John Colin Jones, Esq.
30 Washington Street - Suite 918
Boston, MA 02135
5639 North Meade Ave.
Chicago, IL 60646
phone: 312-399-5963 fax: 734-939-6330
September 11, 2003
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Via E-Mail: email@example.com
RE: File No. SR-BSE-2002-15
Dear Mr. Katz:
I am an attorney who has practiced securities law continuously for the past 18 years.
I began my career as a securities regulator for the Massachusetts Securities Division, the securities regulatory arm of Massachusetts state government. While there, I was, at various points in time, in charge of broker-dealer registration and compliance enforcement as well as being assigned to general enforcement matters and to review of corporate finance filings.
I began my private practice 6 years ago, and I devote my time exclusively to securities law matters. I represent persons and companies in all phases of securities work and compliance. I consider myself extremely well-versed on state and federal securities laws.
I am familiar with Order Flow Providers (OFPs), professional and institutional options traders and Liquidity Provider Organizations (LPOs) generally.
I am familiar with this proposed regulation and its implications.
I strongly support the introduction of another all-electronic options exchange and I urge the SEC to approve the above referenced rule filing by the Boston Option Exchange (BOX) for a number of reasons.
I would note that I have absolutely no financial or economic interest in the BOX program, the Boston Stock Exchange, any of its members or the outcome of the present regulatory proceeding. I submit this letter simply as a securities attorney.
Greater Competition. I believe that the proposed BOX membership structure is cost effective and will encourage greater numbers of LPOs. I believe that more LPOs mean deeper markets and greater competition (and thus tighter spreads) for participants. Also, with its strict time priority (as opposed to the other options exchanges' auto-ex systems) market makers have a real incentive to proactively improve markets, instead of waiting for their turn (on the auto-ex system) to trade.
Price Improvement. The Price Improvement Process (PIP) at the BOX will enable its participants to receive executions at prices that are guaranteed to be better than the National Best Bid or Offer (NBBO) available at another exchange at that moment. Not only will OFPs be able to take part in the PIP, but customers as well, via Customer PIP Orders (CPOs).
For the first time, customers will be able to participate directly with market makers and LPOs for other customers' business. This will encourage active participation by all market participants and result in better prices over the then-current NBBO.
Faster Execution. The all-electronic BOX will result in better and faster executions than are possible at the traditional open-outcry exchanges. No longer will there be a need to hand-scribe orders onto paper tickets and run them through the crowd to be called out, traded, and then the trade hand-scribed onto the paper ticket which is then hand-carried back to the executing broker's booth on the floor to be keypunched into its system.
At the BOX, orders are electronically received, electronically price improved under the 3-second PIP and the resulting fill information is immediately returned electronically. This results in faster executions and permits market participants to more effectively manage their positions while also providing the added benefit of a single point of data entry that reduces the potential for errors.
Lower Costs. The all-electronic nature of the BOX facility, which includes straight-through processing of transactions as well as the minimal cost of entry to BOX participants will provide for lower execution costs and will, I believe create the opportunity for participants to pass savings on to their clients.
In conclusion, based upon the factors mentioned above, I strongly support the introduction of the BOX facility.
I eagerly anticipate the debut of this alternative to the traditional floor-based exchange and I feel that it will greatly improve the options marketplace.
John Colin Jones, Esq.