[Federal Register Volume 78, Number 185 (Tuesday, September 24, 2013)]
[Notices]
[Pages 58583-58585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-23126]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70441; File No. SR-BATS-2013-050]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Eliminate References to Obsolete Functionality
September 18, 2013.
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 September 12, 2013, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
has designated this proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with
the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange filed a proposal to eliminate reference to a Market
Maker order functionality in Rule 11.8(e) that has now been retired by
the Exchange. The Exchange is also proposing to eliminate reference to
BATS' TCP FAST PITCH, which is a data product that has also been
discontinued by the Exchange.
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
Proposed Change to Rule 11.8
Background
On August 29, 2012, the Commission approved the Exchange's proposed
rule change to adopt a new Market Maker Peg Order functionality that
was designed to replace the automated functionality (commonly referred
to as the Market Maker Quoter) provided to Market Makers in Rule
11.8(e).\5\ The Exchange originally adopted Rule 11.8(e) as part of an
effort to address issues uncovered by the aberrant trading that
occurred on May 6, 2010.\6\ The Market Maker Quoter functionality was
designed to help Market Makers meet the enhanced obligations imposed on
them post May 6, 2010 \7\ and avoid execution of Market Maker ``stub
quotes'' in instances of aberrant trading.\8\ Although the Market Maker
Quoter was successful in allowing Exchange Market Makers to meet their
enhanced obligations and in avoiding the deleterious effect on the
markets caused by ``stub quote'' executions, the functionality
presented difficulties to Market Makers in meeting their obligations
under Rule 15c3-5 under the Act (the ``Market Access Rule'') \9\ and
Regulation SHO.\10\
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\5\ Securities Exchange Act Release No. 67756 (Aug. 29, 2012),
77 FR 54633 (Sept. 5, 2012) (SR-BATS-2012-026).
\6\ Securities Exchange Act Release No. 63255 (Nov. 5, 2010), 75
FR 69484 (Nov. 12, 2010) (SR-BATS-2010-025).
\7\ Id.
\8\ For each issue in which a market maker was registered, the
Market Maker Quoter functionality optionally created a quotation for
display to comply with market making obligations. Compliant
displayed quotations were thereafter allowed to rest and were not
adjusted unless the relationship between the quotation and its
related national best bid or national best offer, as appropriate,
either: (a) Shrank to a specified number of percentage points away
from the Designated Percentage towards the then current national
best bid or national best offer, which number of percentage points
was determined and published in a circular distributed to Members
from time to time; or (b) expanded to within 0.5% of the applicable
percentage necessary to trigger an individual stock trading pause,
whereupon such bid or offer was cancelled and re-entered at the
Designated Percentage away from the then current national best bid
and national best offer, or if no national best bid or national best
offer, at the Designated Percentage away from the last reported sale
from the responsible single plan processor. Quotations independently
entered by market makers were allowed to move freely towards the
national best bid or national best offer, as appropriate, for
potential execution. In the event of an execution against a quote
generated pursuant to the Market Maker Quoter functionality, the
Market Maker's quote was refreshed on the executed side of the
market at the applicable Designated Percentage away from the then
national best bid (offer), or if no national best bid (offer), the
last reported sale. See Rule 11.8(e).
\9\ 17 CFR 240.15c3-5.
\10\ 17 CFR 242.200-242.204.
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The Exchange introduced the Market Maker Peg Order to simplify
Market Maker compliance with the requirements of the Market Access Rule
and Regulation SHO. The Market Maker Peg Order allows Market Makers to
control the origination of their orders, as required by the Market
Access Rule, while also allowing Market Makers to make marking and
locate determinations prior to order entry, as required by Regulation
SHO. As such, Market Makers are fully able to comply with the
requirements of the Market Access Rule and Regulation SHO, as they
would when placing any order,
[[Page 58584]]
while also meeting their Exchange market making obligations.
Retirement of the Market Maker Quoter
At the time of Market Maker Peg Order rule filing and in the
subsequent filing to amend the Market Maker Peg Order, the Exchange
noted its intention to continue offering the Market Maker Quoter
functionality for a three-month period after the implementation of the
Market Maker Peg Order to afford Market Makers the opportunity to
gradually transition away from the previous functionality.\11\
Accordingly, the Exchange did not believe it appropriate to eliminate
the language authorizing the Market Maker Quoter functionality
immediately upon the Market Maker Peg Order's effectiveness. However,
as of June 24, 2013, the Exchange decommissioned the Market Maker
Quoter functionality pursuant to its transition plan. Thus, the
Exchange is now proposing to delete Rule 11.8(e), which authorizes the
functionality, and hold the rule number in reserve.
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\11\ See Securities Exchange Act Release No. 67381 (July 10,
2012), 77 FR 41829, 41843 (July 16, 2012) (SR-BATS-2012-026);
Securities Exchange Act Release No. 69310 (Apr. 4, 2013), 78 FR
21447 (Apr. 10, 2013) (SR-BATS-2013-022).
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Proposed Change to Rule 11.22
The Exchange is also proposing to delete reference to TCP FAST
PITCH in Rule 11.22(b) because, as is made clear in the rule text of
Rule 11.22, this data product was discontinued on August 1, 2011.
Therefore, reference to the product within Exchange rules no longer
serves any legitimate purpose.
2. Statutory Basis
The Exchange believes that its proposal 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.\12\ Specifically, the
proposal is consistent with Section 6(b)(5) of the Act,\13\ which
requires exchange rules to 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 Exchange believes that the
proposed rule changes fulfill these requirements because they delete
references to a functionality and a data product that are now retired,
thereby eliminating any investor uncertainty related to the status of
this functionality and data product. Moreover, in relation to the
elimination of references to the Market Maker Quoter functionality and
as noted in the Exchange's Market Maker Peg Order filing, the
transition period during which both the Market Maker Quoter
functionality and the Market Maker Peg Order were operational was
designed to minimize the potential market impact caused by the
implementation of the new order type.\14\ The Exchange believes that
deleting reference to the Market Maker Quoter functionality is now
appropriate and in furtherance of the public interest given the passage
of time since the Market Maker Peg Order became effective and the
Market Maker Quoter was decommissioned.\15\
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ See Securities Exchange Act Release No. 67381 (July 10,
2012), 77 FR 41829 (July 16, 2012) (SR-BATS-2012-026).
\15\ See id.; see also Securities Exchange Act Release No. 69310
(Apr. 4, 2013), 78 FR 21447 (Apr. 10, 2013) (SR-BATS-2013-022).
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B. Self-Regulatory Organization's Statement on Burden on Competition
BATS believes the proposal is consistent with Section 6(b)(8) of
the Act \16\ in that it does not impose any burden on competition that
is not necessary or appropriate in furtherance of the purposes of the
Act. The proposed rule changes will remove references to a
functionality and a data product that have already been retired.
Moreover, with regard to deletion of references to the Market Maker
Quoter, the Exchange does not believe removing reference to the retired
functionality will have any impact on the current competitive
environment given the fact that the Market Maker Quoter's replacement,
the Market Maker Peg Order, has been effective and operational for many
months. The Exchange also notes that deletion of the reference to TCP
FAST PITCH will align BATS Exchange Rules with BATS Y-Exchange Rules as
the related provision in the BATS Y-Exchange Rule Book has already been
deleted.\17\ Therefore, the Exchange does not believe these changes
will have any effect on competition.
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\16\ 15 U.S.C. 78f(b)(8).
\17\ See Securities Exchange Act Release No. 69891 (June 28,
2013), 78 FR 40529 (July 5, 2013) (SR-BYX-2013-022).
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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 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 \18\ and Rule 19b-4(f)(6) thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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The Exchange has requested that the Commission waive the 30-day
operative delay so that the proposal may become operative immediately
upon filing. The Exchange states that waiver of the operative delay
will allow the Exchange to quickly remove language in its rules that is
not supported by any functionality on the Exchange. The Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest, as doing so will allow
the Exchange's rule text to reflect the its existing functionality,
thereby helping to avoid any potential investor confusion. For this
reason, the Commission designates the proposed rule change to be
operative upon filing.\20\
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\20\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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:
[[Page 58585]]
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-2013-050 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 20549-1090.
All submissions should refer to File Number SR-BATS-2013-050. 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 at 100 F Street NE.,
Washington, DC 20549-1090 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-2013-050, and should be submitted on or before October 15, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-23126 Filed 9-23-13; 8:45 am]
BILLING CODE 8011-01-P