of the NOM rulebook.7 Currently, Section 6 of Chapter VII requires that a Market Maker must enter continuous bids and offers in options in which the Market Maker is registered on BX Options, an all-electronic market. Specifically, Section 6(d)i. requires that on a daily basis a Market Maker must: (1) Participate in the pre-opening phase; and (2) thereafter make markets consistent with the applicable quoting requirements specified in BX Options rules, on a continuous basis in at least sixty percent (60%) of the series in options in which the Market Maker is registered. Additionally, subsection 6(d)(i.1) indicates that to satisfy the Section 6(d)i. requirement with respect to quoting a series, a Market Maker must: (3) quote such series 90% of the trading day (as a percentage of the total number of minutes in such trading day) or such higher percentage as BX Options may announce in advance.8 The Exchange does not propose to change any of the continuous quoting requirements applicable to a Market Maker (e.g., continuous quoting in 60% of the Market Maker’s registered series for 90% of the trading day) 9 other than to eliminate the requirement to participate in the pre-opening phase in Section 6(d)i., which is noted in (1) above. Subsequent to this proposal, a Market Maker will continue to have all of the other quoting obligations that the Market Maker now has pursuant to Section 6, and pursuant to Section 6(d)i., during regular market hours will be responsible to quote on a continuous basis in at least sixty percent (60%) of the series in options in which the Market Maker is registered for 90% of the trading day (as a percentage of the total number of minutes in such trading day). The change that the Exchange is (SR–NASDAQ–2012–095) (notice of filing and immediate effectiveness). 7 As a result, subsequent to this amendment NOM and BX Options Chapter VII, Section 6 will have exactly the same amended rule language. 8 Subsection (6)(d)(i.2) establishes that three different types of option series are exempted from the continuous quote requirements: quarterly option series, adjusted option series, and series with an expiration of nine months or greater. For continuous quotation requirements on BX Options generally, see Chapter XIV, Section 6(d). 9 The BX Options trading day, which represents the regular market hours, is 9:30 a.m. to 4:00 p.m. Eastern Time, except for option contracts on fund shares or broad-based indexes which will close as of 4:15 p.m. Eastern Time. Chapter VI, Section 2. The regular market hours on Phlx, ISE, and NOM are similar to BX Options. PO 00000 Frm 00028 Fmt 4703 Sfmt 4703 66205 proposing to Section 6(d)i. is removal of the Market Maker pre-opening quoting obligation and the insertion of text clarifying that the quoting obligation is during regular market hours.10 As a result of the Exchange’s proposed rule filing, the BX Options continuous quoting requirement on BX Options’ electronic market makers will not have a pre-opening quoting obligation, just as other options exchanges (e.g., Phlx, ISE, and NOM) do not impose a pre-opening obligation on their electronic market makers. Phlx, ISE, and NOM have a continuous quoting obligation during their regular market hours, which are similar to BX Options’ market hours.11 However, these exchanges do not have an obligation for their market makers to participate in a pre-opening phase. On Phlx, for example, a Remote Streaming Quote Trader (‘‘RSQT’’),12 which is similar in nature to a BX Options Market Maker, has an obligation during trading hours to quote markets in not less than 60% of the series in which such RSQT is assigned (this is akin to BX Options Market Maker registration in a series). Unlike a BX Options Market Maker, which currently has a preopening obligation, a Phlx RSQT does not have a pre-opening market maker obligation.13 As a second example, there is a quoting requirement for an ISE market maker. However, just like Phlx, and unlike BX Options, ISE does not have a pre-opening market maker obligation.14 And as a further example, there is a quoting requirement for a NOM market maker. However, just like Phlx and ISE, and unlike BX Options, NOM does not have a pre-opening 10 Section 6(d)i. currently states, in relevant part: i. On a daily basis, a Market Maker must participate in the pre-opening phase and thereafter make markets consistent with the applicable quoting requirements specified in these rules, on a continuous basis in at least sixty percent (60%) of the series in options in which the Market Maker is registered. 11 See supra note 9. 12 A Phlx RSQT is a Registered Options Trader that is a member or member organization with no physical trading floor presence that may generate and submit option quotations electronically in assigned options. See Phlx Rule 1014(b)(ii)(B). While the designation of RSQT does not exist on BX Options, a BX Options Market Maker enters quotes electronically on BX Options just as an RSQT does on Phlx pursuant to specific quoting obligations. See BX Options Chapter VII, Section 6(d) and Phlx Rule 1014(b)(ii)(D). 13 For the Phlx continuous quoting rule, see Phlx Rule 1014(b)(ii)(D)(1). 14 ISE rule 804(e)(2)(iii) states, in relevant part, that a Competitive Market Maker must maintain continuous quotations in an options class to which it is appointed and at least 60% of the series of the options class listed on the Exchange until the close of trading that day. E:\FR\FM\02NON1.SGM 02NON1 66206 Federal Register / Vol. 77, No. 213 / Friday, November 2, 2012 / Notices emcdonald on DSK67QTVN1PROD with NOTICES market maker obligation.15 The proposed filing establishes that BX Options Market Makers, like Phlx, ISE, and NOM market makers, will not have a pre-opening quoting obligation prior to market open.16 Exchange Market Makers have noted that unlike BX Options, other options exchanges do not have a pre-opening quoting obligation for their market makers, and have requested the Exchange to eliminate the pre-opening obligation so that BX Options rules are similar to those of other options exchanges such as, for example, NOM and Phlx. This proposed rule change levels the playing field in respect of preopening obligations while leaving all other BX Options quoting requirements intact.17 Moreover, the Exchange believes that its proposal to put BX Options market makers in the same position as market makers on other exchanges will not have a negative effect on BX Options investors and traders (‘‘BX Options participants’’). In particular, the Exchange believes the removal of preopening market maker obligations on BX Options will have no impact on the functioning of the BX Options opening process and in turn will not negatively impact BX Options participants. The Exchange generally requires two other option markets to be open prior to BX Options initiating an opening process.18 In addition, orders and quotes executed during the opening process on BX Options will continue to be protected by the National Best Bid or Offer (‘‘NBBO’’). As such, the Exchange believes that BX Options participants will continue to have a similar experience and quality of execution on 15 ISE rule 804(e)(2)(iii) states, in relevant part, that a Competitive Market Maker must maintain continuous quotations in an options class to which it is appointed and at least 60% of the series of the options class listed on the Exchange until the close of trading that day. 16 The two-sided quote obligation is noted also in Chapter VII, Section 5(a)i., which states that during trading hours a Market Maker must maintain a twosided market, pursuant to Section 6(d)i. of Chapter VII, in those options in which the Market Maker is registered to trade, in a manner that enhances the depth, liquidity and competitiveness of the market. Recognizing the requirement to maintain a twosided market during trading hours per Section 5(a)i., the Exchange is removing reference in Section 5(a)ii. to a Market Maker having to enter two-sided quotes before market open by participating in opening the market. This is done for purposes of conforming Section 5(a)ii. with proposed Section 6(d)i., which eliminates quoting obligations in the pre-opening phase before the market opens. 17 Chapter VII, Section 6(d). 18 For the BX Options opening process, see Chapter VI, Section 8; and for a description of the two options market opening process, see https:// www.nasdaqtrader.com/Content/TechnicalSupport/ BXOptions_SystemSettings.pdf. VerDate Mar<15>2010 12:56 Nov 01, 2012 Jkt 229001 the opening on BX Options as they do today. The Exchange believes further that the proposed rule change eliminating preopening obligations should be procompetitive in that it will attract more Market Makers, and additional liquidity, onto BX Options. This should be advantageous to traders and investors executing trading and hedging strategies on the Exchange. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 19 in general, and furthers the objectives of Section 6(b)(5) of the Act 20 in particular, in that the proposal is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. The Exchange believes the proposal to conform Market Maker obligations to the requirements of competing markets will promote the application of consistent trading practices. Therefore, the Exchange believes the proposal promotes just and equitable principles of trade and serves to protect investors and the public interest. Additionally, the Exchange believes the proposal removes a market maker quoting requirement that is unnecessary, as evidenced by the fact that it does not exist on other competitive markets. The Exchange operates in a highly competitive market comprised of ten U.S. options exchanges in which sophisticated and knowledgeable market participants can, and do, send order flow to competing exchanges if they deem trading practices at a particular exchange to be onerous or cumbersome. With this proposal, the Market Maker will be relieved of a market maker requirement that does not materially improve the quality of the markets. On the contrary, the pre-open phase obligation creates an additional obligation and burden on BX Options Market Makers that does not exist on numerous other competitive markets. The Exchange believes that in this competitive marketplace, the impact of the pre-open trading practice that exists on the Exchange today compels this proposal. It will allow Market Makers on the Exchange to follow rules that are similar to the rules of other options exchanges that do not impose preopening obligations on their market makers, and will allow Market Makers 19 15 20 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00029 Fmt 4703 Sfmt 4703 to focus on aspects of their operations that contribute to the market in a more efficient and meaningful way. 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. To the contrary, BX Options’ proposal to eliminate the pre-opening obligation on Market Makers is consistent with the market maker obligations on other options exchanges, which do not impose pre-opening obligations on market makers. The Exchange believes that its proposal is pro-competitive and should serve to attract market making activity and increase liquidity provision on BX Options. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change does not (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 21 and Rule 19b–4(f)(6) thereunder.22 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 23 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6) 24 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay, noting that doing so will allow Market Makers on the Exchange to follow rules that are similar 21 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, along with a brief description and text of 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. 23 17 CFR 240.19b–4(f)(6). 24 17 CFR 240.19b–4(f)(6). 22 17 E:\FR\FM\02NON1.SGM 02NON1 Federal Register / Vol. 77, No. 213 / Friday, November 2, 2012 / Notices to the rules of other options exchanges that do not impose pre-opening obligations on their market makers. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposal operative upon filing.25 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. provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BX– 2012–069 and should be submitted on or before November 23, 2012. IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 Kevin M. O’Neill, Deputy Secretary. 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 rulecomments@sec.gov. Please include File Number SR–BX–2012–069 on the subject line. emcdonald on DSK67QTVN1PROD with NOTICES 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–2012–069. 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 25 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Mar<15>2010 12:56 Nov 01, 2012 Jkt 229001 [FR Doc. 2012–26858 Filed 11–1–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68117; File No. SR– NYSEMKT–2012–51] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Sections 140 and 141 of the NYSE MKT LLC Company Guide To Amend Annual Fees and Certain Other Listing Fees Included Therein and To Make Technical and Conforming Changes October 26, 2012. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on October 16, 2012, NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend certain of the fees included in the NYSE 26 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00030 Fmt 4703 Sfmt 4703 66207 MKT Company Guide and to make technical and conforming changes. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the 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 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Sections 140 and 141 of its Company Guide to amend certain of the fees included therein and to make technical and conforming changes. The Exchange proposes to immediately reflect the proposed changes in the Company Guide, but not to implement the proposed changes until January 1, 2013.3 The Exchange proposes to amend Section 140 of its Company Guide, which provides for Original Listing Fees. The Exchange proposes to increase the Original Listing Fee charged in connection with the listing of new shares of common stock or common stock equivalents, including securities issued by non-U.S. companies, for issuers with outstanding shares in excess of 15,000,000. The Original Listing Fee for such issuers would increase from $70,000 to $75,000. The Exchange also proposes to amend Section 141 of its Company Guide to increase its Annual Fees for stock issues as follows: (i) for issuers with 50,000,000 shares outstanding or less, the Annual Fee would be increased by $2,500 (or 9.1%), from $27,500 to $30,000; (ii) for issuers with 50,000,001 to 75,000,000 shares outstanding, the 3 The Exchange has proposed changes to the Company Guide, as reflected in Exhibit 5 attached hereto, in a manner that would permit readers of the Company Guide to identify the changes that would be implemented on January 1, 2013. E:\FR\FM\02NON1.SGM 02NON1

Agencies

[Federal Register Volume 77, Number 213 (Friday, November 2, 2012)]
[Notices]
[Pages 66204-66207]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-26858]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68116; File No. SR-BX-2012-069]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to Elimination of Market Maker Pre-Opening Obligations on BX Options

October 26, 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 October 16, 2012, NASDAQ OMX BX, Inc. (``BX'' or ``BX Options'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    BX is filing with the Commission a proposal to modify Chapter VII, 
Section 6 (Market Maker Quotations), to eliminate market maker pre-
opening obligations on BX Options. The Exchange also proposes to modify 
Chapter VII, Section 5 (Obligations of Market Makers) to conform it to 
Section 6.
    The Exchange requests that the Commission waive the 30-day 
operative

[[Page 66205]]

delay period contained in Rule 19b-4(f)(6)(iii) of the Act.\3\
---------------------------------------------------------------------------

    \3\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The text of the proposed rule change is available at https://nasdaqomxbx.cchwallstreet.com/, at BX'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 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 purpose of the proposed rule change is to modify Chapter VII, 
Section 6 of the BX Options rulebook to remove obligations imposed on 
BX Options market makers (``Market Makers'') \4\ to participate in the 
pre-opening phase in terms of continuous quotes; and to conform Section 
5 to Section 6 as modified. This is done to put Market Makers on par 
with the market makers on other options exchanges that have not had 
pre-market continuous quoting obligations.\5\
---------------------------------------------------------------------------

    \4\ A Market Maker is a BX Options participant that is 
registered with the Exchange as a Market Maker and has certain 
rights and bears certain responsibilities beyond those of other 
Options Participants. All Market Makers are designated as 
specialists on BX Options. See Chapter VII, Section 2.
    \5\ NASDAQ OMX PHLX LLC (``Phlx''), and International Securities 
Exchange, LLC (``ISE'') have market pre-opening phases. However, 
Phlx and ISE do not, as discussed in the proposal, impose pre-
opening obligations on their respective options market makers; none 
of the exchanges require continuous quoting prior to the regular 
options trading market. Moreover, as discussed in the proposal, NOM 
has filed an immediately effective filing similarly eliminating pre-
opening obligations on their options market makers. See Securities 
Exchange Act Release No. 67722 (August 23, 2012), 77 FR 52375 
(August 29, 2012)(SR-NASDAQ-2012-095)(notice of filing and immediate 
effectiveness).
---------------------------------------------------------------------------

    The Exchange notes that its proposal is similar to a recent rule 
change to Chapter VII, Section 6 of the NASDAQ Options Market (``NOM'') 
rulebook.\6\ The proposed rule change language to Chapter VII, Section 
6 of the BX Options rulebook is identical in all respects to that of 
the rule change language to Chapter VII, Section 6 of the NOM 
rulebook.\7\
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 67722 (August 23, 
2012), 77 FR 52375 (August 29, 2012) (SR-NASDAQ-2012-095) (notice of 
filing and immediate effectiveness).
    \7\ As a result, subsequent to this amendment NOM and BX Options 
Chapter VII, Section 6 will have exactly the same amended rule 
language.
---------------------------------------------------------------------------

    Currently, Section 6 of Chapter VII requires that a Market Maker 
must enter continuous bids and offers in options in which the Market 
Maker is registered on BX Options, an all-electronic market. 
Specifically, Section 6(d)i. requires that on a daily basis a Market 
Maker must: (1) Participate in the pre-opening phase; and (2) 
thereafter make markets consistent with the applicable quoting 
requirements specified in BX Options rules, on a continuous basis in at 
least sixty percent (60%) of the series in options in which the Market 
Maker is registered. Additionally, subsection 6(d)(i.1) indicates that 
to satisfy the Section 6(d)i. requirement with respect to quoting a 
series, a Market Maker must: (3) quote such series 90% of the trading 
day (as a percentage of the total number of minutes in such trading 
day) or such higher percentage as BX Options may announce in 
advance.\8\ The Exchange does not propose to change any of the 
continuous quoting requirements applicable to a Market Maker (e.g., 
continuous quoting in 60% of the Market Maker's registered series for 
90% of the trading day) \9\ other than to eliminate the requirement to 
participate in the pre-opening phase in Section 6(d)i., which is noted 
in (1) above.
---------------------------------------------------------------------------

    \8\ Subsection (6)(d)(i.2) establishes that three different 
types of option series are exempted from the continuous quote 
requirements: quarterly option series, adjusted option series, and 
series with an expiration of nine months or greater.
    For continuous quotation requirements on BX Options generally, 
see Chapter XIV, Section 6(d).
    \9\ The BX Options trading day, which represents the regular 
market hours, is 9:30 a.m. to 4:00 p.m. Eastern Time, except for 
option contracts on fund shares or broad-based indexes which will 
close as of 4:15 p.m. Eastern Time. Chapter VI, Section 2. The 
regular market hours on Phlx, ISE, and NOM are similar to BX 
Options.
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    Subsequent to this proposal, a Market Maker will continue to have 
all of the other quoting obligations that the Market Maker now has 
pursuant to Section 6, and pursuant to Section 6(d)i., during regular 
market hours will be responsible to quote on a continuous basis in at 
least sixty percent (60%) of the series in options in which the Market 
Maker is registered for 90% of the trading day (as a percentage of the 
total number of minutes in such trading day). The change that the 
Exchange is proposing to Section 6(d)i. is removal of the Market Maker 
pre-opening quoting obligation and the insertion of text clarifying 
that the quoting obligation is during regular market hours.\10\ As a 
result of the Exchange's proposed rule filing, the BX Options 
continuous quoting requirement on BX Options' electronic market makers 
will not have a pre-opening quoting obligation, just as other options 
exchanges (e.g., Phlx, ISE, and NOM) do not impose a pre-opening 
obligation on their electronic market makers.
---------------------------------------------------------------------------

    \10\ Section 6(d)i. currently states, in relevant part:
    i. On a daily basis, a Market Maker must participate in the pre-
opening phase and thereafter make markets consistent with the 
applicable quoting requirements specified in these rules, on a 
continuous basis in at least sixty percent (60%) of the series in 
options in which the Market Maker is registered.
---------------------------------------------------------------------------

    Phlx, ISE, and NOM have a continuous quoting obligation during 
their regular market hours, which are similar to BX Options' market 
hours.\11\ However, these exchanges do not have an obligation for their 
market makers to participate in a pre-opening phase. On Phlx, for 
example, a Remote Streaming Quote Trader (``RSQT''),\12\ which is 
similar in nature to a BX Options Market Maker, has an obligation 
during trading hours to quote markets in not less than 60% of the 
series in which such RSQT is assigned (this is akin to BX Options 
Market Maker registration in a series). Unlike a BX Options Market 
Maker, which currently has a pre-opening obligation, a Phlx RSQT does 
not have a pre-opening market maker obligation.\13\ As a second 
example, there is a quoting requirement for an ISE market maker. 
However, just like Phlx, and unlike BX Options, ISE does not have a 
pre-opening market maker obligation.\14\ And as a further example, 
there is a quoting requirement for a NOM market maker. However, just 
like Phlx and ISE, and unlike BX Options, NOM does not have a pre-
opening

[[Page 66206]]

market maker obligation.\15\ The proposed filing establishes that BX 
Options Market Makers, like Phlx, ISE, and NOM market makers, will not 
have a pre-opening quoting obligation prior to market open.\16\
---------------------------------------------------------------------------

    \11\ See supra note 9.
    \12\ A Phlx RSQT is a Registered Options Trader that is a member 
or member organization with no physical trading floor presence that 
may generate and submit option quotations electronically in assigned 
options. See Phlx Rule 1014(b)(ii)(B). While the designation of RSQT 
does not exist on BX Options, a BX Options Market Maker enters 
quotes electronically on BX Options just as an RSQT does on Phlx 
pursuant to specific quoting obligations. See BX Options Chapter 
VII, Section 6(d) and Phlx Rule 1014(b)(ii)(D).
    \13\ For the Phlx continuous quoting rule, see Phlx Rule 
1014(b)(ii)(D)(1).
    \14\ ISE rule 804(e)(2)(iii) states, in relevant part, that a 
Competitive Market Maker must maintain continuous quotations in an 
options class to which it is appointed and at least 60% of the 
series of the options class listed on the Exchange until the close 
of trading that day.
    \15\ ISE rule 804(e)(2)(iii) states, in relevant part, that a 
Competitive Market Maker must maintain continuous quotations in an 
options class to which it is appointed and at least 60% of the 
series of the options class listed on the Exchange until the close 
of trading that day.
    \16\ The two-sided quote obligation is noted also in Chapter 
VII, Section 5(a)i., which states that during trading hours a Market 
Maker must maintain a two-sided market, pursuant to Section 6(d)i. 
of Chapter VII, in those options in which the Market Maker is 
registered to trade, in a manner that enhances the depth, liquidity 
and competitiveness of the market.
    Recognizing the requirement to maintain a two-sided market 
during trading hours per Section 5(a)i., the Exchange is removing 
reference in Section 5(a)ii. to a Market Maker having to enter two-
sided quotes before market open by participating in opening the 
market. This is done for purposes of conforming Section 5(a)ii. with 
proposed Section 6(d)i., which eliminates quoting obligations in the 
pre-opening phase before the market opens.
---------------------------------------------------------------------------

    Exchange Market Makers have noted that unlike BX Options, other 
options exchanges do not have a pre-opening quoting obligation for 
their market makers, and have requested the Exchange to eliminate the 
pre-opening obligation so that BX Options rules are similar to those of 
other options exchanges such as, for example, NOM and Phlx. This 
proposed rule change levels the playing field in respect of pre-opening 
obligations while leaving all other BX Options quoting requirements 
intact.\17\
---------------------------------------------------------------------------

    \17\ Chapter VII, Section 6(d).
---------------------------------------------------------------------------

    Moreover, the Exchange believes that its proposal to put BX Options 
market makers in the same position as market makers on other exchanges 
will not have a negative effect on BX Options investors and traders 
(``BX Options participants''). In particular, the Exchange believes the 
removal of pre-opening market maker obligations on BX Options will have 
no impact on the functioning of the BX Options opening process and in 
turn will not negatively impact BX Options participants. The Exchange 
generally requires two other option markets to be open prior to BX 
Options initiating an opening process.\18\ In addition, orders and 
quotes executed during the opening process on BX Options will continue 
to be protected by the National Best Bid or Offer (``NBBO''). As such, 
the Exchange believes that BX Options participants will continue to 
have a similar experience and quality of execution on the opening on BX 
Options as they do today.
---------------------------------------------------------------------------

    \18\ For the BX Options opening process, see Chapter VI, Section 
8; and for a description of the two options market opening process, 
see https://www.nasdaqtrader.com/Content/TechnicalSupport/BXOptions_SystemSettings.pdf.
---------------------------------------------------------------------------

    The Exchange believes further that the proposed rule change 
eliminating pre-opening obligations should be pro-competitive in that 
it will attract more Market Makers, and additional liquidity, onto BX 
Options. This should be advantageous to traders and investors executing 
trading and hedging strategies on the Exchange.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \19\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \20\ in particular, in that the proposal is designed 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest. The Exchange believes the proposal to conform Market 
Maker obligations to the requirements of competing markets will promote 
the application of consistent trading practices. Therefore, the 
Exchange believes the proposal promotes just and equitable principles 
of trade and serves to protect investors and the public interest.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Additionally, the Exchange believes the proposal removes a market 
maker quoting requirement that is unnecessary, as evidenced by the fact 
that it does not exist on other competitive markets. The Exchange 
operates in a highly competitive market comprised of ten U.S. options 
exchanges in which sophisticated and knowledgeable market participants 
can, and do, send order flow to competing exchanges if they deem 
trading practices at a particular exchange to be onerous or cumbersome. 
With this proposal, the Market Maker will be relieved of a market maker 
requirement that does not materially improve the quality of the 
markets. On the contrary, the pre-open phase obligation creates an 
additional obligation and burden on BX Options Market Makers that does 
not exist on numerous other competitive markets. The Exchange believes 
that in this competitive marketplace, the impact of the pre-open 
trading practice that exists on the Exchange today compels this 
proposal. It will allow Market Makers on the Exchange to follow rules 
that are similar to the rules of other options exchanges that do not 
impose pre-opening obligations on their market makers, and will allow 
Market Makers to focus on aspects of their operations that contribute 
to the market in a more efficient and meaningful way.

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. To the contrary, BX Options' 
proposal to eliminate the pre-opening obligation on Market Makers is 
consistent with the market maker obligations on other options 
exchanges, which do not impose pre-opening obligations on market 
makers. The Exchange believes that its proposal is pro-competitive and 
should serve to attract market making activity and increase liquidity 
provision on BX Options.

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

    No written comments were either solicited or received.

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

    Because the proposed rule change does not (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \21\ and Rule 19b-4(f)(6) 
thereunder.\22\
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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, along 
with a brief description and text of 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \23\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) \24\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay, noting that doing 
so will allow Market Makers on the Exchange to follow rules that are 
similar

[[Page 66207]]

to the rules of other options exchanges that do not impose pre-opening 
obligations on their market makers. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. Therefore, the Commission hereby 
waives the 30-day operative delay and designates the proposal operative 
upon filing.\25\
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    \23\ 17 CFR 240.19b-4(f)(6).
    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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.

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-2012-069 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-2012-069. 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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BX-2012-069 and should be 
submitted on or before November 23, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-26858 Filed 11-1-12; 8:45 am]
BILLING CODE 8011-01-P
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