[Federal Register Volume 77, Number 235 (Thursday, December 6, 2012)]
[Notices]
[Pages 72894-72895]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29456]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68330; File No. SR-BATS-2012-045]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Expand
the Availability of Risk Management Tools
November 30, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on November 19, 2012, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is filing with the Commission a proposal to expand the
availability of the Exchange's Risk Management Tool (the ``Tool'') to
all Exchange Members.\3\ The Tool is currently available only to
Members that provide sponsored access to other market participants, as
described below.
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\3\ A Member is any registered broker or dealer that has been
admitted to membership in the Exchange.
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The text of the proposed rule change is available at the Exchange's
Web site at http://www.batstrading.com, at the principal office of the
Exchange, and at 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 parts 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 defines a ``Sponsored Participant'' as a person who
has entered into a sponsorship arrangement with a Sponsoring Member.\4\
A ``Sponsoring Member'' is defined as a broker-dealer that is a Member
of the Exchange and has been designated by a Sponsored Participant to
execute, clear and settle transactions occurring on the Exchange.\5\
Under BATS Rule 11.3(b), a Sponsoring Member may allow its customers to
enter orders directly into the trading systems of the Exchange as
Sponsored Participants, without the Sponsoring Member acting as an
intermediary.
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\4\ See BATS Rule 1.5(w).
\5\ See BATS Rule 1.5(x).
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To facilitate the ability of a Sponsoring Member to monitor and
oversee the sponsored access activity of its Sponsored Participants,
the Exchange offers the Sponsored Access Risk Management Tool.\6\ This
optional service acts as a risk filter by causing the orders of
Sponsored Participants to be evaluated by the Tool prior to entering
the Exchange's matching engine for execution. When a Sponsored
Participant's order is evaluated by the Tool, it determines whether the
order complies with the order criteria established by the Sponsoring
Member for that Sponsored Participant. The order criteria pertain to
such matters as the size of the order (e.g., maximum notional value per
order and maximum shares per order), the order type (e.g., pre-market,
post-market, short sales and ISOs), restricted securities, easy to
borrow securities, and order cut-off (e.g., block new orders and cancel
all open orders).
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\6\ See Securities Exchange Act Release No. 60236 (July 2,
2009), 74 FR 34068 (July 14, 2009) (SR-BATS-2009-019) (notice of
filing and immediate effectiveness of proposed rule change to
establish a Sponsored Access Risk Management Tool).
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Given recent market events, the Exchange proposes to expand the
availability of the Tool to all Members. As amended, the Tool can be
configured by a Member to provide an Exchange offered risk management
solution. Just as the use of the Tool by a Sponsoring Member does not
automatically constitute compliance with Exchange Rules, the Exchange
does not believe that use of the Tool can replace Member-managed risk
management solutions. However, the Exchange does believe that the Tool
can be a valuable
[[Page 72895]]
addition to risk management solutions implemented by Members.
As is currently the case, orders subject to the Tool will be
validated by the Exchange prior to entering the Exchange's matching
engine. Based on parameters provided to the Tool, the order will be
immediately passed on to the matching engine or rejected back to the
entering Member.
The Exchange does not propose to require Members to use the Tool.
Members are free to use any appropriate risk-management tool or
service. The Exchange will not provide preferential treatment to
Members using the Tool.
The Exchange proposes to make the Tool available to its Members
upon request. The Exchange believes the Tool will offer the Exchange's
Members another option in the efficient risk management of its Members'
access to BATS Exchange.
2. Statutory Basis
The rule change proposed in this submission is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\7\ Specifically, the
proposed change is consistent with Section 6(b)(5) of the Act,\8\
because it would promote just and equitable principles of trade, remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system, and, in general, protect investors and
the public interest. The proposed rule change also is designed to
support the principles of Section 11A(a)(1) \9\ in that it seeks to
assure economically efficient execution of securities transactions,
make it practicable for brokers to execute investors' orders in the
best market, and provide an opportunity for investors' orders to be
executed without the participation of a dealer. Specifically, the
Exchange believes that the proposed rule change is consistent with all
of the aforementioned principles because it fosters competition by
providing another option in the efficient risk management of trading on
the Exchange. In particular, the Exchange notes that the proposal is
consistent with Section 11(A)(a)(1) in that it makes available to all
Exchange Members a Tool that previously was available only to Members
that provided sponsored access to Sponsored Participants. The Exchange
notes that a similar functionality has already been found to be
consistent with the Act by the Commission.\10\
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78k-1(a)(1).
\10\ Securities Exchange Act Release No. 59354 (February 3,
2009), 74 FR 6683 (February 10, 2009) (SR-NYSE-2008-101) (Approval
of NYSE Risk Management Gateway).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change imposes
any burden on competition.
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 written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
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) of the Act \11\ and Rule 19b-
4(f)(6)(iii) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the 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.
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 email to [email protected]. Please include
File Number SR-BATS-2012-045 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549.
All submissions should refer to File Number SR-BATS-2012-045. This file
number should be included on the subject line if email 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office 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-BATS-2012-045 and should be
submitted on or before December 27, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29456 Filed 12-5-12; 8:45 am]
BILLING CODE 8011-01-P