Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing of a Proposed Rule Change to Rules 11.9 of BATS Y-Exchange, Inc., 52780-52784 [2014-21003]
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Federal Register / Vol. 79, No. 171 / Thursday, September 4, 2014 / Notices
the Act. Applicants state that the
requested relief satisfies the section 6(c)
standard. Applicants contend that,
because the SBIC Subsidiary would be
entitled to rely on section 18(k) if it
were a BDC itself, there is no policy
reason to deny the benefit of that
exemption to the Company.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
The Company shall not issue or sell
any senior security, and the Company
shall not cause or permit Monroe SBIC
or any other SBIC Subsidiary to issue or
sell any senior security of which the
Company, Monroe SBIC or any other
SBIC Subsidiary is the issuer except to
the extent permitted by section 18 (as
modified for BDCs by section 61) of the
Act; provided that, immediately after
the issuance or sale by any of the
Company, Monroe SBIC or any other
SBIC Subsidiary of any such senior
security, the Company, individually and
on a consolidated basis, shall have the
asset coverage required by section 18(a)
of the Act (as modified by section 61(a)).
In determining whether the Company
has the asset coverage on a consolidated
basis required by section 18(a) of the
Act (as modified by section 61(a)), any
senior securities representing
indebtedness of an SBIC Subsidiary if
that SBIC Subsidiary has issued
indebtedness that is held or guaranteed
by the SBA shall not be considered
senior securities and, for purposes of the
definition of ‘‘asset coverage’’ in Section
18(h), shall be treated as indebtedness
not represented by senior securities.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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[Release No. 34–72946; File No. SR–BYX–
2014–019]
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing of a
Proposed Rule Change to Rules 11.9 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
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange filed a proposal to
amend Rule 11.9 to add certain optional
price sliding functionality.
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
[FR Doc. 2014–21004 Filed 9–3–14; 8:45 am]
August 28, 2014.
notice is hereby given that on August
26, 2014, BATS Y-Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
The Exchange currently offers various
forms of sliding which, in all cases,
result in the re-pricing of an order to, or
ranking and/or display of an order at, a
price other than an order’s limit price in
order to comply with applicable
securities laws and/or Exchange rules.
Specifically, the Exchange currently
offers price sliding to ensure
compliance with Regulation NMS and
Regulation SHO. Price sliding currently
offered by the Exchange re-prices and
displays an order upon entry and in
certain cases again re-prices and redisplays an order at a more aggressive
price one time if and when permissible
(‘‘single display-price sliding’’), and
optionally continually re-prices an order
(‘‘multiple display-price sliding’’) based
on changes in the national best bid
(‘‘NBB’’) or national best offer (‘‘NBO’’,
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and together with the NBB, the
‘‘NBBO’’). The Exchange proposes to
add another optional process, the Price
Adjust process, as described below.
Price Adjust in all contexts for which it
is being proposed will have to be
elected by a User 3 in order to be applied
by the Exchange.
In contrast to display-price sliding,
which is based solely on Protected
Quotations 4 at equities markets other
than the Exchange, Price Adjust would
be based on Protected Quotations at
external markets and at the Exchange. If
the Exchange has a Protected Quotation
that an incoming order to the Exchange
locks or crosses then such order
executes against the resting order, or, if
the incoming order is a BATS Post Only
Order or Partial Post Only at Limit
Order, such order would be executed in
accordance with Rules 11.9(c)(6) and
(c)(7), respectively, or adjusted pursuant
to the Price Adjust process, as described
in further detail below. Because the
Exchange will route orders to external
markets with locking or crossing
quotations, the Exchange notes that the
Price Adjust process would only be
applicable to non-routable orders,
including BATS Only Orders, BATS
Post Only Orders and Partial Post Only
at Limit Orders. In turn, because BATS
Only Orders will execute against
locking or crossing interest on the
Exchange (including both Protected
Quotations as well as any non-displayed
interest), the fact that Price Adjust
would be based on Protected Quotations
at the Exchange is only relevant for
BATS Post Only Orders and Partial Post
Only at Limit Orders.
With respect to price sliding offered
to ensure compliance with Regulation
NMS (‘‘display-price sliding’’), under
the Exchange’s current rules, if, at the
time of entry, a non-routable order
would cross a Protected Quotation
displayed by another trading center the
Exchange re-prices and ranks such order
at the locking price, and displays such
order at one minimum price variation
below the NBO for bids and above the
NBB for offers. Similarly, in the event a
non-routable order that, at the time of
entry, would lock a Protected Quotation
displayed by another trading center, the
3 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.’’
4 As defined in BYX Rule 1.5(t), a ‘‘Protected
Quotation’’ is ‘‘a quotation that is a Protected Bid
or Protected Offer.’’ In turn, the term ‘‘Protected
Bid’’ or ‘‘Protected Offer’’ means ‘‘a bid or offer in
a stock that is (i) displayed by an automated trading
center; (ii) disseminated pursuant to an effective
national market system plan; and (iii) an automated
quotation that is the best bid or best offer of a
national securities exchange or association.’’
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Exchange ranks such order at the
locking price and displays the order at
one minimum price variation below the
NBO for bids and above the NBB for
offers.
As proposed, under the Price Adjust
process, an order eligible for display by
the Exchange that, at the time of entry,
would create a violation of Rule 610(d)
of Regulation NMS by locking or
crossing a Protected Quotation of an
external market or the Exchange will be
ranked and displayed by the System at
one minimum price variation below the
current NBO (for bids) or to one
minimum price variation above the
current NBB (for offers). Thus, in
contrast to the display-price sliding
process, the Price Adjust process would
both rank and display an order at one
minimum price variation below the
current NBO or above the current NBB
(rather than ranking an order at the
locking price). Further, as noted above,
the Price Adjust process would adjust
the price of a BATS Post Only Order or
Partial Post Only at Limit Order that
would lock or cross an order displayed
by the Exchange unless such order is
permitted to remove liquidity as
described in Rules 11.9(c)(6) and (c)(7),
respectively, whereas the display-price
sliding process would cancel an order
back to the User unless it removed
liquidity on entry.
The Exchange also proposes to state
that in the event the NBBO changes 5
such that an order subject to Price
Adjust would not lock or cross a
Protected Quotation, the order will
receive a new timestamp, and will be
displayed at the price that originally
locked the NBO (for bids) or NBB (for
offers) on entry.
As an example of the Price Adjust
process, assume the Exchange has a
posted and displayed bid to buy 100
shares of a security priced at $10.10 per
share and a posted and displayed offer
to sell 100 shares at $10.13 per share.
Assume the NBBO is $10.10 by $10.12.
If the Exchange receives a non-routable
bid to buy 100 shares at $10.12 per
share the Exchange will rank and
display the order to buy at $10.11
because displaying the bid at $10.12
would lock an external market’s
Protected Offer to sell for $10.12. If the
NBO then moved to $10.13, the
5 The Exchange notes that it recently filed a
proposal clarifying the methodology used by the
Exchange to calculate the NBBO, including the data
feeds used to calculate the NBBO as well as various
types of feedback that update the Exchange’s view
of the NBBO, such as feedback from receipt of
Intermarket Sweep Orders with a time-in-force of
Day and feedback from the Exchange’s routing
broker-dealer, BATS Trading, Inc. See Securities
Exchange Act Release No. 72687 (July 28, 2014), 79
FR 44926 (August 1, 2014) (SR–BYX–2014–012).
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Exchange would un-slide the bid to buy
and rank and display it at its limit price
of $10.12.
As an example of an order executed
while subject to the Price Adjust process
before being un-slid by the Exchange,
assume the Exchange has a posted and
displayed bid to buy 100 shares of a
security priced at $10.10 per share and
a posted and displayed offer to sell 100
shares at $10.13 per share. Assume the
NBBO is $10.10 by $10.12. If the
Exchange receives a non-routable bid to
buy 100 shares at $10.12 per share the
Exchange will rank and display the
order to buy at $10.11 because
displaying the bid at $10.12 would lock
an external market’s Protected Offer to
sell for $10.12. Assume next that the
Exchange receives an offer to sell 100
shares at $10.11. The incoming order to
sell will execute at $10.11 against the
resting bid to buy 100 shares (originally
priced at $10.12) that has been slid
pursuant to the Price Adjust process.
Thus, the order executes at a full penny
per share better than if it were ranked
at the locking price of $10.12 (buying for
$10.11 rather than $10.12 per share).
Similarly, assume the Exchange has a
posted and displayed bid to buy 100
shares of a security priced at $10.10 per
share and a posted and displayed offer
to sell 100 shares at $10.12 per share.
Assume the NBBO is also $10.10 by
$10.12. Assume the Exchange receives a
BATS Post Only bid to buy 100 shares
at $10.12 per share. The Exchange notes
that under its current pricing structure,
which pays a rebate to orders that
remove liquidity and charges a fee to
orders that add liquidity, the incoming
bid to buy at $10.12 would remove
liquidity pursuant to Rule 11.9(c)(6).
However, if the Exchange has a different
pricing structure that does not allow the
incoming BATS Post Only Order to
remove liquidity then the Exchange will
rank and display the order to buy at
$10.11 because displaying the bid at
$10.12 would lock the Exchange’s
Protected Offer to sell for $10.12. If the
NBO, including the Exchange’s best
offer, then moved to $10.13, the
Exchange would un-slide the bid to buy
and rank and display it at its limit price
of $10.12.
The Exchange also proposes to state
that all orders that are re-ranked and redisplayed pursuant to Price Adjust will
retain their priority as compared to
other orders subject to Price Adjust
based upon the time such orders were
initially received by the Exchange.
Further, as proposed, following the
initial ranking and display of an order
subject to Price Adjust, an order will
only be re-ranked and re-displayed to
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the extent it achieves a more aggressive
price.
In order to offer multiple price sliding
to Exchange Users that select Price
Adjust, the Exchange proposes to make
clear that the ranked and displayed
prices of an order subject to Price Adjust
may be adjusted once or multiple times
depending upon the instructions of a
User and changes to the prevailing
NBBO. As is true for display-price
sliding, multiple price sliding pursuant
to Price Adjust would be optional and
would have to be explicitly selected by
a User before it will be applied. Orders
subject to multiple price sliding for
Price Adjust will be permitted to move
all the way back to their most aggressive
price, whereas orders subject to Price
Adjust may not be adjusted to their most
aggressive price, depending upon
market conditions and the limit price of
the order upon entry.
As an example of multiple price
sliding for Price Adjust assume the
Exchange has a posted and displayed
bid to buy 100 shares of a security
priced at $10.10 per share and a posted
and displayed offer to sell 100 shares at
$10.14 per share. Assume the NBBO is
$10.10 by $10.12. If the Exchange
receives a non-routable bid to buy 100
shares at $10.13 per share, the Exchange
would rank and display the order to buy
at $10.11 because displaying the bid at
$10.13 would cross an external market’s
Protected Offer to sell for $10.12. If the
NBO then moved to $10.13, the
Exchange would un-slide the bid to buy
and rank and display it at $10.12. Under
the proposed single Price Adjust
functionality, the Exchange would not
further adjust the ranked or displayed
price following this un-slide. However,
under multiple price sliding for Price
Adjust if the NBO then moved to
$10.14, the Exchange would un-slide
the bid to buy and rank and display it
at its full limit price of $10.13.
The Exchange currently offers
display-price sliding functionality to
avoid locking or crossing other markets’
Protected Quotations, but does not price
slide to avoid executions on the
Exchange’s order book (‘‘BATS Book’’).
Specifically, when the Exchange
receives an incoming order that could
execute against resting displayed
liquidity but an execution does not
occur because such incoming order is
designated as an order that will not
remove liquidity (i.e., a BATS Post Only
Order),6 then the Exchange will cancel
6 The Exchange again notes that BATS Post Only
Orders are permitted to remove liquidity from the
BATS Book if the value of price improvement
associated with such execution equals or exceeds
the sum of fees charged for such execution and the
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the incoming order. As noted above, the
Exchange proposes to make clear in the
description of Price Adjust that any
display-eligible BATS Post Only Order
that locks or crosses a Protected
Quotation displayed by the Exchange
upon entry will be executed as set forth
in Rule 11.9(c)(6) or adjusted pursuant
to the Price Adjust process. Similarly,
the Exchange proposes to make clear
that any display-eligible Partial Post
Only at Limit Order that locks or crosses
a Protected Quotation displayed by the
Exchange upon entry will be executed
as set forth in Rule 11.9(c)(7) or adjusted
pursuant to the Price Adjust process.
The Exchange reiterates that in contrast
to the proposed operation of Price
Adjust, the existing display-price
sliding process would instead cancel
BATS Post Only orders and BATS
Partial Post Only at Limit orders that
would lock or cross a Protected
Quotation displayed by the Exchange to
the extent such orders are not executed
on entry.
The Exchange currently applies
display-price sliding to Non-Displayed
Orders that cross Protected Quotations
of external markets. The Exchange
proposes language that makes clear that
this functionality will apply to all
orders for which a User has selected
either display-price sliding or Price
Adjust. The proposed rule states that
Non-Displayed Orders that are subject to
display-price sliding or Price Adjust are
ranked at the locking price on entry.
The proposed description also makes
clear that price sliding for NonDisplayed Orders is functionally
equivalent to the handling of
displayable orders except that such
orders will not have a displayed price
and will not be re-priced again unless
such orders cross a Protected Quotation
of an external market (i.e., such orders
are not un-slid). Other than updating the
language of the rule to reflect that NonDisplayed Orders for which a User has
selected Price Adjust will be handled in
the same way as orders subject to
display-price sliding, the Exchange is
not proposing to change its handling of
Non-Displayed Orders.
As an example of the Exchange’s
handling of Non-Displayed Orders in
the context of Price Adjust, assume the
Exchange has a posted and displayed
bid to buy 100 shares of a security
priced at $10.10 per share and a posted
value of any rebate that would be provided if the
order posted to the BATS Book and subsequently
provided liquidity. See Rule 11.9(c)(6). Similarly,
Partial Post Only at Limit Orders are permitted to
remove price improving liquidity as well as a Userselected percentage of the remaining order at the
limit price if, following such removal, the order can
post at its limit price. See Rule 11.9(c)(7).
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and displayed offer to sell 100 shares at
$10.13 per share. Assume the NBBO is
$10.10 by $10.11. If the Exchange
receives a Non-Displayed Order bid to
buy 100 shares at $10.12 per share, the
Exchange would re-price the order to a
$10.11 bid to buy to avoid potentially
trading through the $10.11 offer
displayed as the NBO (i.e., to ensure the
Exchange will not allow the bid to trade
at $10.12 per share). In the event the
NBBO moved to $10.09 by $10.10, the
Exchange would re-price the NonDisplayed bid to buy 100 shares to
$10.10 per share. If the NBBO then
moved to $10.10 by $10.11, the NonDisplayed bid would not be re-priced to
$10.11, but would remain on the
Exchange’s order book at $10.10. This
proposed handling is identical to
handling of a Non-Displayed Order for
which a User has selected display-price
sliding.
The Exchange also proposes that in
the event the NBBO changes such that
display eligible orders subject to
display-price sliding and Price Adjust
would not lock or cross a Protected
Quotation and are eligible to be
displayed at a more aggressive price, the
System will first display all orders
subject to display-price sliding at their
ranked price followed by orders subject
to Price Adjust, which will be re-ranked
and re-displayed as set forth above. The
Exchange believes it is reasonable to unslide orders subject to display-price
sliding before it un-slides orders subject
to Price Adjust because Price Adjust is
a less aggressive form of price sliding
than display-price sliding, in that an
order submitted by a User that elects
Price Adjust will be displayed and
ranked at the same price rather than
ranked at the locking price and
displayed at a less aggressive price.
The Exchange also proposes to make
clear that if a User elects to apply Price
Adjust to an order submitted to the
Exchange, price sliding will apply short
sale price sliding in connection with the
handling of the order by the Exchange.
The Exchange does not propose to
modify its short sale price sliding
functionality.
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’’)7 and
further the objectives of Section 6(b)(5)
of the Act8 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) 9 of the
Act in that it seeks to assure fair
competition among brokers and dealers
and among exchange markets.
The Exchange believes that the
proposed changes to offer Price Adjust
are consistent with Section 6(b)(5) of the
Act,10 as well as Rule 610 of Regulation
NMS 11 and Rule 201 of Regulation
SHO.12 The Exchange is not modifying
the overall functionality of price sliding,
which, to avoid locking or crossing
quotations of other market centers or to
comply with applicable short sale
restrictions, displays orders at
permissible prices while retaining a
price at which the User is willing to buy
or sell, in the event display at such price
or an execution at such price becomes
possible. Instead, the Exchange is
making changes to adopt an optional
form of price sliding, Price Adjust,
which will rank orders at their
displayed price rather than the locking
price, as described above. Thus, while
subject to Price Adjust sliding, an order
is ranked at a less aggressive price,
which may be preferable to certain
Users that wish to provide liquidity but
do not wish to cross the spread (i.e., if
buying, do not wish to trade at the NBO
or if selling, do not wish to trade at the
NBB). The Exchange believes it is
reasonable to un-slide display-price
sliding orders before it un-slides Price
Adjust orders because Price Adjust is a
less aggressive form of price sliding than
display-price sliding, in that an order
submitted by a User would be displayed
and ranked at the same price rather than
ranked at the locking price and
displayed at a less aggressive price.
Thus, because orders subject to displayprice sliding are ranked at and subject
to execution at higher prices when
buying and lower prices when selling,
the Exchange believes that such orders
should be re-displayed before orders
subject to Price Adjust orders in
response to changes to the NBBO.
Rule 610(d) requires exchanges to
establish, maintain, and enforce rules
that require members reasonably to
avoid ‘‘[d]isplaying quotations that lock
or cross any protected quotation in an
NMS stock.’’ 13 Such rules must be
9 15
U.S. C. 78k-1(a)(1).
10 Id.
11 17
CFR 242.610.
CFR 242.201.
13 17 CFR 242.610(d).
7 15
U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
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‘‘reasonably designed to assure the
reconciliation of locked or crossed
quotations in an NMS stock,’’ and must
‘‘prohibit . . . members from engaging
in a pattern or practice of displaying
quotations that lock or cross any
quotation in an NMS stock.’’ 14 Thus,
the Price Adjust process proposed by
the Exchange will assist Users by
displaying orders at permissible prices.
Similarly, Rule 201 of Regulation
SHO 15 requires trading centers to
establish, maintain, and enforce written
policies and procedures reasonably
designed to prevent the execution or
display of a short sale order at a price
at or below the current NBB under
certain circumstances. The Exchange’s
short sale price sliding will continue to
operate the same for Users of Price
Adjust as it does for Users that select the
display-price sliding process offered by
the Exchange.
As noted above, in contrast to displayprice sliding, which is based solely on
Protected Quotations at equities markets
and options exchanges other than the
Exchange, the proposed Price Adjust
process would be based on Protected
Quotations at external markets and at
the Exchange. Thus, if the Exchange has
a Protected Quotation that an incoming
order to the Exchange locks or crosses
then such order executes against the
resting order, or, if the incoming order
is a BATS Post Only Order or Partial
Post Only at Limit Order, such order
would be executed in accordance with
Rules 11.9(c)(6) and (c)(7), respectively,
or adjusted pursuant to the Price Adjust
process. The Exchange believes that it is
reasonable and consistent with the Act
to apply the Price Adjust process to
orders on entry that cannot executed or
displayed at their limit price because
this will contribute to additional
displayed liquidity on the Exchange
than if such orders were cancelled back
to the User. Therefore, the Exchange
believes the proposal to apply the Price
Adjust process to orders that cannot be
displayed because they would lock or
cross displayed contra-side interest on
the Exchange (and not just external
markets) will promote just and equitable
principles of trade, remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system. The
Exchange also reiterates that the
proposed Price Adjust process will
enable the System to avoid displaying a
locking or crossing quotation in order to
ensure compliance with Rule 610(d) of
Regulation NMS. The Exchange again
notes that under its current pricing
14 Id.
15 17
CFR 242.201.
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structure, which pays a rebate to orders
that remove liquidity and charges a fee
to orders that add liquidity, this
provision is currently inapplicable
because even BATS Post Only Orders
will remove on entry if it is in their
economic best interest to do so, and
thus, if there is locking or crossing
interest on the Exchange’s order book,
such orders will remove liquidity rather
than being subject to the Price Adjust
process. However, in order to maintain
a technology offering that is consistent
with technology offered by its affiliates
irrespective of fees,16 the Exchange is
proposing to implement Price Adjust as
proposed.
The Exchange notes that similar
functionality was recently proposed by
the Exchange’s affiliate, EDGX
Exchange, Inc. and that the proposed
rules are based on the Price Adjust
functionality set forth in such
proposal.17
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
proposed rule change is being proposed
as an additional option for Users that
wish to utilize Exchange price sliding
functionality and that the functionality
is consistent with that offered by the
Exchange today as well as affiliates and
competitors of the Exchange. Thus, the
Exchange believes this proposed rule
change is necessary to permit fair
competition among national securities
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
16 The Exchange notes that its affiliate, BATS
Exchange, Inc. is simultaneously proposing to adopt
the Price Adjust process.
17 See Securities Exchange Act Release No. 72676
(July 25, 2014), 79 FR 44520 (July 31, 2014) (SR–
EDGX–2014–18).
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52783
the Commission will: (a) by order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BYX–2014–019 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–2014–019. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S. C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room at 100 F Street NE.,
Washington, DC 20549–1090 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BYX–
E:\FR\FM\04SEN1.SGM
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52784
Federal Register / Vol. 79, No. 171 / Thursday, September 4, 2014 / Notices
2014–019, and should be submitted on
or before September 25, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–21003 Filed 9–3–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72942; File No. SR–
NYSEArca–2014–75]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change Amending
NYSE Arca Equities Rules 7.6, 7.11,
7.16, 7.31, 7.34, 7.35, 7.37 and 7.65 to
Eliminate Certain Order Types,
Modifiers and Related References
August 28, 2014.
I. Introduction
On June 27, 2014, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to to eliminate certain order
types, modifiers and related references
from the Exchange’s rules. The
proposed rule change was published for
comment in the Federal Register on July
16, 2014.3 The Commission received no
comment letters regarding the proposed
rule change. This order approves the
proposed rule change.
mstockstill on DSK4VPTVN1PROD with NOTICES
II. Description of the Proposal
The Exchange has proposed to amend
NYSE Arca Equities Rules (‘‘Rule(s)’’)
7.6, 7.11, 7.16, 7.31, 7.34, 7.35, 7.37 and
7.65 to eliminate certain order types,
modifiers and related references. The
Exchange states that it is proposing
these rule changes in order to streamline
its rules and reduce complexity among
its order type offerings.4
Working Orders. The Exchange has
proposed to eliminate five types of
working orders 5—Passive Discretionary
Orders, Discretion Limit Orders, Sweep
Reserve Orders, Random Reserve
Orders, and PL Select Orders—and to
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 72591
(July 10, 2014), 79 FR 41613 (‘‘Notice’’).
4 See Notice, 79 FR at 41614.
5 According to the Exchange, workings orders are
orders with a conditional or undisplayed price and/
or size. Id.; see also Rule 7.31(h).
1 15
VerDate Mar<15>2010
18:14 Sep 03, 2014
Jkt 232001
delete the definitions of these order
types currently set forth in Rule 7.31(h),
as well as references to these order types
currently in Rules 7.11 and 7.37.6 In
addition, in connection with the
proposed elimination of Passive
Discretionary Orders and Sweep
Reserve Orders, the Exchange has
proposed not to accept certain
combined orders that currently involve
these order types, namely, the Passive
Discretionary Reserve Order (a Passive
Discretionary Order used in
combination with a Reserve Order),
Sweep Reserve with Discretion Order (a
Sweep Reserve Order entered with a
discretionary price), and Inside Limit
Sweep Reserve Order (a Sweep Reserve
Order entered with an inside limit
price).7
Cross Orders. The Exchange has
proposed to accept only one type of
cross order—Cross Orders designated
IOC—and to revise its rules accordingly.
Currently, the Exchange defines a Cross
Order in Rule 7.31(s), separately defines
an IOC Cross Order in Rule 7.31(aa), and
separately defines additional types of
cross orders in other provisions of Rule
7.31. To effect the proposed change, the
Exchange has proposed to consolidate
Rule 7.31(aa) into Rule 7.31(s), thereby
creating one provision that describes
Cross Orders designated IOC, and to
eliminate the additional types of cross
orders currently available on the
Exchange.8 Rule 7.31(aa) would be
Consolidated into Rule 7.31(s) by: (i)
Adding the clause ‘‘designated IOC’’ to
the definition of Cross Order in Rule
7.31(s), (ii) moving to Rule 7.31(s) from
Rule 7.31(aa) text stating that Cross
Orders that would lock or cross the
PBBO or BBO will be cancelled,9 and
(iii) deleting Rule 7.31(aa).10 The
Exchange also has proposed to delete
certain rule provisions that would be
6 A more detailed description of these order types
and the provisions of Rules 7.11, 7.31(h) and 7.37
that would be deleted is set forth in the Notice. See
Notice, 79 FR at 41614; see also proposed Rules
7.11, 7.31(h) and 7.37.
7 See Notice, 79 FR at 41614 n. 8 and 9.
8 The additional types of cross orders currently
available on the Exchange, and which would be
eliminated under the proposal, are the Midpoint
Cross Order (currently defined in Rule 7.31(y)), Post
No Preference (‘‘PNP’’) Cross Order (currently
defined in Rule 7.31(bb)), Cross-and-Post Order
(currently defined in Rule 7.31(ff)), and Portfolio
Crossing Service (‘‘PCS’’) Order (currently defined
in Rule 7.31(ii)). The definitions of these cross order
types currently set forth in Rule 7.31 would be
deleted, as would references to certain of these
cross order types currently set forth in Rules
7.34(g), 7.37(d) and 7.65. Id. at 41615.
9 The terms ‘‘PBBO’’ and ‘‘BBO’’ are defined in
Rules 1.1(h) and (dd), respectively.
10 See Notice, 79 FR at 41614–15; see also
proposed Rule 7.31(s).
PO 00000
Frm 00160
Fmt 4703
Sfmt 4703
rendered moot or inapplicable by this
proposed change.11
Additional Order Types and Rule
Reference Deletions. In addition to the
foregoing proposed changes with
respect to working orders and cross
orders, the Exchange has proposed to
eliminate or limit the operation of five
other order types. First, the Exchange
has proposed to eliminate the Market to
Limit (‘‘MTL’’) Order, and thus to delete
Rule 7.31(rr), which currently sets forth
the definition of this order type. Second,
the Exchange has proposed to amend
the definition of an Auction-Only Order
in Rule 7.31(t) to provide that the
Exchange will only accept the AuctionOnly Orders specified therein, namely,
Limit-on-Open Orders (‘‘LOO Order’’),
Market-on-Open Orders (‘‘MOO
Order’’), Limit-on-Close Orders
(‘‘LOC’’), and Market-on-Close Orders
(‘‘MOC’’).12 Third, the Exchange
proposes not to accept NOW Orders
with a Reserve Modifier, and thus to
amend the definition of a NOW Order
in Rule 7.31(v) to provide that NOW
Orders entered with a Reserve modifier
will be rejected. Fourth, the Exchange
proposes not to accept market orders
with a NOW or IOC modifier, and thus
to delete the reference to market orders
in the definition of the IOC modifier in
Rule 7.31(c)(3),13 and to amend the
definition of a NOW Order in Rule
7.31(v) to provide that NOW Orders
entered with a Market modifier will be
rejected. Lastly, the Exchange proposes
to eliminate the use of a Fill or Kill
(‘‘FOK’’) modifier with a Mid-Point
Liquidity (‘‘MPL’’) Order, and thus to
amend the definition of an MPL Order
in Rule 7.31(h)(5) to provide that an
11 See Notice, 79 FR at 41615. Subparagraphs (1)–
(6) of current Rule 7.31(s) describe Cross Order
functionality that is applicable only when Cross
Orders are not designated IOC, and thus, according
to the Exchange, the proposal would render those
subparagraphs moot. Similarly, the Exchange
proposes to delete Rule 7.16(f)(v)(G) as that rule,
which provides that short sale cross orders priced
at or below the current national best bid will be
rejected during a Short Sale Period (defined in Rule
7.16(f)(iv)), would be inapplicable because Cross
Orders designated IOC cannot execute at or below
the current national best bid. Further, by virtue of
the proposed restriction of Cross Orders to those
with an IOC designation, the Exchange has
proposed to eliminate the Day Cross Order, and
thus a Cross Order with a Day modifier would be
rejected as a result of the proposal. Id.
12 See Notice, 79 FR at 41615. The Exchange also
proposes to replace the references in Rule 7.35 to
Auction-Only Limit with LOO and to Auction-Only
Market with MOO, and to delete the references to
Auction Only Limit Orders in Rule 7.35(f)(3)(E). Id.;
see also proposed Rule 7.35.
13 As a result, the use of the IOC modifier would
be limited to limit orders, and a market order
entered with an IOC modifier would be rejected.
See proposed Rule 7.31(c)(3); see also Notice, 79 FR
at 41615.
E:\FR\FM\04SEN1.SGM
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]]>Agencies
[Federal Register Volume 79, Number 171 (Thursday, September 4, 2014)]
[Notices]
[Pages 52780-52784]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21003]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72946; File No. SR-BYX-2014-019]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing of a Proposed Rule Change to Rules 11.9 of BATS Y-Exchange, Inc.
August 28, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on August 26, 2014, BATS Y-Exchange, Inc. (the ``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange filed a proposal to amend Rule 11.9 to add certain
optional price sliding functionality.
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
The Exchange currently offers various forms of sliding which, in
all cases, result in the re-pricing of an order to, or ranking and/or
display of an order at, a price other than an order's limit price in
order to comply with applicable securities laws and/or Exchange rules.
Specifically, the Exchange currently offers price sliding to ensure
compliance with Regulation NMS and Regulation SHO. Price sliding
currently offered by the Exchange re-prices and displays an order upon
entry and in certain cases again re-prices and re-displays an order at
a more aggressive price one time if and when permissible (``single
display-price sliding''), and optionally continually re-prices an order
(``multiple display-price sliding'') based on changes in the national
best bid (``NBB'') or national best offer (``NBO'', and together with
the NBB, the ``NBBO''). The Exchange proposes to add another optional
process, the Price Adjust process, as described below. Price Adjust in
all contexts for which it is being proposed will have to be elected by
a User \3\ in order to be applied by the Exchange.
---------------------------------------------------------------------------
\3\ 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.''
---------------------------------------------------------------------------
In contrast to display-price sliding, which is based solely on
Protected Quotations \4\ at equities markets other than the Exchange,
Price Adjust would be based on Protected Quotations at external markets
and at the Exchange. If the Exchange has a Protected Quotation that an
incoming order to the Exchange locks or crosses then such order
executes against the resting order, or, if the incoming order is a BATS
Post Only Order or Partial Post Only at Limit Order, such order would
be executed in accordance with Rules 11.9(c)(6) and (c)(7),
respectively, or adjusted pursuant to the Price Adjust process, as
described in further detail below. Because the Exchange will route
orders to external markets with locking or crossing quotations, the
Exchange notes that the Price Adjust process would only be applicable
to non-routable orders, including BATS Only Orders, BATS Post Only
Orders and Partial Post Only at Limit Orders. In turn, because BATS
Only Orders will execute against locking or crossing interest on the
Exchange (including both Protected Quotations as well as any non-
displayed interest), the fact that Price Adjust would be based on
Protected Quotations at the Exchange is only relevant for BATS Post
Only Orders and Partial Post Only at Limit Orders.
---------------------------------------------------------------------------
\4\ As defined in BYX Rule 1.5(t), a ``Protected Quotation'' is
``a quotation that is a Protected Bid or Protected Offer.'' In turn,
the term ``Protected Bid'' or ``Protected Offer'' means ``a bid or
offer in a stock that is (i) displayed by an automated trading
center; (ii) disseminated pursuant to an effective national market
system plan; and (iii) an automated quotation that is the best bid
or best offer of a national securities exchange or association.''
---------------------------------------------------------------------------
With respect to price sliding offered to ensure compliance with
Regulation NMS (``display-price sliding''), under the Exchange's
current rules, if, at the time of entry, a non-routable order would
cross a Protected Quotation displayed by another trading center the
Exchange re-prices and ranks such order at the locking price, and
displays such order at one minimum price variation below the NBO for
bids and above the NBB for offers. Similarly, in the event a non-
routable order that, at the time of entry, would lock a Protected
Quotation displayed by another trading center, the
[[Page 52781]]
Exchange ranks such order at the locking price and displays the order
at one minimum price variation below the NBO for bids and above the NBB
for offers.
As proposed, under the Price Adjust process, an order eligible for
display by the Exchange that, at the time of entry, would create a
violation of Rule 610(d) of Regulation NMS by locking or crossing a
Protected Quotation of an external market or the Exchange will be
ranked and displayed by the System at one minimum price variation below
the current NBO (for bids) or to one minimum price variation above the
current NBB (for offers). Thus, in contrast to the display-price
sliding process, the Price Adjust process would both rank and display
an order at one minimum price variation below the current NBO or above
the current NBB (rather than ranking an order at the locking price).
Further, as noted above, the Price Adjust process would adjust the
price of a BATS Post Only Order or Partial Post Only at Limit Order
that would lock or cross an order displayed by the Exchange unless such
order is permitted to remove liquidity as described in Rules 11.9(c)(6)
and (c)(7), respectively, whereas the display-price sliding process
would cancel an order back to the User unless it removed liquidity on
entry.
The Exchange also proposes to state that in the event the NBBO
changes \5\ such that an order subject to Price Adjust would not lock
or cross a Protected Quotation, the order will receive a new timestamp,
and will be displayed at the price that originally locked the NBO (for
bids) or NBB (for offers) on entry.
---------------------------------------------------------------------------
\5\ The Exchange notes that it recently filed a proposal
clarifying the methodology used by the Exchange to calculate the
NBBO, including the data feeds used to calculate the NBBO as well as
various types of feedback that update the Exchange's view of the
NBBO, such as feedback from receipt of Intermarket Sweep Orders with
a time-in-force of Day and feedback from the Exchange's routing
broker-dealer, BATS Trading, Inc. See Securities Exchange Act
Release No. 72687 (July 28, 2014), 79 FR 44926 (August 1, 2014) (SR-
BYX-2014-012).
---------------------------------------------------------------------------
As an example of the Price Adjust process, assume the Exchange has
a posted and displayed bid to buy 100 shares of a security priced at
$10.10 per share and a posted and displayed offer to sell 100 shares at
$10.13 per share. Assume the NBBO is $10.10 by $10.12. If the Exchange
receives a non-routable bid to buy 100 shares at $10.12 per share the
Exchange will rank and display the order to buy at $10.11 because
displaying the bid at $10.12 would lock an external market's Protected
Offer to sell for $10.12. If the NBO then moved to $10.13, the Exchange
would un-slide the bid to buy and rank and display it at its limit
price of $10.12.
As an example of an order executed while subject to the Price
Adjust process before being un-slid by the Exchange, assume the
Exchange has a posted and displayed bid to buy 100 shares of a security
priced at $10.10 per share and a posted and displayed offer to sell 100
shares at $10.13 per share. Assume the NBBO is $10.10 by $10.12. If the
Exchange receives a non-routable bid to buy 100 shares at $10.12 per
share the Exchange will rank and display the order to buy at $10.11
because displaying the bid at $10.12 would lock an external market's
Protected Offer to sell for $10.12. Assume next that the Exchange
receives an offer to sell 100 shares at $10.11. The incoming order to
sell will execute at $10.11 against the resting bid to buy 100 shares
(originally priced at $10.12) that has been slid pursuant to the Price
Adjust process. Thus, the order executes at a full penny per share
better than if it were ranked at the locking price of $10.12 (buying
for $10.11 rather than $10.12 per share).
Similarly, assume the Exchange has a posted and displayed bid to
buy 100 shares of a security priced at $10.10 per share and a posted
and displayed offer to sell 100 shares at $10.12 per share. Assume the
NBBO is also $10.10 by $10.12. Assume the Exchange receives a BATS Post
Only bid to buy 100 shares at $10.12 per share. The Exchange notes that
under its current pricing structure, which pays a rebate to orders that
remove liquidity and charges a fee to orders that add liquidity, the
incoming bid to buy at $10.12 would remove liquidity pursuant to Rule
11.9(c)(6). However, if the Exchange has a different pricing structure
that does not allow the incoming BATS Post Only Order to remove
liquidity then the Exchange will rank and display the order to buy at
$10.11 because displaying the bid at $10.12 would lock the Exchange's
Protected Offer to sell for $10.12. If the NBO, including the
Exchange's best offer, then moved to $10.13, the Exchange would un-
slide the bid to buy and rank and display it at its limit price of
$10.12.
The Exchange also proposes to state that all orders that are re-
ranked and re-displayed pursuant to Price Adjust will retain their
priority as compared to other orders subject to Price Adjust based upon
the time such orders were initially received by the Exchange. Further,
as proposed, following the initial ranking and display of an order
subject to Price Adjust, an order will only be re-ranked and re-
displayed to the extent it achieves a more aggressive price.
In order to offer multiple price sliding to Exchange Users that
select Price Adjust, the Exchange proposes to make clear that the
ranked and displayed prices of an order subject to Price Adjust may be
adjusted once or multiple times depending upon the instructions of a
User and changes to the prevailing NBBO. As is true for display-price
sliding, multiple price sliding pursuant to Price Adjust would be
optional and would have to be explicitly selected by a User before it
will be applied. Orders subject to multiple price sliding for Price
Adjust will be permitted to move all the way back to their most
aggressive price, whereas orders subject to Price Adjust may not be
adjusted to their most aggressive price, depending upon market
conditions and the limit price of the order upon entry.
As an example of multiple price sliding for Price Adjust assume the
Exchange has a posted and displayed bid to buy 100 shares of a security
priced at $10.10 per share and a posted and displayed offer to sell 100
shares at $10.14 per share. Assume the NBBO is $10.10 by $10.12. If the
Exchange receives a non-routable bid to buy 100 shares at $10.13 per
share, the Exchange would rank and display the order to buy at $10.11
because displaying the bid at $10.13 would cross an external market's
Protected Offer to sell for $10.12. If the NBO then moved to $10.13,
the Exchange would un-slide the bid to buy and rank and display it at
$10.12. Under the proposed single Price Adjust functionality, the
Exchange would not further adjust the ranked or displayed price
following this un-slide. However, under multiple price sliding for
Price Adjust if the NBO then moved to $10.14, the Exchange would un-
slide the bid to buy and rank and display it at its full limit price of
$10.13.
The Exchange currently offers display-price sliding functionality
to avoid locking or crossing other markets' Protected Quotations, but
does not price slide to avoid executions on the Exchange's order book
(``BATS Book''). Specifically, when the Exchange receives an incoming
order that could execute against resting displayed liquidity but an
execution does not occur because such incoming order is designated as
an order that will not remove liquidity (i.e., a BATS Post Only
Order),\6\ then the Exchange will cancel
[[Page 52782]]
the incoming order. As noted above, the Exchange proposes to make clear
in the description of Price Adjust that any display-eligible BATS Post
Only Order that locks or crosses a Protected Quotation displayed by the
Exchange upon entry will be executed as set forth in Rule 11.9(c)(6) or
adjusted pursuant to the Price Adjust process. Similarly, the Exchange
proposes to make clear that any display-eligible Partial Post Only at
Limit Order that locks or crosses a Protected Quotation displayed by
the Exchange upon entry will be executed as set forth in Rule
11.9(c)(7) or adjusted pursuant to the Price Adjust process. The
Exchange reiterates that in contrast to the proposed operation of Price
Adjust, the existing display-price sliding process would instead cancel
BATS Post Only orders and BATS Partial Post Only at Limit orders that
would lock or cross a Protected Quotation displayed by the Exchange to
the extent such orders are not executed on entry.
---------------------------------------------------------------------------
\6\ The Exchange again notes that BATS Post Only Orders are
permitted to remove liquidity from the BATS Book if the value of
price improvement associated with such execution equals or exceeds
the sum of fees charged for such execution and the value of any
rebate that would be provided if the order posted to the BATS Book
and subsequently provided liquidity. See Rule 11.9(c)(6). Similarly,
Partial Post Only at Limit Orders are permitted to remove price
improving liquidity as well as a User-selected percentage of the
remaining order at the limit price if, following such removal, the
order can post at its limit price. See Rule 11.9(c)(7).
---------------------------------------------------------------------------
The Exchange currently applies display-price sliding to Non-
Displayed Orders that cross Protected Quotations of external markets.
The Exchange proposes language that makes clear that this functionality
will apply to all orders for which a User has selected either display-
price sliding or Price Adjust. The proposed rule states that Non-
Displayed Orders that are subject to display-price sliding or Price
Adjust are ranked at the locking price on entry. The proposed
description also makes clear that price sliding for Non-Displayed
Orders is functionally equivalent to the handling of displayable orders
except that such orders will not have a displayed price and will not be
re-priced again unless such orders cross a Protected Quotation of an
external market (i.e., such orders are not un-slid). Other than
updating the language of the rule to reflect that Non-Displayed Orders
for which a User has selected Price Adjust will be handled in the same
way as orders subject to display-price sliding, the Exchange is not
proposing to change its handling of Non-Displayed Orders.
As an example of the Exchange's handling of Non-Displayed Orders in
the context of Price Adjust, assume the Exchange has a posted and
displayed bid to buy 100 shares of a security priced at $10.10 per
share and a posted and displayed offer to sell 100 shares at $10.13 per
share. Assume the NBBO is $10.10 by $10.11. If the Exchange receives a
Non-Displayed Order bid to buy 100 shares at $10.12 per share, the
Exchange would re-price the order to a $10.11 bid to buy to avoid
potentially trading through the $10.11 offer displayed as the NBO
(i.e., to ensure the Exchange will not allow the bid to trade at $10.12
per share). In the event the NBBO moved to $10.09 by $10.10, the
Exchange would re-price the Non-Displayed bid to buy 100 shares to
$10.10 per share. If the NBBO then moved to $10.10 by $10.11, the Non-
Displayed bid would not be re-priced to $10.11, but would remain on the
Exchange's order book at $10.10. This proposed handling is identical to
handling of a Non-Displayed Order for which a User has selected
display-price sliding.
The Exchange also proposes that in the event the NBBO changes such
that display eligible orders subject to display-price sliding and Price
Adjust would not lock or cross a Protected Quotation and are eligible
to be displayed at a more aggressive price, the System will first
display all orders subject to display-price sliding at their ranked
price followed by orders subject to Price Adjust, which will be re-
ranked and re-displayed as set forth above. The Exchange believes it is
reasonable to un-slide orders subject to display-price sliding before
it un-slides orders subject to Price Adjust because Price Adjust is a
less aggressive form of price sliding than display-price sliding, in
that an order submitted by a User that elects Price Adjust will be
displayed and ranked at the same price rather than ranked at the
locking price and displayed at a less aggressive price.
The Exchange also proposes to make clear that if a User elects to
apply Price Adjust to an order submitted to the Exchange, price sliding
will apply short sale price sliding in connection with the handling of
the order by the Exchange. The Exchange does not propose to modify its
short sale price sliding functionality.
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'')\7\ and further the objectives of Section 6(b)(5) of the Act\8\
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) \9\ of the Act in that it seeks to
assure fair competition among brokers and dealers and among exchange
markets.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S. C. 78k-1(a)(1).
---------------------------------------------------------------------------
The Exchange believes that the proposed changes to offer Price
Adjust are consistent with Section 6(b)(5) of the Act,\10\ as well as
Rule 610 of Regulation NMS \11\ and Rule 201 of Regulation SHO.\12\ The
Exchange is not modifying the overall functionality of price sliding,
which, to avoid locking or crossing quotations of other market centers
or to comply with applicable short sale restrictions, displays orders
at permissible prices while retaining a price at which the User is
willing to buy or sell, in the event display at such price or an
execution at such price becomes possible. Instead, the Exchange is
making changes to adopt an optional form of price sliding, Price
Adjust, which will rank orders at their displayed price rather than the
locking price, as described above. Thus, while subject to Price Adjust
sliding, an order is ranked at a less aggressive price, which may be
preferable to certain Users that wish to provide liquidity but do not
wish to cross the spread (i.e., if buying, do not wish to trade at the
NBO or if selling, do not wish to trade at the NBB). The Exchange
believes it is reasonable to un-slide display-price sliding orders
before it un-slides Price Adjust orders because Price Adjust is a less
aggressive form of price sliding than display-price sliding, in that an
order submitted by a User would be displayed and ranked at the same
price rather than ranked at the locking price and displayed at a less
aggressive price. Thus, because orders subject to display-price sliding
are ranked at and subject to execution at higher prices when buying and
lower prices when selling, the Exchange believes that such orders
should be re-displayed before orders subject to Price Adjust orders in
response to changes to the NBBO.
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\10\ Id.
\11\ 17 CFR 242.610.
\12\ 17 CFR 242.201.
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Rule 610(d) requires exchanges to establish, maintain, and enforce
rules that require members reasonably to avoid ``[d]isplaying
quotations that lock or cross any protected quotation in an NMS
stock.'' \13\ Such rules must be
[[Page 52783]]
``reasonably designed to assure the reconciliation of locked or crossed
quotations in an NMS stock,'' and must ``prohibit . . . members from
engaging in a pattern or practice of displaying quotations that lock or
cross any quotation in an NMS stock.'' \14\ Thus, the Price Adjust
process proposed by the Exchange will assist Users by displaying orders
at permissible prices. Similarly, Rule 201 of Regulation SHO \15\
requires trading centers to establish, maintain, and enforce written
policies and procedures reasonably designed to prevent the execution or
display of a short sale order at a price at or below the current NBB
under certain circumstances. The Exchange's short sale price sliding
will continue to operate the same for Users of Price Adjust as it does
for Users that select the display-price sliding process offered by the
Exchange.
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\13\ 17 CFR 242.610(d).
\14\ Id.
\15\ 17 CFR 242.201.
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As noted above, in contrast to display-price sliding, which is
based solely on Protected Quotations at equities markets and options
exchanges other than the Exchange, the proposed Price Adjust process
would be based on Protected Quotations at external markets and at the
Exchange. Thus, if the Exchange has a Protected Quotation that an
incoming order to the Exchange locks or crosses then such order
executes against the resting order, or, if the incoming order is a BATS
Post Only Order or Partial Post Only at Limit Order, such order would
be executed in accordance with Rules 11.9(c)(6) and (c)(7),
respectively, or adjusted pursuant to the Price Adjust process. The
Exchange believes that it is reasonable and consistent with the Act to
apply the Price Adjust process to orders on entry that cannot executed
or displayed at their limit price because this will contribute to
additional displayed liquidity on the Exchange than if such orders were
cancelled back to the User. Therefore, the Exchange believes the
proposal to apply the Price Adjust process to orders that cannot be
displayed because they would lock or cross displayed contra-side
interest on the Exchange (and not just external markets) will promote
just and equitable principles of trade, remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system. The Exchange also reiterates that the proposed Price Adjust
process will enable the System to avoid displaying a locking or
crossing quotation in order to ensure compliance with Rule 610(d) of
Regulation NMS. The Exchange again notes that under its current pricing
structure, which pays a rebate to orders that remove liquidity and
charges a fee to orders that add liquidity, this provision is currently
inapplicable because even BATS Post Only Orders will remove on entry if
it is in their economic best interest to do so, and thus, if there is
locking or crossing interest on the Exchange's order book, such orders
will remove liquidity rather than being subject to the Price Adjust
process. However, in order to maintain a technology offering that is
consistent with technology offered by its affiliates irrespective of
fees,\16\ the Exchange is proposing to implement Price Adjust as
proposed.
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\16\ The Exchange notes that its affiliate, BATS Exchange, Inc.
is simultaneously proposing to adopt the Price Adjust process.
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The Exchange notes that similar functionality was recently proposed
by the Exchange's affiliate, EDGX Exchange, Inc. and that the proposed
rules are based on the Price Adjust functionality set forth in such
proposal.\17\
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\17\ See Securities Exchange Act Release No. 72676 (July 25,
2014), 79 FR 44520 (July 31, 2014) (SR-EDGX-2014-18).
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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 proposed
rule change is being proposed as an additional option for Users that
wish to utilize Exchange price sliding functionality and that the
functionality is consistent with that offered by the Exchange today as
well as affiliates and competitors of the Exchange. Thus, the Exchange
believes this proposed rule change is necessary to permit fair
competition among national securities 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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BYX-2014-019 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-2014-019. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S. C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room at 100 F Street NE.,
Washington, DC 20549-1090 on official business days between the hours
of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-BYX-
[[Page 52784]]
2014-019, and should be submitted on or before September 25, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21003 Filed 9-3-14; 8:45 am]
BILLING CODE 8011-01-P
