Daily Rules, Proposed Rules, and Notices of the Federal Government
The exchange proposes to amend BX Rule 4751 to include Order Collar functionality that cancels any portion of any Unpriced orders (also known as market orders) submitted to the Exchange that would execute at a price that is more than $0.25 or 5 percent worse than the national best bid and offer at the time the order initially reaches the Exchange, whichever is greater. The text of the proposed rule change is available at
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
The purpose of the proposed rule change is to protect market participants by reducing the risk that unpriced orders, also known as market orders, will execute at prices that are significantly worse than the national best bid and offer ("NBBO") at the time the Exchange receives the order. BX believes that most market participants expect that their order will be executed at its full size at a price reasonably related to the prevailing market. However, participants may not be aware that there is insufficient liquidity at or near the NBBO to fill the entire order, particularly for more thinly-traded securities. These Unpriced orders can be disruptive both to the BX and to other markets that are impacted by BX's participation in the national market system.
BX is proposing to implement order collar functionality that cancels any portion of any unpriced orders that would execute on BX at a price that is the greater of $0.25 or 5 percent worse than the NBBO at the time BX receives the order. Unpriced orders that would be subject to this calculation and potential cancellation are defined in new BX Rule 4751(f)(10).
The following example illustrates the Order Collar functionality. A market participant submits an Unpriced order to buy 500 shares. The NBBO is $6.00 bid by $6.05 offer, with 100 shares available on each side. Both sides of the NBBO are set by BX and BX has 100 shares available at the $6.05 to sell at the offer price and also has reserve orders to sell 100 shares at $6.32 and 400 shares at $6.40. No other market center is publishing offers to sell the security in between $6.05 and $6.40.
In this example, the Unpriced Order would be executed in the following manner:
* 100 shares would be executed by BX at the $6.05;
* 100 shares executed by BX at $6.32 (more than $0.25 but less than 5 percent worse than the NBBO); and
* 300 shares, representing the remainder of the Unpriced Order, would be cancelled because the remaining liquidity available at $6.40 is more than 5 percent worse than the NBBO.
BX believes that market participants who wish to trade at prices further away from the NBBO than the Unpriced Order thresholds would permit, may still accomplish their strategy by submitting a marketable limit order to BX. In the example above, a market participant with such a strategy could have input a limit order with a price of $7.00, which would have executed up to its full size provided liquidity is available. BX's proposal is similar to a rule change already implemented by NASDAQ, BATS Exchange, Inc. and NYSE Arca, Inc.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act in general,
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended.
Written comments were neither solicited nor received.
Because the foregoing proposed rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing.
At any time within 60 days of the filing of such 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.
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:
* Use the Commission's Internet comment form (
* Send an e-mail to
* 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-2010-067. 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 (