Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BATS Rule 19.5, entitled “Minimum Participation Requirement for Opening Trading of Option Series”, 31491-31494 [2010-13341]
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Federal Register / Vol. 75, No. 106 / Thursday, June 3, 2010 / Notices
to which market participants would
choose one or more alternatives instead
of purchasing the exchange’s data.23 Of
course, the most basic source of
information generally available at an
exchange is the complete record of an
Share VolTrading Venue
ume in NMS exchange’s transactions that is provided
Stocks
in the core data feeds.24 In this respect,
the core data feeds that include an
Other Registered Exchanges
3.7 exchange’s own transaction information
are a significant alternative to the
ECNs:
5 ECNS .................................
10.8 exchange’s market data product.25 The
Dark Pools:
various self-regulatory organizations,
32 Dark Pools (Estimated) ....
7.9 the several Trade Reporting Facilities of
Broker-Dealer Internatization:
FINRA, and ECNs that produce
200+ Broker-Dealers (Estimated) ...............................
17.5 proprietary data are all sources of
competition.
The market share percentages in Table
In sum, there are a variety of
1 strongly indicate that NYSE must
alternative sources of information that
compete vigorously for order flow to
impose significant competitive
maintain its share of trading volume.
pressures on the NYSE in setting the
This compelling need to attract order
terms for distributing its NYSE BBO
flow imposes significant pressure on
Information. The Commission believes
NYSE to act reasonably in setting its
that the availability of those
fees for NYSE market data, particularly
alternatives, as well as the NYSE’s
given that the market participants that
compelling need to attract order flow,
must pay such fees often will be the
imposed significant competitive
same market participants from whom
pressure on the NYSE to act equitably,
NYSE must attract order flow. These
market participants particularly include fairly, and reasonably in setting the
the large broker-dealer firms that control terms of its proposal.
the handling of a large volume of
Because the NYSE was subject to
customer and proprietary order flow.
significant competitive forces in setting
Given the portability of order flow from the terms of the proposal, the
one trading venue to another, any
Commission will approve the proposal
exchange that seeks to charge
in the absence of a substantial
unreasonably high data fees would risk
countervailing basis to find that its
alienating many of the same customers
terms nevertheless fail to meet an
on whose orders it depends for
applicable requirement of the Act or the
competitive survival.21
rules thereunder. An analysis of the
In addition to the need to attract order proposal does not provide such a basis.
flow, the availability of alternatives to
V. Conclusion
NYSE’s BBO Information data
significantly affect the terms on which
It is therefore ordered, pursuant to
NYSE can distribute this market data.22
Section 19(b)(2) of the Act,26 that the
In setting the fees for its NYSE BBO
Service, NYSE must consider the extent proposed rule change (SR–NYSE–2010–
30) be, and hereby is, approved.
TABLE 1—TRADING CENTERS AND ESTIMATED % OF SHAREVOLUME IN
NMS STOCKS SEPTEMBER 2009—
Continued
21 See
NYSE Arca Order at 74783.
Richard Posner, Economic Analysis of Law
§ 9.1 (5th ed. 1998) (discussing the theory of
monopolies and pricing). See also U.S. Dep’t of
Justice & Fed’l Trade Comm’n, Horizontal Merger
Guidelines § 1.11 (1992), as revised (1997)
(explaining the importance of alternatives to the
presence of competition and the definition of
markets and market power). Courts frequently refer
to the Department of Justice and Federal Trade
Commission merger guidelines to define product
markets and evaluate market power. See, e.g., FTC
v. Whole Foods Market, Inc., 502 F. Supp. 2d 1
(D.D.C. 2007); FTC v. Arch Coal, Inc., 329 F. Supp.
2d 109 (D.D.C. 2004). In considering antitrust
issues, courts have recognized the value of
competition in producing lower prices. See, e.g.,
Leegin Creative Leather Products v. PSKS, Inc., 127
S. Ct. 2705 (2007); Atlanta Richfield Co. v. United
States Petroleum Co., 495 U.S. 328 (1990);
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574 (1986); State Oil Co. v. Khan, 522 U.S.
3 (1997); Northern Pacific Railway Co. v. U.S., 356
U.S. 1 (1958).
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22 See
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–13336 Filed 6–2–10; 8:45 am]
BILLING CODE 8010–01–P
23 See
NYSE Arca Order at 74783.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62177; File No. SR–BATS–
2010–013]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend BATS Rule
19.5, entitled ‘‘Minimum Participation
Requirement for Opening Trading of
Option Series’’
May 26, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 13,
2010, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange has
designated this proposal as a ‘‘noncontroversial’’ 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to amend
BATS Rule 19.5, entitled ‘‘Minimum
Participation Requirement for Opening
Trading of Option Series.’’ The text of
the proposed rule change 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
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 aspects of such
statements.
24 Id.
1 15
25 Id.
2 17
26 15
27 17
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U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
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31491
U.S.C. 78s(b)(1).
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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Federal Register / Vol. 75, No. 106 / Thursday, June 3, 2010 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange is proposing the
elimination of a requirement that at
least one Options Market Maker be
registered for trading a particular series
before it may be opened for trading on
BATS Options.
An Options Market Maker is an
Options Member 5 registered with the
Exchange as a Market Maker.6 Options
Market Makers on BATS Options have
certain obligations such as maintaining
two-sided markets and participating in
transactions that are ‘‘reasonably
calculated to contribute to the
maintenance of a fair and orderly
market.’’ 7 To register as an Options
Market Maker, an Options Member must
file a written application with the
Exchange, which will consider an
applicant’s market making ability and
other factors it deems appropriate in
determining whether to approve an
applicant’s registration.8 All Options
Market Makers are designated as
specialists on BATS Options for all
purposes under the Act or rules
thereunder.9 The BATS Options Rules
place no limit on the number of
qualifying entities that may become
Options Market Makers.10 The good
standing of an Options Market Maker
may be suspended, terminated, or
withdrawn if the conditions for
approval cease to be maintained or the
Options Market Maker violates any of its
agreements with the Exchange or any
provisions of the BATS Options Rules.11
An Options Member that has qualified
as an Options Market Maker may
register to make markets in individual
series of options.12
Currently Exchange Rule 19.5
provides in relevant part that after a
particular class of options has been
approved for listing on BATS Options,
the Exchange will allow trading in
series of options in that class only if
there is at least one Options Market
Maker registered for trading that
particular series. The Exchange is
proposing to eliminate this requirement
5 The term ‘‘Options Member’’ means a firm, or
organization that is registered with the Exchange
pursuant to Chapter XVII of the Exchange’s rules for
purposes of participating in options trading on
BATS Options as an ‘‘Options Order Entry Firm’’ or
‘‘Options Market Maker.’’
6 See Exchange Rule 22.2.
7 See Exchange Rule 22.5(a).
8 See Exchange Rule 22.2(a).
9 See Exchange Rule 22.2.
10 See Exchange Rule 22.2(c).
11 See Exchange Rule 22.4(b).
12 See Exchange Rule 22.3(a).
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in order to expand the number of series
available to investors for trading and for
hedging risks associated with securities
underlying those options, as well as to
enhance markets in products which are
likely to receive customer order flow.
The Exchange believes that eliminating
the listing requirement to have an
Options Market Maker in every series
would permit Options Market Makers,
who currently may choose to serve as
Options Market Makers solely to permit
an options to trade on BATS Options, to
focus their expertise on the products
that are more consistent with their
business objectives or more likely to
receive customer order flow.
Eliminating the Options Market
Maker listing requirement would
provide the Exchange the opportunity to
trade options that may have occasional
interest but that do not necessarily
require a two-sided market at all times.
The lack of a two-sided market would
not cause customer orders to receive
prices inferior to the best prices
available across all exchanges. BATS
Options is designed to systematically
avoid trading through protected
quotations on other options exchanges,
and as such, orders accepted into BATS
Options in options that do not have
Options Market Makers will not trade at
inferior prices even if there is not a twosided market on BATS Options. As a
result, incoming orders are protected
from receiving inferior execution prices
simply by the fact that there is robust
quote competition in the exchangelisted options business with eight
competing options exchanges and a
multitude of competing Market Makers
and liquidity providers. Additionally,
the Options Order Protection and
Locked/Crossed Market Plan requires
plan participants to ‘‘establish, maintain
and enforce written policies and
procedures that are reasonably designed
to prevent Trade-Throughs in that
participant’s market in Eligible Options
Classes.’’ 13 With the implementation of
this plan, a robust network of private
routing has been constructed that
ensures routable customer orders can
access the best prevailing prices in the
market.
Moreover, the Commission recently
approved the proposed rule change
filing of the NASDAQ Options Market
(‘‘NOM’’), which has rules that are
13 See Securities Exchange Act Release No. 60405
(July 30, 2009), 74 FR 39362 (August 6, 2009) (File
No. 4–546) (approval order for the Protection and
Locked/Crossed Plan); see also Securities Exchange
Act Release No 61419 (January 26, 2010), 75 FR
5157 (February 1, 2010) (File No. SR–BATS–2009–
031) (approval order of BATS Options rules,
including rules governing participation in
Protection and Locked/Crossed Plan).
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substantially similar to the Exchange’s,
in which NOM eliminated the
requirements for having at least one
Options Market Maker registered for
trading in a particular series before it
may be opened for trading on NOM.14
In its recent approval order for NOM’s
identical rule change the Commission
cited certain findings that it made in its
earlier approval of NOM, including that
‘‘the Act does not mandate a particular
market model for national securities
exchanges’’ and that ‘‘many different
types of market models could satisfy the
requirements of the Act’’.15 The
Commission stated that it does not
believe that the Act requires an
exchange to have Market Makers.16 The
Commission also noted that in the
context of approving NOM, it had
previously stated that although Options
Market Makers could be an important
source of liquidity on NOM, they likely
would not be the only source.17 The
Exchange notes that the NOM System
operates in a substantially similar
manner to the Exchange’s System, and
is designed to match buying and selling
interest of all participants on the
Exchange. The Exchange is proposing
simply to remove the Options Market
Maker participation requirement as
superfluous to the existence of a vibrant
options market, nevertheless
acknowledging the value Options
Market Makers provide to the Exchange.
With regard to the impact on system
capacity, the Exchange has analyzed its
capacity and represents that it and the
Options Price Reporting Authority have
the necessary systems capacity to
handle the additional traffic associated
with the listing and trading of an
expanded number of series as proposed
by this filing.
The Exchange also proposes to delete
paragraph (b) of Rule 19.5, which states
that a class of options will be put into
a non-regulatory halt if at least one
series for that class is not open for
trading. Originally, this provision was
put in place so that the Exchange could
approve underlying securities for the
listing of options but delay the listing if
14 See Securities Exchange Act Release No. 61735
(March 18, 2010), 75 FR 14227 (March 24, 2010)
(File No. SR–NASDAQ–2010–007).
15 Id. (citing Securities Exchange Act Release No.
57478 (March 12, 2008), 73 FR 14521, 14527 (March
18, 2008) (File No. SR–NASDAQ–2007–004) (‘‘NOM
Approval Order’’)).
16 As the Commission noted in its approval order
for the NOM filing, in its release adopting
Regulation ATS, the Commission rejected the
suggestion that a guaranteed source of liquidity was
a necessary component of an exchange. See
Securities Exchange Act Release No. 40760
(December 8, 1998), 63 FR 70844 (December 22,
1998) (‘‘Regulation ATS Release).
17 See NOM Approval Order, supra note 15, at
14527.
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Federal Register / Vol. 75, No. 106 / Thursday, June 3, 2010 / Notices
the Options Market Makers on the
Exchange were not yet ready to register
in any series of options for that class.
With the elimination of the other
paragraphs in Rule 19.5 requiring an
Options Market Maker, the Exchange
will no longer need to delay the listings
of particular series and thus will no
longer need this provision.
Finally, the Exchange proposes to
delete paragraph (c) of Rule 19.5, which
addresses the situation where a series of
options only has one Options Market
Maker that then withdraws its
registration. Based on the proposed
change described above, this provision
is no longer necessary.
2. Statutory Basis
Approval of 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.18 In particular, the proposed
change is consistent with Section 6(b)(5)
of the Act,19 because it would promote
just and equitable principles of trade,
remove impediments to, and perfect the
mechanism of, a free and open market
and a national market system, and, in
general, protect investors and the public
interest. Specifically, the Exchange
believes that the proposed amendment
would expand the ability of investors to
trade options and hedge risks associated
with securities underlying options
which are not currently listed due to the
lack of an Options Market Maker
registration in such options series.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change imposes any
burden on competition.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received from
Members, Participants, or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i)
Does not significantly affect the
protection of investors or the public
interest; (ii) does not impose any
significant burden on competition; and
(iii) does not become operative for 30
18 15
19 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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days after the date of the filing, or such
shorter time as the Commission may
designate if consistent with the
protection of investors and the public
interest, the proposed rule change has
become effective pursuant to Section
19(b)(3)(A) of the Act 20 and Rule 19b–
4(f)(6) thereunder.21
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 22 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 23
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
requested that the Commission waive
the 30-day operative delay.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest. In
making this determination, the
Commission notes that BAT’s proposed
rule change is substantially similar to
Nasdaq’s recently approved rule change
to eliminate its requirement that at least
one options Market Maker be registered
for trading a particular series before it
could be opened for trading on NOM,24
and the Commission believes that
BATS’ proposed rule change raises no
new regulatory issues. The Commission
believes that waiving the operative
delay will allow BATS to immediately
expand the number of series available
for trading, permitting BATS to compete
with NOM in the trading of these series
and should foster intermarket price
competition by providing an additional
market and source of liquidity for
options series that would otherwise
have been prohibited from trading on
BATS due to the lack of a Market Maker
registered in that series. For these
reasons, the Commission designates that
the proposed rule change become
operative immediately.25
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
the rule change if it appears to the
20 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). Pursuant to Rule 19b–
4(f)(6)(iii) under the Act, the Exchange is required
to give the Commission written notice of its intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
22 17 CFR 240.19b 4(f)(6).
23 17 CFR 240.19b 4(f)(6)(iii).
24 See supra note 14.
25 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
21 17
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31493
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the 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 e-mail to rulecomments@sec.gov. Please include File
Number SR–BATS–2010–013 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–BATS–2010–013. This file
number should be included on the
subject line if e-mail 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, on official business
days between the hours of 10 a.m. and
3 p.m. Copies of the filing also will be
available for inspection and copying at
the principal office of the Exchange. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–BATS–2010–013 and
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Federal Register / Vol. 75, No. 106 / Thursday, June 3, 2010 / Notices
should be submitted on or before June
24, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–13341 Filed 6–2–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62169; File No. SR–
NYSEAmex–2010–43]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Make Certain
Reporting Requirements Punishable
Under its MRVP
May 25, 2010.
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 May 7,
2010, NYSE Amex LLC (‘‘NYSE Amex’’
or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
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.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Amex Disciplinary Rule 476A
(Imposition of Fines for Minor
Violation(s) of Rules) to add a new Part
1D: List of Reports Required to be Filed
with the Exchange by ATP Holders and
Filing Deadlines. The Exchange also
proposes to add violations of NYSE
Amex Rule 340.01 to Part 1C of
Disciplinary Rule 476A, and to make
other technical changes to the Rule. The
text of the proposed rule change is
available on NYSE Amex’s Web site at
https://www.nyse.com, on the
Commission’s Web site at https://
www.sec.gov, at NYSE Amex, and at the
Commission’s Public Reference Room.
26 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
NYSE Amex Disciplinary Rule 476A
(Imposition of Fines for Minor
Violation(s) of Rules) to add a new Part
1D: List of Reports Required to be filed
with the Exchange by ATP Holders and
Filing Deadlines. The Exchange also
proposes to add violations of NYSE
Amex Rule 340.01 to Part 1C of
Disciplinary Rule 476A, and to make
other technical changes to the Rule.
Background
As described more fully in a related
rule filing, effective October 1, 2008,
NYSE Euronext acquired The Amex
Membership Corporation (‘‘AMC’’)
pursuant to an Agreement and Plan of
Merger, dated January 17, 2008 (the
‘‘Merger’’). Pursuant to the Merger the
Exchange’s predecessor, the American
Stock Exchange LLC, a subsidiary of
AMC, became a subsidiary of NYSE
Euronext.3
In connection with the Merger, on
December 1, 2008, the Exchange
relocated all equities trading conducted
on the Exchange’s legacy trading
systems and facilities located at 86
Trinity Place, New York, New York, to
new trading systems and facilities
located at 11 Wall Street, New York,
New York (known as ‘‘NYSE Amex
Equities’’).4 Similarly, on March 2, 2009,
the Exchange relocated all options
trading conducted on the Exchange’s
legacy trading systems and facilities to
new trading systems and facilities
3 See Securities Exchange Act Release No. 58673
(September 29, 2008), 73 FR 57707 (October 3,
2008) (SR–NYSE–2008–60 and SR–Amex–2008–
62).
4 See Securities Exchange Act Release No. 58705
(October 1, 2008), 73 FR 58995 (October 8, 2008)
(SR–Amex–2008–63) (approving the adoption of the
‘‘NYSE Amex Equities’’ rules).
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located at 11 Wall Street (known as
‘‘NYSE Amex Options’’).5
As part of this process, the Exchange
adopted NYSE Rules 475–477,
including Rule 476A, subject to such
changes as necessary to apply the Rules
to the Exchange, as NYSE Amex
Disciplinary Rules 475–477 to govern
transactions and the conduct of its
members and member organizations on
both NYSE Amex Equities and NYSE
Amex Options.6
Current NYSE Amex Disciplinary Rule
476A
NYSE Amex Disciplinary Rule 476A,
the Exchange’s Minor Rule Violation
Plan (‘‘MRVP’’), governs transactions
and conduct on both NYSE Amex
Equities and NYSE Amex Options.
Under NYSE Amex Disciplinary Rule
476A, the Exchange may impose a
summary fine on any member, member
organization, allied member, approved
person or registered or non-registered
employee of a member or member
organization for a minor violation of
specified Exchange rules:
Supplementary Part 1A to the Rule
contains a list of NYSE Amex Equities
Rules subject to summary fine; Part 1B
contains a list of legacy Exchange rules;
and Part 1C contains a list of NYSE
Amex Options Rules. The fines
permitted under the MRVP provide an
appropriate sanction when, given the
facts and circumstances of a particular
rule violation, a response stronger than
a simple admonition letter is needed but
the initiation of a formal disciplinary
proceeding under Disciplinary Rule 476
is unwarranted.
Violations of the listed rules are
subject to the fine schedules in NYSE
Amex Disciplinary Rule 476A. For
violations of the rules listed in Parts 1A
and 1B, individuals may be charged
$500.00 for a first offense, $1,000.00 for
a second offense and $2,500.00 for
subsequent offenses; member firms may
be charged $1,000.00 for a first offense,
$2,500.00 for a second offense and
$5,000.00 for subsequent offenses.
Violations of the rules listed in Part 1C
are subject to varying fines as specified,
depending on the rule violated.
5 See Securities Exchange Act Release No. 59472
(February 27, 2009), 74 FR 9843 (March 6, 2009)
(SR–NYSEALTR–2008–14) (approving the adoption
of the ‘‘NYSE Amex Options’’ rules).
6 See Securities Exchange Act Release Nos. 58673
(September 29, 2008), 73 FR 57707 (October 3,
2008) (adopting NYSE Amex Disciplinary Rules
475–477); 58705 (October 1, 2008), 73 FR 58995
(October 8, 2008) (adopting NYSE Amex
Disciplinary Rule 476A).
E:\FR\FM\03JNN1.SGM
03JNN1
]]>Agencies
[Federal Register Volume 75, Number 106 (Thursday, June 3, 2010)]
[Notices]
[Pages 31491-31494]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-13341]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62177; File No. SR-BATS-2010-013]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
BATS Rule 19.5, entitled ``Minimum Participation Requirement for
Opening Trading of Option Series''
May 26, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 13, 2010, BATS Exchange, Inc. (the ``Exchange'' or ``BATS'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Exchange has designated this
proposal as a ``non-controversial'' proposed rule change pursuant to
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)(iii)
thereunder,\4\ which renders it effective upon filing with the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend BATS Rule 19.5, entitled
``Minimum Participation Requirement for Opening Trading of Option
Series.'' The text of the proposed rule change 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 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 aspects of such
statements.
[[Page 31492]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing the elimination of a requirement that at
least one Options Market Maker be registered for trading a particular
series before it may be opened for trading on BATS Options.
An Options Market Maker is an Options Member \5\ registered with
the Exchange as a Market Maker.\6\ Options Market Makers on BATS
Options have certain obligations such as maintaining two-sided markets
and participating in transactions that are ``reasonably calculated to
contribute to the maintenance of a fair and orderly market.'' \7\ To
register as an Options Market Maker, an Options Member must file a
written application with the Exchange, which will consider an
applicant's market making ability and other factors it deems
appropriate in determining whether to approve an applicant's
registration.\8\ All Options Market Makers are designated as
specialists on BATS Options for all purposes under the Act or rules
thereunder.\9\ The BATS Options Rules place no limit on the number of
qualifying entities that may become Options Market Makers.\10\ The good
standing of an Options Market Maker may be suspended, terminated, or
withdrawn if the conditions for approval cease to be maintained or the
Options Market Maker violates any of its agreements with the Exchange
or any provisions of the BATS Options Rules.\11\ An Options Member that
has qualified as an Options Market Maker may register to make markets
in individual series of options.\12\
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\5\ The term ``Options Member'' means a firm, or organization
that is registered with the Exchange pursuant to Chapter XVII of the
Exchange's rules for purposes of participating in options trading on
BATS Options as an ``Options Order Entry Firm'' or ``Options Market
Maker.''
\6\ See Exchange Rule 22.2.
\7\ See Exchange Rule 22.5(a).
\8\ See Exchange Rule 22.2(a).
\9\ See Exchange Rule 22.2.
\10\ See Exchange Rule 22.2(c).
\11\ See Exchange Rule 22.4(b).
\12\ See Exchange Rule 22.3(a).
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Currently Exchange Rule 19.5 provides in relevant part that after a
particular class of options has been approved for listing on BATS
Options, the Exchange will allow trading in series of options in that
class only if there is at least one Options Market Maker registered for
trading that particular series. The Exchange is proposing to eliminate
this requirement in order to expand the number of series available to
investors for trading and for hedging risks associated with securities
underlying those options, as well as to enhance markets in products
which are likely to receive customer order flow. The Exchange believes
that eliminating the listing requirement to have an Options Market
Maker in every series would permit Options Market Makers, who currently
may choose to serve as Options Market Makers solely to permit an
options to trade on BATS Options, to focus their expertise on the
products that are more consistent with their business objectives or
more likely to receive customer order flow.
Eliminating the Options Market Maker listing requirement would
provide the Exchange the opportunity to trade options that may have
occasional interest but that do not necessarily require a two-sided
market at all times. The lack of a two-sided market would not cause
customer orders to receive prices inferior to the best prices available
across all exchanges. BATS Options is designed to systematically avoid
trading through protected quotations on other options exchanges, and as
such, orders accepted into BATS Options in options that do not have
Options Market Makers will not trade at inferior prices even if there
is not a two-sided market on BATS Options. As a result, incoming orders
are protected from receiving inferior execution prices simply by the
fact that there is robust quote competition in the exchange-listed
options business with eight competing options exchanges and a multitude
of competing Market Makers and liquidity providers. Additionally, the
Options Order Protection and Locked/Crossed Market Plan requires plan
participants to ``establish, maintain and enforce written policies and
procedures that are reasonably designed to prevent Trade-Throughs in
that participant's market in Eligible Options Classes.'' \13\ With the
implementation of this plan, a robust network of private routing has
been constructed that ensures routable customer orders can access the
best prevailing prices in the market.
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\13\ See Securities Exchange Act Release No. 60405 (July 30,
2009), 74 FR 39362 (August 6, 2009) (File No. 4-546) (approval order
for the Protection and Locked/Crossed Plan); see also Securities
Exchange Act Release No 61419 (January 26, 2010), 75 FR 5157
(February 1, 2010) (File No. SR-BATS-2009-031) (approval order of
BATS Options rules, including rules governing participation in
Protection and Locked/Crossed Plan).
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Moreover, the Commission recently approved the proposed rule change
filing of the NASDAQ Options Market (``NOM''), which has rules that are
substantially similar to the Exchange's, in which NOM eliminated the
requirements for having at least one Options Market Maker registered
for trading in a particular series before it may be opened for trading
on NOM.\14\ In its recent approval order for NOM's identical rule
change the Commission cited certain findings that it made in its
earlier approval of NOM, including that ``the Act does not mandate a
particular market model for national securities exchanges'' and that
``many different types of market models could satisfy the requirements
of the Act''.\15\ The Commission stated that it does not believe that
the Act requires an exchange to have Market Makers.\16\ The Commission
also noted that in the context of approving NOM, it had previously
stated that although Options Market Makers could be an important source
of liquidity on NOM, they likely would not be the only source.\17\ The
Exchange notes that the NOM System operates in a substantially similar
manner to the Exchange's System, and is designed to match buying and
selling interest of all participants on the Exchange. The Exchange is
proposing simply to remove the Options Market Maker participation
requirement as superfluous to the existence of a vibrant options
market, nevertheless acknowledging the value Options Market Makers
provide to the Exchange.
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\14\ See Securities Exchange Act Release No. 61735 (March 18,
2010), 75 FR 14227 (March 24, 2010) (File No. SR-NASDAQ-2010-007).
\15\ Id. (citing Securities Exchange Act Release No. 57478
(March 12, 2008), 73 FR 14521, 14527 (March 18, 2008) (File No. SR-
NASDAQ-2007-004) (``NOM Approval Order'')).
\16\ As the Commission noted in its approval order for the NOM
filing, in its release adopting Regulation ATS, the Commission
rejected the suggestion that a guaranteed source of liquidity was a
necessary component of an exchange. See Securities Exchange Act
Release No. 40760 (December 8, 1998), 63 FR 70844 (December 22,
1998) (``Regulation ATS Release).
\17\ See NOM Approval Order, supra note 15, at 14527.
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With regard to the impact on system capacity, the Exchange has
analyzed its capacity and represents that it and the Options Price
Reporting Authority have the necessary systems capacity to handle the
additional traffic associated with the listing and trading of an
expanded number of series as proposed by this filing.
The Exchange also proposes to delete paragraph (b) of Rule 19.5,
which states that a class of options will be put into a non-regulatory
halt if at least one series for that class is not open for trading.
Originally, this provision was put in place so that the Exchange could
approve underlying securities for the listing of options but delay the
listing if
[[Page 31493]]
the Options Market Makers on the Exchange were not yet ready to
register in any series of options for that class. With the elimination
of the other paragraphs in Rule 19.5 requiring an Options Market Maker,
the Exchange will no longer need to delay the listings of particular
series and thus will no longer need this provision.
Finally, the Exchange proposes to delete paragraph (c) of Rule
19.5, which addresses the situation where a series of options only has
one Options Market Maker that then withdraws its registration. Based on
the proposed change described above, this provision is no longer
necessary.
2. Statutory Basis
Approval of 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.\18\ In particular, the proposed change is consistent with
Section 6(b)(5) of the Act,\19\ because it would promote just and
equitable principles of trade, remove impediments to, and perfect the
mechanism of, a free and open market and a national market system, and,
in general, protect investors and the public interest. Specifically,
the Exchange believes that the proposed amendment would expand the
ability of investors to trade options and hedge risks associated with
securities underlying options which are not currently listed due to the
lack of an Options Market Maker registration in such options series.
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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change imposes
any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative for 30 days after the date of the filing, or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interest, the proposed rule change has
become effective pursuant to Section 19(b)(3)(A) of the Act \20\ and
Rule 19b-4(f)(6) thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii)
under the Act, the Exchange is required to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing 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 pursuant to Rule 19b-4(f)(6) under the
Act \22\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ 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 requested that the Commission waive the 30-day operative delay.
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\22\ 17 CFR 240.19b 4(f)(6).
\23\ 17 CFR 240.19b 4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest. In
making this determination, the Commission notes that BAT's proposed
rule change is substantially similar to Nasdaq's recently approved rule
change to eliminate its requirement that at least one options Market
Maker be registered for trading a particular series before it could be
opened for trading on NOM,\24\ and the Commission believes that BATS'
proposed rule change raises no new regulatory issues. The Commission
believes that waiving the operative delay will allow BATS to
immediately expand the number of series available for trading,
permitting BATS to compete with NOM in the trading of these series and
should foster intermarket price competition by providing an additional
market and source of liquidity for options series that would otherwise
have been prohibited from trading on BATS due to the lack of a Market
Maker registered in that series. For these reasons, the Commission
designates that the proposed rule change become operative
immediately.\25\
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\24\ See supra note 14.
\25\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. 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 may summarily abrogate the rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the 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 e-mail to rule-comments@sec.gov. Please include
File Number SR-BATS-2010-013 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BATS-2010-013. This file
number should be included on the subject line if e-mail 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, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-BATS-2010-013 and
[[Page 31494]]
should be submitted on or before June 24, 2010.
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\26\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-13341 Filed 6-2-10; 8:45 am]
BILLING CODE 8010-01-P
