[Federal Register Volume 80, Number 22 (Tuesday, February 3, 2015)]
[Notices]
[Pages 5858-5861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02014]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74164; File No. SR-BYX-2015-04]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Chapter IX of Its Rulebook To Incorporate Certain Rules of NASDAQ and
FINRA Relating to Arbitration and Mediation
January 28, 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 14, 2015, BATS Y-Exchange, Inc. (the ``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been substantially prepared by the Exchange.
[[Page 5859]]
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 Chapter IX of its rulebook
to incorporate certain rules of the NASDAQ Stock Market LLC
(``NASDAQ'') and the Financial Industry Regulatory Authority, Inc.
(``FINRA'') relating to arbitration and mediation. 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
On July 30, 2007, the National Association of Securities Dealers,
Inc. (``NASD''), the Exchange, and NYSE Regulation, Inc. consolidated
their member firm regulation operations into a combined organization,
FINRA, and entered into a plan to allocate to FINRA certain regulatory
responsibilities for common rules and common members (``17d-2
Agreement'').\5\ The 17d-2 Agreement was entered into in accordance
with the requirements of Rule 17d-2 promulgated pursuant to the Act,\6\
which permits self-regulatory organizations (``SROs'') to allocate
certain regulatory responsibilities with respect to common members and
common rules. On September 5, 2012, the Exchange and FINRA entered into
a Regulatory Services Agreement (``RSA''), whereby FINRA was retained
to perform certain regulatory services on behalf of the Exchange
pertaining to dispute resolution. On February 1, 2014, the Exchange and
FINRA terminated their 2012 RSA and entered into a new RSA that covers
the services contained in the 2012 RSA plus additional regulatory
services. Today, FINRA performs all arbitration, mediation, and other
dispute resolution services, as may be needed from time to time, on
behalf of the Exchange.
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\5\ See Securities Exchange Act Release No. 56148 (Jul. 26,
2007), 72 FR 42146 (Aug. 1, 2007) (File No. 4-544) (Notice of Filing
and Order Approving and Declaring Effective a Plan for the
Allocation of Regulatory Responsibilities).
\6\ 17 CFR 240.17d-2.
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To facilitate FINRA's performance of these functions under the 2014
RSA and to further harmonize the rules of FINRA and the Exchange
generally, the Exchange is proposing to conform the text of its rules
governing arbitration and mediation (Chapter IX) to the FINRA Code of
Arbitration Procedure for Customer Disputes (12000 Series), FINRA Code
of Arbitration Procedure for Industry Disputes (13000 Series), and the
FINRA Code of Mediation (14000 Series).
The Exchange proposes to amend Chapter IX (Arbitration) of its
rulebook to incorporate certain rules of NASDAQ and FINRA relating to
arbitration and mediation, and to make certain non-substantive changes.
The Exchange proposes to make the following changes to its current
rules in Chapter IX of its rulebook.
Proposed Amendments to Current Rules
The Exchange proposes to amend current Rule 9.1 (Code of
Arbitration) to make the rule substantially similar to NASDAQ Rule
10100. The Exchange proposes to replace the reference to NASD Code of
Arbitration with FINRA Code of Arbitration,\7\ clarify the meaning of
``Exchange arbitrations,'' \8\ and add a sentence stating that Members
must comply with FINRA arbitration rules as if they were rules of the
Exchange.
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\7\ See FINRA Rule 12000 Series (Code of Arbitration Procedure
for Customer Disputes) and FINRA Rule 13000 Series (Code of
Arbitration Procedure for Industry Disputes).
\8\ They would be defined as ``every claim, dispute or
controversy arising out of or in connection with matters eligible
for submission under Rule 9.2.''
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The Exchange proposes to replace current Rule 9.2 (Jurisdiction)
with amended Rule 9.2 (Matters Eligible for Submission), which is
substantially similar to NASDAQ Rule 10101.\9\ Amended Rule 9.2 would
state that the Exchange adopts the FINRA Code of Arbitration for any
dispute, claim, or controversy arising out of or in connection with the
business of any Member, or arising out of the employment or termination
of employment of associated person(s) with any Member: Between or among
Members; between or among Members and associated persons; and between
or among Members or associated persons and public customers, or others,
except for any type of dispute, claim, or controversy that is not
permitted to be arbitrated under the FINRA Code of Procedure.
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\9\ See also FINRA Rule 12000 Series, FINRA Rule 13000 Series.
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The Exchange proposes to amend current Rule 9.3 (Predispute
Arbitration Agreements) to incorporate FINRA Rule 2268 by reference,
instead of restating the predispute arbitration agreement rules in
full.
The Exchange proposes to amend current Rule 9.5 (Payment of
Awards), to re-name its tile as ``Failure to Act under Provisions of
FINRA Code of Arbitration,'' to expand the rule to include additional
conduct deemed inconsistent with just and equitable principles of trade
and a violation of Rule 3.1 (Business Conduct of Members), using the
language of NASDAQ IM-10100, and FINRA IM-12000 and IM-13000. These
prohibited acts include: Failure to submit a dispute for arbitration
under the FINRA Code of Arbitration as required by the FINRA Code of
Arbitration; failure to comply with any injunctive order issued
pursuant to the FINRA Code of Arbitration; failure to appear or to
produce any document in his or her or its possession or control as
directed pursuant to provisions of the FINRA Code of Arbitration;
failure to honor an award, or comply with a written and executed
settlement agreement, obtained in connection with an arbitration
submitted for disposition under the FINRA Code of Arbitration where
timely motion has not been made to vacate or modify such award pursuant
to applicable law; or, failure to comply with a written and executed
agreement obtained in connection with a mediation submitted for
disposition pursuant to the FINRA Code of Mediation.\10\ The Exchange
proposed to add Rule 9.5(b) to provide that action by Members requiring
associated persons to waive the arbitration of disputes contrary to the
provisions of the FINRA
[[Page 5860]]
Code of Arbitration is a violation of Exchange Rule 3.1.
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\10\ See FINRA Rule 14000 Series (Code of Mediation Procedure).
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The Exchange proposes to amend current Rule 9.6 to extend the
application of the rule (currently applicable to arbitration) to
mediation.
The Exchange proposes to add proposed Rule 9.7 (Mediation) to state
that FINRA's mediation services, as governed by the 14000 Series of
FINRA's Manual (the Code of Mediation Procedure), are also available to
Members who voluntarily agree to submit matters for mediation. The
Exchange also proposes to incorporate by reference the FINRA Code of
Mediation into its rules so that Members have the same obligations with
which to comply as if such rules and interpretations were part of the
Exchange's rules.
The Exchange proposes to add Rule 9.8 (Regulatory Services
Agreement) to state, among other things, that FINRA staff will perform
arbitrations and mediations on behalf of the Exchange pursuant to an
RSA with FINRA in accordance with the FINRA Codes of Arbitration and
Mediation.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\12\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and a national market system
and, in general, to protect investors and the public interest.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes that the proposed rule change
will provide greater harmonization between Exchange and FINRA rules of
similar purpose, resulting in less burdensome and more efficient
regulatory compliance for members of both the Exchange and FINRA
(``dual members''). As previously noted, in many instances the proposed
rule text is substantially similar to FINRA's and NASDAQ's respective
rule texts, which have already been approved by the Commission. As
such, the Exchange believes that the proposed rule change will foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and will remove impediments to and perfect
the mechanism of a free and open market and a national market system.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not designed to address any competitive issues but rather is designed
to provide greater harmonization between Exchange and FINRA rules of
similar purpose for arbitration and mediation matters, resulting in
less burdensome and more efficient regulatory compliance for dual
members and facilitating FINRA's performance of its regulatory
functions under the 2014 RSA.
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 proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Commission believes that 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 prior to 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, if consistent
with the protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a SRO 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. See 17 CFR 240.19b-4(f)(6)(iii).
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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: (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-BYX-2015-04 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-BYX-2015-04. 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-BYX-2015-04 and should be
submitted on or before February 24, 2015.
[[Page 5861]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-02014 Filed 2-2-15; 8:45 am]
BILLING CODE 8011-01-P