North America

Stock Market Guide to the Boston Stock Exchange

The history of the Boston Stock Exchange (BSE) goes back to the 1830s, when local businessmen were looking for alternatives to invest the wealth they had accumulated through the insurance, banking and shipping industries. As the area developed, it was vital to raise more capital so that the region's businesses and other enterprises could be funded, and so it was that in 1834, the BSE was established for the purpose of listing and trading stocks of companies based in New England. The BSE has moved with the times over the years, earning a reputation for reliability and innovative thinking. With technology and business developing at an unprecedented rate, in October 2007, NASDAQ OMX acquired all the outstanding membership interests in the BSE, at the same time obtaining a second equities trading license and separate Regulation NMS protected quote, allowing the newly acquired entity to operate as an equities trading platform, and naming it NASDAQ OMX BX.

NASDAQ OMX BX, referred to simply as BX, was launched on January 16, 2009, and by the end of the year was trading an average of 250 million shares per day, with every indication that this number will continue to grow. BX trades securities listed on regional exchanges, including NASDAQ and the New York Stock Exchange. As a Reg NMS protected quote, the best bid and best offer on BX is protected under Rule 611 by the Securities and Exchange Commission.

With regard to order types and functionality, BX offers orders that add and remove liquidity from the BX book. Moreover, Intermarket Sweep Orders (ISOs) and pegging functionality are supported by BX, as are attributable and non-attributable orders. BX also offers a Post-Only order type which assists market participants to anticipate their trading costs by increasing their ability to control their provision of market liquidity. With the launch of BX, NASDAQ OMX introduced BX TotalView, a proprietary data feed providing order level data with market participant attribution, with many user-friendly features.

While it is not a prerequisite for firms to be either FINRA or NASDAQ members in order to become a BX member, an applicant must be a member of at least one other Self-Regulatory Organization (SRO) when applying for BX membership. Firms that were members of the Boston Stock Exchange at the time of the changeover have not automatically been made members of NASDAQ OMX BX, but were required to register as members of BX and sign the NASDAQ OMX BX Membership Agreement. A non-refundable fee of $2,000 applies to all applications.

In addition to acquiring membership interests in the BSE, NASDAQ OMX acquired Boston Options Regulation (BOXR) and the BSE Clearing Corporation (BSECC) – both wholly-owned subsidiaries of BSE. However, NASDAQ did not acquire an interest in BSE’s options trading facility, the Boston Options Exchange (BOX). There will continue to be a connection of sorts though, as BX operates as the regulatory services provider to BOX through BOXR.

Interestingly, Boston has the oldest, continuously used port in America using it to export metals and grains and importing automobiles and petroleum products. The port is capable of accommodating some of the largest ocean going freighters making it strategically important for trade and adding to the city’s commercial stability.