Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rules 11.9, 11.12, and 11.18 of BATS Y-Exchange, Inc., 43522-43528 [2014-17514]
Download as PDF
<![CDATA[
43522
Federal Register / Vol. 79, No. 143 / Friday, July 25, 2014 / Notices
that the other proposed changes to its
rulebook to correct typographical
changes and add additional detail to the
way that certain functionality currently
operates provides further clarification to
Members, Users, and the investing
public regarding the operation of the
Exchange’s System.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange reiterates that the proposed
rule change is being proposed in the
context of the technology integration of
the BGM Affiliated Exchanges. Thus,
the Exchange believes this proposed
rule change is necessary to permit fair
competition among national securities
exchanges. In addition, the Exchange
believes the proposed rule change will
benefit Exchange participants in that it
is one of several changes necessary to
achieve a consistent technology offering
by the BGM Affiliated 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
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 18 and Rule 19b–4(f)(6)
thereunder.19
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 20 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 21
18 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
20 17 CFR 240.19b–4(f)(6).
21 17 CFR 240.19b–4(f)(6)(iii).
emcdonald on DSK67QTVN1PROD with NOTICES
19 17
VerDate Mar<15>2010
18:34 Jul 24, 2014
Jkt 232001
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay, noting that doing so
will allow the Exchange to immediately
clarify its rules with respect to existing
functionality already offered by the
Exchange; correct typographical errors
in the Exchange’s rules; and offer
certain functionality that is already
available on other market centers, which
will allow the Exchange to remain
competitive with such other market
centers. In addition, the Exchange states
that, to the extent a proposed change
optimizes existing functionality, the
Exchange does not believe that there is
a reason to delay the availability of such
optimization. Furthermore, the
Exchange states that waiver of the
operative delay will allow the Exchange
to continue to strive towards a complete
technology integration of the BGM
Affiliated Exchanges, with gradual rollouts of new functionality to ensure
stability of the System. The Commission
believes that waiving the 30-day
operative delay is consistent with the
protection of investors and the public
interest. Therefore, the Commission
hereby waives the 30-day operative
delay and designates the proposal
operative upon filing.22
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:
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BATS–2014–027. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 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 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–
2014–027 and should be submitted on
or before August 15, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–17513 Filed 7–24–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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–2014–027 on the subject line.
[Release No. 34–72647; File No. SR–BYX–
2014–010]
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
July 21, 2014.
22 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
PO 00000
Frm 00135
Fmt 4703
Sfmt 4703
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Rules 11.9, 11.12, and
11.18 of BATS Y-Exchange, Inc.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\25JYN1.SGM
25JYN1
Federal Register / Vol. 79, No. 143 / Friday, July 25, 2014 / Notices
notice is hereby given that on July 15,
2014, BATS Y-Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I 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) 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 11.9 to add certain
functionality to the Exchange’s trading
platform, to add additional detail
regarding existing functionality in place
on the Exchange, and to correct certain
typographical errors. The Exchange also
proposes to make related changes to
Rule 11.12 and to eliminate obsolete
language and correct certain
typographical errors in Rule 11.18.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
emcdonald on DSK67QTVN1PROD with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Earlier this year, the Exchange and its
affiliate BATS Exchange, Inc. (‘‘BZX’’)
received approval to affect a merger (the
‘‘Merger’’) of the Exchange’s parent
company, BATS Global Markets, Inc.,
3 15
4 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
VerDate Mar<15>2010
18:34 Jul 24, 2014
Jkt 232001
with Direct Edge Holdings LLC, the
indirect parent of EDGX Exchange, Inc.
(‘‘EDGX’’) and EDGA Exchange, Inc.
(‘‘EDGA’’, and together with BZX, BYX
and EDGX, the ‘‘BGM Affiliated
Exchanges’’).5 In the context of the
Merger, the BGM Affiliated Exchanges
are working to align certain system
functionality, retaining only intended
differences between the BGM Affiliated
Exchanges. Thus, many of the proposals
set forth below are intended to add
certain system functionality currently
offered by EDGA and/or EDGX in order
to provide a consistent technology
offering for users of the BGM Affiliated
Exchanges. In the context of such
alignment, the Exchange is also seeking
to improve the transparency and
understandability of its rules, and has
therefore proposed various corrective
and clarifying changes, as described
below.
The specific proposals set forth in
more detail below include: (i) The
addition of Fill-or-Kill functionality; (ii)
the addition of a new replenishment
option with respect to Reserve Orders as
well as additional detail regarding the
existing functionality of Reserve Orders;
(iii) the addition of rule text regarding
Minimum Quantity functionality; (iv)
the addition of Stop Orders and Stop
Limit Orders; and (v) various
corrections to typographical errors in
Exchange rules, elimination of obsolete
language in Rule 11.18 as well as the
addition of detail to the routing portion
of Rule 11.18.
Fill-or-Kill (‘‘FOK’’) Functionality
The Exchange proposes to add a
Time-in-Force (‘‘TIF’’) term of Fill-orKill (‘‘FOK’’). The Exchange currently
offers five other TIF terms pursuant to
Rule 11.9(b), including Immediate-orCancel (‘‘IOC’’). The Exchange proposes
to add FOK as a sixth TIF option, which
would be numbered as 11.9(b)(6). As
proposed, a FOK would be a limit order
that is to be executed in its entirety as
soon as it is received and, if not so
executed, cancelled.
Example 1—FOK Executes
Assume the NBBO is 10.00 × 10.01
and the Exchange has a displayed order
to buy 100 shares at 10.00 and a nondisplayed order to buy 100 shares at
10.00. Assume that a User 6 submits a
5 See Securities Exchange Act Release No. 71375
(January 23, 2014), 79 FR 4771 (January 29, 2014)
(SR–BATS–2013–059; SR–BYX–2013–039).
6 As defined in BYX 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.’’
PO 00000
Frm 00136
Fmt 4703
Sfmt 4703
43523
limit order to sell 200 shares at 10.00
that is designated with a TIF of FOK.
• The order to sell 200 shares would
execute against the resting displayed
and non-displayed orders at 10.00.
Example 2—FOK Does not Execute
Assume the NBBO is 10.00 × 10.01
and the Exchange has a displayed order
to buy 100 shares at 10.00 and no other
equal or better priced liquidity. Assume
that a User submits a limit order to sell
200 shares at 10.00 that is designated
with a TIF of FOK.
• The order to sell 200 shares would
be cancelled back to the User because
the order could not be executed in its
entirety upon receipt by the Exchange.
An order designated as FOK is similar
to an IOC order and unique from other
TIFs in that it is either executed
immediately or cancelled back to a User,
and thus, the Exchange also proposes to
modify Rules 11.9(e)(1) and 11.18(e)(5)
to add reference to orders with a TIF of
FOK alongside references to orders with
a TIF of IOC, as described below. First,
Rule 11.9(e)(1) states that an order may
only be cancelled or replaced if the
order has a TIF term other than IOC and
if the order has not yet been executed.
The Exchange proposes to modify Rule
11.9(e)(1) to include the TIF of FOK as
another TIF that, when attached to an
order, would mean that the order cannot
be cancelled or replaced. Second, Rule
11.18(e)(5) describes the operation of
BATS market orders 7 and IOC orders in
the context of the Plan to Address
Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation NMS
under the Act (the ‘‘Limit Up-Limit
Down Plan’’).8 The Exchange proposes
to modify Rule 11.18(e)(5) to include
orders with a TIF of FOK along with
such description. Specifically, the
Exchange proposes to make clear that,
like IOC and BATS market orders, FOK
orders will only be executed if such
executions are possible at or within the
price bands prescribed by the Limit UpLimit Down Plan, and that if an order
with a TIF of FOK cannot be so
executed, the remainder of the order
will be cancelled.
Reserve Orders and Replenishment
The Exchange currently offers Reserve
Orders, which are defined in Rule
11.9(c)(1) as limit orders ‘‘with a portion
of the quantity displayed . . . and with
a reserve portion of the quantity . . .
that is not displayed.’’ Pursuant to
current Rule 11.12(a)(5), the displayed
7 See Rule 11.9(a)(2) for a description of BATS
market orders.
8 See Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012) (the
‘‘Limit Up-Limit Down Release’’).
E:\FR\FM\25JYN1.SGM
25JYN1
emcdonald on DSK67QTVN1PROD with NOTICES
43524
Federal Register / Vol. 79, No. 143 / Friday, July 25, 2014 / Notices
quantity of a Reserve Order has time
priority as of the time of display.
Further, as currently described, if the
displayed quantity of the Reserve Order
is decremented such that 99 shares or
fewer would be displayed, the displayed
portion of the Reserve Order shall be
refreshed for (i) the original displayed
quantity, or (ii) the entire reserve
quantity, if the remaining reserve
quantity is smaller than the original
displayed quantity. Finally, as set forth
in Rule 11.12(a)(5), a new timestamp is
created both for the refreshed and
reserved portion of the order each time
it is refreshed from reserve.
The Exchange proposes to add
Random Replenishment functionality,
as described below, and to [sic]
additional detail to Rule 11.9(c)(1),
which defines Reserve Orders. In
making these changes, the Exchange
proposes to remove details regarding
replenishment from Rule 11.12(a)(5), as
such details are proposed to be included
in Rule 11.9(c)(1).
The Exchange proposes to leave the
current definition of Reserve Order as
currently drafted, but to add the defined
terms ‘‘Display Quantity’’ to refer to the
displayed quantity of a Reserve Order
and ‘‘Reserve Quantity’’ to refer to the
non-displayed quantity of a Reserve
Order. The Exchange also proposes to
explicitly state within Rule 11.9(c)(1)
that both the Display Quantity and the
Reserve Quantity of a Reserve Order are
available for execution against incoming
orders.
As noted above, the Exchange
currently sets forth the details regarding
replenishment of a Reserve Order in
Rule 11.12(a)(5). The Exchange proposes
to move these details to Rule 11.9(c)(1)
and to make certain changes necessary
to support the proposed Random
Replenishment functionality.
Specifically, proposed Rule 11.9(c)(1)
would state that if the Display Quantity
of an order is reduced to less than a
round lot, the System will, in
accordance with the User’s instruction,
replenish the Display Quantity from the
Reserve Quantity using one of the
replenishment instructions set forth in
the Rule. The Exchange also proposes to
state in Rule 11.9(c)(1) that if the
remainder of an order is less than the
replenishment amount, the System 9
will replenish and display the entire
remainder of the order.
The Exchange currently requires
Users to designate the original display
quantity of an order, which is also the
9 As defined in BYX Rule 1.5(aa), the System is
the electronic communications and trading facility
designated by the Board through which securities
orders of Users are consolidated for ranking,
execution and, when applicable, routing away.
VerDate Mar<15>2010
18:34 Jul 24, 2014
Jkt 232001
amount to which an order is
replenished (unless the remainder of an
order is smaller than the original
displayed quantity) under the current
replenishment functionality. The
Exchange refers to this quantity as ‘‘max
floor’’ in its specifications. The
Exchange proposes to add a defined
term of ‘‘Max Floor’’ to Rule 11.9(c)(1),
which would be a mandatory value
entered by a User that will determine
the quantity of the order to be initially
displayed by the System and will also
be used to determine the replenishment
amount under both replenishment
options described below.
The Exchange currently offers one
replenishment option, which uses the
number of shares from reserve necessary
to return the displayed quantity of an
order to its original display amount. The
Exchange proposes to retain this
replenishment option and to define it as
‘‘Fixed Replenishment.’’ As proposed,
Fixed Replenishment will apply to any
order for which Random Replenishment
has not been selected. Under the Fixed
Replenishment option, the System will
replenish the Display Quantity of an
order to the Max Floor designated by the
User. The Exchange also proposes to
add a new replenishment option,
Random Replenishment. As proposed,
Random Replenishment is an
instruction that a User may attach to an
order with Reserve Quantity where
replenishment quantities for the order
are randomly determined by the System
within a replenishment range
established by the User. Further, as
proposed, the User entering an order
into the System subject to the Random
Replenishment instruction must select a
replenishment value and a Max Floor.
The initial Display Quantity will be the
Max Floor. The Display Quantity of an
order when replenished will be
determined by the System randomly
selecting a round lot number of shares
within a replenishment range that is
between: (i) The Max Floor minus the
replenishment value; and (ii) the Max
Floor plus the replenishment value. The
Exchange believes that the Random
Replenishment is an optimization of
current System functionality as it will
help to achieve the general goal of
Reserve Orders, which is to display less
than the full interest that one represents
in order to avoid moving the market.
Random Replenishment will help Users
to further disguise reserve interest by
replenishing the Display Quantity of a
Reserve Order to a variable amount so
that other participants are less likely to
detect that such order is in fact a
Reserve Order with additional nondisplayed size.
PO 00000
Frm 00137
Fmt 4703
Sfmt 4703
In addition to the changes set forth
above, the Exchange proposes to modify
Rule 11.9(e)(3) to state that the Max
Floor set for an order can be modified
through the use of a replace message
rather than requiring a User to cancel
and re-enter an order. The Exchange
also proposes to modify Rule 11.12(a)(3)
to make clear that a modification to the
Max Floor of a Reserve Order will not
cause such order to lose priority. The
Exchange believes that this is
appropriate because a modification to
Max Floor of a resting Reserve Order
will not change the handling or display
of the order in any way until
replenishment is caused due to the
reduction of the Display Quantity to less
than a round lot. When such
replenishment occurs (based on the new
Max Floor), the order will receive a new
timestamp, and thus, will have a new
priority.
Example 1(a)—Fixed Replenishment
Assume the NBBO is 10.00 × 10.01
and the Exchange has a displayed order
to buy 100 shares at 9.99, a displayed
order to sell 100 shares at 10.01, and no
other equal or better priced liquidity.
• A User enters an order into the
System to buy 10,000 shares at 10.00
with a Display Quantity (i.e., Max Floor)
of 1,000 shares and a Reserve Quantity
of 9,000 shares. Because Random
Replenishment was not designated the
order defaults to a Fixed Replenishment
quantity of 1,000 shares.
• An inbound market order to sell
400 shares is entered into the System
and executes against the Display
Quantity of 1,000 shares, resulting in a
remaining Display Quantity of 600
shares.
• Another market order to sell 600
shares is entered into the System and
executes against the 600 displayed
shares. The Display Quantity is then
replenished by the System from the
Reserve Quantity to the order’s original
displayed quantity of 1,000 shares,
resulting in a remaining Reserve
Quantity of 8,000 shares. Both the
Display Quantity and the Reserve
Quantity receive new timestamps upon
replenishment.
Example 1(b)—Fixed Replenishment
Assume the NBBO is 10.00 × 10.01
and the Exchange has a displayed order
to buy 100 shares at 9.99, a displayed
order to sell 100 shares at 10.01, and no
other equal or better priced liquidity.
• User A enters Order 1, a limit order
to buy 6,000 shares at 10.00, the NBB,
with a Display Quantity (i.e., Max Floor)
of 1,000 shares and a Reserve Quantity
of 5,000 shares. Because Random
Replenishment was not designated the
E:\FR\FM\25JYN1.SGM
25JYN1
Federal Register / Vol. 79, No. 143 / Friday, July 25, 2014 / Notices
emcdonald on DSK67QTVN1PROD with NOTICES
order defaults to a Fixed Replenishment
quantity of 1,000 shares.
• User B then enters Order 2, a
display-eligible limit order to buy 600
shares at 10.00 with no Reserve
Quantity.
• An inbound market order to sell
2,000 shares is entered into the System.
• The order to sell first executes
against the Display Quantity of 1,000
shares of Order 1, then executes against
the full 600 shares of Order 2, and then
executes against 400 shares of the
Reserve Quantity of Order 1 (i.e., the
displayed quantities of Orders 1 and 2
execute in time priority, followed by the
Reserve Quantity of Order 1).
• The Display Quantity of Order 1 is
then replenished for 1,000 shares,
leaving a Reserve Quantity of 3,600
shares. Both the Display Quantity and
the Reserve Quantity receive new
timestamps upon replenishment.
Example 2(a)—Random Replenishment
Assume the NBBO is 10.00 × 10.01
and the Exchange has a displayed order
to buy 100 shares at 9.99, a displayed
order to sell 100 shares at 10.01, and no
other equal or better priced liquidity.
• A User enters an order into the
System to buy 10,000 shares at 10.00
and designates such order for Random
Replenishment with a Max Floor of
1,000 shares and a replenishment value
of 400 shares.
• The initial Display Quantity of the
order is 1,000 shares and the Reserve
Quantity is 9,000 shares.
• An inbound market order to sell
950 shares is entered into the System
and executes against the Display
Quantity of the order (1,000 shares),
leaving a 50 share Display Quantity.
Because the remaining Display Quantity
is less than a round lot, the System will
replenish the Display Quantity.
• With a replenishment value of 400,
subsequent replenishments will return
the Display Quantity to a randomly
selected round lot value between 600
shares (i.e., Max Floor minus the
replenishment value) and 1,400 shares
(i.e., Max Floor plus the replenishment
value).
• Assume the System selects a
Display Quantity of 1,200 shares. The
System will refresh the order with 1,150
shares from the Reserve Quantity, thus
generating a new Display Quantity of
1,200 shares to sell at 10.00, and a
Reserve Quantity of 7,850 shares.
Example 2(b)—Random Replenishment
Assume the NBBO is 10.00 × 10.01
and the Exchange has a displayed order
to buy 100 shares at 9.99, a displayed
order to sell 100 shares at 10.01, and no
other equal or better priced liquidity.
VerDate Mar<15>2010
18:34 Jul 24, 2014
Jkt 232001
43525
• A User enters an order into the
System to buy 5,000 shares at 10.00 and
designates such order for Random
Replenishment with a Max Floor of
2,000 shares and a replenishment value
of 1,000 shares.
• The initial Display Quantity of the
order is 2,000 shares and the Reserve
Quantity is 3,000 shares.
• An inbound market order to sell
1,800 shares is entered into the System
and executes against the Display
Quantity of the order (2,000 shares),
leaving a 200 share Display Quantity.
• A second inbound market order to
sell 700 shares is entered into the
System and executes against the Display
Quantity of the order (200 shares) and
500 shares of the Reserve Quantity of
the order, leaving no Display Quantity
and a Reserve Quantity of 2,500 shares.
• With a replenishment value of
1,000, subsequent replenishments
would otherwise return the Display
Quantity to a randomly selected round
lot value between 1,000 shares (i.e., Max
Floor minus the replenishment value)
and 3,000 shares (i.e., Max Floor plus
the replenishment value). However, in
this example, because the Reserve
Quantity is now 2,500 shares, the
System would instead replenish the
Display Quantity to a round lot value
between 1,000 and 2,500 shares.
• Assume the System selects a
Display Quantity of 2,000 shares,
leaving a Reserve Quantity of 500
shares.
• An inbound market order to sell
2,050 shares is entered into the System
and executes against the Display
Quantity of the order (2,000 shares) and
50 shares of the Reserve Quantity of the
order, leaving no Display Quantity and
a Reserve Quantity of 450 shares.
Because the remaining Reserve Quantity
is less than the lower end of the
replenishment range (i.e., 1,000 shares),
the System will Display the entire
remainder of the order, or 450 shares.
obtained. The Exchange proposes to
state in Rule 11.9(c)(5) that orders with
a specified minimum quantity will only
execute against multiple, aggregated
orders if such executions would occur
simultaneously (rather than only
executing against a single order that
satisfies the applicable minimum
quantity). Finally, the Exchange will
only honor a specified minimum
quantity on BATS Only Orders that are
non-displayed or IOCs. The Exchange
will disregard a minimum quantity on
any other order.
The Exchange notes that a specified
minimum quantity is only applicable to
BATS Only Orders, which are not
routed to other market centers, because
of the practical difficulty the Exchange
would face in trying to achieve a
minimum quantity through its routing
process. For instance, although most
market centers have a feature similar to
or identical to the Exchange’s minimum
quantity functionality, the Exchange
cannot guarantee that all away market
centers would always have such
functionality. Minimum quantity is also
inconsistent with routed orders because
under most of the Exchange’s routing
options an order is split into multiple
smaller orders that are routed
simultaneously to away market centers.
Similarly, the Exchange notes that a
specified minimum quantity is only
possible to apply to non-displayed
orders or IOCs due to the Exchange’s
obligations to honor displayed
quotations by executing such quotations
against incoming orders.10 By limiting
the minimum quantity instruction to
non-displayed orders or IOCs the
Exchange avoids the display of a
quotation that is not executable unless
a specific condition is met.
Minimum Quantity Functionality
The Exchange proposes to codify
existing functionality already offered by
the Exchange by introducing a
definition of Minimum Quantity Order
in Rule 11.9(c)(5). The Exchange notes
that the main difference between a
Minimum Quantity Order and an order
with a TIF of FOK is that an order with
a specified minimum quantity may be
partially executed so long as the
execution size is equal to or exceeds the
quantity provided by the User whereas
a FOK Order must be executed in full.
A Minimum Quantity Order, as
proposed, is a limit order to buy or sell
that will only execute if a specified
minimum quantity of shares can be
Assume the NBBO is 10.00 × 10.01
and the Exchange has a displayed order
to buy 100 shares at 10.00 and a nondisplayed order to buy 100 shares at
10.00. Assume that a User submits an
IOC limit order to sell 500 shares at
10.00 with a minimum quantity of 200
shares.
• The order to sell 500 shares would
receive a partial execution of 200 shares
against the resting displayed and nondisplayed orders at 10.00. The
remaining 300 shares would be
cancelled back to the User.
PO 00000
Frm 00138
Fmt 4703
Sfmt 4703
Example 1—Minimum Quantity Order
Executes
10 See, e.g., Rule 602 of Regulation NMS (the
‘‘Firm Quote Rule’’). 17 CFR 240.602.
E:\FR\FM\25JYN1.SGM
25JYN1
43526
Federal Register / Vol. 79, No. 143 / Friday, July 25, 2014 / Notices
Example 2—Minimum Quantity Order
Does Not Execute
Assume the NBBO is 10.00 × 10.01
and the Exchange has a displayed order
to buy 100 shares at 10.00 and a nondisplayed order to buy 100 shares at
10.00. Assume that a User submits an
IOC limit order to sell 500 shares at
10.00 with a minimum quantity of 300
shares.
• The order to sell would be
cancelled back to the User because the
required execution of at least 300 shares
could not be satisfied upon receipt by
the Exchange.
Stop and Stop Limit Order
Functionality
The Exchange proposes to adopt new
orders that trigger based on trades
occurring on the Exchange or reported
on other marketplaces. Specifically, the
Exchange proposes to adopt Stop Orders
and Stop Limit Orders. Stop Orders and
Stop Limit Orders are not executable
unless and until their stop price is
triggered. As proposed, a Stop Order is
an order that becomes a BATS market
order 11 when the stop price is elected.
In contrast, a Stop Limit Order is an
order that becomes a limit order when
the stop price is elected. The triggering
events for Stop Orders and Stop Limit
Orders will be the same. A Stop Order
or Stop Limit Order to buy will be
elected when the consolidated last sale
in the security occurs at, or above, the
specified stop price. A Stop Order or
Stop Limit Order to sell will be elected
when the consolidated last sale in the
security occurs at, or below, the
specified stop price.
emcdonald on DSK67QTVN1PROD with NOTICES
Example 1—Stop Order Is Triggered
Assume the NBBO is 7.80 × 8.00.
Assume that a User submits a Stop
Order to buy 500 shares with a stop
price of 8.05.
• Assume the NBBO shifts gradually
upwards to 8.00 by 8.05. An execution
reported by another exchange at 8.05
will trigger the stop price of the Stop
Order, which will convert into a BATS
market order to buy.
Example 2—Stop Limit Order Is
Triggered
Assume the NBBO is 7.84 × 7.85.
Assume that a User submits a Stop
Limit Order to buy 500 shares at 8.04
with stop limit price of 8.05.
• Assume the NBBO shifts gradually
upwards to 8.03 by 8.05. An execution
reported by another exchange at 8.05
will trigger the stop price of the Stop
Limit Order, which will convert into a
limit order to buy at 8.04.
11 See
Rule 11.9(a)(2).
VerDate Mar<15>2010
18:34 Jul 24, 2014
Jkt 232001
In addition to the changes set forth
above, the Exchange proposes to modify
Rule 11.9(e)(3) to state that the stop
price of an order can be modified
through the use of a replace message
rather than requiring a User to cancel
and re-enter an order. The Exchange
also proposes to modify Rule 11.12(a)(3)
to make clear that a modification to the
stop price of a Stop Order or Stop Limit
Order will not cause such an order to
lose priority. The Exchange believes that
this is appropriate because a
modification to the stop price of a
resting order will not change the
handling of the order in any way other
than to trigger the order based on a
different subsequent trade than the
order otherwise would have.
Additional Changes
The Exchange proposes to correct
three incorrect internal cross-references
in Rule 11.9(c)(7)(B), each of which
points to paragraph (c)(6)(A) but is
intended to refer to paragraph (c)(7)(A).
The Exchange proposes to instead
simply reference paragraph (A) above,
which the Exchange believes is
sufficient detail when read in context.
The Exchange also proposes to
eliminate all references in Rule 11.18 to
individual stock trading pauses issued
by a primary listing market and related
definitions, which are contained in Rule
11.18(e), 11.18(e)(6) and 11.18(f). The
stock trading pauses described in such
provisions have been fully phased out
as securities have become subject to the
Limit Up-Limit Down Plan. The Plan is
already operational with respect to all
securities, and thus, the Exchange
believes that all references to individual
stock trading pauses should be removed.
This change will also serve to eliminate
certain duplicative references that have
occurred through amendments to Rule
11.18, including amendments related to
the operation of the Limit Up-Limit
Down Plan as well as other
amendments. The Exchange also
proposes various other corrections to
the numbering of Rule 11.18 for
consistency with other portions of its
rules. The Exchange also proposes to
eliminate a reference to the operational
date of the Limit Up-Limit Down Plan
now that it is, in fact, already
operational.
In reviewing Rule 11.18 in connection
with the above-described corrections,
the Exchange determined to also add
additional detail to the routing
description of Rule 11.18 to reflect the
existing functionality of the System. In
particular, the Exchange proposes to
affirmatively state in Rule 11.18 that the
System will not route buy (sell) interest
at a price above (below) the Upper
PO 00000
Frm 00139
Fmt 4703
Sfmt 4703
(Lower) Price Band.12 Because
executions cannot occur outside of
applicable price bands anyway, the
Exchange believes it is inefficient to
route orders outside of price bands. For
example, assume that the Lower Price
Band is $9.50 and the Upper Price Band
is $10.50. Further assume the NBBO is
$10.00 by $11.00, and thus, that the
national best offer of $11.00 is not
executable.13 If the Exchange received a
routable limit order to buy at $11.00
such order would not be routed to the
available quotation(s) at $11.00 because
such quotation could not be executed.
The Exchange notes that the proposed
rule text reflecting that the Exchange
will not route if there are not executable
quotations available is consistent with
the rules of several other market centers,
including EDGA and EDGX.14
2. Statutory Basis
The Exchange believes that the
proposed rule changes are consistent
with Section 6(b) of the Securities
Exchange Act of 1934 (the ‘‘Act’’) 15 and
further the objectives of Section 6(b)(5)
of the Act 16 because they are designed
to promote just and equitable principles
of trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
and, in general, to protect investors and
the public interest. The proposed rule
change also is designed to support the
principles of Section 11A(a)(1) 17 of the
Act in that it seeks to assure fair
competition among brokers and dealers
and among exchange markets.
The proposed rule changes to add
functionality are generally intended to
add certain system functionality
currently offered by EDGA and/or EDGX
in order to provide a consistent
technology offering for the BGM
Affiliated Exchanges. A consistent
technology offering, in turn, will
simplify the technology
implementation, changes and
12 The Upper Price Band and Lower Price Band
are defined terms in the Limit Up-Limit Down Plan.
13 The Exchange notes that this condition, with
the national best bid and/or national best offer
outside of applicable price bands, is defined in the
Plan as Straddle State (as long as the security is not
in a Limit State). The Exchange also notes that
pursuant to the Plan if a security is in a Straddle
State and trading in that stock deviates from normal
trading characteristics, the applicable listing
exchange may, but is not required to, declare a
trading pause for that security.
14 See, e.g., EDGA Rule 11.9(b)(1)(B)(i); EDGX
Rule 11.9(b)(1)(B)(i); NASDAQ Rule
4120(a)(12)(E)(4); NYSE Arca Rule 7.11(a)(7).
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
17 15 U.S.C. 78k–1(a)(1).
E:\FR\FM\25JYN1.SGM
25JYN1
emcdonald on DSK67QTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 143 / Friday, July 25, 2014 / Notices
maintenance by Users of the Exchange
that are also participants on BYX, EDGA
and/or EDGX. The proposed rule
changes would also provide Users with
access to functionality that is generally
available on markets other than the
BGM Affiliated Exchanges and may
result in the efficient execution of such
orders and will provide additional
flexibility as well as increased
functionality to the Exchange’s System
and its Users. The Exchange also
believes that the changes to correct or
provide additional specificity regarding
the functionality of the System would
promote just and equitable principles of
trade and remove impediments to a free
and open market by providing greater
transparency concerning the operation
of the System. The Exchange also
believes that the proposed amendments
will contribute to the protection of
investors and the public interest by
making the Exchange’s rules easier to
understand.
As explained elsewhere in this
proposal, the proposed FOK
functionality is similar to existing IOC
and Minimum Quantity functionality
and is available on numerous other
market centers, including EDGA and
EDGX. Similarly, the proposed
Minimum Quantity functionality is
intended to codify functionality that has
been available on the Exchange since its
inception and is available on numerous
other market centers, including the
equity options trading platform operated
by BZX, known as BATS Options.
Finally, the Stop Orders and Stop Limit
Orders that the Exchange proposes to
add are available on numerous other
market centers, including EDGA and
EDGX. Thus, the Exchange believes that
each of these proposed functionality
additions have already been accepted as
consistent with the Act and offered by
various market centers for many years.
Also, to the extent any of the proposals
differ from functionality available on
other market centers as described
elsewhere in this proposal, the
Exchange does not believe that any such
differences present any additional
policy issues to be considered under the
Act. The Exchange’s addition of such
functionality is consistent with the Act
for the reasons set forth above.
The Exchange believes that the
additional detail with respect to the
operation of Reserve Orders and
restructuring to move certain
descriptions related to Reserve Order
handling from Rule 11.12 to Rule 11.9
are consistent with the Act for the
reasons set forth above related to
transparency of the operation of the
System. The Exchange believes that the
addition of the Random Replenishment
VerDate Mar<15>2010
18:34 Jul 24, 2014
Jkt 232001
option is consistent with the Act as it
will help to achieve the general goal of
Reserve Orders, which is to display less
than the full interest that one represents
in order to avoid moving the market.
Random Replenishment will help Users
to further disguise reserve interest by
replenishing the Display Quantity of a
Reserve Order to a variable amount so
that other participants are less likely to
detect that such order is in fact a
Reserve Order with additional nondisplayed size. Given the consistency of
this functionality with the overall intent
of Reserve Orders, and the widespread
and longstanding offering of Reserve
Orders by most market centers, the
Exchange believes that the Random
Replenishment option is consistent with
the Act.
The Exchange believes that the
proposed change with respect to the fact
that the Exchange does not route orders
outside of price bands established by
the Limit Up-Limit Down Plan is
consistent with the Act in that it reflects
the current operation of the System, is
consistent with the rules of other
Exchanges that have adopted such
functionality consistent with the Act,
and because routing such orders would
be inefficient, even if they would return
to the Exchange unexecuted. As
described above, the Exchange believes
that the other proposed changes to its
rulebook to correct typographical
changes and add additional detail to the
way that certain functionality currently
operates provides further clarification to
Members, Users, and the investing
public regarding the operation of the
Exchange’s System.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange reiterates that the proposed
rule change is being proposed in the
context of the technology integration of
the BGM Affiliated Exchanges. Thus,
the Exchange believes this proposed
rule change is necessary to permit fair
competition among national securities
exchanges. In addition, the Exchange
believes the proposed rule change will
benefit Exchange participants in that it
is one of several changes necessary to
achieve a consistent technology offering
by the BGM Affiliated Exchanges.
PO 00000
Frm 00140
Fmt 4703
Sfmt 4703
43527
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 18 and Rule 19b–4(f)(6)
thereunder.19
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 20 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 21
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay, noting that doing so
will allow the Exchange to immediately
clarify its rules with respect to existing
functionality already offered by the
Exchange; correct typographical errors
in the Exchange’s rules; and offer
certain functionality that is already
available on other market centers, which
will allow the Exchange to remain
competitive with such other market
centers. In addition, the Exchange states
that, to the extent a proposed change
optimizes existing functionality, the
Exchange does not believe that there is
a reason to delay the availability of such
optimization. Furthermore, the
Exchange states that waiver of the
operative delay will allow the Exchange
to continue to strive towards a complete
technology integration of the BGM
Affiliated Exchanges, with gradual rollouts of new functionality to ensure
stability of the System. The Commission
believes that waiving the 30-day
18 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
20 17 CFR 240.19b–4(f)(6).
21 17 CFR 240.19b–4(f)(6)(iii).
19 17
E:\FR\FM\25JYN1.SGM
25JYN1
43528
Federal Register / Vol. 79, No. 143 / Friday, July 25, 2014 / Notices
operative delay is consistent with the
protection of investors and the public
interest. Therefore, the Commission
hereby waives the 30-day operative
delay and designates the proposal
operative upon filing.22
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:
10:00 a.m. and 3:00 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–BYX–
2014–010 and should be submitted on
or before August 15, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–17514 Filed 7–24–14; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
[Public Notice: 8807]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BYX–2014–010 on the subject line.
Culturally Significant Objects Imported
for Exhibition Determinations: ‘‘NeoImpressionism and the Dream of
Realities: Painting, Poetry, Music’’
Exhibition
emcdonald on DSK67QTVN1PROD with NOTICES
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BYX–2014–010. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
22 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
VerDate Mar<15>2010
18:34 Jul 24, 2014
Jkt 232001
Dated: July 16, 2014.
Kelly Keiderling,
Principal Deputy Assistant Secretary, Bureau
of Educational and Cultural Affairs,
Department of State.
[FR Doc. 2014–17570 Filed 7–24–14; 8:45 am]
BILLING CODE 4710–05–P
DEPARTMENT OF TRANSPORTATION
Intelligent Transportation Systems
Program Advisory Committee; Notice
of Meeting
ITS Joint Program Office, Office
of the Assistant Secretary for Research
and Technology, U.S. Department of
Transportation.
ACTION: Notice.
AGENCY:
Electronic Comments
Paper Comments
Simpson, Attorney-Adviser, Office of
the Legal Adviser, U.S. Department of
State (telephone: 202–632–6467). The
mailing address is U.S. Department of
State, SA–5, L/PD, Fifth Floor (Suite
5H03), Washington, DC 20522–0505.
Notice is hereby given of the
following determinations: Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
seq.), Delegation of Authority No. 234 of
October 1, 1999, Delegation of Authority
No. 236–3 of August 28, 2000 (and, as
appropriate, Delegation of Authority No.
257 of April 15, 2003), I hereby
determine that the objects to be
included in the exhibition ‘‘NeoImpressionism and the Dream of
Realities: Painting, Poetry, Music,’’
imported from abroad for temporary
exhibition within the United States, are
of cultural significance. The objects are
imported pursuant to loan agreements
with the foreign owners or custodians.
I also determine that the exhibition or
display of the exhibit objects at The
Phillips Collection, Washington, DC,
from on or about September 27, 2014,
until on or about January 11, 2015, and
at possible additional exhibitions or
venues yet to be determined, is in the
national interest. I have ordered that
Public Notice of these Determinations
be published in the Federal Register.
FOR FURTHER INFORMATION CONTACT: For
further information, including a list of
the exhibit objects, contact Julie
SUMMARY:
PO 00000
23 17
CFR 200.30–3(a)(12).
Frm 00141
Fmt 4703
Sfmt 4703
The Intelligent Transportation
Systems (ITS) Program Advisory
Committee (ITSPAC) will hold a
meeting on August 13, 2014, from 8:00
a.m. to 5:00 p.m. (EDT) at the Key
Bridge Marriott Hotel, 1401 Lee
Highway, Arlington, VA 22209.
The ITSPAC, established under
Section 5305 of Public Law 109–59,
Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for
Users, August 10, 2005, and reestablished under Section 53003 of
Public Law 112–141, Moving Ahead for
Progress in the 21st Century, July 6,
2012, was created to advise the
Secretary of Transportation on all
matters relating to the study,
development, and implementation of
intelligent transportation systems.
Through its sponsor, the ITS Joint
Program Office (JPO), the ITSPAC makes
recommendations to the Secretary
regarding ITS Program needs, objectives,
plans, approaches, content, and
progress.
The following is a summary of the
meeting tentative agenda: (1) Call to
Order and Roll Call, (2) Opening
Remarks, (3) Committee Member
Introductions, (4) ITS JPO Briefing and
Group Discussion, (5) Committee Topics
of Interest Discussion, (6) Committee
Organization Discussion, and (7)
Summary and Next Steps.
The meeting will be open to the
public, but limited space will be
available on a first-come, first-served
basis. Members of the public who wish
to present oral statements at the meeting
must request approval from Mr. Stephen
Glasscock, the Committee Designated
E:\FR\FM\25JYN1.SGM
25JYN1
]]>Agencies
[Federal Register Volume 79, Number 143 (Friday, July 25, 2014)]
[Notices]
[Pages 43522-43528]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17514]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72647; File No. SR-BYX-2014-010]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to Rules
11.9, 11.12, and 11.18 of BATS Y-Exchange, Inc.
July 21, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\
[[Page 43523]]
notice is hereby given that on July 15, 2014, BATS Y-Exchange, Inc.
(the ``Exchange'' or ``BYX'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I 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) 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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend Rule 11.9 to add certain
functionality to the Exchange's trading platform, to add additional
detail regarding existing functionality in place on the Exchange, and
to correct certain typographical errors. The Exchange also proposes to
make related changes to Rule 11.12 and to eliminate obsolete language
and correct certain typographical errors in Rule 11.18.
The text of the proposed rule change is available at the Exchange's
Web site at https://www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Earlier this year, the Exchange and its affiliate BATS Exchange,
Inc. (``BZX'') received approval to affect a merger (the ``Merger'') of
the Exchange's parent company, BATS Global Markets, Inc., with Direct
Edge Holdings LLC, the indirect parent of EDGX Exchange, Inc.
(``EDGX'') and EDGA Exchange, Inc. (``EDGA'', and together with BZX,
BYX and EDGX, the ``BGM Affiliated Exchanges'').\5\ In the context of
the Merger, the BGM Affiliated Exchanges are working to align certain
system functionality, retaining only intended differences between the
BGM Affiliated Exchanges. Thus, many of the proposals set forth below
are intended to add certain system functionality currently offered by
EDGA and/or EDGX in order to provide a consistent technology offering
for users of the BGM Affiliated Exchanges. In the context of such
alignment, the Exchange is also seeking to improve the transparency and
understandability of its rules, and has therefore proposed various
corrective and clarifying changes, as described below.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 71375 (January 23,
2014), 79 FR 4771 (January 29, 2014) (SR-BATS-2013-059; SR-BYX-2013-
039).
---------------------------------------------------------------------------
The specific proposals set forth in more detail below include: (i)
The addition of Fill-or-Kill functionality; (ii) the addition of a new
replenishment option with respect to Reserve Orders as well as
additional detail regarding the existing functionality of Reserve
Orders; (iii) the addition of rule text regarding Minimum Quantity
functionality; (iv) the addition of Stop Orders and Stop Limit Orders;
and (v) various corrections to typographical errors in Exchange rules,
elimination of obsolete language in Rule 11.18 as well as the addition
of detail to the routing portion of Rule 11.18.
Fill-or-Kill (``FOK'') Functionality
The Exchange proposes to add a Time-in-Force (``TIF'') term of
Fill-or-Kill (``FOK''). The Exchange currently offers five other TIF
terms pursuant to Rule 11.9(b), including Immediate-or-Cancel
(``IOC''). The Exchange proposes to add FOK as a sixth TIF option,
which would be numbered as 11.9(b)(6). As proposed, a FOK would be a
limit order that is to be executed in its entirety as soon as it is
received and, if not so executed, cancelled.
Example 1--FOK Executes
Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 10.00 and a non-displayed order to buy 100
shares at 10.00. Assume that a User \6\ submits a limit order to sell
200 shares at 10.00 that is designated with a TIF of FOK.
---------------------------------------------------------------------------
\6\ As defined in BYX 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.''
---------------------------------------------------------------------------
The order to sell 200 shares would execute against the
resting displayed and non-displayed orders at 10.00.
Example 2--FOK Does not Execute
Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 10.00 and no other equal or better priced
liquidity. Assume that a User submits a limit order to sell 200 shares
at 10.00 that is designated with a TIF of FOK.
The order to sell 200 shares would be cancelled back to
the User because the order could not be executed in its entirety upon
receipt by the Exchange.
An order designated as FOK is similar to an IOC order and unique
from other TIFs in that it is either executed immediately or cancelled
back to a User, and thus, the Exchange also proposes to modify Rules
11.9(e)(1) and 11.18(e)(5) to add reference to orders with a TIF of FOK
alongside references to orders with a TIF of IOC, as described below.
First, Rule 11.9(e)(1) states that an order may only be cancelled or
replaced if the order has a TIF term other than IOC and if the order
has not yet been executed. The Exchange proposes to modify Rule
11.9(e)(1) to include the TIF of FOK as another TIF that, when attached
to an order, would mean that the order cannot be cancelled or replaced.
Second, Rule 11.18(e)(5) describes the operation of BATS market orders
\7\ and IOC orders in the context of the Plan to Address Extraordinary
Market Volatility Pursuant to Rule 608 of Regulation NMS under the Act
(the ``Limit Up-Limit Down Plan'').\8\ The Exchange proposes to modify
Rule 11.18(e)(5) to include orders with a TIF of FOK along with such
description. Specifically, the Exchange proposes to make clear that,
like IOC and BATS market orders, FOK orders will only be executed if
such executions are possible at or within the price bands prescribed by
the Limit Up-Limit Down Plan, and that if an order with a TIF of FOK
cannot be so executed, the remainder of the order will be cancelled.
---------------------------------------------------------------------------
\7\ See Rule 11.9(a)(2) for a description of BATS market orders.
\8\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down
Release'').
---------------------------------------------------------------------------
Reserve Orders and Replenishment
The Exchange currently offers Reserve Orders, which are defined in
Rule 11.9(c)(1) as limit orders ``with a portion of the quantity
displayed . . . and with a reserve portion of the quantity . . . that
is not displayed.'' Pursuant to current Rule 11.12(a)(5), the displayed
[[Page 43524]]
quantity of a Reserve Order has time priority as of the time of
display. Further, as currently described, if the displayed quantity of
the Reserve Order is decremented such that 99 shares or fewer would be
displayed, the displayed portion of the Reserve Order shall be
refreshed for (i) the original displayed quantity, or (ii) the entire
reserve quantity, if the remaining reserve quantity is smaller than the
original displayed quantity. Finally, as set forth in Rule 11.12(a)(5),
a new timestamp is created both for the refreshed and reserved portion
of the order each time it is refreshed from reserve.
The Exchange proposes to add Random Replenishment functionality, as
described below, and to [sic] additional detail to Rule 11.9(c)(1),
which defines Reserve Orders. In making these changes, the Exchange
proposes to remove details regarding replenishment from Rule
11.12(a)(5), as such details are proposed to be included in Rule
11.9(c)(1).
The Exchange proposes to leave the current definition of Reserve
Order as currently drafted, but to add the defined terms ``Display
Quantity'' to refer to the displayed quantity of a Reserve Order and
``Reserve Quantity'' to refer to the non-displayed quantity of a
Reserve Order. The Exchange also proposes to explicitly state within
Rule 11.9(c)(1) that both the Display Quantity and the Reserve Quantity
of a Reserve Order are available for execution against incoming orders.
As noted above, the Exchange currently sets forth the details
regarding replenishment of a Reserve Order in Rule 11.12(a)(5). The
Exchange proposes to move these details to Rule 11.9(c)(1) and to make
certain changes necessary to support the proposed Random Replenishment
functionality. Specifically, proposed Rule 11.9(c)(1) would state that
if the Display Quantity of an order is reduced to less than a round
lot, the System will, in accordance with the User's instruction,
replenish the Display Quantity from the Reserve Quantity using one of
the replenishment instructions set forth in the Rule. The Exchange also
proposes to state in Rule 11.9(c)(1) that if the remainder of an order
is less than the replenishment amount, the System \9\ will replenish
and display the entire remainder of the order.
---------------------------------------------------------------------------
\9\ As defined in BYX Rule 1.5(aa), the System is the electronic
communications and trading facility designated by the Board through
which securities orders of Users are consolidated for ranking,
execution and, when applicable, routing away.
---------------------------------------------------------------------------
The Exchange currently requires Users to designate the original
display quantity of an order, which is also the amount to which an
order is replenished (unless the remainder of an order is smaller than
the original displayed quantity) under the current replenishment
functionality. The Exchange refers to this quantity as ``max floor'' in
its specifications. The Exchange proposes to add a defined term of
``Max Floor'' to Rule 11.9(c)(1), which would be a mandatory value
entered by a User that will determine the quantity of the order to be
initially displayed by the System and will also be used to determine
the replenishment amount under both replenishment options described
below.
The Exchange currently offers one replenishment option, which uses
the number of shares from reserve necessary to return the displayed
quantity of an order to its original display amount. The Exchange
proposes to retain this replenishment option and to define it as
``Fixed Replenishment.'' As proposed, Fixed Replenishment will apply to
any order for which Random Replenishment has not been selected. Under
the Fixed Replenishment option, the System will replenish the Display
Quantity of an order to the Max Floor designated by the User. The
Exchange also proposes to add a new replenishment option, Random
Replenishment. As proposed, Random Replenishment is an instruction that
a User may attach to an order with Reserve Quantity where replenishment
quantities for the order are randomly determined by the System within a
replenishment range established by the User. Further, as proposed, the
User entering an order into the System subject to the Random
Replenishment instruction must select a replenishment value and a Max
Floor. The initial Display Quantity will be the Max Floor. The Display
Quantity of an order when replenished will be determined by the System
randomly selecting a round lot number of shares within a replenishment
range that is between: (i) The Max Floor minus the replenishment value;
and (ii) the Max Floor plus the replenishment value. The Exchange
believes that the Random Replenishment is an optimization of current
System functionality as it will help to achieve the general goal of
Reserve Orders, which is to display less than the full interest that
one represents in order to avoid moving the market. Random
Replenishment will help Users to further disguise reserve interest by
replenishing the Display Quantity of a Reserve Order to a variable
amount so that other participants are less likely to detect that such
order is in fact a Reserve Order with additional non-displayed size.
In addition to the changes set forth above, the Exchange proposes
to modify Rule 11.9(e)(3) to state that the Max Floor set for an order
can be modified through the use of a replace message rather than
requiring a User to cancel and re-enter an order. The Exchange also
proposes to modify Rule 11.12(a)(3) to make clear that a modification
to the Max Floor of a Reserve Order will not cause such order to lose
priority. The Exchange believes that this is appropriate because a
modification to Max Floor of a resting Reserve Order will not change
the handling or display of the order in any way until replenishment is
caused due to the reduction of the Display Quantity to less than a
round lot. When such replenishment occurs (based on the new Max Floor),
the order will receive a new timestamp, and thus, will have a new
priority.
Example 1(a)--Fixed Replenishment
Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 9.99, a displayed order to sell 100 shares
at 10.01, and no other equal or better priced liquidity.
A User enters an order into the System to buy 10,000
shares at 10.00 with a Display Quantity (i.e., Max Floor) of 1,000
shares and a Reserve Quantity of 9,000 shares. Because Random
Replenishment was not designated the order defaults to a Fixed
Replenishment quantity of 1,000 shares.
An inbound market order to sell 400 shares is entered into
the System and executes against the Display Quantity of 1,000 shares,
resulting in a remaining Display Quantity of 600 shares.
Another market order to sell 600 shares is entered into
the System and executes against the 600 displayed shares. The Display
Quantity is then replenished by the System from the Reserve Quantity to
the order's original displayed quantity of 1,000 shares, resulting in a
remaining Reserve Quantity of 8,000 shares. Both the Display Quantity
and the Reserve Quantity receive new timestamps upon replenishment.
Example 1(b)--Fixed Replenishment
Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 9.99, a displayed order to sell 100 shares
at 10.01, and no other equal or better priced liquidity.
User A enters Order 1, a limit order to buy 6,000 shares
at 10.00, the NBB, with a Display Quantity (i.e., Max Floor) of 1,000
shares and a Reserve Quantity of 5,000 shares. Because Random
Replenishment was not designated the
[[Page 43525]]
order defaults to a Fixed Replenishment quantity of 1,000 shares.
User B then enters Order 2, a display-eligible limit order
to buy 600 shares at 10.00 with no Reserve Quantity.
An inbound market order to sell 2,000 shares is entered
into the System.
The order to sell first executes against the Display
Quantity of 1,000 shares of Order 1, then executes against the full 600
shares of Order 2, and then executes against 400 shares of the Reserve
Quantity of Order 1 (i.e., the displayed quantities of Orders 1 and 2
execute in time priority, followed by the Reserve Quantity of Order 1).
The Display Quantity of Order 1 is then replenished for
1,000 shares, leaving a Reserve Quantity of 3,600 shares. Both the
Display Quantity and the Reserve Quantity receive new timestamps upon
replenishment.
Example 2(a)--Random Replenishment
Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 9.99, a displayed order to sell 100 shares
at 10.01, and no other equal or better priced liquidity.
A User enters an order into the System to buy 10,000
shares at 10.00 and designates such order for Random Replenishment with
a Max Floor of 1,000 shares and a replenishment value of 400 shares.
The initial Display Quantity of the order is 1,000 shares
and the Reserve Quantity is 9,000 shares.
An inbound market order to sell 950 shares is entered into
the System and executes against the Display Quantity of the order
(1,000 shares), leaving a 50 share Display Quantity. Because the
remaining Display Quantity is less than a round lot, the System will
replenish the Display Quantity.
With a replenishment value of 400, subsequent
replenishments will return the Display Quantity to a randomly selected
round lot value between 600 shares (i.e., Max Floor minus the
replenishment value) and 1,400 shares (i.e., Max Floor plus the
replenishment value).
Assume the System selects a Display Quantity of 1,200
shares. The System will refresh the order with 1,150 shares from the
Reserve Quantity, thus generating a new Display Quantity of 1,200
shares to sell at 10.00, and a Reserve Quantity of 7,850 shares.
Example 2(b)--Random Replenishment
Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 9.99, a displayed order to sell 100 shares
at 10.01, and no other equal or better priced liquidity.
A User enters an order into the System to buy 5,000 shares
at 10.00 and designates such order for Random Replenishment with a Max
Floor of 2,000 shares and a replenishment value of 1,000 shares.
The initial Display Quantity of the order is 2,000 shares
and the Reserve Quantity is 3,000 shares.
An inbound market order to sell 1,800 shares is entered
into the System and executes against the Display Quantity of the order
(2,000 shares), leaving a 200 share Display Quantity.
A second inbound market order to sell 700 shares is
entered into the System and executes against the Display Quantity of
the order (200 shares) and 500 shares of the Reserve Quantity of the
order, leaving no Display Quantity and a Reserve Quantity of 2,500
shares.
With a replenishment value of 1,000, subsequent
replenishments would otherwise return the Display Quantity to a
randomly selected round lot value between 1,000 shares (i.e., Max Floor
minus the replenishment value) and 3,000 shares (i.e., Max Floor plus
the replenishment value). However, in this example, because the Reserve
Quantity is now 2,500 shares, the System would instead replenish the
Display Quantity to a round lot value between 1,000 and 2,500 shares.
Assume the System selects a Display Quantity of 2,000
shares, leaving a Reserve Quantity of 500 shares.
An inbound market order to sell 2,050 shares is entered
into the System and executes against the Display Quantity of the order
(2,000 shares) and 50 shares of the Reserve Quantity of the order,
leaving no Display Quantity and a Reserve Quantity of 450 shares.
Because the remaining Reserve Quantity is less than the lower end of
the replenishment range (i.e., 1,000 shares), the System will Display
the entire remainder of the order, or 450 shares.
Minimum Quantity Functionality
The Exchange proposes to codify existing functionality already
offered by the Exchange by introducing a definition of Minimum Quantity
Order in Rule 11.9(c)(5). The Exchange notes that the main difference
between a Minimum Quantity Order and an order with a TIF of FOK is that
an order with a specified minimum quantity may be partially executed so
long as the execution size is equal to or exceeds the quantity provided
by the User whereas a FOK Order must be executed in full.
A Minimum Quantity Order, as proposed, is a limit order to buy or
sell that will only execute if a specified minimum quantity of shares
can be obtained. The Exchange proposes to state in Rule 11.9(c)(5) that
orders with a specified minimum quantity will only execute against
multiple, aggregated orders if such executions would occur
simultaneously (rather than only executing against a single order that
satisfies the applicable minimum quantity). Finally, the Exchange will
only honor a specified minimum quantity on BATS Only Orders that are
non-displayed or IOCs. The Exchange will disregard a minimum quantity
on any other order.
The Exchange notes that a specified minimum quantity is only
applicable to BATS Only Orders, which are not routed to other market
centers, because of the practical difficulty the Exchange would face in
trying to achieve a minimum quantity through its routing process. For
instance, although most market centers have a feature similar to or
identical to the Exchange's minimum quantity functionality, the
Exchange cannot guarantee that all away market centers would always
have such functionality. Minimum quantity is also inconsistent with
routed orders because under most of the Exchange's routing options an
order is split into multiple smaller orders that are routed
simultaneously to away market centers. Similarly, the Exchange notes
that a specified minimum quantity is only possible to apply to non-
displayed orders or IOCs due to the Exchange's obligations to honor
displayed quotations by executing such quotations against incoming
orders.\10\ By limiting the minimum quantity instruction to non-
displayed orders or IOCs the Exchange avoids the display of a quotation
that is not executable unless a specific condition is met.
---------------------------------------------------------------------------
\10\ See, e.g., Rule 602 of Regulation NMS (the ``Firm Quote
Rule''). 17 CFR 240.602.
---------------------------------------------------------------------------
Example 1--Minimum Quantity Order Executes
Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 10.00 and a non-displayed order to buy 100
shares at 10.00. Assume that a User submits an IOC limit order to sell
500 shares at 10.00 with a minimum quantity of 200 shares.
The order to sell 500 shares would receive a partial
execution of 200 shares against the resting displayed and non-displayed
orders at 10.00. The remaining 300 shares would be cancelled back to
the User.
[[Page 43526]]
Example 2--Minimum Quantity Order Does Not Execute
Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 10.00 and a non-displayed order to buy 100
shares at 10.00. Assume that a User submits an IOC limit order to sell
500 shares at 10.00 with a minimum quantity of 300 shares.
The order to sell would be cancelled back to the User
because the required execution of at least 300 shares could not be
satisfied upon receipt by the Exchange.
Stop and Stop Limit Order Functionality
The Exchange proposes to adopt new orders that trigger based on
trades occurring on the Exchange or reported on other marketplaces.
Specifically, the Exchange proposes to adopt Stop Orders and Stop Limit
Orders. Stop Orders and Stop Limit Orders are not executable unless and
until their stop price is triggered. As proposed, a Stop Order is an
order that becomes a BATS market order \11\ when the stop price is
elected. In contrast, a Stop Limit Order is an order that becomes a
limit order when the stop price is elected. The triggering events for
Stop Orders and Stop Limit Orders will be the same. A Stop Order or
Stop Limit Order to buy will be elected when the consolidated last sale
in the security occurs at, or above, the specified stop price. A Stop
Order or Stop Limit Order to sell will be elected when the consolidated
last sale in the security occurs at, or below, the specified stop
price.
---------------------------------------------------------------------------
\11\ See Rule 11.9(a)(2).
---------------------------------------------------------------------------
Example 1--Stop Order Is Triggered
Assume the NBBO is 7.80 x 8.00. Assume that a User submits a Stop
Order to buy 500 shares with a stop price of 8.05.
Assume the NBBO shifts gradually upwards to 8.00 by 8.05.
An execution reported by another exchange at 8.05 will trigger the stop
price of the Stop Order, which will convert into a BATS market order to
buy.
Example 2--Stop Limit Order Is Triggered
Assume the NBBO is 7.84 x 7.85. Assume that a User submits a Stop
Limit Order to buy 500 shares at 8.04 with stop limit price of 8.05.
Assume the NBBO shifts gradually upwards to 8.03 by 8.05.
An execution reported by another exchange at 8.05 will trigger the stop
price of the Stop Limit Order, which will convert into a limit order to
buy at 8.04.
In addition to the changes set forth above, the Exchange proposes
to modify Rule 11.9(e)(3) to state that the stop price of an order can
be modified through the use of a replace message rather than requiring
a User to cancel and re-enter an order. The Exchange also proposes to
modify Rule 11.12(a)(3) to make clear that a modification to the stop
price of a Stop Order or Stop Limit Order will not cause such an order
to lose priority. The Exchange believes that this is appropriate
because a modification to the stop price of a resting order will not
change the handling of the order in any way other than to trigger the
order based on a different subsequent trade than the order otherwise
would have.
Additional Changes
The Exchange proposes to correct three incorrect internal cross-
references in Rule 11.9(c)(7)(B), each of which points to paragraph
(c)(6)(A) but is intended to refer to paragraph (c)(7)(A). The Exchange
proposes to instead simply reference paragraph (A) above, which the
Exchange believes is sufficient detail when read in context.
The Exchange also proposes to eliminate all references in Rule
11.18 to individual stock trading pauses issued by a primary listing
market and related definitions, which are contained in Rule 11.18(e),
11.18(e)(6) and 11.18(f). The stock trading pauses described in such
provisions have been fully phased out as securities have become subject
to the Limit Up-Limit Down Plan. The Plan is already operational with
respect to all securities, and thus, the Exchange believes that all
references to individual stock trading pauses should be removed. This
change will also serve to eliminate certain duplicative references that
have occurred through amendments to Rule 11.18, including amendments
related to the operation of the Limit Up-Limit Down Plan as well as
other amendments. The Exchange also proposes various other corrections
to the numbering of Rule 11.18 for consistency with other portions of
its rules. The Exchange also proposes to eliminate a reference to the
operational date of the Limit Up-Limit Down Plan now that it is, in
fact, already operational.
In reviewing Rule 11.18 in connection with the above-described
corrections, the Exchange determined to also add additional detail to
the routing description of Rule 11.18 to reflect the existing
functionality of the System. In particular, the Exchange proposes to
affirmatively state in Rule 11.18 that the System will not route buy
(sell) interest at a price above (below) the Upper (Lower) Price
Band.\12\ Because executions cannot occur outside of applicable price
bands anyway, the Exchange believes it is inefficient to route orders
outside of price bands. For example, assume that the Lower Price Band
is $9.50 and the Upper Price Band is $10.50. Further assume the NBBO is
$10.00 by $11.00, and thus, that the national best offer of $11.00 is
not executable.\13\ If the Exchange received a routable limit order to
buy at $11.00 such order would not be routed to the available
quotation(s) at $11.00 because such quotation could not be executed.
The Exchange notes that the proposed rule text reflecting that the
Exchange will not route if there are not executable quotations
available is consistent with the rules of several other market centers,
including EDGA and EDGX.\14\
---------------------------------------------------------------------------
\12\ The Upper Price Band and Lower Price Band are defined terms
in the Limit Up-Limit Down Plan.
\13\ The Exchange notes that this condition, with the national
best bid and/or national best offer outside of applicable price
bands, is defined in the Plan as Straddle State (as long as the
security is not in a Limit State). The Exchange also notes that
pursuant to the Plan if a security is in a Straddle State and
trading in that stock deviates from normal trading characteristics,
the applicable listing exchange may, but is not required to, declare
a trading pause for that security.
\14\ See, e.g., EDGA Rule 11.9(b)(1)(B)(i); EDGX Rule
11.9(b)(1)(B)(i); NASDAQ Rule 4120(a)(12)(E)(4); NYSE Arca Rule
7.11(a)(7).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule changes are consistent
with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act'')
\15\ and further the objectives of Section 6(b)(5) of the Act \16\
because they are designed to promote just and equitable principles of
trade, to remove impediments to and perfect the mechanism of a free and
open market and a national market system, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, and, in general, to protect investors and the public
interest. The proposed rule change also is designed to support the
principles of Section 11A(a)(1) \17\ of the Act in that it seeks to
assure fair competition among brokers and dealers and among exchange
markets.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
\17\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------
The proposed rule changes to add functionality are generally
intended to add certain system functionality currently offered by EDGA
and/or EDGX in order to provide a consistent technology offering for
the BGM Affiliated Exchanges. A consistent technology offering, in
turn, will simplify the technology implementation, changes and
[[Page 43527]]
maintenance by Users of the Exchange that are also participants on BYX,
EDGA and/or EDGX. The proposed rule changes would also provide Users
with access to functionality that is generally available on markets
other than the BGM Affiliated Exchanges and may result in the efficient
execution of such orders and will provide additional flexibility as
well as increased functionality to the Exchange's System and its Users.
The Exchange also believes that the changes to correct or provide
additional specificity regarding the functionality of the System would
promote just and equitable principles of trade and remove impediments
to a free and open market by providing greater transparency concerning
the operation of the System. The Exchange also believes that the
proposed amendments will contribute to the protection of investors and
the public interest by making the Exchange's rules easier to
understand.
As explained elsewhere in this proposal, the proposed FOK
functionality is similar to existing IOC and Minimum Quantity
functionality and is available on numerous other market centers,
including EDGA and EDGX. Similarly, the proposed Minimum Quantity
functionality is intended to codify functionality that has been
available on the Exchange since its inception and is available on
numerous other market centers, including the equity options trading
platform operated by BZX, known as BATS Options. Finally, the Stop
Orders and Stop Limit Orders that the Exchange proposes to add are
available on numerous other market centers, including EDGA and EDGX.
Thus, the Exchange believes that each of these proposed functionality
additions have already been accepted as consistent with the Act and
offered by various market centers for many years. Also, to the extent
any of the proposals differ from functionality available on other
market centers as described elsewhere in this proposal, the Exchange
does not believe that any such differences present any additional
policy issues to be considered under the Act. The Exchange's addition
of such functionality is consistent with the Act for the reasons set
forth above.
The Exchange believes that the additional detail with respect to
the operation of Reserve Orders and restructuring to move certain
descriptions related to Reserve Order handling from Rule 11.12 to Rule
11.9 are consistent with the Act for the reasons set forth above
related to transparency of the operation of the System. The Exchange
believes that the addition of the Random Replenishment option is
consistent with the Act as it will help to achieve the general goal of
Reserve Orders, which is to display less than the full interest that
one represents in order to avoid moving the market. Random
Replenishment will help Users to further disguise reserve interest by
replenishing the Display Quantity of a Reserve Order to a variable
amount so that other participants are less likely to detect that such
order is in fact a Reserve Order with additional non-displayed size.
Given the consistency of this functionality with the overall intent of
Reserve Orders, and the widespread and longstanding offering of Reserve
Orders by most market centers, the Exchange believes that the Random
Replenishment option is consistent with the Act.
The Exchange believes that the proposed change with respect to the
fact that the Exchange does not route orders outside of price bands
established by the Limit Up-Limit Down Plan is consistent with the Act
in that it reflects the current operation of the System, is consistent
with the rules of other Exchanges that have adopted such functionality
consistent with the Act, and because routing such orders would be
inefficient, even if they would return to the Exchange unexecuted. As
described above, the Exchange believes that the other proposed changes
to its rulebook to correct typographical changes and add additional
detail to the way that certain functionality currently operates
provides further clarification to Members, Users, and the investing
public regarding the operation of the Exchange's System.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
reiterates that the proposed rule change is being proposed in the
context of the technology integration of the BGM Affiliated Exchanges.
Thus, the Exchange believes this proposed rule change is necessary to
permit fair competition among national securities exchanges. In
addition, the Exchange believes the proposed rule change will benefit
Exchange participants in that it is one of several changes necessary to
achieve a consistent technology offering by the BGM Affiliated
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
Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \18\ and Rule 19b-4(f)(6)
thereunder.\19\
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \20\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \21\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay, noting
that doing so will allow the Exchange to immediately clarify its rules
with respect to existing functionality already offered by the Exchange;
correct typographical errors in the Exchange's rules; and offer certain
functionality that is already available on other market centers, which
will allow the Exchange to remain competitive with such other market
centers. In addition, the Exchange states that, to the extent a
proposed change optimizes existing functionality, the Exchange does not
believe that there is a reason to delay the availability of such
optimization. Furthermore, the Exchange states that waiver of the
operative delay will allow the Exchange to continue to strive towards a
complete technology integration of the BGM Affiliated Exchanges, with
gradual roll-outs of new functionality to ensure stability of the
System. The Commission believes that waiving the 30-day
[[Page 43528]]
operative delay is consistent with the protection of investors and the
public interest. Therefore, the Commission hereby waives the 30-day
operative delay and designates the proposal operative upon filing.\22\
---------------------------------------------------------------------------
\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
\22\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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-BYX-2014-010 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BYX-2014-010. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 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 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-BYX-2014-010 and should be
submitted on or before August 15, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-17514 Filed 7-24-14; 8:45 am]
BILLING CODE 8011-01-P
