Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by BATS Exchange, Inc. To Amend BATS Rules Related to Price Sliding Functionality, 50199-50204 [2012-20320]
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Federal Register / Vol. 77, No. 161 / Monday, August 20, 2012 / Notices
Commission, 100 F Street NE.,
Washington, DC 20549–0609.
All submissions should refer to File
Number SR–FICC–2012–06. To help the
Commission process and review your
comments more efficiently, please use
only one method of submission. 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 change that
are filed with the Commission, and all
written communications relating to the
proposed 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
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also will be available for inspection and
copying at the principal office of FICC
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rule_filings/2012/ficc/SR–FICC–2012–
06.pdf.
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be submitted on or before September 10,
2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.5
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–20398 Filed 8–17–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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[Release No. 34–67657; File No. SR–BATS–
2012–035]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change by BATS Exchange, Inc.
To Amend BATS Rules Related to
Price Sliding Functionality
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August 3,
2012, 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 proposes to amend
Rule 11.9, entitled ‘‘Orders and
Modifiers’’, and Rule 21.1, entitled
‘‘Definitions’’, to modify the operation
of the Exchange’s price sliding
functionality described in Rules 11.9
and 21.1 applicable to the BATS equity
securities trading platform (‘‘BATS
Equities’’) and the BATS equity options
trading platform (‘‘BATS Options’’),
respectively. The Exchange also
proposes other minor changes,
including changes to the terms used to
describe price sliding and crossreferences contained in Rules 11.13,
21.1, 21.6 and 21.9.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
August 14, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
5 17
CFR 200.30–3(a)(12).
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1 15
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).
2 17
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50199
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Background
The Exchange currently offers various
forms of sliding which, in all cases,
result in the re-pricing of an order to, or
ranking and/or display of an order at, a
price other than an order’s limit price in
order to comply with applicable
securities laws and/or Exchange rules.
Specifically, the Exchange currently
offers price sliding to ensure
compliance with Regulation NMS and
Regulation SHO for BATS Equities, as
well as price sliding for BATS Options
to ensure compliance rules analogous to
Regulation NMS adopted by the
Exchange and other options exchanges.
Price sliding currently offered by the
Exchange re-prices and displays an
order upon entry and in certain cases
again re-prices and re-displays an order
at a more aggressive price one time if
and when permissible, but does not
continually re-price an order based on
changes in the national best bid
(‘‘NBB’’) or national best offer (‘‘NBO’’,
and together with the NBB, the
‘‘NBBO’’). The Exchange proposes to
modify all forms of price sliding in
order to create an optional order
handling behavior functionality that
will continue to re-price, re-rank and/or
re-display an order based on changes to
the NBBO (‘‘multiple price sliding’’), as
further described below. Multiple price
sliding in all contexts for which it is
being proposed will have to be elected
by a User 5 in order to be applied by the
Exchange. If a User elects to apply
multiple price sliding to an order
submitted to BATS Equities, multiple
price sliding will apply with respect to
both display-price sliding and short sale
price sliding in connection with the
handling of the order by the Exchange.
The Exchange also proposes to add
language to make clear that displayprice sliding is based on Protected
Quotations 6 at equities markets and
5 As defined in BATS Rule 1.5(cc), a User is ‘‘any
Member or Sponsored Participant who is
authorized to obtain access to the System pursuant
to Rule 11.3.’’
6 As defined in BATS Rule 1.5(t), applicable to
BATS Equities, a ‘‘Protected Quotation’’ is ‘‘a
quotation that is a Protected Bid or Protected
Offer.’’ In turn, the term ‘‘Protected Bid’’ or
‘‘Protected Offer’’ means ‘‘a bid or offer in a stock
that is (i) displayed by an automated trading center;
(ii) disseminated pursuant to an effective national
market system plan; and (iii) an automated
quotation that is the best bid or best offer of a
national securities exchange or association.’’ As
defined in BATS Rule 27.1, applicable to BATS
Continued
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options exchanges other than the
Exchange. If the Exchange has a
Protected Quotation that an incoming
order to the Exchange locks or crosses
then such order either executes against
the resting order, or, if the incoming
order is a BATS Post Only Order or
Partial Post Only at Limit Order, such
order is executed in accordance with
Rules 11.9(c)(6) and (c)(7), respectively,
or cancelled back to the entering User,
as described in further detail below.
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BATS Equities—Display-Price Sliding
With respect to price sliding offered
to ensure compliance with Regulation
NMS (‘‘display-price sliding’’),7 under
the Exchange’s current rules for BATS
Equities, if, at the time of entry, a nonroutable order would cross a Protected
Quotation displayed by another trading
center the Exchange re-prices and ranks
such order at the locking price, and
displays such order at one minimum
price variation below the NBO for bids
and above the NBB for offers. Similarly,
in the event a non-routable order that,
at the time of entry, would lock a
Protected Quotation displayed by
another trading center, the Exchange
displays such order at one minimum
price variation below the NBO for bids
and above the NBB for offers.
As an example of display-price
sliding, assume the Exchange has a
posted and displayed bid to buy 100
shares of a security priced at $10.10 per
share and a posted and displayed offer
to sell 100 shares at $10.13 per share.
Assume the NBBO is $10.10 by $10.12.
If the Exchange receives a non-routable
bid to buy 100 shares at $10.12 per
share the Exchange will rank the order
to buy at $10.12 and display the order
at $10.11 because displaying the bid at
$10.12 would lock an external market’s
Protected Offer to sell for $10.12. If the
NBO then moved to $10.13, the
Exchange would un-slide the bid to buy
Options, a ‘‘Protected Quotation’’ is ‘‘a Protected
Bid or Protected Offer.’’ In turn, the term ‘‘Protected
Bid’’ or ‘‘Protected Offer’’ means ‘‘a Bid or Offer in
an options series, respectively, that: (A) Is
disseminated pursuant to the OPRA Plan; and (B)
is the Best Bid or Best Offer, respectively, displayed
by an Eligible Exchange.’’ An ‘‘Eligible Exchange’’
is defined in Rule 27.1 and means ‘‘a national
securities exchange registered with the SEC in
accordance with Section 6(a) of the Exchange Act
that: (a) Is a Participant Exchange in OCC (as that
term is defined in Section VII of the OCC by-laws);
(b) is a party to the OPRA Plan (as that term is
described in Section I of the OPRA Plan); and (c)
if the national securities exchange chooses not to
become a party to this Plan, is a participant in
another plan approved by the Commission
providing for comparable Trade-Through and
Locked and Crossed Market protection.’’
7 The Exchange’s Rules for BATS Equities
currently describe this functionality as ‘‘NMS price
sliding’’ but the Exchange proposes to rename such
functionality ‘‘display-price sliding.’’
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and display it at its ranked price (and
limit price) of $10.12.
The Exchange proposes to modify the
description of price sliding to make
clear that price sliding is generally
applied to orders that are eligible for
display, as such orders would violate
Rule 610(d) of Regulation NMS if they
were displayed by the Exchange at a
price that locked or crossed a Protected
Quotation. As described in further detail
below, certain price sliding is also
applied to Non-Displayed Orders, and
the Exchange has proposed certain
changes intended to clarify the
application of such price sliding.
The Exchange currently permits Users
to instruct the Exchange not to apply
price sliding functionality to their
orders. As one variation of this
instruction, the Exchange currently
allows Users to elect to apply displayprice sliding only to the extent a
display-eligible order at the time of
entry would create a violation of Rule
610(d) of Regulation NMS by locking a
Protected Quotation of an external
market (‘‘lock-only display-price
sliding’’). For Users that select this order
handling, price sliding is not applied
and any display-eligible order is instead
cancelled if, upon entry, such order
would create a violation of Rule 610(d)
of Regulation NMS by crossing a
Protected Quotation of an external
market. The lock-only display-price
sliding option is a variation of displayprice sliding that is intended to allow
Users to re-evaluate their orders and/or
strategies in the event they are
submitting orders to the Exchange that
are crossing the market. Consistent with
the goal of increasing the clarity of its
price sliding rule, the Exchange
proposes to modify its description of
display-price sliding to clearly define
the lock-only display-price sliding
option.
As an example of lock-only displayprice sliding, assume the Exchange has
a posted and displayed bid to buy 100
shares of a security priced at $10.10 per
share and a posted and displayed offer
to sell 100 shares at $10.14 per share.
Assume the NBBO is $10.10 by $10.12.
If the Exchange receives a non-routable
bid to buy 100 shares at $10.13 per
share and the User has elected lock-only
display-price sliding, the Exchange will
cancel the order back to the User. To
reiterate a basic example of displayprice sliding, if instead the User applied
display-price sliding (and not lock-only
display-price sliding), the Exchange
would rank the order to buy at $10.12
and display the order at $10.11 because
displaying the bid at $10.13 would cross
an external market’s Protected Offer to
sell for $10.12. If the NBO then moved
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to $10.13, the Exchange would un-slide
the bid to buy and display it at $10.12.
The Exchange proposes to modify the
description of display-price sliding so
that any order subject to display-price
sliding will retain its original limit price
irrespective of the prices at which such
order is ranked and displayed.
Accordingly, the Exchange also
proposes to clarify language throughout
its descriptions of display-price sliding
to refer to the ranking and display of an
order rather than using the term reprice. In order to ensure compliance
with Regulation NMS, as it does today,
the Exchange will rank orders subject to
display-price sliding at the locking price
and will display such orders at one
minimum price variation below the
current NBO (for bids) or to one
minimum price variation above the
current NBB (for offers).
The Exchange also proposes to amend
its existing description of display-price
sliding to state that when an order is
displayed by the Exchange through the
display-price sliding process the
Exchange will display such order at the
most aggressive permissible price. The
Exchange’s current description of
display-price sliding states that orders
that are re-displayed by the Exchange
receive new timestamps when this new
display price is established. The
Exchange proposes to retain this
language but also to make clear that all
orders that are re-ranked and redisplayed pursuant to display-price
sliding will retain their priority as
compared to other orders subject to
display-price sliding based upon the
time such orders were initially received
by the Exchange. Finally, the proposed
description of price sliding also states
that following the initial ranking and
display of an order subject to displayprice sliding, an order will only be reranked and re-displayed to the extent it
achieves a more aggressive price.
In order to offer multiple price sliding
to Exchange Users, the Exchange
proposes to make clear that the ranked
and displayed prices of an order subject
to display-price sliding may be adjusted
once or multiple times depending upon
the instructions of a User and changes
to the prevailing NBBO. As noted above,
multiple price sliding is optional and
must be explicitly selected by a User
before it will be applied. The Exchange
proposes to make clear that the default
display-price sliding process will only
adjust the ranked and displayed prices
of an order upon entry and then the
displayed price one time following a
change to the prevailing NBBO. As
explained throughout this filing, orders
subject to multiple price sliding will be
permitted to move all the way back to
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their most aggressive price, whereas
orders subject to the current handling
may not be adjusted to their most
aggressive price, depending upon
market conditions.
As an example of multiple price
sliding, assume the Exchange has a
posted and displayed bid to buy 100
shares of a security priced at $10.10 per
share and a posted and displayed offer
to sell 100 shares at $10.14 per share.
Assume the NBBO is $10.10 by $10.12.
If the Exchange receives a non-routable
bid to buy 100 shares at $10.13 per
share, the Exchange would rank the
order to buy at $10.12 and display the
order at $10.11 because displaying the
bid at $10.13 would cross an external
market’s Protected Offer to sell for
$10.12. If the NBO then moved to
$10.13, the Exchange would un-slide
the bid to buy, rank it at $10.13 and
display it at $10.12. Under current price
sliding functionality, the Exchange
would not further adjust the ranked or
displayed price following this un-slide.
However, under multiple price sliding,
if the NBO then moved to $10.14, the
Exchange would un-slide the bid to buy
and display it at its full limit price of
$10.13.
The Exchange offers display-price
sliding functionality to avoid locking or
crossing other markets’ Protected
Quotations, but does not price slide to
avoid executions on the Exchange’s
order book (‘‘BATS Book’’).8
Specifically, when the Exchange
receives an incoming order that could
execute against resting displayed
liquidity but an execution does not
8 The Exchange notes that it inadvertently
constructed an example in a previous rule filing
that contradicts this statement. Specifically, in
Example 5 of SR–BATS–2011–015, in order to
establish the possibility of an order that has been
price slid and has a working price ranked at the
same price as an order displayed by the Exchange
on the opposite side of the market, the Exchange
explained that an incoming BATS Post Only bid at
$10.11 would price slide if it locked an offer
displayed by the Exchange at $10.11. See Securities
Exchange Act Release No. 64475 (May 12, 2011), 76
FR 28830, 28832 (May 18, 2011) (SR–BATS–2011–
015) (the ‘‘Order Handling Filing’’). However, at the
time of the Order Handling Filing, under the
current behavior, and as proposed, the Exchange
would not price slide a BATS Post Only order to
avoid an execution against an order displayed by
the Exchange. The Exchange notes that Example 5
from the Order Handling Filing would be accurate
if instead the incoming bid at $10.11 locked a
protected offer displayed by an external market and
not also displayed by the Exchange, was price slid
and displayed at $10.10, ranked at $10.11, and
BATS subsequently received a BATS Post Only
offer at $10.11. In other words, the outcome would
be the same as set forth in Example 5, insofar as
the price slid order could ultimately have a ranked
price that locks the contra-side, however the
sequence leading up to that outcome neither is nor
was possible as described because the Exchange
does not price slide to avoid executions against the
BATS Book.
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occur because such incoming order is
designated as an order that will not
remove liquidity (i.e., a BATS Post Only
Order),9 then the Exchange will cancel
the incoming order. The Exchange
proposes to make clear in the
description of display-price sliding that
any display-eligible BATS Post Only
Order that locks or crosses a Protected
Quotation displayed by the Exchange
upon entry will not be price slid upon
entry but will be executed as set forth
in Rule 11.9(c)(6) or cancelled.
Similarly, the Exchange proposes to
make clear that any display-eligible
Partial Post Only at Limit Order that
locks or crosses a Protected Quotation
displayed by the Exchange upon entry
will be executed as set forth in Rule
11.9(c)(7) or cancelled. The Exchange
also proposes to make clear that any
display-eligible BATS Post Only Order
or Partial Post Only at Limit Order that
locks or crosses a Protected Quotation
displayed by an external market upon
entry will be subject to the display-price
sliding process. Consistent with the
principal of not price sliding to avoid
executions, in the event the NBBO
changes such that a BATS Post Only
Order subject to display-price sliding
would un-slide and would be ranked at
a price at which it could remove
displayed liquidity from the BATS Book
(i.e., when the Exchange is at the NBB
or NBO) the Exchange proposes to
execute 10 or cancel such order.
The Exchange previously proposed
changes to its existing order handling
procedures to permit BATS Post Only
Orders to be posted to the BATS Book
to join the NBB or NBO, as applicable,
even when such orders would be posted
at prices equal to opposite-side orders
ranked at the same price.11 Consistent
with this previously adopted change,
the Exchange proposes to add language
stating that BATS Post Only Orders will
be permitted to post and be displayed
opposite the ranked price of orders
subject to display-price sliding. As is
the case today, in the event an order
subject to display-price sliding is ranked
on the BATS Book with a price equal to
an opposite side order displayed by the
9 The Exchange notes that it recently proposed
and implemented a change to Rule 11.9(c)(6)
regarding the Exchange’s handling of BATS Post
Only Orders to permit such orders to remove
liquidity from the BATS Book if the value of price
improvement associated with such execution equals
or exceeds the sum of fees charged for such
execution and the value of any rebate that would
be provided if the order posted to the BATS Book
and subsequently provided liquidity. See Securities
Exchange Act Release No. 67093 (June 1, 2012), 77
FR 33798 (June 7, 2012) (SR–BATS–2012–018).
10 As noted above, the Exchange will execute a
BATS Post Only Order in certain circumstances
where it would receive price improvement. See id.
11 See Order Handling Filing, supra note 7.
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50201
Exchange, it will be subject to
processing as set forth in Rule
11.13(a)(1).
As an example of the Exchange’s
handling of BATS Post Only Orders in
the context of price sliding, assume the
Exchange has a posted and displayed
bid to buy 100 shares of a security
priced at $10.10 per share and a posted
and displayed offer to sell 100 shares at
$10.12 per share. Assume the NBBO
(including Protected Quotations of other
external markets) is also $10.10 by
$10.12. If the Exchange receives a BATS
Post Only Order bid to buy 100 shares
at $10.12 per share, unless executed
pursuant to Rule 11.9(c)(6),12 the
Exchange would cancel the order back
to the User because absent the BATS
Post Only designation the $10.12 bid
would be able to remove the $10.12
offer, and, as explained above, the
Exchange does not offer price sliding to
avoid executions against orders
displayed by the Exchange.
If the Exchange did not have a
displayed offer to sell at $10.12 in the
example above, but instead the best
offer on the Exchange’s book was
$10.13, the Exchange would apply price
sliding to the incoming bid by ranking
such order at $10.12 and displaying the
order at $10.11. The Exchange’s order
book would now be displayed as $10.11
by $10.13. Assume, however, that after
price sliding the incoming bid from
$10.12 to a display price of $10.11, the
Exchange received a BATS Post Only
offer to sell for $10.12, thus joining the
NBO. As noted above, pursuant to
previously adopted changes, BATS Post
Only Orders are permitted to post and
be displayed opposite the ranked price
of orders subject to display-price
sliding. Accordingly, the Exchange
would allow such the incoming BATS
Post Only offer at $10.12 to post and
display on the Exchange’s order book, as
described above, with an opposite side
price slid order ranked at $10.12 but
displayed at $10.11. Assume that next
the Protected Offers displayed by all
external markets other than the
Exchange moved to $10.13. In this
situation the Exchange would un-slide
but then cancel the bid at $10.12
because, as proposed, in the event the
NBBO changes such that a BATS Post
Only Order subject to display-price
sliding would un-slide and would be
ranked at a price at which it could
remove displayed liquidity from the
BATS Book (i.e., when the Exchange is
at the NBB or NBO) the Exchange
12 See
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supra note 8.
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proposes to execute 13 or cancel such
order.
The Exchange currently applies
display-price sliding to Non-Displayed
Orders that cross Protected Quotations
of external markets as well. The
Exchange proposes language that makes
clear that this functionality is offered
both upon entry and once an order has
been posted to the Exchange’s order
book in order to avoid potentially
trading through Protected Quotations of
external markets. The proposed rule
states that Non-Displayed Orders that
are subject to display-price sliding are
ranked at the locking price on entry.
The proposed description also makes
clear that display-price sliding for NonDisplayed Orders is functionally
equivalent to the handling of
displayable orders except that such
orders will not have a displayed price
and will not be re-priced again unless
such orders cross a Protected Quotation
of an external market (i.e., such orders
are not unslid).
As an example of the Exchange’s
handling of Non-Displayed Orders in
the context of price sliding, assume the
Exchange has a posted and displayed
bid to buy 100 shares of a security
priced at $10.10 per share and a posted
and displayed offer to sell 100 shares at
$10.13 per share. Assume the NBBO is
$10.10 by $10.11. If the Exchange
receives a Non-Displayed Order bid to
buy 100 shares at $10.12 per share, the
Exchange would re-price the order to a
$10.11 bid to buy to avoid potentially
trading through the $10.11 offer
displayed as the NBO (i.e., to ensure the
Exchange will not allow the bid to trade
at $10.12 per share). In the event the
NBBO moved to $10.09 by $10.10, the
Exchange would again re-price the NonDisplayed bid to buy 100 shares to
$10.10 per share. If the NBBO then
moved to $10.10 by $10.11, the NonDisplayed bid would not be re-priced to
$10.11, but would remain on the
Exchange’s order book at $10.10.
As described above, the Exchange has
proposed to offer multiple price sliding
to Exchange Users that opt-in to the
functionality. The remaining changes
described above are intended to clarify
and expand upon the written
description of display-price sliding, but
do not represent changes to the existing
functionality offered by the Exchange.
Consistent with achieving better clarity,
the Exchange has proposed structural
changes to the description of display13 As noted above, the Exchange will execute a
BATS Post Only Order in certain circumstances
where it would receive price improvement. See
supra note 8.
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price sliding by separating the
description into several sub-paragraphs.
BATS Equities—Short Sale Price Sliding
With respect to price sliding offered
to ensure compliance with Regulation
SHO on BATS Equities (‘‘short sale
price sliding’’), when an order cannot be
executed or displayed in compliance
with Rule 201 of Regulation SHO,14 the
Exchange currently re-prices short sale
orders to one minimum price variation
above the current NBB (‘‘Permitted
Price’’). In order to describe this repricing, the Exchange proposes to add
the term ‘‘Permitted Price’’ to its
description of short sale price sliding. In
order to offer multiple price sliding in
the short sale price sliding context, the
Exchange proposes to amend its rules to
state that depending upon the
instructions of a User, to reflect declines
in the NBB the System will continue to
re-price a short sale order at the
Permitted Price down to the order’s
original limit price. Accordingly, short
sale orders subject to multiple price
sliding that are adjusted to lower price
levels due to a decline to the NBB will
be priced at one minimum price
variation above the current NBB. As is
true for display-price sliding, multiple
price sliding is optional and must be
explicitly selected by a User before it
will be applied. The Exchange’s default
short sale sliding process will only reprice an order upon entry. Accordingly,
there will be no change to existing Users
of short sale price sliding due to the
proposed introduction of multiple price
sliding unless such Users opt-in to the
functionality.
As an example of the Exchange’s
current short sale price sliding, which
adjusts the price of an order only upon
entry, assume the Exchange has a posted
and displayed bid to buy 100 shares of
a security priced at $10.10 per share and
a posted and displayed offer to sell 100
shares at $10.13 per share.15 Assume the
NBBO is $10.10 by $10.12. If the
Exchange receives a non-routable offer
to sell 100 shares at $10.10 per share
and the order is marked ‘‘short’’ the
Exchange will rank and display the
order to sell at $10.11 because executing
the short sale at $10.10, the NBB, would
be in contravention of Regulation SHO.
The result would be the same if the
Exchange had no bids at $10.10 because
the Exchange cannot display an order
marked ‘‘short’’ at the current NBB
(such display would also lock the
protected quote of an external market).
14 17
CFR 242.201.
purposes of these examples, Rule 201’s
short sale price test is assumed to be in effect for
the security at the time.
15 For
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If the NBB then moved to $10.09, under
existing handling, the Exchange would
not re-price or re-display the order, but
instead would leave it as a displayed
offer to sell 100 shares at $10.11. Under
multiple price sliding, however, the
Exchange would re-price and display
the offer at $10.10 if the NBB moved to
$10.09. If, in the example above, the
NBB instead moved upwards to $10.11,
the Exchange would not re-price or
restrict execution of the resting $10.11
offer under either type of short sale
price sliding. The Exchange notes that if
this were the case, its quotation would
be locked.
In addition to changes to the
description of short sale price sliding to
add the option of multiple price sliding,
the Exchange proposes various changes
to improve the accuracy and the clarity
of the description of short sale price
sliding. For instance, the Exchange
proposes to make clear that when a
short sale price test restriction under
Rule 201 of Regulation SHO is in effect,
the System may execute a displayed
short sale order at a price below the
Permitted Price if, at the time of initial
display of the short sale order, the order
was at a price above the then current
NBB. The Exchange also proposes to
make clear that orders marked ‘‘short
exempt’’ will not be subject to short sale
price sliding.
BATS Options—Display-Price Sliding
In order to maintain consistency
between analogous processes offered by
BATS Equities and BATS Options, the
Exchange proposes to modify the rules
of BATS Options to conform with the
changes described above related to
display-price sliding. Accordingly, the
Exchange proposes deleting the current
description of price sliding from Rule
21.1(d)(6), and adopting new Rule
21.1(h), which is based on Rule 11.9, as
amended. Proposed Rule 21.1(h) relates
to display-price sliding 16 offered to
ensure compliance with locked and
crossed market rules relevant to
participation on BATS Options. As
proposed, in order to adopt multiple
price sliding for BATS Options displayprice sliding, Rule 21.1(h) will provide
that the ranked and displayed prices of
an order subject to display-price sliding
may be adjusted once or multiple times
depending upon the instructions of a
User and changes to the prevailing
NBBO. As is true for BATS Equities,
display-price sliding for BATS Options
will default to the current functionality
16 The Exchange’s Rules for BATS Options
currently describe this functionality as ‘‘displayed
price sliding’’ but the Exchange proposes to rename
such functionality ‘‘display-price sliding.’’
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mstockstill on DSK4VPTVN1PROD with NOTICES
pursuant to which the ranked and
displayed prices of an order will be
adjusted upon entry and then the
displayed price will be adjusted one
time following a change to the
prevailing NBBO. Users will need to
opt-in to multiple price sliding
functionality.
As drafted, Rule 21.1(h) is identical to
the description of display-price sliding
set forth in proposed Rule 11.9 and
described above with the exception of
minor references necessary due to the
difference between rules applicable to
BATS Equities and BATS Options, the
omission of certain rule text specific to
non-displayed orders, which are
applicable to BATS Equities only, and
the omission of reference to the specific
order handling process for BATS
Equities described in Rule 11.13(a)(1).
In addition to the adoption of Rule
21.1(h), the Exchange proposes to delete
a portion of the display-price sliding
process that is described in Rule
21.1(d)(8), which states that an order
that would cross a Protected Quotation
will be re-priced to the locking price
and ranked in the BATS Options Book.
The Exchange proposes to eliminate this
language because it is duplicative with
the proposed language in Rule 21.1(h).
The Exchange also proposes to modify
applicable cross-references in Rules
21.1(d), 21.6 and 21.9.
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 prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in facilitating transactions in securities,
and to remove impediments to, and
perfect the mechanism of, a free and
open market and a national market
system.
The Exchange believes that the
proposed changes to price sliding are
consistent with Section 6(b)(5) of the
Act,19 as well as Rule 610 of Regulation
NMS 20 and Rule 201 of Regulation
SHO.21 The Exchange is not modifying
the overall functionality of price sliding,
17 15
18 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
which, to avoid locking or crossing
quotations of other market centers or to
comply with applicable short sale
restrictions, displays orders at
permissible prices while retaining a
price at which the User is willing to buy
or sell, in the event display at such price
or an execution at such price becomes
possible. Instead, the Exchange is
making changes to adopt an optional
form of price sliding, multiple price
sliding, and to clarify portions of its
Rules that describe price sliding.
Rule 610(d) requires exchanges to
establish, maintain, and enforce rules
that require members reasonably to
avoid ‘‘[d]isplaying quotations that lock
or cross any protected quotation in an
NMS stock.’’ 22 Such rules must be
‘‘reasonably designed to assure the
reconciliation of locked or crossed
quotations in an NMS stock,’’ and must
‘‘prohibit * * * members from engaging
in a pattern or practice of displaying
quotations that lock or cross any
quotation in an NMS stock.’’ 23 Thus,
display-price sliding offered by the
Exchange, including the functionality
offered for BATS Options, assists Users
by displaying orders at permissible
prices. Similarly, Rule 201 of Regulation
SHO 24 requires trading centers to
establish, maintain, and enforce written
policies and procedures reasonably
designed to prevent the execution or
display of a short sale order at a price
at or below the current NBB under
certain circumstances. The Exchange’s
short sale price sliding will continue to
operate consistent with this rule,
however, if a User opts-in to multiple
price sliding, the Exchange will re-price
a short sale order based on declines to
the NBB. If, instead, a User maintains
the default form of price sliding, the
Exchange will only re-price and display
an order subject to short sale price
sliding upon entry but will not update
the order to reflect declines to the NBB.
The Exchange notes that the proposed
descriptions of price sliding will also
more closely mirror the description
used by at least one of its competitors,
the Nasdaq Stock Market LLC
(‘‘Nasdaq’’), and thus will help to avoid
confusion amongst Exchange Users that
also utilize analogous functionality at
Nasdaq.
(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.
19 Id.
22 17
20 17
23 Id.
CFR 242.610.
21 17 CFR 242.201.
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50203
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Changes and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 25 and Rule 19b–
4(f)(6)(iii) thereunder.26
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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 rulecomments@sec.gov. Please include File
Number SR–BATS–2012–035 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–2012–035. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
25 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b-4(f)(6). As required under Rule
19b-4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change along with a brief
description and the 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.
26 17
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Federal Register / Vol. 77, No. 161 / Monday, August 20, 2012 / Notices
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, 100 F Street NE.,
Washington, DC 20549, 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–
2012–035 and should be submitted on
or before September 10, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–20320 Filed 8–17–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
Star Entertainment Group, Inc., Order
of Suspension of Trading
mstockstill on DSK4VPTVN1PROD with NOTICES
August 16, 2012.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Star
Entertainment Group, Inc. (‘‘Star
Entertainment’’) because of questions
regarding the accuracy of the company’s
financial statements published with
OTC Markets Group Inc. Star
Entertainment’s securities are quoted on
OTC Link operated by OTC Markets
Group Inc. under the ticker symbol
‘‘SETY.’’
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-quoted
company.
Therefore, it is ordered, pursuant to
Section 12(k) of the Securities Exchange
Act of 1934, that trading in the abovequoted company is suspended for the
period from August 16, 2012, 9:30 a.m.
EDT, on August 16, 2012 through 11:59
p.m. EDT, on August 29, 2012.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–20484 Filed 8–16–12; 4:15 pm]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #13196 and #13197]
Colorado Disaster Number CO–00046
Small Business Administration.
ACTION: Amendment 1.
AGENCY:
This is an amendment of the
Administrative declaration of a major
disaster for the State of Colorado,
effective 08/08/2012.
Incident: Wildfires in El Paso and
Larimer Counties and Subsequent
Flooding and Mudslides.
Incident Period: 06/09/2012 through
07/11/2012.
Effective Date: 08/08/2012.
Physical Loan Application Deadline
Date: 10/09/2012.
EIDL Loan Application Deadline Date:
05/07/2013.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road Fort, Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: The notice
of an Administrative declaration for the
State of Colorado, dated 08/07/2012 is
hereby amended to establish the
incident period ending date of 07/11/
2012.
All other information in the original
declaration remains unchanged.
SUMMARY:
(Catalog of Federal Domestic Assistance
Numbers 59002 and 59008)
Dated: August 9, 2012.
Karen G. Mills,
Administrator.
[FR Doc. 2012–20303 Filed 8–17–12; 8:45 am]
27 17
CFR 200.30–3(a)(12).
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SOCIAL SECURITY ADMINISTRATION
Agency Information Collection
Activities: Proposed Request and
Comment Request
The Social Security Administration
(SSA) publishes a list of information
collection packages requiring clearance
by the Office of Management and
Budget (OMB) in compliance with
Public Law 104–13, the Paperwork
Reduction Act of 1995, effective October
1, 1995. This notice includes one
revision and one extension of OMBapproved information collections.
SSA is soliciting comments on the
accuracy of the agency’s burden
estimate; the need for the information;
its practical utility; ways to enhance its
quality, utility, and clarity; and ways to
minimize burden on respondents,
including the use of automated
collection techniques or other forms of
information technology. Mail, email, or
fax your comments and
recommendations on the information
collection(s) to the OMB Desk Officer
and SSA Reports Clearance Officer at
the following addresses or fax numbers.
(OMB)
Office of Management and Budget, Attn:
Desk Officer for SSA, Fax: 202–395–
6974, Email address:
OIRA_Submission@omb.eop.gov;
(SSA)
Social Security Administration, DCRDP,
Attn: Reports Clearance Director, 107
Altmeyer Building, 6401 Security
Blvd., Baltimore, MD 21235, Fax:
410–966–2830, Email address:
OPLM.RCO@ssa.gov.
I
The information collection below is
pending at SSA. SSA will submit it to
OMB within 60 days from the date of
this notice. To be sure we consider your
comments, we must receive them no
later than October 19, 2012. Individuals
can obtain copies of the collection
instrument by writing to the above
email address.
Vocational Rehabilitation Provider
Claim—20 CFR 404.2108(b),
404.2117(c)(1)&(2), 404.2101(a)&(b),
404.2121(a), 416.2208(b),
416.2217(c)(1)&(2), 416.2201(a)&(b),
416.2221(a), 34 CFR 361—0960–0310.
State Vocational Rehabilitation (VR)
agencies submit Form SSA–199 to SSA
to obtain reimbursement of costs
incurred for providing VR services. SSA
requires state VR agencies to submit
reimbursement claims for the following
categories: (1) Claiming reimbursement
for VR services provided; (2) certifying
adherence to cost containment policies
and procedures; and (3) preparing
E:\FR\FM\20AUN1.SGM
20AUN1
]]>Agencies
[Federal Register Volume 77, Number 161 (Monday, August 20, 2012)]
[Notices]
[Pages 50199-50204]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-20320]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67657; File No. SR-BATS-2012-035]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change by BATS
Exchange, Inc. To Amend BATS Rules Related to Price Sliding
Functionality
August 14, 2012.
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 August 3, 2012, 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 11.9, entitled ``Orders and
Modifiers'', and Rule 21.1, entitled ``Definitions'', to modify the
operation of the Exchange's price sliding functionality described in
Rules 11.9 and 21.1 applicable to the BATS equity securities trading
platform (``BATS Equities'') and the BATS equity options trading
platform (``BATS Options''), respectively. The Exchange also proposes
other minor changes, including changes to the terms used to describe
price sliding and cross-references contained in Rules 11.13, 21.1, 21.6
and 21.9.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background
The Exchange currently offers various forms of sliding which, in
all cases, result in the re-pricing of an order to, or ranking and/or
display of an order at, a price other than an order's limit price in
order to comply with applicable securities laws and/or Exchange rules.
Specifically, the Exchange currently offers price sliding to ensure
compliance with Regulation NMS and Regulation SHO for BATS Equities, as
well as price sliding for BATS Options to ensure compliance rules
analogous to Regulation NMS adopted by the Exchange and other options
exchanges. Price sliding currently offered by the Exchange re-prices
and displays an order upon entry and in certain cases again re-prices
and re-displays an order at a more aggressive price one time if and
when permissible, but does not continually re-price an order based on
changes in the national best bid (``NBB'') or national best offer
(``NBO'', and together with the NBB, the ``NBBO''). The Exchange
proposes to modify all forms of price sliding in order to create an
optional order handling behavior functionality that will continue to
re-price, re-rank and/or re-display an order based on changes to the
NBBO (``multiple price sliding''), as further described below. Multiple
price sliding in all contexts for which it is being proposed will have
to be elected by a User \5\ in order to be applied by the Exchange. If
a User elects to apply multiple price sliding to an order submitted to
BATS Equities, multiple price sliding will apply with respect to both
display-price sliding and short sale price sliding in connection with
the handling of the order by the Exchange. The Exchange also proposes
to add language to make clear that display-price sliding is based on
Protected Quotations \6\ at equities markets and
[[Page 50200]]
options exchanges other than the Exchange. If the Exchange has a
Protected Quotation that an incoming order to the Exchange locks or
crosses then such order either executes against the resting order, or,
if the incoming order is a BATS Post Only Order or Partial Post Only at
Limit Order, such order is executed in accordance with Rules 11.9(c)(6)
and (c)(7), respectively, or cancelled back to the entering User, as
described in further detail below.
---------------------------------------------------------------------------
\5\ As defined in BATS Rule 1.5(cc), a User is ``any Member or
Sponsored Participant who is authorized to obtain access to the
System pursuant to Rule 11.3.''
\6\ As defined in BATS Rule 1.5(t), applicable to BATS Equities,
a ``Protected Quotation'' is ``a quotation that is a Protected Bid
or Protected Offer.'' In turn, the term ``Protected Bid'' or
``Protected Offer'' means ``a bid or offer in a stock that is (i)
displayed by an automated trading center; (ii) disseminated pursuant
to an effective national market system plan; and (iii) an automated
quotation that is the best bid or best offer of a national
securities exchange or association.'' As defined in BATS Rule 27.1,
applicable to BATS Options, a ``Protected Quotation'' is ``a
Protected Bid or Protected Offer.'' In turn, the term ``Protected
Bid'' or ``Protected Offer'' means ``a Bid or Offer in an options
series, respectively, that: (A) Is disseminated pursuant to the OPRA
Plan; and (B) is the Best Bid or Best Offer, respectively, displayed
by an Eligible Exchange.'' An ``Eligible Exchange'' is defined in
Rule 27.1 and means ``a national securities exchange registered with
the SEC in accordance with Section 6(a) of the Exchange Act that:
(a) Is a Participant Exchange in OCC (as that term is defined in
Section VII of the OCC by-laws); (b) is a party to the OPRA Plan (as
that term is described in Section I of the OPRA Plan); and (c) if
the national securities exchange chooses not to become a party to
this Plan, is a participant in another plan approved by the
Commission providing for comparable Trade-Through and Locked and
Crossed Market protection.''
---------------------------------------------------------------------------
BATS Equities--Display-Price Sliding
With respect to price sliding offered to ensure compliance with
Regulation NMS (``display-price sliding''),\7\ under the Exchange's
current rules for BATS Equities, if, at the time of entry, a non-
routable order would cross a Protected Quotation displayed by another
trading center the Exchange re-prices and ranks such order at the
locking price, and displays such order at one minimum price variation
below the NBO for bids and above the NBB for offers. Similarly, in the
event a non-routable order that, at the time of entry, would lock a
Protected Quotation displayed by another trading center, the Exchange
displays such order at one minimum price variation below the NBO for
bids and above the NBB for offers.
---------------------------------------------------------------------------
\7\ The Exchange's Rules for BATS Equities currently describe
this functionality as ``NMS price sliding'' but the Exchange
proposes to rename such functionality ``display-price sliding.''
---------------------------------------------------------------------------
As an example of display-price sliding, assume the Exchange has a
posted and displayed bid to buy 100 shares of a security priced at
$10.10 per share and a posted and displayed offer to sell 100 shares at
$10.13 per share. Assume the NBBO is $10.10 by $10.12. If the Exchange
receives a non-routable bid to buy 100 shares at $10.12 per share the
Exchange will rank the order to buy at $10.12 and display the order at
$10.11 because displaying the bid at $10.12 would lock an external
market's Protected Offer to sell for $10.12. If the NBO then moved to
$10.13, the Exchange would un-slide the bid to buy and display it at
its ranked price (and limit price) of $10.12.
The Exchange proposes to modify the description of price sliding to
make clear that price sliding is generally applied to orders that are
eligible for display, as such orders would violate Rule 610(d) of
Regulation NMS if they were displayed by the Exchange at a price that
locked or crossed a Protected Quotation. As described in further detail
below, certain price sliding is also applied to Non-Displayed Orders,
and the Exchange has proposed certain changes intended to clarify the
application of such price sliding.
The Exchange currently permits Users to instruct the Exchange not
to apply price sliding functionality to their orders. As one variation
of this instruction, the Exchange currently allows Users to elect to
apply display-price sliding only to the extent a display-eligible order
at the time of entry would create a violation of Rule 610(d) of
Regulation NMS by locking a Protected Quotation of an external market
(``lock-only display-price sliding''). For Users that select this order
handling, price sliding is not applied and any display-eligible order
is instead cancelled if, upon entry, such order would create a
violation of Rule 610(d) of Regulation NMS by crossing a Protected
Quotation of an external market. The lock-only display-price sliding
option is a variation of display-price sliding that is intended to
allow Users to re-evaluate their orders and/or strategies in the event
they are submitting orders to the Exchange that are crossing the
market. Consistent with the goal of increasing the clarity of its price
sliding rule, the Exchange proposes to modify its description of
display-price sliding to clearly define the lock-only display-price
sliding option.
As an example of lock-only display-price sliding, assume the
Exchange has a posted and displayed bid to buy 100 shares of a security
priced at $10.10 per share and a posted and displayed offer to sell 100
shares at $10.14 per share. Assume the NBBO is $10.10 by $10.12. If the
Exchange receives a non-routable bid to buy 100 shares at $10.13 per
share and the User has elected lock-only display-price sliding, the
Exchange will cancel the order back to the User. To reiterate a basic
example of display-price sliding, if instead the User applied display-
price sliding (and not lock-only display-price sliding), the Exchange
would rank the order to buy at $10.12 and display the order at $10.11
because displaying the bid at $10.13 would cross an external market's
Protected Offer to sell for $10.12. If the NBO then moved to $10.13,
the Exchange would un-slide the bid to buy and display it at $10.12.
The Exchange proposes to modify the description of display-price
sliding so that any order subject to display-price sliding will retain
its original limit price irrespective of the prices at which such order
is ranked and displayed. Accordingly, the Exchange also proposes to
clarify language throughout its descriptions of display-price sliding
to refer to the ranking and display of an order rather than using the
term re-price. In order to ensure compliance with Regulation NMS, as it
does today, the Exchange will rank orders subject to display-price
sliding at the locking price and will display such orders at one
minimum price variation below the current NBO (for bids) or to one
minimum price variation above the current NBB (for offers).
The Exchange also proposes to amend its existing description of
display-price sliding to state that when an order is displayed by the
Exchange through the display-price sliding process the Exchange will
display such order at the most aggressive permissible price. The
Exchange's current description of display-price sliding states that
orders that are re-displayed by the Exchange receive new timestamps
when this new display price is established. The Exchange proposes to
retain this language but also to make clear that all orders that are
re-ranked and re-displayed pursuant to display-price sliding will
retain their priority as compared to other orders subject to display-
price sliding based upon the time such orders were initially received
by the Exchange. Finally, the proposed description of price sliding
also states that following the initial ranking and display of an order
subject to display-price sliding, an order will only be re-ranked and
re-displayed to the extent it achieves a more aggressive price.
In order to offer multiple price sliding to Exchange Users, the
Exchange proposes to make clear that the ranked and displayed prices of
an order subject to display-price sliding may be adjusted once or
multiple times depending upon the instructions of a User and changes to
the prevailing NBBO. As noted above, multiple price sliding is optional
and must be explicitly selected by a User before it will be applied.
The Exchange proposes to make clear that the default display-price
sliding process will only adjust the ranked and displayed prices of an
order upon entry and then the displayed price one time following a
change to the prevailing NBBO. As explained throughout this filing,
orders subject to multiple price sliding will be permitted to move all
the way back to
[[Page 50201]]
their most aggressive price, whereas orders subject to the current
handling may not be adjusted to their most aggressive price, depending
upon market conditions.
As an example of multiple price sliding, assume the Exchange has a
posted and displayed bid to buy 100 shares of a security priced at
$10.10 per share and a posted and displayed offer to sell 100 shares at
$10.14 per share. Assume the NBBO is $10.10 by $10.12. If the Exchange
receives a non-routable bid to buy 100 shares at $10.13 per share, the
Exchange would rank the order to buy at $10.12 and display the order at
$10.11 because displaying the bid at $10.13 would cross an external
market's Protected Offer to sell for $10.12. If the NBO then moved to
$10.13, the Exchange would un-slide the bid to buy, rank it at $10.13
and display it at $10.12. Under current price sliding functionality,
the Exchange would not further adjust the ranked or displayed price
following this un-slide. However, under multiple price sliding, if the
NBO then moved to $10.14, the Exchange would un-slide the bid to buy
and display it at its full limit price of $10.13.
The Exchange offers display-price sliding functionality to avoid
locking or crossing other markets' Protected Quotations, but does not
price slide to avoid executions on the Exchange's order book (``BATS
Book'').\8\ Specifically, when the Exchange receives an incoming order
that could execute against resting displayed liquidity but an execution
does not occur because such incoming order is designated as an order
that will not remove liquidity (i.e., a BATS Post Only Order),\9\ then
the Exchange will cancel the incoming order. The Exchange proposes to
make clear in the description of display-price sliding that any
display-eligible BATS Post Only Order that locks or crosses a Protected
Quotation displayed by the Exchange upon entry will not be price slid
upon entry but will be executed as set forth in Rule 11.9(c)(6) or
cancelled. Similarly, the Exchange proposes to make clear that any
display-eligible Partial Post Only at Limit Order that locks or crosses
a Protected Quotation displayed by the Exchange upon entry will be
executed as set forth in Rule 11.9(c)(7) or cancelled. The Exchange
also proposes to make clear that any display-eligible BATS Post Only
Order or Partial Post Only at Limit Order that locks or crosses a
Protected Quotation displayed by an external market upon entry will be
subject to the display-price sliding process. Consistent with the
principal of not price sliding to avoid executions, in the event the
NBBO changes such that a BATS Post Only Order subject to display-price
sliding would un-slide and would be ranked at a price at which it could
remove displayed liquidity from the BATS Book (i.e., when the Exchange
is at the NBB or NBO) the Exchange proposes to execute \10\ or cancel
such order.
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\8\ The Exchange notes that it inadvertently constructed an
example in a previous rule filing that contradicts this statement.
Specifically, in Example 5 of SR-BATS-2011-015, in order to
establish the possibility of an order that has been price slid and
has a working price ranked at the same price as an order displayed
by the Exchange on the opposite side of the market, the Exchange
explained that an incoming BATS Post Only bid at $10.11 would price
slide if it locked an offer displayed by the Exchange at $10.11. See
Securities Exchange Act Release No. 64475 (May 12, 2011), 76 FR
28830, 28832 (May 18, 2011) (SR-BATS-2011-015) (the ``Order Handling
Filing''). However, at the time of the Order Handling Filing, under
the current behavior, and as proposed, the Exchange would not price
slide a BATS Post Only order to avoid an execution against an order
displayed by the Exchange. The Exchange notes that Example 5 from
the Order Handling Filing would be accurate if instead the incoming
bid at $10.11 locked a protected offer displayed by an external
market and not also displayed by the Exchange, was price slid and
displayed at $10.10, ranked at $10.11, and BATS subsequently
received a BATS Post Only offer at $10.11. In other words, the
outcome would be the same as set forth in Example 5, insofar as the
price slid order could ultimately have a ranked price that locks the
contra-side, however the sequence leading up to that outcome neither
is nor was possible as described because the Exchange does not price
slide to avoid executions against the BATS Book.
\9\ The Exchange notes that it recently proposed and implemented
a change to Rule 11.9(c)(6) regarding the Exchange's handling of
BATS Post Only Orders to permit such orders to remove liquidity from
the BATS Book if the value of price improvement associated with such
execution equals or exceeds the sum of fees charged for such
execution and the value of any rebate that would be provided if the
order posted to the BATS Book and subsequently provided liquidity.
See Securities Exchange Act Release No. 67093 (June 1, 2012), 77 FR
33798 (June 7, 2012) (SR-BATS-2012-018).
\10\ As noted above, the Exchange will execute a BATS Post Only
Order in certain circumstances where it would receive price
improvement. See id.
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The Exchange previously proposed changes to its existing order
handling procedures to permit BATS Post Only Orders to be posted to the
BATS Book to join the NBB or NBO, as applicable, even when such orders
would be posted at prices equal to opposite-side orders ranked at the
same price.\11\ Consistent with this previously adopted change, the
Exchange proposes to add language stating that BATS Post Only Orders
will be permitted to post and be displayed opposite the ranked price of
orders subject to display-price sliding. As is the case today, in the
event an order subject to display-price sliding is ranked on the BATS
Book with a price equal to an opposite side order displayed by the
Exchange, it will be subject to processing as set forth in Rule
11.13(a)(1).
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\11\ See Order Handling Filing, supra note 7.
---------------------------------------------------------------------------
As an example of the Exchange's handling of BATS Post Only Orders
in the context of price sliding, assume the Exchange has a posted and
displayed bid to buy 100 shares of a security priced at $10.10 per
share and a posted and displayed offer to sell 100 shares at $10.12 per
share. Assume the NBBO (including Protected Quotations of other
external markets) is also $10.10 by $10.12. If the Exchange receives a
BATS Post Only Order bid to buy 100 shares at $10.12 per share, unless
executed pursuant to Rule 11.9(c)(6),\12\ the Exchange would cancel the
order back to the User because absent the BATS Post Only designation
the $10.12 bid would be able to remove the $10.12 offer, and, as
explained above, the Exchange does not offer price sliding to avoid
executions against orders displayed by the Exchange.
---------------------------------------------------------------------------
\12\ See supra note 8.
---------------------------------------------------------------------------
If the Exchange did not have a displayed offer to sell at $10.12 in
the example above, but instead the best offer on the Exchange's book
was $10.13, the Exchange would apply price sliding to the incoming bid
by ranking such order at $10.12 and displaying the order at $10.11. The
Exchange's order book would now be displayed as $10.11 by $10.13.
Assume, however, that after price sliding the incoming bid from $10.12
to a display price of $10.11, the Exchange received a BATS Post Only
offer to sell for $10.12, thus joining the NBO. As noted above,
pursuant to previously adopted changes, BATS Post Only Orders are
permitted to post and be displayed opposite the ranked price of orders
subject to display-price sliding. Accordingly, the Exchange would allow
such the incoming BATS Post Only offer at $10.12 to post and display on
the Exchange's order book, as described above, with an opposite side
price slid order ranked at $10.12 but displayed at $10.11. Assume that
next the Protected Offers displayed by all external markets other than
the Exchange moved to $10.13. In this situation the Exchange would un-
slide but then cancel the bid at $10.12 because, as proposed, in the
event the NBBO changes such that a BATS Post Only Order subject to
display-price sliding would un-slide and would be ranked at a price at
which it could remove displayed liquidity from the BATS Book (i.e.,
when the Exchange is at the NBB or NBO) the Exchange
[[Page 50202]]
proposes to execute \13\ or cancel such order.
---------------------------------------------------------------------------
\13\ As noted above, the Exchange will execute a BATS Post Only
Order in certain circumstances where it would receive price
improvement. See supra note 8.
---------------------------------------------------------------------------
The Exchange currently applies display-price sliding to Non-
Displayed Orders that cross Protected Quotations of external markets as
well. The Exchange proposes language that makes clear that this
functionality is offered both upon entry and once an order has been
posted to the Exchange's order book in order to avoid potentially
trading through Protected Quotations of external markets. The proposed
rule states that Non-Displayed Orders that are subject to display-price
sliding are ranked at the locking price on entry. The proposed
description also makes clear that display-price sliding for Non-
Displayed Orders is functionally equivalent to the handling of
displayable orders except that such orders will not have a displayed
price and will not be re-priced again unless such orders cross a
Protected Quotation of an external market (i.e., such orders are not
unslid).
As an example of the Exchange's handling of Non-Displayed Orders in
the context of price sliding, assume the Exchange has a posted and
displayed bid to buy 100 shares of a security priced at $10.10 per
share and a posted and displayed offer to sell 100 shares at $10.13 per
share. Assume the NBBO is $10.10 by $10.11. If the Exchange receives a
Non-Displayed Order bid to buy 100 shares at $10.12 per share, the
Exchange would re-price the order to a $10.11 bid to buy to avoid
potentially trading through the $10.11 offer displayed as the NBO
(i.e., to ensure the Exchange will not allow the bid to trade at $10.12
per share). In the event the NBBO moved to $10.09 by $10.10, the
Exchange would again re-price the Non-Displayed bid to buy 100 shares
to $10.10 per share. If the NBBO then moved to $10.10 by $10.11, the
Non-Displayed bid would not be re-priced to $10.11, but would remain on
the Exchange's order book at $10.10.
As described above, the Exchange has proposed to offer multiple
price sliding to Exchange Users that opt-in to the functionality. The
remaining changes described above are intended to clarify and expand
upon the written description of display-price sliding, but do not
represent changes to the existing functionality offered by the
Exchange. Consistent with achieving better clarity, the Exchange has
proposed structural changes to the description of display-price sliding
by separating the description into several sub-paragraphs.
BATS Equities--Short Sale Price Sliding
With respect to price sliding offered to ensure compliance with
Regulation SHO on BATS Equities (``short sale price sliding''), when an
order cannot be executed or displayed in compliance with Rule 201 of
Regulation SHO,\14\ the Exchange currently re-prices short sale orders
to one minimum price variation above the current NBB (``Permitted
Price''). In order to describe this re-pricing, the Exchange proposes
to add the term ``Permitted Price'' to its description of short sale
price sliding. In order to offer multiple price sliding in the short
sale price sliding context, the Exchange proposes to amend its rules to
state that depending upon the instructions of a User, to reflect
declines in the NBB the System will continue to re-price a short sale
order at the Permitted Price down to the order's original limit price.
Accordingly, short sale orders subject to multiple price sliding that
are adjusted to lower price levels due to a decline to the NBB will be
priced at one minimum price variation above the current NBB. As is true
for display-price sliding, multiple price sliding is optional and must
be explicitly selected by a User before it will be applied. The
Exchange's default short sale sliding process will only re-price an
order upon entry. Accordingly, there will be no change to existing
Users of short sale price sliding due to the proposed introduction of
multiple price sliding unless such Users opt-in to the functionality.
---------------------------------------------------------------------------
\14\ 17 CFR 242.201.
---------------------------------------------------------------------------
As an example of the Exchange's current short sale price sliding,
which adjusts the price of an order only upon entry, assume the
Exchange has a posted and displayed bid to buy 100 shares of a security
priced at $10.10 per share and a posted and displayed offer to sell 100
shares at $10.13 per share.\15\ Assume the NBBO is $10.10 by $10.12. If
the Exchange receives a non-routable offer to sell 100 shares at $10.10
per share and the order is marked ``short'' the Exchange will rank and
display the order to sell at $10.11 because executing the short sale at
$10.10, the NBB, would be in contravention of Regulation SHO. The
result would be the same if the Exchange had no bids at $10.10 because
the Exchange cannot display an order marked ``short'' at the current
NBB (such display would also lock the protected quote of an external
market). If the NBB then moved to $10.09, under existing handling, the
Exchange would not re-price or re-display the order, but instead would
leave it as a displayed offer to sell 100 shares at $10.11. Under
multiple price sliding, however, the Exchange would re-price and
display the offer at $10.10 if the NBB moved to $10.09. If, in the
example above, the NBB instead moved upwards to $10.11, the Exchange
would not re-price or restrict execution of the resting $10.11 offer
under either type of short sale price sliding. The Exchange notes that
if this were the case, its quotation would be locked.
---------------------------------------------------------------------------
\15\ For purposes of these examples, Rule 201's short sale price
test is assumed to be in effect for the security at the time.
---------------------------------------------------------------------------
In addition to changes to the description of short sale price
sliding to add the option of multiple price sliding, the Exchange
proposes various changes to improve the accuracy and the clarity of the
description of short sale price sliding. For instance, the Exchange
proposes to make clear that when a short sale price test restriction
under Rule 201 of Regulation SHO is in effect, the System may execute a
displayed short sale order at a price below the Permitted Price if, at
the time of initial display of the short sale order, the order was at a
price above the then current NBB. The Exchange also proposes to make
clear that orders marked ``short exempt'' will not be subject to short
sale price sliding.
BATS Options--Display-Price Sliding
In order to maintain consistency between analogous processes
offered by BATS Equities and BATS Options, the Exchange proposes to
modify the rules of BATS Options to conform with the changes described
above related to display-price sliding. Accordingly, the Exchange
proposes deleting the current description of price sliding from Rule
21.1(d)(6), and adopting new Rule 21.1(h), which is based on Rule 11.9,
as amended. Proposed Rule 21.1(h) relates to display-price sliding \16\
offered to ensure compliance with locked and crossed market rules
relevant to participation on BATS Options. As proposed, in order to
adopt multiple price sliding for BATS Options display-price sliding,
Rule 21.1(h) will provide that the ranked and displayed prices of an
order subject to display-price sliding may be adjusted once or multiple
times depending upon the instructions of a User and changes to the
prevailing NBBO. As is true for BATS Equities, display-price sliding
for BATS Options will default to the current functionality
[[Page 50203]]
pursuant to which the ranked and displayed prices of an order will be
adjusted upon entry and then the displayed price will be adjusted one
time following a change to the prevailing NBBO. Users will need to opt-
in to multiple price sliding functionality.
---------------------------------------------------------------------------
\16\ The Exchange's Rules for BATS Options currently describe
this functionality as ``displayed price sliding'' but the Exchange
proposes to rename such functionality ``display-price sliding.''
---------------------------------------------------------------------------
As drafted, Rule 21.1(h) is identical to the description of
display-price sliding set forth in proposed Rule 11.9 and described
above with the exception of minor references necessary due to the
difference between rules applicable to BATS Equities and BATS Options,
the omission of certain rule text specific to non-displayed orders,
which are applicable to BATS Equities only, and the omission of
reference to the specific order handling process for BATS Equities
described in Rule 11.13(a)(1).
In addition to the adoption of Rule 21.1(h), the Exchange proposes
to delete a portion of the display-price sliding process that is
described in Rule 21.1(d)(8), which states that an order that would
cross a Protected Quotation will be re-priced to the locking price and
ranked in the BATS Options Book. The Exchange proposes to eliminate
this language because it is duplicative with the proposed language in
Rule 21.1(h). The Exchange also proposes to modify applicable cross-
references in Rules 21.1(d), 21.6 and 21.9.
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 prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to, and perfect
the mechanism of, a free and open market and a national market system.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed changes to price sliding
are consistent with Section 6(b)(5) of the Act,\19\ as well as Rule 610
of Regulation NMS \20\ and Rule 201 of Regulation SHO.\21\ The Exchange
is not modifying the overall functionality of price sliding, which, to
avoid locking or crossing quotations of other market centers or to
comply with applicable short sale restrictions, displays orders at
permissible prices while retaining a price at which the User is willing
to buy or sell, in the event display at such price or an execution at
such price becomes possible. Instead, the Exchange is making changes to
adopt an optional form of price sliding, multiple price sliding, and to
clarify portions of its Rules that describe price sliding.
---------------------------------------------------------------------------
\19\ Id.
\20\ 17 CFR 242.610.
\21\ 17 CFR 242.201.
---------------------------------------------------------------------------
Rule 610(d) requires exchanges to establish, maintain, and enforce
rules that require members reasonably to avoid ``[d]isplaying
quotations that lock or cross any protected quotation in an NMS
stock.'' \22\ Such rules must be ``reasonably designed to assure the
reconciliation of locked or crossed quotations in an NMS stock,'' and
must ``prohibit * * * members from engaging in a pattern or practice of
displaying quotations that lock or cross any quotation in an NMS
stock.'' \23\ Thus, display-price sliding offered by the Exchange,
including the functionality offered for BATS Options, assists Users by
displaying orders at permissible prices. Similarly, Rule 201 of
Regulation SHO \24\ requires trading centers to establish, maintain,
and enforce written policies and procedures reasonably designed to
prevent the execution or display of a short sale order at a price at or
below the current NBB under certain circumstances. The Exchange's short
sale price sliding will continue to operate consistent with this rule,
however, if a User opts-in to multiple price sliding, the Exchange will
re-price a short sale order based on declines to the NBB. If, instead,
a User maintains the default form of price sliding, the Exchange will
only re-price and display an order subject to short sale price sliding
upon entry but will not update the order to reflect declines to the
NBB. The Exchange notes that the proposed descriptions of price sliding
will also more closely mirror the description used by at least one of
its competitors, the Nasdaq Stock Market LLC (``Nasdaq''), and thus
will help to avoid confusion amongst Exchange Users that also utilize
analogous functionality at Nasdaq.
---------------------------------------------------------------------------
\22\ 17 CFR 242.610(d).
\23\ Id.
\24\ 17 CFR 242.201.
---------------------------------------------------------------------------
(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
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Changes and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \25\ and Rule 19b-
4(f)(6)(iii) thereunder.\26\
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\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change along with a
brief description and the 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.
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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-BATS-2012-035 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-2012-035. This file
number should be included on the subject line if email is used. To help
the Commission process and review your
[[Page 50204]]
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, 100 F Street NE., Washington, DC 20549, 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-2012-035 and should be submitted on or before
September 10, 2012.
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\27\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-20320 Filed 8-17-12; 8:45 am]
BILLING CODE 8011-01-P
