[Federal Register Volume 80, Number 21 (Monday, February 2, 2015)]
[Notices]
[Pages 5593-5595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-01870]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74152; File No. SR-BATS-2015-07]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rules 2.5(c)(4) and 11.5 To Harmonize With EDGA and EDGX Rules, Its
Membership Requirements Applicable to Clearing Agencies That Clear
Transactions for Members
January 27, 2015.
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 January 22, 2015, 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 Rules 2.5(c)(4) and 11.15 to
harmonize its membership requirements applicable to clearing agencies
that clear transactions for Members \5\ of the Exchange with those set
forth under EDGX Exchange, Inc. (``EDGX'') and EDGA Exchange, Inc.
(``EDGA'') rules.\6\
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\5\ The term ``Member'' is defined as ``any registered broker or
dealer that has been admitted to membership in the Exchange. A
Member will have the status of a ``member'' of the Exchange as that
term is defined in Section 3(a)(3) of the Act. Membership may be
granted to a sole proprietor, partnership, corporation, limited
liability company or other organization which is a registered broker
or dealer pursuant to Section 15 of the Act, and which has been
approved by the Exchange.'' See Exchange Rule 1.5(n).
\6\ See EDGA Rules 2.5(c)(4) and 11.13; EDGX Rules 2.5(c)(4) and
11.13.
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The text of the proposed rule change is available at the Exchange's
Web site at 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 proposes to amend Rules 2.5(c)(4) and 11.15 to
harmonize its membership requirements applicable to clearing agencies
that clear transactions for Members with those set forth under EDGX and
EDGA rules.\7\
[[Page 5594]]
Earlier this year, the Exchange and its affiliate, BATS Y-Exchange,
Inc. (``BYX''), received approval to effect a merger (the ``Merger'')
of the Exchange's parent company, BATS Global Markets, Inc., with
Direct Edge Holdings LLC, the indirect parent of EDGX and EDGA
(together with BZX, BYX and EDGX, the ``BGM Affiliated Exchanges'').\8\
In the context of the Merger, the BGM Affiliated Exchanges are working
to align certain rules, retaining only intended differences between the
BGM Affiliated Exchanges. As part of this effort, the proposal set
forth below harmonizes Exchange Rules 2.5 and 11.15 with EDGA and EDGX
Rules 2.5 and 11.13 by no longer requiring that a Qualified Clearing
Agency \9\ be a Member in order to clear other Member's transactions
executed on the Exchange.\10\
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\7\ See supra note 6.
\8\ See Securities Exchange Act Release No. 71375 (January 23,
2014), 79 FR 4771 (January 29, 2014) (SR-BATS-2013-059; SR-BYX-2013-
039).
\9\ The term ``Qualified Clearing Agency'' is defined as ``a
clearing agency registered with the Commission pursuant to Section
17A of the Act that is deemed qualified by the Exchange.'' See
Exchange Rule 1.5(u).
\10\ The Exchange understands that BYX is to file a proposed
rule change with the Commission to adopt similar changes.
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In sum, Rule 2.5(a)(4) currently provides that a Member also be a
member of a Qualified Clearing Agency or clear its transactions
executed on the Exchange through another Member that is a member of a
Qualified Clearing Agency. Rule 11.15(a) currently requires a Qualified
Clearing Agency be a Member of the Exchange in order to clear
transactions on behalf of another Member. EDGA and EDGX Rules 2.5(c)(4)
and 11.13(a) do not require that: (i) A Qualified Clearing Agency be a
member in order to clear other member's transactions executed on EDGA
or EDGX; (ii) that a member be a member of a Qualified Clearing Agency;
or (iii) that a member clear its transaction through a member of a
Qualified Clearing Agency. Rather, EDGA and EDGX Rules simply require
that a member clear transactions through a registered clearing agency
using a continuous net settlement system. EDGA and EDGX Rules 11.13(a)
further state that this requirement may be satisfied by direct
participation, use of direct clearing services, or by entering into a
correspondent clearing arrangement with another member that clears
trades through such agency.
As amended, Rules 2.5(a)(4) and 11.15(a) would be substantially
similar to EDGA and EDGX rules 2.5(c)(4) and 11.3(a). Like EDGA and
EDGX Rules 2.5(c)(4), Exchange Rules 2.5(a)(4) would require that a
Member clear transactions through a Qualified Clearing Agency using a
continuous net settlement system. Like EDGA and EDGX Rules 11.13(a),
amended Exchange Rule 11.15(a) would state that this requirement may be
satisfied by direct participation, use of direct clearing services, or
by entering into a correspondent clearing arrangement with another
member that clears trades through such agency. In addition, Exchange
Rule 11.15(a) would no longer require a Qualified Clearing Agency be a
Member in order to clear another Members' transactions executed on the
Exchange.
The Exchange also proposes to add new subparagraph (b) to Rule
11.15 stating that notwithstanding subparagraph (a) of Rule 11.15,
transactions may be settled ``ex-clearing,'' provided that both parties
to the transaction agree. Proposed subparagraph (b) to Rule 11.15 would
be identical to EDGA and EDGX Rules 11.13(b). The Exchange also
proposes to renumber the remaining subparagraphs of Rule 11.13
accordingly.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \11\ and furthers the objectives of
Section 6(b)(5) of the Act,\12\ in that it is designed 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 change is not designed to
permit unfair discrimination between customers, issuers, brokers or
dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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The proposed rule change is identical to the existing rules of EDGA
and EDGX.\13\ Requiring Qualified Clearing Agencies to be Members of
the Exchange has unreasonably limited the ability of Members to clear
trades through such agencies that are not Members when no such
restriction is contained in the rules of EDGA or EDGX. The proposed
rule change is, therefore, intended to align the Exchange's rules
regarding Members clearing transaction through a Qualified Clearing
Agency with that of EDGA and EDGX as well as BYX \14\ in order to
provide consistent rules across the BGM Affiliated Exchanges.
Consistent rules, in turn, will simplify the membership requirements
for clearing agencies that are also clear transactions for members of
the other BGM Affiliated Exchanges. The proposed rule change would
provide greater harmonization between the rules of the BGM Affiliated
Exchanges of similar purpose, resulting in greater uniformity and less
burdensome and more efficient regulatory compliance. As such, the
proposed rule change would foster cooperation and coordination with
persons engaged in facilitating transactions in securities and would
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\13\ See supra note 6.
\14\ See supra note 10.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change would not impose any burden on
competition. The Exchange believes that the proposed rule changes will
not burden intramarket competition because all Members would be subject
to the same requirements with regard to clearing transactions through
non-Member registered clearing agencies. The proposed rule change is
not designed to address any competitive issues but rather is designed
to provide greater harmonization among the Exchange, BYX, EDGA and EDGX
rules of similar purpose, resulting in less burdensome and more
efficient regulatory compliance for common members of the BGM
Affiliated Exchanges.
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 \15\ and Rule 19b-
4(f)(6)(iii) thereunder.\16\ The Exchange provided the Commission with
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at least
five business days prior to the date of filing the proposed
[[Page 5595]]
rule change as required by Rule 19b-4(f)(6).\17\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ 17 CFR 240.19b-(f)(6).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily temporarily suspend such rule
change if it appears to the Commission that such action is: (1)
Necessary or appropriate in the public interest; (2) for the protection
of investors; or (3) otherwise in furtherance of the purposes of the
Act. If the Commission takes such action, the Commission shall
institute proceedings to determine whether the proposed rule should be
approved or disapproved.
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 No. SR-BATS-2015-07 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File No. SR-BATS-2015-07. 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 will also 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 No. SR-BATS-2015-07 and
should be submitted on or before February 23, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-01870 Filed 1-30-15; 8:45 am]
BILLING CODE 8011-01-P