[Federal Register: October 2, 2006 (Volume 71, Number 190)]
[Notices]
[Page 58021-58023]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02oc06-132]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54505; File No. SR-BSE-2006-40]
Self-Regulatory Organizations; Boston Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Trade Information Submitted to the Exchange
September 26, 2006.
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 September 15, 2006, 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 and
II below, which Items have been prepared by the Exchange. The BSE has
filed the proposed rule change, pursuant to Section 19(b)(3)(A) 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Section 15 (Audit Trail) of Chapter
V of the Rules of the Boston Options Exchange (``BOX'') to delete the
language that specifically references the two specific participant
capacity codes and the three specific customer identification codes.
The text of the proposed rule change is available on the BSE's Web site
at http://www.bostonstock.com, at the principal office of the Exchange
and in 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 Exchange states that the proposed rule change mimics the
Chicago Board Options Exchange (``CBOE'') Rule 6.51 \5\ and the
International Securities Exchange, Inc. (``ISE'') Rule 712 \6\ and
proposes to amend Section 15 (Audit Trail) of Chapter V of the BOX
Rules to delete the language that specifically references the two
specific participant capacity codes and the three specific customer
identification codes.\7\
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\5\ See Securities Exchange Act Release No. 45226 (January 3,
2002), 67 FR 1383 (January 10, 2002) (SR-CBOE-2001-69).
\6\ See Securities Exchange Act Release No. 43795 (January 3,
2001),66 FR 2468 (January 11, 2001) (SR-ISE-00-21).
\7\ Currently, BOX Rules Chapter V, Section 15(b)(vi) and (viii)
statethat order information submitted under BOX Rule Chapter V,
Section 15 must include certain specific participant capacity codes
and customer identification codes.
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Chapter V, Section 15 of the BOX Rules requires members to file
with BOX order information in such form as may be prescribed by the
Exchange. Among the ``order information'' that the rule requires to be
marked on an order ticket \8\ includes ``participant capacity'' and
``customer identification.'' The purpose of these marking requirements
is primarily twofold. First, participant capacity codes and customer
identification codes ensure that orders route to the proper exchange
systems, provide the Boston Options Exchange Regulation LLC (``BOXR'')
with a mechanism by which to surveil whether members are in fact
marking orders correctly and provide BOX with customer information.
Second, the marking requirements assist the Options Clearing
Corporation (``OCC'') in the clearance of trades.
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\8\ All order tickets are submitted to BOX in electronic form.
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BSE currently lists two participant capacity codes in Chapter V,
Section 15(b)(vi) of the BOX Rules and three customer identification
codes in Chapter V, Section 15(b)(viii) of the BOX Rules.\9\ Because
BOX's participant capacity codes and customer identification codes are
specifically listed in its rules, each time BOX determines to add,
delete, or change a participant capacity code or customer
identification code, BSE must submit a rule filing to the Commission.
This could require several separate rule filings if BOX decided to add
participant capacity codes and customer identification codes at
different times.\10\
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\9\ BOX currently uses the following participant capacity codes:
(1)Order Flow Provider or (2) Market Maker. See BOX Rules Chapter V,
Section 15(b)(vi). BOX currently uses the following customer
identification codes: (1) Public Customer; (2) Broker-dealer; or (3)
Market Maker. See BOX Rules Chapter V, Section 15(b)(viii).
\10\ Over the next few months, the Exchange anticipates adding
severalnew identification codes to the BOX system. This could
require the submission of several rule filings if all participant
capacity and customer identification codes are not added at the same
time.
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Accordingly, since Chapter V, Section 15(a) of the BOX Rules
already provides that ``each Options Participant shall submit order
information in such form as may be prescribed by BOXR. * * *,'' \11\
BSE proposes to delete the language from Chapter V, Section 15(b)(vi)
and (viii) of the BOX Rules that references the two specific
participant capacity codes and three specific customer identification
codes. This change will have two primary effects. First, it would
eliminate the need for BSE to submit a rule filing each time BOX adds,
deletes or changes a participant capacity code or customer
identification code. Second, and more importantly, it would allow BSE
to continue to ensure that members submit requisite trade information,
including participant capacity codes and customer
[[Page 58022]]
identification codes, in an Exchange-dictated manner. BSE notes that
the proposed change to Chapter V, Section 15(b)(vi) and (viii) would
not eliminate the requirement that members submit tickets with
participant capacity codes and customer identification codes. Rather,
this change simply eliminates the specific participant capacity codes
and customer identification codes from Chapter V, Section 15(b)(vi) and
(viii) of the BOX Rules. Options Participants would still be required
to submit orders with participant capacity codes and customer
identification codes as may be prescribed by BOXR.
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\11\ See BOX Rules Chapter V, Section 15(a).
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Upon approval of this filing, BSE will notify members of the
current order marking requirements (i.e., valid participant capacity
codes and customer identification codes) by regulatory circular. As
such, each time BOX adds, deletes, or changes a participant capacity
code or customer identification code, BSE will distribute a regulatory
circular to the Options Participants apprising them of the change. BSE
believes that this will ensure that BOX's Options Participants are
aware of the applicable participant capacity codes and customer
identification codes with which it must mark order tickets.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\12\ in general, and furthers
the objectives of Section 6(b)(5) of the Act,\13\ in particular, in
that it is designed to promote just and equitable principles of trade,
and to protect investors and the public interest. The Exchange believes
that the proposed rule change would enhance BOX's ability to surveil
for and investigate potential fraudulent and manipulative conduct. The
Exchange further believes that, since the proposed rule change would
enhance BOX's ability to conduct investigations and surveil for
misconduct, it would protect investors and the public interest.
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\12\ 15 U.S.C. 78f(b).
\13\ 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 that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative prior to 30 days after the date of filing, or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interests, the proposed rule change has
become effective pursuant to Section 19(b)(3)(A)(iii) of the Act \14\
and Rule 19b-4(f)(6) thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
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BSE requests that the Commission waive both the 30-day pre-
operative period specified in Rule 19b-4(f)(6)(iii).\16\ The Commission
believes that waiving the 30-day pre-operative period is consistent
with the protection of investors and public interest. BSE's proposed
deletion of the language from Chapter V, Section 15(b)(vi) and (viii)
of the BOX Rules that references certain specific participant capacity
and customer identification codes allows for greater Exchange
flexibility in administering its order ticket marking rules while
maintaining the underlying requirements. According to the Exchange,
this change will eliminate the need for BSE to submit a rule filing
each time BOX adds, deletes or changes a participant capacity code or
customer identification code and will allow BSE to continue to ensure
that members submit requisite trade information, including participant
capacity codes and customer identification codes, in an Exchange-
dictated manner. The change is also consistent with the approaches used
by other self-regulatory organizations.\17\ For these reasons, the
Commission designates the proposal to be effective and operative upon
filing with the Commission.\18\
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\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ See n. 5-6, supra.
\18\ For purposes only of waiving the 30-day operative delay,
theCommission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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.\19\
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\19\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-BSE-2006-40 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities andExchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BSE-2006-40. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal offices 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-2006-40 and
should
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be submitted on or before October 23, 2006.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\20\
Nancy M. Morris,
Secretary.
[FR Doc. E6-16165 Filed 9-29-06; 8:45 am]
BILLING CODE 8010-01-P