Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes to amend its order routing rules. The text of the proposed rule change is available on the Exchange's Web site (
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.
Rule 6.36 governs the Exchange's process for routing sweep orders to other markets pursuant to intermarket linkage rules and states that the Exchange may contract with one or more routing brokers that are not affiliated with the Exchange to route sweep orders to other exchanges. The Rule imposes certain obligations on the Exchange and routing brokers. In particular, Rule 6.36(e) provides that the Exchange will determine the logic that provides when, how and where orders are routed away to other exchanges. Additionally, Rule 6.36(f) provides that a routing broker cannot change the terms of an order or the routing instructions, nor does the routing broker have any discretion about where to route an order.
The proposed rule change adds Interpretation and Policy .01 to Rule 6.36 to clarify that the Rule does not prohibit a routing broker from designating a preferred market-maker (or equivalent market participant) at the other exchange to which an outbound sweep order is being routed. The proposed rule change has no impact on customer orders, which receive the same level of order protection and trade at the best market prices regardless of whether the routing broker designates a preferred market-maker recipient at the destination exchange. The Exchange still makes the sole determination as to which exchange an order will be routed, as well as when and how the order will be routed. Additionally, routing brokers are still prohibited from changing the terms of an order or the Exchange's routing instructions and still have no discretion about to which exchange an order will be routed.
The proposed rule change merely clarifies that a routing broker may indicate which market-maker at the away exchange may trade against the routed order in accordance with the order terms and the Exchange's routing instructions. In other words, if a routing broker preferences a customer order that is to be routed to another exchange, the order is not handled any differently by the routing broker than if the routing broker did not preference the order.
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the proposed rule change helps remove impediments to and perfect the mechanism for a free and open market and a national market system because it still provides customer order protection and facilitates trading at away exchanges so that customer orders trade at the best market prices. Additionally, customer orders still trade in compliance with the Exchange's routing instructions in accordance with the Options Order Protection and Locked/Crossed Market Plan. The proposed rule change also protects investors and the public interest because it clarifies in the rules an existing practice of the Exchange's routing brokers, which the Exchange believes other exchanges allow their routing brokers to do as well. Finally, codifying this practice in the Rules provides additional transparency to Trading Permit Holders regarding routing of their orders to away exchanges.
C2 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.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not:
A. significantly affect the protection of investors or the public interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)
At any time within 60 days of the filing of this 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 email to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.