[Federal Register Volume 81, Number 25 (Monday, February 8, 2016)]
[Notices]
[Pages 6552-6554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-02336]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77036; File No. SR-EDGX-2016-01]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule
21.1, Definitions, Relating to the Operation of the Attribution Feature
of EDGX Options
February 2, 2016.
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 21, 2016, EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') 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 authorize the Exchange's equity
options platform (``EDGX Options'') to make a modification to Rule 21.1
(Definitions) in connection with the operation of the attribution
feature of EDGX Options, as described below. The Exchange has
designated this proposal as non-controversial and provided the
Commission with the notice required by Rule 19b-4(f)(6)(iii) under the
Act.\5\
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\5\ 17 CFR 240.19b-4(f)(6)(iii).
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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 is proposing to modify Rule 21.1, Definitions, which
sets forth the various definitions applicable to the operation of the
EDGX Options platform, including order types and order type modifiers
accepted by EDGX Options. As set forth in Rule 21.1, an order can be
attributed on EDGX Options, meaning that such order is displayed with
not only a price and size
[[Page 6553]]
but also a User's \6\ market participant identifier, or MPID (such
order an ``Attributable Order''). Alternatively, a User may also submit
an order that is designated for display on an anonymous basis, a ``Non-
Attributable Order.'' Rule 21.1(c) also states that all orders shall be
treated as Attributable Orders unless a User has entered instructions
to treat such orders as Non-Attributable Orders. In addition to
attribution, as discussed in Rule 21.1, Exchange Rule 21.15(c) states
that the Exchange will indicate on OPRA when there is Customer interest
on EDGX Options and will identify Customer orders and trades as such on
the Exchange's proprietary data feeds.
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\6\ The term User is defined in Rule 1.5(ee) as ``any Member or
Sponsored Participant who is authorized to obtain access to the
System pursuant to Rule 11.3.''
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While the Exchange does not propose to modify the identification of
Customer interest, orders or trades to either OPRA or on Exchange
proprietary data feeds, the Exchange proposes to eliminate the ability
for a Customer order to also be an Attributable Order. In other words,
though Customer interest, orders and trades would still be identified
as such through applicable data feeds, only non-Customer orders could
be identified on Exchange data feeds with attribution to a specified
MPID. The Exchange believes that limiting the use of Attributable
Orders to non-Customer orders is reasonable because such functionality
was primarily intended for Market Makers and other professional
participants that typically provide liquidity to indicate their
presence on EDGX Options with attribution to their MPID.
The Exchange notes that it does not propose the change set forth
above due to concerns with respect to Customer orders being entered as
Attributable Orders but rather due to current system limitations in
supporting both the attribution feature and the identifcation [sic] of
Customer orders as such. On balance, the Exchange believes that the
identification of orders as Customer orders is more consistent with the
operation of other options exchanges and important to the Exchange's
pro rata priority model than is the attribution of a particular
Customer order to a specific MPID.
The Exchange also notes that the equities platform of the Nasdaq
Stock Market LLC (``Nasdaq'') also limits the availability of
attribution to certain market participants, including market makers.\7\
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\7\ See Nasdaq Rule 4756(b), which permits Nasdaq Market Makers
and Nasdaq ECNs to attribute their quotations on Nasdaq. See also
Nasdaq Rule 4702(b)(2)(A), which limits the availability of Nasdaq
``Price to Display Orders'' to Nasdaq Market Makers and further
states that all Price to Display Orders are Attributable Orders.
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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.\8\ In particular, the
proposal is consistent with Section 6(b)(5) of the Act \9\ because 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, 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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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The proposed rule change will allow the Exchange to continue to
accept Attributable Orders from non-Customers while also designating
Customer orders as such on applicable data feeds. As set forth above,
the Exchange believes that non-Customers quoting and providing
liquidity are the most likely users of the Attributable Order feature
and that restricting Customer orders from the use of the feature is
appropriate given the separate identification of Customer orders on
applicable data feeds. As set forth above, at least one other exchange
has similarly limited attribution to certain professional market
participants.\10\
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\10\ See supra note 7.
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(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 to make a
modification to the Exchange's attribution offering to ensure that the
Exchange's System and rules are consistent and that the most important
features can be offered to Users in their varying capacities. As noted
above, at least one other exchange has similarly limited attribution to
certain professional market participants.\11\
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\11\ Id.
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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 not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written comments from members or other interested parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
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 and Rule 19b-4(f)(6)
thereunder.\14\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to
give the Commission written notice of the Exchange's 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 of the proposed rule change, or such shorter time as
designated by the Commission. The Exchange has satisfied this
requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange has asked the Commission to waive the
30-day operative delay so that the Exchange may continue to permit non-
Customers to attribute their orders and to allow the Exchange to label
orders as Customer Orders. The Commission believes that the proposal
will update the rules of the Exchange to accurately reflect how the
System operates with respect to Attributable Orders thereby avoiding
confusion by market participants. Based on the foregoing, the
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public
interest.\15\ The
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Commission hereby grants the Exchange's request and designates the
proposal operative upon filing.
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\15\ 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. 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 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 No. SR-EDGX-2016-01 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-EDGX-2016-01. 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-EDGX-2016-01 and should be
submitted on or before February 29, 2016.
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-02336 Filed 2-5-16; 8:45 am]
BILLING CODE 8011-01-P