Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify BATS Options Market Maker Continuous Quoting Obligation Rules, 77736-77739 [2013-30592]

Download as PDF 77736 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Notices Safety Evaluation dated December 6, 2013. Week of January 13, 2014—Tentative No significant hazards consideration comments received: No. Dated at Rockville, Maryland, this 16th day of December, 2013. For the Nuclear Regulatory Commission. Michele G. Evans, Director, Division of Operating Reactor Licensing, Office of Nuclear Reactor Regulation. BILLING CODE 7590–01–P NUCLEAR REGULATORY COMMISSION [NRC–2013–0001] Sunshine Act Meetings Weeks of December 23, 30, 2013, January 6, 13, 20, 27, 2014. PLACE: Commissioners’ Conference Room, 11555 Rockville Pike, Rockville, Maryland. STATUS: Public and Closed. DATE: Week of December 23, 2013 There are no meetings scheduled for the week of December 23, 2013. Week of December 30, 2013—Tentative There are no meetings scheduled for the week of December 30, 2013. Week of January 6, 2014—Tentative Monday, January 6, 2014 9:00 a.m. Briefing on Spent Fuel Pool Safety and Consideration of Expedited Transfer of Spent Fuel to Dry Casks (Public Meeting); (Contact: Kevin Witt, 301–415– 2145) This meeting will be webcast live at the Web address—http://www.nrc.gov/. 1:30 p.m. Briefing on Flooding and Other Extreme Weather Events (Public Meeting); (Contact: George Wilson, 301–415–1711) This meeting will be webcast live at the Web address—http://www.nrc.gov/. emcdonald on DSK67QTVN1PROD with NOTICES Friday, January 10, 2014 9:00 a.m. Briefing on the NRC Staff’s Recommendations to Disposition Fukushima Near-Term Task Force (NTTF) Recommendation 1 on Improving NRC’s Regulatory Framework (Public Meeting); (Contact: Dick Dudley, 301–415– 1116) This meeting will be webcast live at the Web address—http://www.nrc.gov/. 16:36 Dec 23, 2013 Jkt 232001 [Release No. 34–71129; File No. SR–BATS– 2013–062] Week of January 20, 2014—Tentative There are no meetings scheduled for the week of January 20, 2014. Week of January 27, 2014—Tentative Wednesday, January 29, 2014 9:30 a.m. Briefing on Equal Employment Opportunity and Civil Rights Outreach (Public Meeting); (Contact: Larniece McKoy Moore, 301–415–1942) [FR Doc. 2013–30540 Filed 12–23–13; 8:45 am] VerDate Mar<15>2010 There are no meetings scheduled for the week of January 13, 2014. SECURITIES AND EXCHANGE COMMISSION This meeting will be webcast live at the Web address—http://www.nrc.gov/. * * * * * The schedule for Commission meetings is subject to change on short notice. To verify the status of meetings, call (recording)—301–415–1292. Contact person for more information: Rochelle Bavol, 301–415–1651. * * * * * The NRC Commission Meeting Schedule can be found on the Internet at: http://www.nrc.gov/public-involve/ public-meetings/schedule.html. * * * * * The NRC provides reasonable accommodation to individuals with disabilities where appropriate. If you need a reasonable accommodation to participate in these public meetings, or need this meeting notice or the transcript or other information from the public meetings in another format (e.g. braille, large print), please notify Kimberly Meyer, NRC Disability Program Manager, at 301–287–0727, or by email at Kimberly.Meyer-Chambers@ nrc.gov. Determinations on requests for reasonable accommodation will be made on a case-by-case basis. * * * * * Members of the public may request to receive this information electronically. If you would like to be added to the distribution, please contact the Office of the Secretary, Washington, DC 20555 (301–415–1969), or send an email to Darlene.Wright@nrc.gov. Dated: December 19, 2013. Rochelle C. Bavol, Policy Coordinator, Office of the Secretary. [FR Doc. 2013–30848 Filed 12–20–13; 4:15 pm] BILLING CODE 7590–01–P PO 00000 Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify BATS Options Market Maker Continuous Quoting Obligation Rules December 18, 2013. 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 December 5, 2013, BATS Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend Rule 22.6(d) with respect to the continuous quoting requirement applicable to Market Makers (as defined below) registered with the Exchange. The text of the proposed rule change is available at the Exchange’s Web site at http://www.batstrading.com, at the principal office of the Exchange, at the Commission’s Public Reference Room, and on the Commission’s Web site at http://www.sec.gov. 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 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 Frm 00094 Fmt 4703 Sfmt 4703 E:\FR\FM\24DEN1.SGM 24DEN1 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Notices 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 emcdonald on DSK67QTVN1PROD with NOTICES 1. Purpose The Exchange is proposing to amend Rule 22.6(d), which is applicable to the Exchange’s options platform (‘‘BATS Options’’). A ‘‘Market Maker’’ on BATS Options is an Options Member registered as a Market Maker. Options Market Makers have obligations beyond those of other Options Members.5 One of these obligations is the requirement to maintain a two-sided market in those options series in which a Market Maker is registered to trade in a manner that enhances the depth, liquidity, and competitiveness of the market.6 Pursuant to this obligation and existing Rule 22.6(d), Market Makers must enter ‘‘continuous bids and offers for the options series to which it is registered.’’ The Exchange proposes to add Rule 22.6(d)(3), which would specify numerically the meaning of ‘‘continuous’’ with respect to Market Makers’ obligation to maintain continuous, two-sided quotes. For the purposes of Rule 22.6, the Exchange will consider the continuous quoting requirement fulfilled if a Market Maker provides two-sided quotes for 90% of the time the Market Maker is required to provide quotes in an appointed options series on a given trading day, or such higher percentage as the Exchange may announce in advance. Proposed Rule 22.6(d)(3) would also provide that the continuous quoting requirement will be applied to all options classes collectively, rather than on a [sic] issue-by-issue basis and that compliance will be determined on a monthly basis. The Exchange believes that applying the quoting requirements for Market Makers collectively across all options classes and reviewing such compliance over a monthly basis is a fair and more efficient way for the Exchange and market participants to evaluate compliance with the continuous quoting requirements. Applying the continuous quoting requirement collectively across all option classes rather than on an issueby-issue basis, is beneficial to Market Makers by providing some flexibility to choose which series in their appointed classes they will continuously quote— increasing the continuous quoting obligation in the series of one class to 5 See BATS Rule 22.2, 22.5. Rule 22.5(a). 6 BATS VerDate Mar<15>2010 16:36 Dec 23, 2013 Jkt 232001 allow for a decrease in the continuous quoting obligation in the series of another class. This flexibility, however, does not diminish the Market Maker’s obligation to continuously quote a significant part of the trading day in a significant percentage of series. This flexibility is especially important for classes that have relatively few series and may prevent the Market Maker, in particular, from breaching the continuous quoting requirement when failing to quote 90% of the trading day (as proposed) in more than one series in an appointed class. In addition, determining compliance with the continuous quoting requirement on a monthly basis does not relieve the Market Maker of the obligation to provide continuous two-sided quotes on a daily basis, nor will it prohibit the Exchange from taking disciplinary action against a Market Maker for failing to meet the continuous quoting obligation each trading day. Compliance on a monthly basis allows the Exchange to review the Market Maker’s daily compliance in the aggregate and determine the appropriate disciplinary action for single or multiple failures to comply with the continuous quoting requirement during the month period. The Exchange believes that the proposal will not diminish, and in fact may increase, market making activity on the Exchange, by establishing quoting compliance standards that are reasonable and are already in place on other options exchanges.7 As proposed, pursuant to Rule 22.6(d)(4) if there is a technical failure or limitation of an Exchange system that prevents a Market Maker from maintaining or communicating to the Exchange timely and accurate quotes in an options series, the Exchange will not consider the duration of such failure in determining whether the Market Maker has satisfied the 90% quoting standard with respect to the affected options series. The Exchange also proposes to add paragraph (d)(6) to Rule 22.6, which would specify that Market Makers would not be required to make twosided markets pursuant to Rule 22.6 in any Quarterly Option Series, any adjusted option series, and any option series until the time to expiration for such series is less than nine months. Accordingly, the continuous quotation obligations set forth in the Rule will not apply to Market Makers respecting Quarterly Option Series, adjusted option 7 See NYSE MKT Rule 925.1NY; see also, CBOE Rule 1.1(ccc); ISE Rule 804(e); ISE Gemini Rule 804(e); MIAX Rule 604(e); NASDAQ OMX PHLX Rule 1014(b)(ii)(D)(1); NOM Rules, Chapter VII, Sec. 6(d); NYSE Arca Rule 6.37B(b). PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 77737 series, and series with an expiration of nine months or greater. For purposes of paragraph (d)(6), an adjusted option series would be defined as an option series wherein, as a result of a corporate action by the issuer of the underlying security, one option contract in the series represents the delivery of other than 100 shares of underlying stock or Exchange-Traded Fund Shares. The Exchange will also reserve the right to consider other exceptions to the continuous quoting obligation based on demonstrated legal or regulatory requirements or other mitigating circumstances. As explained below, the proposed changes will provide a specific numerical threshold that Market Makers will need to meet, which is consistent with the rules of several other options exchanges.8 In addition to the changes described above, the Exchange proposes to number an existing paragraph currently contained within Rule 22.6(d)(2) as a separate paragraph, paragraph (d)(5). 2. Statutory Basis The Exchange believes that its proposal is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.9 Specifically, the proposal is consistent with Section 6(b)(5) of the Act,10 which requires exchange rules to 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. The Exchange believes the proposed rule change fulfills these requirements because it provides a specific standard to which the Exchange will hold Market Makers regarding their obligation to maintain a two-sided market in specified options series. By numerically specifying this obligation, the Exchange will enhance the quality of its market and avoid unnecessary investor confusion. Moreover, the Exchange again notes that the proposed rule change is substantially similar to the rules of other options exchanges.11 Furthermore, the Exchange believes this proposed rule change promotes just and equitable principles of trade because it reduces a burden and unnecessary restrictiveness on Market Makers. The Exchange still imposes many obligations on all Market Makers 8 See id. U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). 11 See supra note 7. 9 15 E:\FR\FM\24DEN1.SGM 24DEN1 emcdonald on DSK67QTVN1PROD with NOTICES 77738 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Notices to maintain a fair and orderly market in their appointed classes, which the Exchange believes eliminates the risk of a material decrease in liquidity. Accordingly, the proposal supports the quality of the Exchange’s market by helping to ensure that Market Makers will continue to be obligated to quote in series when necessary. The benefit provided to the Market Maker from the proposed definition of continuous quoting is offset by the required percentage of series in which the Market Maker must provide continuous quotes. Ultimately, the benefit the proposed rule change confers upon Market Makers is offset by the continued responsibilities to provide significant liquidity to the market to the benefit of market participants. The proposed rule change also protects investors and the public interest by creating more uniformity and consistency among the Exchange’s rules related to Market-Maker quoting obligations. The proposed rule change allows the Exchange to require Market Makers to provide continuous quotes in a percentage of series in their appointed classes for a portion of the trading day that is the same as that of market-makers at other exchanges, which the Exchange believes will ultimately make the Exchange more competitive and help remove impediments to and promote a free and open market. For the foregoing reasons, the Exchange believes that the balance between the benefits provided to Market-Makers and the obligations imposed upon Market-Makers by the proposed rule change is appropriate. Further, providing Market Makers with flexibility by providing the continuous quoting obligation collectively across all option classes will not diminish the Market Maker’s obligation to continuously quote a significant part of the trading day in a significant percentage of series. Additionally, with respect to compliance standards, the Exchange believes that adopting the proposed standards will enhance compliance efforts by Market Makers and the Exchange, and are consistent with the requirement [sic] currently in place on other exchanges. The proposal ensures that compliance standards for continuous quoting will be the same on the Exchange as on other options exchanges. The Exchange believes that the proposal will not diminish and in fact may increase, market making activity on the Exchange, by establishing a quoting compliance standard that is reasonable and is already in place on other options exchanges. VerDate Mar<15>2010 16:36 Dec 23, 2013 Jkt 232001 The Exchange notes that its Market Makers are subject to many obligations, including the obligation to maintain a fair and orderly market in their appointed classes, which the Exchange believes eliminates the risk of a material decrease in liquidity. The Exchange continues to believe the balance of obligations and benefits is appropriate given the following: (i) although the percentage of the trading day Market Makers will be required to quote will be numerically set at 90%, Market Makers will continue to have heightened quoting requirements based on the significant percentage of series Market Makers are required to quote; (ii) the proposed clarification in the rule text of which series the continuous quoting obligations apply to does not diminish the continuous quoting obligation and is consistent with requirements in place at other option exchanges; (iii) the flexibility being provided by the proposal to apply the continuous quoting obligation collectively across all option classes also does not diminish the Market Maker’s obligations; and (iv) the proposed changes are all consistent with requirements in place at other options exchanges. The Exchange believes that its proposal is consistent with the Act in that providing clarification and flexibility does not detract from the overall market making obligations of Market Makers. The requirement that a market maker hold itself out as willing to buy and sell options for its own account on a regular or continuous basis is better supported by these proposed revisions and clarifications. Accordingly, the benefits the proposed rule change confers upon Market Makers are offset by the continued responsibilities to provide significant liquidity to the market to the benefit of all market participants. (B) Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes the proposal is consistent with Section 6(b)(8) of the Act 12 in that it does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposed rule change will provide specificity in Exchange rules as they relate to Market Maker’s [sic] obligation to maintain continuous, two-sided quotes in specific options series. Moreover, as previously noted, the proposed rule change is substantially similar to the rules of other options exchanges.13 As such, the Exchange believes the proposed rule 12 15 U.S.C. 78f(b)(8). supra note 7. 13 See PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 changes will enhance, rather than diminish, competition among the options exchanges. (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 The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 14 and Rule 19b– 4(f)(6) thereunder.15 Because the proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 16 and Rule 19b–4(f)(6) thereunder.17 At any time within 60 days of the filing of such 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 proposal is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml) or 14 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 16 15 U.S.C. 78s(b)(3)(A). 17 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 15 17 E:\FR\FM\24DEN1.SGM 24DEN1 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Notices Send an email to rule-comments@ sec.gov. Please include File No. SR– BATS–2013–062 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments [Release No. 34–71122; File No. SR–NYSE– 2013–81] • 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 No. SR–BATS–2013–062. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule changes between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–BATS– 2013–062 and should be submitted on or before January 14, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–30592 Filed 12–23–13; 8:45 am] emcdonald on DSK67QTVN1PROD with NOTICES BILLING CODE 8011–01–P Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Offer Partial Cabinets and Cabinet Upgrades as Part of its Co-location Services and to Amend its Price List to Reflect the New Services December 18, 2013. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on December 12, 2013, New York Stock Exchange LLC (‘‘NYSE’’ 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 self-regulatory organization. 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 offer partial cabinets and cabinet upgrades as part of its co-location services and to amend its Price List to reflect the new services. The Exchange proposes to implement the fee change effective December 16, 2013. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.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 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. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 18 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 16:36 Dec 23, 2013 Jkt 232001 PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 77739 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to offer partial cabinets and cabinet upgrades as part of its co-location services and to amend its Price List to reflect the new services.4 The Exchange proposes to implement the fee change effective December 16, 2013. Partial Cabinets A User is able to request a physical cabinet to house its servers and other equipment in the data center.5 Currently, a User only has the option of receiving an entire cabinet that is dedicated solely to that User (‘‘dedicated cabinet’’). The Exchange proposes to expand its co-location services to offer a partial cabinet alternative (‘‘partial cabinet’’). Partial cabinets would be made available in increments of eight-rack units of space.6 The Exchange would allocate each eight-rack unit up to two kilowatts (‘‘kWs’’) of power.7 Consistent with existing pricing for dedicated cabinets, the Exchange would charge Users an 4 The Securities and Exchange Commission (‘‘Commission’’) initially approved the Exchange’s co-location services in Securities Exchange Act Release No. 62960 (September 21, 2010), 75 FR 59310 (September 27, 2010) (SR–NYSE–2010–56) (the ‘‘Original Co-location Approval’’). The Exchange operates a data center in Mahwah, New Jersey (the ‘‘data center’’) from which it provides co-location services to Users. The Exchange’s colocation services allow Users to rent space in the data center so they may locate their electronic servers in close physical proximity to the Exchange’s trading and execution system. See id. at 59310. 5 For purposes of the Exchange’s co-location services, the term ‘‘User’’ includes (i) member organizations, as that term is defined in NYSE Rule 2(b); (ii) Sponsored Participants, as that term is defined in NYSE Rule 123B.30(a)(ii)(B); and (iii) non-member organization broker-dealers and vendors that request to receive co-location services directly from the Exchange. See, e.g., Securities Exchange Act Release No. 65973 (December 15, 2011), 76 FR 79232 (December 21, 2011) (SR– NYSE–2011–53). As specified in the Price List, a User that incurs co-location fees for a particular colocation service pursuant thereto would not be subject to co-location fees for the same co-location service charged by the Exchange’s affiliates NYSE MKT LLC and NYSE Arca, Inc. See Securities Exchange Act Release No. 70206 (August 15, 2013), 78 FR 51765 (August 21, 2013) (SR–NYSE–2013– 59). 6 A full cabinet includes enough space for approximately four separate eight-rack units. The Exchange would submit a separate proposed rule change if it decided to change the manner in which space is allocated within a partial cabinet (e.g., sixrack units instead of eight-rack units). 7 The Exchange would submit a separate proposed rule change if it decided to change the manner in which power is allocated to partial cabinets (e.g., more than two kWs of power allocated per eight-rack unit). E:\FR\FM\24DEN1.SGM 24DEN1

Agencies

[Federal Register Volume 78, Number 247 (Tuesday, December 24, 2013)]
[Notices]
[Pages 77736-77739]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30592]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71129; File No. SR-BATS-2013-062]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify 
BATS Options Market Maker Continuous Quoting Obligation Rules

December 18, 2013.
    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 December 5, 2013, BATS Exchange, Inc. (the ``Exchange'' or ``BATS'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Exchange has 
designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend Rule 22.6(d) with respect to 
the continuous quoting requirement applicable to Market Makers (as 
defined below) registered with the Exchange.
    The text of the proposed rule change is available at the Exchange's 
Web site at http://www.batstrading.com, at the principal office of the 
Exchange, at the Commission's Public Reference Room, and on the 
Commission's Web site at http://www.sec.gov.

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

[[Page 77737]]

the most significant parts of such statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend Rule 22.6(d), which is 
applicable to the Exchange's options platform (``BATS Options''). A 
``Market Maker'' on BATS Options is an Options Member registered as a 
Market Maker. Options Market Makers have obligations beyond those of 
other Options Members.\5\ One of these obligations is the requirement 
to maintain a two-sided market in those options series in which a 
Market Maker is registered to trade in a manner that enhances the 
depth, liquidity, and competitiveness of the market.\6\ Pursuant to 
this obligation and existing Rule 22.6(d), Market Makers must enter 
``continuous bids and offers for the options series to which it is 
registered.''
---------------------------------------------------------------------------

    \5\ See BATS Rule 22.2, 22.5.
    \6\ BATS Rule 22.5(a).
---------------------------------------------------------------------------

    The Exchange proposes to add Rule 22.6(d)(3), which would specify 
numerically the meaning of ``continuous'' with respect to Market 
Makers' obligation to maintain continuous, two-sided quotes. For the 
purposes of Rule 22.6, the Exchange will consider the continuous 
quoting requirement fulfilled if a Market Maker provides two-sided 
quotes for 90% of the time the Market Maker is required to provide 
quotes in an appointed options series on a given trading day, or such 
higher percentage as the Exchange may announce in advance.
    Proposed Rule 22.6(d)(3) would also provide that the continuous 
quoting requirement will be applied to all options classes 
collectively, rather than on a [sic] issue-by-issue basis and that 
compliance will be determined on a monthly basis. The Exchange believes 
that applying the quoting requirements for Market Makers collectively 
across all options classes and reviewing such compliance over a monthly 
basis is a fair and more efficient way for the Exchange and market 
participants to evaluate compliance with the continuous quoting 
requirements. Applying the continuous quoting requirement collectively 
across all option classes rather than on an issue-by-issue basis, is 
beneficial to Market Makers by providing some flexibility to choose 
which series in their appointed classes they will continuously quote--
increasing the continuous quoting obligation in the series of one class 
to allow for a decrease in the continuous quoting obligation in the 
series of another class. This flexibility, however, does not diminish 
the Market Maker's obligation to continuously quote a significant part 
of the trading day in a significant percentage of series. This 
flexibility is especially important for classes that have relatively 
few series and may prevent the Market Maker, in particular, from 
breaching the continuous quoting requirement when failing to quote 90% 
of the trading day (as proposed) in more than one series in an 
appointed class. In addition, determining compliance with the 
continuous quoting requirement on a monthly basis does not relieve the 
Market Maker of the obligation to provide continuous two-sided quotes 
on a daily basis, nor will it prohibit the Exchange from taking 
disciplinary action against a Market Maker for failing to meet the 
continuous quoting obligation each trading day. Compliance on a monthly 
basis allows the Exchange to review the Market Maker's daily compliance 
in the aggregate and determine the appropriate disciplinary action for 
single or multiple failures to comply with the continuous quoting 
requirement during the month period. The Exchange believes that the 
proposal will not diminish, and in fact may increase, market making 
activity on the Exchange, by establishing quoting compliance standards 
that are reasonable and are already in place on other options 
exchanges.\7\
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    \7\ See NYSE MKT Rule 925.1NY; see also, CBOE Rule 1.1(ccc); ISE 
Rule 804(e); ISE Gemini Rule 804(e); MIAX Rule 604(e); NASDAQ OMX 
PHLX Rule 1014(b)(ii)(D)(1); NOM Rules, Chapter VII, Sec. 6(d); NYSE 
Arca Rule 6.37B(b).
---------------------------------------------------------------------------

    As proposed, pursuant to Rule 22.6(d)(4) if there is a technical 
failure or limitation of an Exchange system that prevents a Market 
Maker from maintaining or communicating to the Exchange timely and 
accurate quotes in an options series, the Exchange will not consider 
the duration of such failure in determining whether the Market Maker 
has satisfied the 90% quoting standard with respect to the affected 
options series.
    The Exchange also proposes to add paragraph (d)(6) to Rule 22.6, 
which would specify that Market Makers would not be required to make 
two-sided markets pursuant to Rule 22.6 in any Quarterly Option Series, 
any adjusted option series, and any option series until the time to 
expiration for such series is less than nine months. Accordingly, the 
continuous quotation obligations set forth in the Rule will not apply 
to Market Makers respecting Quarterly Option Series, adjusted option 
series, and series with an expiration of nine months or greater. For 
purposes of paragraph (d)(6), an adjusted option series would be 
defined as an option series wherein, as a result of a corporate action 
by the issuer of the underlying security, one option contract in the 
series represents the delivery of other than 100 shares of underlying 
stock or Exchange-Traded Fund Shares.
    The Exchange will also reserve the right to consider other 
exceptions to the continuous quoting obligation based on demonstrated 
legal or regulatory requirements or other mitigating circumstances. As 
explained below, the proposed changes will provide a specific numerical 
threshold that Market Makers will need to meet, which is consistent 
with the rules of several other options exchanges.\8\
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    \8\ See id.
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    In addition to the changes described above, the Exchange proposes 
to number an existing paragraph currently contained within Rule 
22.6(d)(2) as a separate paragraph, paragraph (d)(5).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of Section 6(b) of the Act.\9\ Specifically, the 
proposal is consistent with Section 6(b)(5) of the Act,\10\ which 
requires exchange rules to 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. The Exchange believes the proposed 
rule change fulfills these requirements because it provides a specific 
standard to which the Exchange will hold Market Makers regarding their 
obligation to maintain a two-sided market in specified options series. 
By numerically specifying this obligation, the Exchange will enhance 
the quality of its market and avoid unnecessary investor confusion. 
Moreover, the Exchange again notes that the proposed rule change is 
substantially similar to the rules of other options exchanges.\11\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ See supra note 7.
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    Furthermore, the Exchange believes this proposed rule change 
promotes just and equitable principles of trade because it reduces a 
burden and unnecessary restrictiveness on Market Makers. The Exchange 
still imposes many obligations on all Market Makers

[[Page 77738]]

to maintain a fair and orderly market in their appointed classes, which 
the Exchange believes eliminates the risk of a material decrease in 
liquidity. Accordingly, the proposal supports the quality of the 
Exchange's market by helping to ensure that Market Makers will continue 
to be obligated to quote in series when necessary. The benefit provided 
to the Market Maker from the proposed definition of continuous quoting 
is offset by the required percentage of series in which the Market 
Maker must provide continuous quotes. Ultimately, the benefit the 
proposed rule change confers upon Market Makers is offset by the 
continued responsibilities to provide significant liquidity to the 
market to the benefit of market participants.
    The proposed rule change also protects investors and the public 
interest by creating more uniformity and consistency among the 
Exchange's rules related to Market-Maker quoting obligations. The 
proposed rule change allows the Exchange to require Market Makers to 
provide continuous quotes in a percentage of series in their appointed 
classes for a portion of the trading day that is the same as that of 
market-makers at other exchanges, which the Exchange believes will 
ultimately make the Exchange more competitive and help remove 
impediments to and promote a free and open market. For the foregoing 
reasons, the Exchange believes that the balance between the benefits 
provided to Market-Makers and the obligations imposed upon Market-
Makers by the proposed rule change is appropriate.
    Further, providing Market Makers with flexibility by providing the 
continuous quoting obligation collectively across all option classes 
will not diminish the Market Maker's obligation to continuously quote a 
significant part of the trading day in a significant percentage of 
series. Additionally, with respect to compliance standards, the 
Exchange believes that adopting the proposed standards will enhance 
compliance efforts by Market Makers and the Exchange, and are 
consistent with the requirement [sic] currently in place on other 
exchanges. The proposal ensures that compliance standards for 
continuous quoting will be the same on the Exchange as on other options 
exchanges. The Exchange believes that the proposal will not diminish 
and in fact may increase, market making activity on the Exchange, by 
establishing a quoting compliance standard that is reasonable and is 
already in place on other options exchanges.
    The Exchange notes that its Market Makers are subject to many 
obligations, including the obligation to maintain a fair and orderly 
market in their appointed classes, which the Exchange believes 
eliminates the risk of a material decrease in liquidity. The Exchange 
continues to believe the balance of obligations and benefits is 
appropriate given the following: (i) although the percentage of the 
trading day Market Makers will be required to quote will be numerically 
set at 90%, Market Makers will continue to have heightened quoting 
requirements based on the significant percentage of series Market 
Makers are required to quote; (ii) the proposed clarification in the 
rule text of which series the continuous quoting obligations apply to 
does not diminish the continuous quoting obligation and is consistent 
with requirements in place at other option exchanges; (iii) the 
flexibility being provided by the proposal to apply the continuous 
quoting obligation collectively across all option classes also does not 
diminish the Market Maker's obligations; and (iv) the proposed changes 
are all consistent with requirements in place at other options 
exchanges. The Exchange believes that its proposal is consistent with 
the Act in that providing clarification and flexibility does not 
detract from the overall market making obligations of Market Makers. 
The requirement that a market maker hold itself out as willing to buy 
and sell options for its own account on a regular or continuous basis 
is better supported by these proposed revisions and clarifications. 
Accordingly, the benefits the proposed rule change confers upon Market 
Makers are offset by the continued responsibilities to provide 
significant liquidity to the market to the benefit of all market 
participants.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposal is consistent with Section 
6(b)(8) of the Act \12\ in that it does not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange believes the proposed rule change 
will provide specificity in Exchange rules as they relate to Market 
Maker's [sic] obligation to maintain continuous, two-sided quotes in 
specific options series. Moreover, as previously noted, the proposed 
rule change is substantially similar to the rules of other options 
exchanges.\13\ As such, the Exchange believes the proposed rule changes 
will enhance, rather than diminish, competition among the options 
exchanges.
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    \12\ 15 U.S.C. 78f(b)(8).
    \13\ See supra note 7.
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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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
Because the proposed rule change does not: (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of such 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 proposal is 
consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or

[[Page 77739]]

    Send an email to rule-comments@sec.gov. Please include File No. SR-
BATS-2013-062 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 No. SR-BATS-2013-062. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule changes between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-BATS-2013-062 and should be 
submitted on or before January 14, 2014.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30592 Filed 12-23-13; 8:45 am]
BILLING CODE 8011-01-P