Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing of a Proposed Rule Change to Rules 11.9 of BATS Y-Exchange, Inc., 56411-56415 [2014-22327]
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Federal Register / Vol. 79, No. 182 / Friday, September 19, 2014 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
investment company may not issue or
sell any senior security if, immediately
thereafter, the company has outstanding
more than one class of senior security.
Applicants state that the creation of
multiple classes of shares of the Fund
may be prohibited by Section 18(c), as
a class may have priority over another
class as to payment of dividends
because shareholders of different classes
would pay different fees and expenses.
2. Section 18(i) of the Act provides
that each share of stock issued by a
registered management investment
company will be a voting stock and
have equal voting rights with every
other outstanding voting stock.
Applicants state that multiple classes of
Fund Shares may violate Section 18(i) of
the Act because each class would be
entitled to exclusive voting rights with
respect to matters solely related to that
class.
3. Section 6(c) of the Act provides that
the Commission may exempt any
person, security or transaction or any
class or classes of persons, securities or
transactions from any provision of the
Act, or from any rule thereunder, if and
to the extent such exemption is
necessary or appropriate in the public
interest and consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act. Applicants
request an exemption under Section 6(c)
from Sections 18(c) and 18(i) to permit
the Fund to issue multiple classes of
shares.
4. Applicants submit that the
proposed allocation of expenses and
voting rights among multiple classes is
equitable and will not discriminate
against any group or class of
shareholders. Applicants submit that
the proposed arrangements would
permit a Fund to facilitate the
distribution of its shares and provide
investors with a broader choice of
shareholder services. Applicants assert
that the proposed closed-end
investment company multiple class
structure does not raise the concerns
underlying Section 18 of the Act to any
greater degree than open-end
investment companies’ multiple class
structures that are permitted by Rule
18f–3 under the Act. Applicants state
that each Fund will comply with the
provisions of Rule 18f–3 as if it were an
open-end investment company.
CDSCs
1. Applicants believe that the
requested relief meets the standards of
Section 6(c) of the Act. Rule 6c–10
under the Act permits open-end
investment companies to impose
CDSCs, subject to certain conditions.
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Applicants state that any CDSC imposed
by the Fund will comply with Rule 6c–
10 under the Act as if the rule were
applicable to closed-end investment
companies. The Fund also will disclose
CDSCs in accordance with the
requirements of Form N–1A concerning
CDSCs as if the Fund were an open-end
investment company. Applicants further
state that the Fund will apply the CDSC
(and any waivers or scheduled
variations of the CDSC) uniformly to all
shareholders in a given class and
consistently with the requirements of
Rule 22d–1 under the Act.
Asset-Based Service and/or Distribution
Fees
1. Section 17(d) of the Act and Rule
17d–1 under the Act prohibit an
affiliated person of a registered
investment company or an affiliated
person of such person, acting as
principal, from participating in or
effecting any transaction in connection
with any joint enterprise or joint
arrangement in which the investment
company participates unless the
Commission issues an order permitting
the transaction. In reviewing
applications submitted under Section
17(d) and Rule 17d–1, the Commission
considers whether the participation of
the investment company in a joint
enterprise or joint arrangement is
consistent with the provisions, policies
and purposes of the Act, and the extent
to which the participation is on a basis
different from or less advantageous than
that of other participants.
2. Rule 17d–3 under the Act provides
an exemption from Section 17(d) and
Rule 17d–1 to permit open-end
investment companies to enter into
distribution arrangements pursuant to
Rule 12b–1 under the Act. Applicants
request an order under Section 17(d)
and Rule 17d–1 under the Act to the
extent necessary to permit the Fund to
impose asset-based service and/or
distribution fees. Applicants have
agreed to comply with Rules 12b–1 and
17d–3 as if those rules applied to
closed-end investment companies.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
Each Fund relying on the order will
comply with the provisions of Rules 6c–
10, 12b–1, 17d–3, 18f–3 and 22d–1
under the Act, as amended from time to
time, as if those rules applied to closedend management investment
companies, and will comply with the
NASD Sales Charge Rule, as amended
from time to time, as if that rule applied
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to all closed-end management
investment companies.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–22339 Filed 9–18–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73094; File No. SR–BYX–
2014–018]
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing of a
Proposed Rule Change to Rules 11.9 of
BATS Y-Exchange, Inc.
September 15, 2014.
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 3, 2014, 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, II and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange is proposing to add
Rule 11.23, entitled ‘‘Opening Process,’’
as well as to make several
corresponding changes in order to
modify the manner in which the
Exchange opens trading in individual
securities at the beginning of the day
and after trading halts.
The text of the proposed rule addition
is available at the Exchange’s Web site
at https://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
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 79, No. 182 / Friday, September 19, 2014 / Notices
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.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend Exchange Rules
11.9(b) and 11.18(f) and to add new
Rule 11.23 in order to allow for the
entry of orders with a time-in-force of
Regular Hours Only and to amend the
process by which the Exchange opens
trading at the beginning of the day and
after trading halts. Specifically, the
Exchange is proposing to accept Regular
Hours Only orders for queuing
throughout the Pre-Opening Session,3 as
well as to establish a process for
handling queued orders in order to open
trading on the Exchange for Regular
Trading Hours 4 and following a halt.
The Exchange is proposing this rule
change in order to create a more orderly
opening of trading and to facilitate the
price formation process at the open of
trading by allowing Users to enter
orders during the Pre-Market Session
and during a halt rather than requiring
them to submit a flood of orders to the
Exchange immediately following the
beginning of Regular Trading Hours or
the resumption of trading following a
halt.
Currently, the Exchange begins
accepting orders for trading at the
beginning of the Pre-Opening Session
and any such orders received by the
Exchange are immediately eligible for
execution. Any such orders that are on
the BATS Book 5 at the beginning of
Regular Trading Hours remain on the
BATS Book, subject to the User’s
instruction, and trading continues into
Regular Trading Hours without any
transition period. Upon a halt, the
Exchange currently cancels all orders on
the BATS Book and does not accept any
orders until the halt is lifted. The
Exchange does not currently have a
Regular Hours Only time-in-force.
The Exchange is proposing to
implement a process by which the
Exchange will accept and queue orders
that have a time-in-force of Regular
Hours Only (or ‘‘RHO’’) during the PreOpening Session for execution at the
3 Pre-Opening Session is defined in BYX Rule
1.5(r).
4 Regular Trading Hours is defined in BYX Rule
1.5(w).
5 BATS Book is defined in BYX Rule 1.5(e).
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midpoint of the NBBO 6 shortly after the
beginning of Regular Trading Hours (the
‘‘Opening Process’’). The Exchange is
also proposing to implement a similar
opening process after a halt, suspension,
or pause (a ‘‘Halt’’ and the ‘‘Halt
Opening Process’’) in which a User’s
orders will remain on the BATS Book,
unless the User has designated that its
orders be cancelled upon a halt, as
further described below.
As mentioned above, the Exchange is
proposing to add Rule 11.9(b)(7) which
would define the new RHO time-inforce as a limit or market order that is
designated for execution only during
Regular Trading Hours, which includes
the Opening Process, as defined in Rule
11.23. The Exchange is also proposing
to make a non-substantive change to
Rule 11.9(b) in order to delete the word
‘‘limit’’ because an RHO order can be
both a limit order or a market order.
Each other time-in-force clearly states
that it applies only to limit orders.
The Exchange proposes that prior to
the beginning of Regular Trading Hours,
Users 7 that wish to participate in the
Opening Process may enter orders to
buy or sell with a time in force of
Regular Hours Only. Orders cancelled
before the completion of the Opening
Process will not participate in the
Opening Process. Any order that is not
designated as RHO will not be eligible
for participation in the Opening Process.
Proposed Rule 11.23(a)(2) provides that
all orders that are marked as RHO may
participate in the Opening Process
except BATS Post Only Orders,8 Partial
Post Only at Limit Orders,9 ISO 10 orders
not modified by Rule 11.23(a)(1), as
described below, and Minimum
Quantity Orders.11 Because RHO orders
received prior to the completion of the
Opening Process are not immediately
executable, but rather queued for later
participation in the Opening Process,
BATS Post Only Orders, Partial Post
Only at Limit Orders, and Minimum
Quantity Orders marked as RHO do not
make sense in the context of the
Opening Process and, thus, the
Exchange is proposing to exclude them
from the Opening Process. Similarly,
because an order designated as an ISO
implies that there is currently a
protected bid or offer and there are no
protected bids or offers prior to 9:30
a.m. Eastern Time, the Exchange
6 NBBO
is defined in BYX Rule 1.5(o).
is defined in BYX Rule 1.5(cc).
8 BATS Post Only Order is defined in BYX Rule
11.9(c)(6).
9 Partial Post Only at Limit Order is defined in
BYX Rule 11.9(c)(7).
10 ISO is defined in BYX Rule 11.9(d).
11 Minimum Quantity Order is defined in BYX
Rule 11.9(c)(5).
7 User
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proposes to reject any ISOs designated
RHO entered prior to the beginning of
Regular Trading Hours. While this
functionality is opposite of the way that
ISOs are handled on the options
platform operated by BATS Exchange,
Inc. (‘‘BATS Options’’) (ISOs are
converted to non-ISOs and entered for
queuing), the Exchange believes that
because there is continuous trading
during the Pre-Opening Session on the
Exchange while orders are also being
queued for participation in the Opening
Process, an ISO tag could be interpreted
in various ways and there is no obvious
way to eliminate this confusion and, as
such, the order should be rejected. On
BATS Options, on the other hand, there
is no continuous book and all orders
entered prior to 9:30 a.m. Eastern Time
are queued for participation in the
BATS Options opening process, so an
ISO tag simply does not make sense in
that context and can reasonably be
ignored and converted to a non-ISO for
queuing. Consistent with this logic and
as further detailed below, the Exchange
is also proposing that, prior to a reopening after a halt, any ISO that is not
IOC or FOK be converted into a non-ISO
for queuing and participation in the reopening process because there is no
continuous trading while a security is
halted.
Limit orders with a Reserve
Quantity 12 may participate to the full
extent of their displayed size and
Reserve Quantity. Discretionary
Orders 13 may participate only up to
their ranked price for buy orders or
down to their ranked price for sell
orders. The discretionary range of such
orders will not be eligible for
participation in the Opening Process.
All Pegged Orders and Mid-Point Peg
Orders, as defined in Rule 11.9(c)(8) and
(9), will be eligible for execution in the
Opening Process based on their pegged
prices.
The Exchange will then attempt to
perform the Opening Process, as
described in proposed Rule 11.23(b), in
which the Exchange matches buy and
sell orders that are executable at the
midpoint of the NBBO as described in
proposed Rule 11.23(c) below. All
orders eligible to trade at the midpoint
will be processed in time sequence,
beginning with the order with the oldest
time stamp. The Exchange believes that
handling orders in time priority makes
more sense than price-time priority for
the Opening Process because the price
of the order is not particularly important
12 Reserve Quantity is defined in BYX Rule
11.9(c)(1).
13 Discretionary Order is defined in BYX Rule
11.9(c)(10).
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Federal Register / Vol. 79, No. 182 / Friday, September 19, 2014 / Notices
to the Opening Process, so long as the
order is priced at or more aggressively
than the Opening Price and, as such,
there is no reason to reward a more
aggressive order with priority in the
Opening Process. Thus, the Exchange is
proposing that all orders that are priced
equal to or more aggressively than the
Opening Price be matched based only
on time priority and will be matched
until there is no remaining volume or
there is an imbalance of orders (the
‘‘Opening Match’’). All MTP modifiers,
as defined in Rule 11.9(f), will be
ignored as it relates to executions
occurring as part of the Opening Match
because the counterparty against which
an order executes is mostly random and
completely out of the control of the User
entering the order. It does not make
sense to cancel an order because the
order happens to execute against an
order entered using the same MPID, but
to allow both orders to execute at the
exact same price to the exact same effect
where the orders happen to execute
against different orders. An imbalance
of orders on the buy side or sell side
may result in orders that are not
executed in whole or in part. Such
orders may, in whole or in part, be
placed on the BATS Book, cancelled,
executed, or routed to other away
Trading Centers 14 in accordance with
Rule 11.13(a)(2). If no matches can be
made, the Opening Process will
conclude with all orders that
participated in the Opening Process
being placed in the BATS Book,
cancelled, executed, or routed to away
Trading Centers in accordance with
Rule 11.13(a)(2) related to order
execution and routing. Because an RHO
order is not executable until the
Opening Process (rather than upon
entry), to the extent that any order is not
executed during the Opening Process
and is placed on the BATS Book, such
order will receive a time stamp that
reflects the time that the order was
placed on the BATS Book during the
Opening Process and not the time that
the order was entered for queuing.
Under proposed Rule 11.23(c), the
Exchange will determine the price of the
Opening Process by using the midpoint
of the NBBO, as follows: (a) When the
listing exchange is either the NYSE or
NYSE MKT, the Opening Process will
be priced at the midpoint of the: (i) First
NBBO subsequent to the first reported
trade on the listing exchange after
9:30:00 a.m. Eastern Time; or (ii) then
prevailing NBBO when the first twosided quotation is published by the
listing exchange after 9:30:00 a.m.
Eastern Time if no first trade is reported
14 Trading
Center is defined in BYX Rule 2.11(a).
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by the listing exchange within one
second of publication of the first twosided quotation by the listing exchange;
or (b) for any other listing market, the
Opening Process will be priced at the
midpoint of the first NBBO
disseminated after 9:30:00 a.m. Eastern
Time. The Exchange is proposing to
differentiate the treatment between
NYSE and NYSE MKT listed securities
and securities listed on any other
exchange because NYSE and NYSE
MKT do not offer continuous trading
prior to 9:30:00 a.m. Eastern Time and
the market for trading in securities
listed on these exchanges may take a
moment to develop. Using the first
NBBO disseminated for NYSE and
NYSE MKT listed securities to establish
the Opening Price may result in
executions that are not necessarily
reflective of market conditions after the
first execution on the listing market or
one second after the listing market’s first
quote. Every other listing exchange
allows for continuous trading prior to
9:30:00 a.m. Eastern Time, which results
in a more fully developed market
immediately after 9:30:00 a.m. Eastern
Time and, thus, a more immediately
reliable Opening Price.
Proposed Rule 11.23(a)(1) provides
that during the period between 9:30 a.m.
Eastern Time and the occurrence of the
Opening Process, all non-RHO orders,
subject to order instructions, and ISOs
designated RHO may execute against
eligible Pre-Opening Session contra-side
interest resting in the BATS Book. The
Exchange will convert any unexecuted
portion of an ISO designated RHO
entered during this period into a nonISO and queue the order for
participation in the Opening Process.
If the conditions to establish the price
of the Opening Process set forth under
proposed Rule 11.23(c) do not occur by
9:45:00 a.m. Eastern Time, proposed
Rule 11.23(d) describes a contingent
opening process (the ‘‘Contingent Open
Process’’) in which instead of matching
orders at the midpoint of the NBBO,
orders will be handled in time
sequence, beginning with the order with
the oldest time stamp, and will be
placed on the BATS Book, routed,
cancelled, or executed in accordance
with the terms of the order. Because an
RHO order is not executable until the
Opening Process (rather than upon
entry), any order subject to the
Contingent Open Process that is placed
on the BATS Book will receive a time
stamp that reflects the time that the
order was placed on the BATS Book
during the Opening Process and not the
time that the order was entered for
queuing.
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56413
In the event of a Halt, the proposed
amendment to Rule 11.18(f) provides
that, except where a User has designated
that its orders be cancelled, all
outstanding orders in the System 15 will
remain on the BATS Book. Proposed
Rule 11.23(e) then provides that the
Exchange will accept orders for queuing
prior to the resumption of trading in
order to participate in the Halt Opening
Process. While a security is subject to a
Halt, the Exchange will accept orders for
queuing prior to the resumption of
trading in the security for participation
in the Halt Opening Process. The Halt
Opening Process will occur in the same
manner described in proposed Rules
11.23(a)(2) and (b) with the following
exceptions: (1) Non-RHO orders will be
eligible for participation in the reopening, but IOC,16 FOK, BATS Post
Only Orders, Partial Post Only at Limit
Orders, and Minimum Quantity Orders
will be cancelled or rejected, as
applicable, and any ISO that is not IOC
or FOK will be converted into a non-ISO
and be queued for participation in the
Halt Opening Process; and (2) the reopening will occur at the midpoint of
the: (i) First NBBO subsequent to the
first reported trade on the listing
exchange following the resumption of
trading after a Halt; or (ii) NBBO when
the first two-sided quotation is
published by the listing exchange
following the resumption of trading
after a Halt if no first trade is reported
by the listing exchange within one
second of publication of the first twosided quotation by the listing exchange.
Similar to the rationale for waiting for
the sooner of the first execution on the
primary or one second to use the
midpoint of the NBBO for the Opening
Process for NYSE and NYSE MKT, the
Exchange is proposing to wait until the
sooner of the first execution on the
primary or one second to use the
midpoint of the NBBO for the Halt
Opening Process because there is no
continuous trading occurring on any
market during a Halt and waiting will
provide time for the market to be more
fully established before determining the
price at which the Halt Opening Process
will occur. Where neither of the above
conditions required to establish the
price of the re-opening have occurred,
the security may be opened for trading
at the discretion of the Exchange. Where
the security is opened by the Exchange
subject to this discretion, orders will be
handled in the same manner as the
Contingent Open Process.
15 System
16 IOC
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is defined in BYX Rule 1.5(aa).
is defined in BYX Rule 11.9(b)(1).
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2. Statutory Basis
The rule change proposed in this
submission 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.17 Specifically, the proposed change
is consistent with Section 6(b)(5) of the
Act,18 because it is designed to promote
just and equitable principles of trade, 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. The Exchange believes
that allowing for the entry of RHO
orders during the Pre-Opening Session
and transitioning into Regular Trading
Hours pursuant to the Opening Process
will help to ensure that the Exchange
opens trading in a fair and orderly
manner. Specifically, the Exchange
believes that allowing Users to enter and
cancel orders during the Pre-Opening
Session to be queued for execution at
the midpoint of the NBBO and/or entry
on to the BATS Book shortly following
the beginning of Regular Trading Hours
will create a more orderly opening and
facilitate the price formation process at
the opening of trading because Users are
able to enter orders to participate in the
Opening Process during the Pre-Market
Session rather than having a flood of
orders submitted to the Exchange
immediately following the beginning of
Regular Trading Hours. Similarly, the
Exchange believes that implementing
substantially similar functionality in
non-BATS listed securities for accepting
orders during re-opening after a Halt
will also create a more orderly opening
and facilitate price formation as a
security is coming out of a Halt.
Additionally, using the midpoint of the
NBBO as the price for the Opening
Process (regardless of the time at which
such NBBO is selected as described
under proposed Rule 11.23(c)) will
further create a more orderly opening
and facilitation of the price formation
process by basing the price at which the
Opening Process will occur on the best
available pricing under current market
conditions.
The Exchange also believes that
excluding BATS Post Only Orders,
Partial Post Only at Limit Orders, ISOs,
and Minimum Quantity Orders from
participation in the Opening Process is
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
17 15
18 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest; and is not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers
because, as described above, such order
types combined with an RHO time-inforce do not make sense in the context
of queuing orders for the Opening
Process. Further, the Exchange believes
that allowing certain RHO orders and all
non-RHO orders to interact with interest
(and, in the case of non-RHO orders, to
be added to the BATS Book where there
is no contra-side interest) from the PreOpening Session after 9:30 a.m. Eastern
Time, but before the completion of the
Opening Process will also create a more
orderly opening and facilitate the price
formation process because Users will
have the option to enter orders that will
either participate in the Opening
Process or immediately interact with
liquidity from the Pre-Opening Session,
allowing trading to continue while the
Exchange is waiting for the conditions
necessary to complete the Opening
Process. The Exchange also believes that
allowing an ISO marked RHO to execute
against eligible Pre-Opening Session
interest after 9:30 a.m. Eastern and
before completion of the Opening
Process and then converting the
unexecuted portion of the order into a
non-ISO for queuing for participation in
the Opening Process is consistent with
the Act because it is consistent with the
requirements of Regulation NMS.19 In
particular, because after 9:30 a.m.
Eastern Time there may be a protected
bid or offer displayed by the Exchange
that the User entering the order is trying
to execute against, the Exchange is
proposing to allow an ISO designated as
an RHO to interact with liquidity
currently on the BATS Book prior to
queuing for participation in the Opening
Process.
The Exchange also believes that the
proposal is designed 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 because it would create
a contingent opening process under
which the orders queued for
participation in the Opening Process
would be entered on to the BATS Book
in the event that the conditions for
determining the price of the Opening
Process are not met prior to 9:45:00 a.m.
Eastern Time, which will further help to
ensure that the Exchange opens trading
in a fair and orderly manner by
providing a means for trading in a
19 17
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PO 00000
security to open where there is no twosided NBBO in the security for fifteen
minutes after the beginning of Regular
Trading Hours. The Exchange believes
that fifteen minutes is a reasonable
amount of time to wait for the
establishment of a two-sided NBBO
because it marks a point at which the
market in a security has had a sufficient
amount of time to develop while
simultaneously providing a reasonable
cut-off point at which the Exchange may
open the security for Regular Trading
Hours trading. The Exchange also
believes that handling all orders queued
for participation in the Opening Process
in time sequence after fifteen minutes
will help to ensure that trading opens in
as fair and orderly a manner as possible.
The implementation of the Opening
Process will also provide Users with
greater control and flexibility with
respect to entering orders, allowing
them to enter orders for participation
during Regular Trading Hours during
the Pre-Opening Session, rather than
only after Regular Trading Hours begin
at 9:30 a.m. Eastern Time. This
simplifies the order entry process for
Users that do not want to participate in
the Pre-Opening Session by allowing
them to enter their orders designated as
Regular Hours Only prior to Regular
Trading Hours, which removes
impediments to a free and open market
and benefits all Users of the Exchange.
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 not
necessary or appropriate in furtherance
of the purposes of the act. To the
contrary, the Exchange’s inability to
accept orders prior to 9:30 a.m. Eastern
Time for participation during Regular
Trading Hours limits competition in
that the listing exchange is able to begin
accepting orders in such securities,
while the Exchange cannot accept such
orders. Thus, approval of the proposed
rule change will promote competition
because it will allow the Exchange to
offer its Users the ability to enter orders
prior to the beginning of Regular
Trading Hours for queuing and entry
during Regular Trading Hours and thus
compete more directly with other
exchanges for order flow that a User
may not have directed to the Exchange
if they were not able to enter orders for
queuing prior to Regular Trading Hours.
CFR 242.600.
Frm 00080
Fmt 4703
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E:\FR\FM\19SEN1.SGM
19SEN1
Federal Register / Vol. 79, No. 182 / Friday, September 19, 2014 / Notices
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission will: (a) By order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be disapproved.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BYX–2014–018 on the subject line.
tkelley on DSK3SPTVN1PROD with NOTICES
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
Number SR–BYX–2014–018. 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 (https://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
17:15 Sep 18, 2014
Jkt 232001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–22327 Filed 9–18–14; 8:45 am]
BILLING CODE 8011–01–P
IV. Solicitation of Comments
VerDate Sep<11>2014
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–BYX–
2014–018, and should be submitted on
or before October 10, 2014.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73098; File No. SR–EDGA–
2014–16]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Designation
of a Longer Period for Commission
Action on a Proposed Rule Change To
Establish a New Market Data Product
Called the BATS One Feed
September 15, 2014.
On July 14, 2014, EDGA Exchange,
Inc. (‘‘Exchange’’ or ‘‘EDGA’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to establish a new market data
product called the BATS One Feed. The
proposed rule change was published for
comment in the Federal Register on
August 1, 2014.3 One comment on the
proposal has been received.4
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 72689
(July 28, 2014), 79 FR 44917.
4 See Letter from Suzanne Shatto to Commission
(Aug. 19, 2014); see also Letter from Sal Arnuk and
Joe Saluzzi, Themis Trading LLC, to Elizabeth M.
Murphy, Secretary, Commission, dated August 21,
2014 (SR–BATS–2014–028); Letter from Ira D.
Hammerman, General Counsel, SIFMA, to Kevin M.
O’Neill, Deputy Secretary, Commission, dated
August 22, 2014 (SR–BATS–2014–028) (letters
1 15
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
56415
Section 19(b)(2) of the Act 5 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The Commission is
extending this 45-day time period.
The Commission finds that it is
appropriate to designate a longer period
within which to take action on the
proposed rule change so that it has
sufficient time to consider the proposed
rule change and the comments received.
Accordingly, the Commission, pursuant
to Section 19(b)(2) of the Act,6
designates October 30, 2014, as the date
by which the Commission shall either
approve or disapprove or institute
proceedings to determine whether to
disapprove the proposed rule change
(File No. SR–EDGA–2014–16).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–22334 Filed 9–18–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73100; File No. SR–CBOE–
2014–070]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Fees
Schedule
September 15, 2014.
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 2, 2014, Chicago Board
Options Exchange, Incorporated (the
‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
commenting on a companion BATS filing that
proposes to offer the same feed).
5 15 U.S.C. 78s(b)(2).
6 Id.
7 17 CFR 200.30–3(a)(57).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
E:\FR\FM\19SEN1.SGM
19SEN1
]]>Agencies
[Federal Register Volume 79, Number 182 (Friday, September 19, 2014)]
[Notices]
[Pages 56411-56415]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-22327]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73094; File No. SR-BYX-2014-018]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing of a Proposed Rule Change to Rules 11.9 of BATS Y-Exchange, Inc.
September 15, 2014.
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 3, 2014, 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, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is proposing to add Rule 11.23, entitled ``Opening
Process,'' as well as to make several corresponding changes in order to
modify the manner in which the Exchange opens trading in individual
securities at the beginning of the day and after trading halts.
The text of the proposed rule addition is available at the
Exchange's Web site at https://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
[[Page 56412]]
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 the proposed rule change is to amend Exchange Rules
11.9(b) and 11.18(f) and to add new Rule 11.23 in order to allow for
the entry of orders with a time-in-force of Regular Hours Only and to
amend the process by which the Exchange opens trading at the beginning
of the day and after trading halts. Specifically, the Exchange is
proposing to accept Regular Hours Only orders for queuing throughout
the Pre-Opening Session,\3\ as well as to establish a process for
handling queued orders in order to open trading on the Exchange for
Regular Trading Hours \4\ and following a halt. The Exchange is
proposing this rule change in order to create a more orderly opening of
trading and to facilitate the price formation process at the open of
trading by allowing Users to enter orders during the Pre-Market Session
and during a halt rather than requiring them to submit a flood of
orders to the Exchange immediately following the beginning of Regular
Trading Hours or the resumption of trading following a halt.
---------------------------------------------------------------------------
\3\ Pre-Opening Session is defined in BYX Rule 1.5(r).
\4\ Regular Trading Hours is defined in BYX Rule 1.5(w).
---------------------------------------------------------------------------
Currently, the Exchange begins accepting orders for trading at the
beginning of the Pre-Opening Session and any such orders received by
the Exchange are immediately eligible for execution. Any such orders
that are on the BATS Book \5\ at the beginning of Regular Trading Hours
remain on the BATS Book, subject to the User's instruction, and trading
continues into Regular Trading Hours without any transition period.
Upon a halt, the Exchange currently cancels all orders on the BATS Book
and does not accept any orders until the halt is lifted. The Exchange
does not currently have a Regular Hours Only time-in-force.
---------------------------------------------------------------------------
\5\ BATS Book is defined in BYX Rule 1.5(e).
---------------------------------------------------------------------------
The Exchange is proposing to implement a process by which the
Exchange will accept and queue orders that have a time-in-force of
Regular Hours Only (or ``RHO'') during the Pre-Opening Session for
execution at the midpoint of the NBBO \6\ shortly after the beginning
of Regular Trading Hours (the ``Opening Process''). The Exchange is
also proposing to implement a similar opening process after a halt,
suspension, or pause (a ``Halt'' and the ``Halt Opening Process'') in
which a User's orders will remain on the BATS Book, unless the User has
designated that its orders be cancelled upon a halt, as further
described below.
---------------------------------------------------------------------------
\6\ NBBO is defined in BYX Rule 1.5(o).
---------------------------------------------------------------------------
As mentioned above, the Exchange is proposing to add Rule
11.9(b)(7) which would define the new RHO time-in-force as a limit or
market order that is designated for execution only during Regular
Trading Hours, which includes the Opening Process, as defined in Rule
11.23. The Exchange is also proposing to make a non-substantive change
to Rule 11.9(b) in order to delete the word ``limit'' because an RHO
order can be both a limit order or a market order. Each other time-in-
force clearly states that it applies only to limit orders.
The Exchange proposes that prior to the beginning of Regular
Trading Hours, Users \7\ that wish to participate in the Opening
Process may enter orders to buy or sell with a time in force of Regular
Hours Only. Orders cancelled before the completion of the Opening
Process will not participate in the Opening Process. Any order that is
not designated as RHO will not be eligible for participation in the
Opening Process. Proposed Rule 11.23(a)(2) provides that all orders
that are marked as RHO may participate in the Opening Process except
BATS Post Only Orders,\8\ Partial Post Only at Limit Orders,\9\ ISO
\10\ orders not modified by Rule 11.23(a)(1), as described below, and
Minimum Quantity Orders.\11\ Because RHO orders received prior to the
completion of the Opening Process are not immediately executable, but
rather queued for later participation in the Opening Process, BATS Post
Only Orders, Partial Post Only at Limit Orders, and Minimum Quantity
Orders marked as RHO do not make sense in the context of the Opening
Process and, thus, the Exchange is proposing to exclude them from the
Opening Process. Similarly, because an order designated as an ISO
implies that there is currently a protected bid or offer and there are
no protected bids or offers prior to 9:30 a.m. Eastern Time, the
Exchange proposes to reject any ISOs designated RHO entered prior to
the beginning of Regular Trading Hours. While this functionality is
opposite of the way that ISOs are handled on the options platform
operated by BATS Exchange, Inc. (``BATS Options'') (ISOs are converted
to non-ISOs and entered for queuing), the Exchange believes that
because there is continuous trading during the Pre-Opening Session on
the Exchange while orders are also being queued for participation in
the Opening Process, an ISO tag could be interpreted in various ways
and there is no obvious way to eliminate this confusion and, as such,
the order should be rejected. On BATS Options, on the other hand, there
is no continuous book and all orders entered prior to 9:30 a.m. Eastern
Time are queued for participation in the BATS Options opening process,
so an ISO tag simply does not make sense in that context and can
reasonably be ignored and converted to a non-ISO for queuing.
Consistent with this logic and as further detailed below, the Exchange
is also proposing that, prior to a re-opening after a halt, any ISO
that is not IOC or FOK be converted into a non-ISO for queuing and
participation in the re-opening process because there is no continuous
trading while a security is halted.
---------------------------------------------------------------------------
\7\ User is defined in BYX Rule 1.5(cc).
\8\ BATS Post Only Order is defined in BYX Rule 11.9(c)(6).
\9\ Partial Post Only at Limit Order is defined in BYX Rule
11.9(c)(7).
\10\ ISO is defined in BYX Rule 11.9(d).
\11\ Minimum Quantity Order is defined in BYX Rule 11.9(c)(5).
---------------------------------------------------------------------------
Limit orders with a Reserve Quantity \12\ may participate to the
full extent of their displayed size and Reserve Quantity. Discretionary
Orders \13\ may participate only up to their ranked price for buy
orders or down to their ranked price for sell orders. The discretionary
range of such orders will not be eligible for participation in the
Opening Process. All Pegged Orders and Mid-Point Peg Orders, as defined
in Rule 11.9(c)(8) and (9), will be eligible for execution in the
Opening Process based on their pegged prices.
---------------------------------------------------------------------------
\12\ Reserve Quantity is defined in BYX Rule 11.9(c)(1).
\13\ Discretionary Order is defined in BYX Rule 11.9(c)(10).
---------------------------------------------------------------------------
The Exchange will then attempt to perform the Opening Process, as
described in proposed Rule 11.23(b), in which the Exchange matches buy
and sell orders that are executable at the midpoint of the NBBO as
described in proposed Rule 11.23(c) below. All orders eligible to trade
at the midpoint will be processed in time sequence, beginning with the
order with the oldest time stamp. The Exchange believes that handling
orders in time priority makes more sense than price-time priority for
the Opening Process because the price of the order is not particularly
important
[[Page 56413]]
to the Opening Process, so long as the order is priced at or more
aggressively than the Opening Price and, as such, there is no reason to
reward a more aggressive order with priority in the Opening Process.
Thus, the Exchange is proposing that all orders that are priced equal
to or more aggressively than the Opening Price be matched based only on
time priority and will be matched until there is no remaining volume or
there is an imbalance of orders (the ``Opening Match''). All MTP
modifiers, as defined in Rule 11.9(f), will be ignored as it relates to
executions occurring as part of the Opening Match because the
counterparty against which an order executes is mostly random and
completely out of the control of the User entering the order. It does
not make sense to cancel an order because the order happens to execute
against an order entered using the same MPID, but to allow both orders
to execute at the exact same price to the exact same effect where the
orders happen to execute against different orders. An imbalance of
orders on the buy side or sell side may result in orders that are not
executed in whole or in part. Such orders may, in whole or in part, be
placed on the BATS Book, cancelled, executed, or routed to other away
Trading Centers \14\ in accordance with Rule 11.13(a)(2). If no matches
can be made, the Opening Process will conclude with all orders that
participated in the Opening Process being placed in the BATS Book,
cancelled, executed, or routed to away Trading Centers in accordance
with Rule 11.13(a)(2) related to order execution and routing. Because
an RHO order is not executable until the Opening Process (rather than
upon entry), to the extent that any order is not executed during the
Opening Process and is placed on the BATS Book, such order will receive
a time stamp that reflects the time that the order was placed on the
BATS Book during the Opening Process and not the time that the order
was entered for queuing.
---------------------------------------------------------------------------
\14\ Trading Center is defined in BYX Rule 2.11(a).
---------------------------------------------------------------------------
Under proposed Rule 11.23(c), the Exchange will determine the price
of the Opening Process by using the midpoint of the NBBO, as follows:
(a) When the listing exchange is either the NYSE or NYSE MKT, the
Opening Process will be priced at the midpoint of the: (i) First NBBO
subsequent to the first reported trade on the listing exchange after
9:30:00 a.m. Eastern Time; or (ii) then prevailing NBBO when the first
two-sided quotation is published by the listing exchange after 9:30:00
a.m. Eastern Time if no first trade is reported by the listing exchange
within one second of publication of the first two-sided quotation by
the listing exchange; or (b) for any other listing market, the Opening
Process will be priced at the midpoint of the first NBBO disseminated
after 9:30:00 a.m. Eastern Time. The Exchange is proposing to
differentiate the treatment between NYSE and NYSE MKT listed securities
and securities listed on any other exchange because NYSE and NYSE MKT
do not offer continuous trading prior to 9:30:00 a.m. Eastern Time and
the market for trading in securities listed on these exchanges may take
a moment to develop. Using the first NBBO disseminated for NYSE and
NYSE MKT listed securities to establish the Opening Price may result in
executions that are not necessarily reflective of market conditions
after the first execution on the listing market or one second after the
listing market's first quote. Every other listing exchange allows for
continuous trading prior to 9:30:00 a.m. Eastern Time, which results in
a more fully developed market immediately after 9:30:00 a.m. Eastern
Time and, thus, a more immediately reliable Opening Price.
Proposed Rule 11.23(a)(1) provides that during the period between
9:30 a.m. Eastern Time and the occurrence of the Opening Process, all
non-RHO orders, subject to order instructions, and ISOs designated RHO
may execute against eligible Pre-Opening Session contra-side interest
resting in the BATS Book. The Exchange will convert any unexecuted
portion of an ISO designated RHO entered during this period into a non-
ISO and queue the order for participation in the Opening Process.
If the conditions to establish the price of the Opening Process set
forth under proposed Rule 11.23(c) do not occur by 9:45:00 a.m. Eastern
Time, proposed Rule 11.23(d) describes a contingent opening process
(the ``Contingent Open Process'') in which instead of matching orders
at the midpoint of the NBBO, orders will be handled in time sequence,
beginning with the order with the oldest time stamp, and will be placed
on the BATS Book, routed, cancelled, or executed in accordance with the
terms of the order. Because an RHO order is not executable until the
Opening Process (rather than upon entry), any order subject to the
Contingent Open Process that is placed on the BATS Book will receive a
time stamp that reflects the time that the order was placed on the BATS
Book during the Opening Process and not the time that the order was
entered for queuing.
In the event of a Halt, the proposed amendment to Rule 11.18(f)
provides that, except where a User has designated that its orders be
cancelled, all outstanding orders in the System \15\ will remain on the
BATS Book. Proposed Rule 11.23(e) then provides that the Exchange will
accept orders for queuing prior to the resumption of trading in order
to participate in the Halt Opening Process. While a security is subject
to a Halt, the Exchange will accept orders for queuing prior to the
resumption of trading in the security for participation in the Halt
Opening Process. The Halt Opening Process will occur in the same manner
described in proposed Rules 11.23(a)(2) and (b) with the following
exceptions: (1) Non-RHO orders will be eligible for participation in
the re-opening, but IOC,\16\ FOK, BATS Post Only Orders, Partial Post
Only at Limit Orders, and Minimum Quantity Orders will be cancelled or
rejected, as applicable, and any ISO that is not IOC or FOK will be
converted into a non-ISO and be queued for participation in the Halt
Opening Process; and (2) the re-opening will occur at the midpoint of
the: (i) First NBBO subsequent to the first reported trade on the
listing exchange following the resumption of trading after a Halt; or
(ii) NBBO when the first two-sided quotation is published by the
listing exchange following the resumption of trading after a Halt if no
first trade is reported by the listing exchange within one second of
publication of the first two-sided quotation by the listing exchange.
Similar to the rationale for waiting for the sooner of the first
execution on the primary or one second to use the midpoint of the NBBO
for the Opening Process for NYSE and NYSE MKT, the Exchange is
proposing to wait until the sooner of the first execution on the
primary or one second to use the midpoint of the NBBO for the Halt
Opening Process because there is no continuous trading occurring on any
market during a Halt and waiting will provide time for the market to be
more fully established before determining the price at which the Halt
Opening Process will occur. Where neither of the above conditions
required to establish the price of the re-opening have occurred, the
security may be opened for trading at the discretion of the Exchange.
Where the security is opened by the Exchange subject to this
discretion, orders will be handled in the same manner as the Contingent
Open Process.
---------------------------------------------------------------------------
\15\ System is defined in BYX Rule 1.5(aa).
\16\ IOC is defined in BYX Rule 11.9(b)(1).
---------------------------------------------------------------------------
[[Page 56414]]
2. Statutory Basis
The rule change proposed in this submission 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.\17\ Specifically, the
proposed change is consistent with Section 6(b)(5) of the Act,\18\
because it is designed to promote just and equitable principles of
trade, 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. The Exchange believes that
allowing for the entry of RHO orders during the Pre-Opening Session and
transitioning into Regular Trading Hours pursuant to the Opening
Process will help to ensure that the Exchange opens trading in a fair
and orderly manner. Specifically, the Exchange believes that allowing
Users to enter and cancel orders during the Pre-Opening Session to be
queued for execution at the midpoint of the NBBO and/or entry on to the
BATS Book shortly following the beginning of Regular Trading Hours will
create a more orderly opening and facilitate the price formation
process at the opening of trading because Users are able to enter
orders to participate in the Opening Process during the Pre-Market
Session rather than having a flood of orders submitted to the Exchange
immediately following the beginning of Regular Trading Hours.
Similarly, the Exchange believes that implementing substantially
similar functionality in non-BATS listed securities for accepting
orders during re-opening after a Halt will also create a more orderly
opening and facilitate price formation as a security is coming out of a
Halt. Additionally, using the midpoint of the NBBO as the price for the
Opening Process (regardless of the time at which such NBBO is selected
as described under proposed Rule 11.23(c)) will further create a more
orderly opening and facilitation of the price formation process by
basing the price at which the Opening Process will occur on the best
available pricing under current market conditions.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange also believes that excluding BATS Post Only Orders,
Partial Post Only at Limit Orders, ISOs, and Minimum Quantity Orders
from participation in the Opening Process is designed to promote just
and equitable principles of trade, 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; and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers because, as described above, such order
types combined with an RHO time-in-force do not make sense in the
context of queuing orders for the Opening Process. Further, the
Exchange believes that allowing certain RHO orders and all non-RHO
orders to interact with interest (and, in the case of non-RHO orders,
to be added to the BATS Book where there is no contra-side interest)
from the Pre-Opening Session after 9:30 a.m. Eastern Time, but before
the completion of the Opening Process will also create a more orderly
opening and facilitate the price formation process because Users will
have the option to enter orders that will either participate in the
Opening Process or immediately interact with liquidity from the Pre-
Opening Session, allowing trading to continue while the Exchange is
waiting for the conditions necessary to complete the Opening Process.
The Exchange also believes that allowing an ISO marked RHO to execute
against eligible Pre-Opening Session interest after 9:30 a.m. Eastern
and before completion of the Opening Process and then converting the
unexecuted portion of the order into a non-ISO for queuing for
participation in the Opening Process is consistent with the Act because
it is consistent with the requirements of Regulation NMS.\19\ In
particular, because after 9:30 a.m. Eastern Time there may be a
protected bid or offer displayed by the Exchange that the User entering
the order is trying to execute against, the Exchange is proposing to
allow an ISO designated as an RHO to interact with liquidity currently
on the BATS Book prior to queuing for participation in the Opening
Process.
---------------------------------------------------------------------------
\19\ 17 CFR 242.600.
---------------------------------------------------------------------------
The Exchange also believes that the proposal is designed 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 because it would create a contingent opening process
under which the orders queued for participation in the Opening Process
would be entered on to the BATS Book in the event that the conditions
for determining the price of the Opening Process are not met prior to
9:45:00 a.m. Eastern Time, which will further help to ensure that the
Exchange opens trading in a fair and orderly manner by providing a
means for trading in a security to open where there is no two-sided
NBBO in the security for fifteen minutes after the beginning of Regular
Trading Hours. The Exchange believes that fifteen minutes is a
reasonable amount of time to wait for the establishment of a two-sided
NBBO because it marks a point at which the market in a security has had
a sufficient amount of time to develop while simultaneously providing a
reasonable cut-off point at which the Exchange may open the security
for Regular Trading Hours trading. The Exchange also believes that
handling all orders queued for participation in the Opening Process in
time sequence after fifteen minutes will help to ensure that trading
opens in as fair and orderly a manner as possible.
The implementation of the Opening Process will also provide Users
with greater control and flexibility with respect to entering orders,
allowing them to enter orders for participation during Regular Trading
Hours during the Pre-Opening Session, rather than only after Regular
Trading Hours begin at 9:30 a.m. Eastern Time. This simplifies the
order entry process for Users that do not want to participate in the
Pre-Opening Session by allowing them to enter their orders designated
as Regular Hours Only prior to Regular Trading Hours, which removes
impediments to a free and open market and benefits all Users of the
Exchange.
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 not necessary or appropriate in
furtherance of the purposes of the act. To the contrary, the Exchange's
inability to accept orders prior to 9:30 a.m. Eastern Time for
participation during Regular Trading Hours limits competition in that
the listing exchange is able to begin accepting orders in such
securities, while the Exchange cannot accept such orders. Thus,
approval of the proposed rule change will promote competition because
it will allow the Exchange to offer its Users the ability to enter
orders prior to the beginning of Regular Trading Hours for queuing and
entry during Regular Trading Hours and thus compete more directly with
other exchanges for order flow that a User may not have directed to the
Exchange if they were not able to enter orders for queuing prior to
Regular Trading Hours.
[[Page 56415]]
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BYX-2014-018 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 Number SR-BYX-2014-018. 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 (https://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-BYX-
2014-018, and should be submitted on or before October 10, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22327 Filed 9-18-14; 8:45 am]
BILLING CODE 8011-01-P
