[Federal Register Volume 78, Number 192 (Thursday, October 3, 2013)]
[Notices]
[Pages 61422-61424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24165]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70548; File No. SR-BATS-2013-052]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify
the Trading Halt Rule of BATS Options
September 27, 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 20, 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 Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend Rule 20.3, entitled
``Trading Halts,'' to authorize the Exchange to nullify a transaction
that occurs after a halt has been issued.
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 purpose of this filing is to amend Rule 20.3, which is
applicable to the Exchange's equity options platform (``BATS
Options''), to authorize the Exchange to nullify transactions that
occur during a trading halt. Specifically, the Exchange proposes to
adopt Interpretation and Policy .01, which will state that the Exchange
may nullify any transaction that occurs: (a) During a trading halt in
the affected option on the Exchange; or (b) with respect to equity
options (including options overlying exchange traded funds (``ETFs'')),
during a trading halt on the primary listing market for the underlying
security. The Exchange believes the proposed rule change will allow the
Exchange to avoid any unnecessary harm from allowing erroneous trades
to stand if such trades occur after a trading halt has been issued, as
explained below.
With respect to a trading halt in the affected option on the
Exchange, if any trades occur notwithstanding such halt then the
Exchange believes it appropriate to nullify such transactions. While
the Exchange may halt options trading for various reasons, such a
scenario almost certainly is due to extraordinary circumstances and is
potentially the result of market-wide coordination to halt options
trading or trading generally. Accordingly, the Exchange does not
believe it is appropriate to allow trades to stand if such trades
should not have occurred in the first place. Similarly, the Exchange
believes that trades occurring during a trading halt on the primary
listing market for a security that underlies an equity option should be
nullified. Executions in options overlying a halted security do not
have proper reference prices and could diverge significantly from the
price at which such options will trade when the underlying security is
re-opened. Thus, nullification of such trades will protect investors
from potential harm. Further, the halt in the underlying security is
often issued to prevent harm to investors and the Exchange believes
that this same protection should be afforded to investors in the
overlying option. The Exchange notes that primary listing markets for
equity securities have various authority to halt trading in their
listed securities, including for regulatory reasons or based upon
certain notifications provided by an issuer. The Exchange also notes
that the proposed
[[Page 61423]]
rule change will align the Exchange's rules regarding nullification of
trades during a trading halt with the rules of certain other options
exchanges.\5\
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\5\ See MIAX Rule 521(c)(4); see also NASDAQ OMX PHLX Rule
1092(c)(iv); NYSE Arca Options Rule 6.65, Commentary .04; NYSE MKT
Rule 953NY, Commentary .04.
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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.\6\ In particular, the
proposal is consistent with Section 6(b)(5) of the Act,\7\ 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. The Exchange believes the proposed rule
change fulfills these requirements because it will allow the Exchange
to avoid harm to investors resulting from trades that execute during a
trading halt. Specifically, the proposal will protect market
participants from transactions occurring either during extraordinary
circumstances with respect to options trading or at a time when there
is no adequate source of information regarding the value of the
underlying security. Nullifying transactions as proposed in connection
with the proposed rule will help to protect investors from harm caused
by trading losses during times of uncertainty or during systemic market
events. Furthermore, the proposed change is based on the approved rules
of certain other options exchanges.\8\
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ See supra note 5.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposal is consistent with Section
6(b)(8) of the Act \9\ in that it does not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. As previously noted, the proposed rule change will
align the Exchange's rules regarding the nullification of trades that
occur during a trading halt with the rules of certain other
exchanges.\10\ Therefore, the Exchange does not believe the proposed
change will impose any burden on competition.
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\9\ 15 U.S.C. 78f(b)(8).
\10\ See supra note 5.
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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, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6)
thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of 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.
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Exchange stated that waiver of this requirement will allow
the Exchange to apply the proposed change to the Exchange's trading
halt rule immediately, which will in turn protect market participants
from transactions occurring either during extraordinary circumstances
with respect to options trading or at a time when there is no adequate
source of information regarding the value of the underlying security.
The Exchange also stated that nullifying transactions as proposed in
connection with the proposed rule will help to protect investors from
harm caused by trading losses during times of uncertainty or during
systemic market events. For these reasons, the Commission believes that
waiving the 30-day operative delay is consistent with the protection of
investors and the public interest. Therefore, the Commission designates
the proposed rule change to be operative upon filing.\13\
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\13\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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 proposal 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-2013-052 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-2013-052. 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 the 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-2013-052 and should be
submitted on or before October 24, 2013.
[[Page 61424]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24165 Filed 10-2-13; 8:45 am]
BILLING CODE 8011-01-P