Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 14.11(j)(5) of BATS Exchange, Inc., To Remove the Restriction Prohibiting Market Makers in UTP Derivative Securities From Acting or Registering as a Market Maker in Any Reference Asset of That UTP Derivative Security or Any Derivative Instrument Based on Such Reference Asset, 73367-73369 [2014-28905]
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Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices
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. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 24 of the Act to
determine whether the proposed rule
change should be approved or
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:
mstockstill on DSK4VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–BYX–2014–035 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–2014–035. 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 such
filing will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
24 15
U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
17:48 Dec 09, 2014
Jkt 235001
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–
2014–035 and should be submitted on
or before December 31, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–28904 Filed 12–9–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73743; File No. SR–BATS–
2014–057]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Rule 14.11(j)(5)
of BATS Exchange, Inc., To Remove
the Restriction Prohibiting Market
Makers in UTP Derivative Securities
From Acting or Registering as a Market
Maker in Any Reference Asset of That
UTP Derivative Security or Any
Derivative Instrument Based on Such
Reference Asset
December 4, 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 November
21, 2014, BATS Exchange, Inc.
(‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange has
designated this proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A) of the
Act 3 and Rule 19b–4(f)(6)(iii)
thereunder,4 which renders it effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to
amend Rule 14.11(j)(5) to harmonize its
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6)(iii).
1 15
PO 00000
Frm 00091
Fmt 4703
Sfmt 4703
73367
restrictions on Market Makers 5 in UTP
Derivative Securities 6 with NYSE Arca,
Inc. (‘‘NYSE Arca’’) Rule 5.1(a)(2)(v) 7
and the Nasdaq Stock Market LLC
(‘‘Nasdaq’’) Rule 4630(e).8
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 proposes to amend
Rule 14.11(j)(5) to harmonize its
restrictions on Market Makers in UTP
Derivative Securities with NYSE Arca
Rule 5.1(a)(2)(v) 9 and Nasdaq Rule
4630(e).10 The purpose of the proposed
rule change is to remove the restriction
that a Member acting as a registered
Market Maker in a UTP Derivative
Security on the Exchange will not act or
5 The term ‘‘Market Maker’’ is defined as ‘‘a
Member that acts as a Market Maker pursuant to
Chapter XI.’’ See Exchange Rule 1.5(l).
6 The term ‘‘UTP Derivative Security’’ is defined
as ‘‘[a]ny UTP Security that is a ‘new derivative
securities product’ as defined in Rule 19b–4(e)
under the Exchange Act . . . and traded pursuant
to Rule 19b–4(e) under the Exchange Act.’’ See
Exchange Rule 14.11(j).
7 See Securities Exchange Act Release No. 67066
(May 29, 2012), 77 FR 33010 (June 4, 2012) (SR–
NYSEArca–2012–46) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
Regarding the Extension of Unlisted Trading
Privileges to New Derivative Securities Products
That Are Listed on Another Exchange and to Make
Other Conforming and Technical Amendments).
The Commission also waived the 30-day operative
delay for SR–NYSEArca–2012–46 under Rule 19b–
4(f)(6) of the Act. Id.
8 See Securities Exchange Act Release No. 69858
(June 25, 2013), 78 FR 39432 (July 1, 2013) (SR–
Nasdaq–2013–085) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change [sic] Rule
4630 to Remove a Restriction on a Member Acting
as a Registered Market Maker in a CommodityRelated Security).
9 See supra note 7.
10 See supra note 8.
E:\FR\FM\10DEN1.SGM
10DEN1
mstockstill on DSK4VPTVN1PROD with NOTICES
73368
Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices
register as a market maker in any
Reference Asset 11 that a UTP Derivative
Security derives its value from. The
Exchange also proposes to amend a
related cross-reference contained in
Exchange Rule 3.21.
Exchange Rule 14.11(j)(5) prohibits a
Market Maker in a UTP Derivative
Security from acting or registering as a
market maker on another exchange in
any Reference Asset of that UTP
Derivative Security, or any derivative
instrument based on a Reference Asset
of that UTP Derivative Security
(collectively, with Reference Assets,
‘‘Related Instruments’’). NYSE Arca
Rule 5.1(a)(2)(v) and Nasdaq Rule
4630(e) recently amended their
respective rules to permit market
makers to trade in securities underlying
the derivative security so long as that
market maker discloses to NYSE Arca or
Nasdaq all accounts within which it
trades the underlying securities.12 As
amended, Exchange Rule 14.11(j)(5),
would similarly remove this
prohibition, which states that a Market
Maker in a UTP Derivative Security is
prohibited from acting or registering as
a market maker on another exchange in
any Related Instruments.
Similar to NYSE Arca Rule 5.1(a)(2)(v)
and Nasdaq Rule 4630(e), amended Rule
14.11(j)(5) would require a Member
acting as a registered Market Maker in
a UTP Derivative Security to file with
the Exchange, in a manner prescribed by
the Exchange, and to keep a current list
identifying all accounts for trading the
underlying physical asset or
commodity, related futures or options
on futures, or any other related
derivatives, which the Member acting as
registered Market Maker may have or
over which it may exercise investment
discretion. Rule 14.11(j)(5) would also
prohibit a Member from acting as
registered Market Maker in the UTP
Derivative Security from trading in the
underlying physical asset or
commodity, related futures or options
on futures, or any other related
derivatives in an account in which a
Member acting as a registered Market
Maker, directly or indirectly, controls
trading activities, or has a direct interest
in the profits or losses thereof, that has
not been reported to the Exchange.
Exchange Rules 13 ensure that Market
Makers in UTP Derivative Securities
would continue to have in place
11 A
‘‘Reference Asset’’ is defined as one or more
currencies, or commodities, or derivatives based on
one or more currencies, or commodities, or is based
on a basket or index comprised of currencies or
commodities that a UTP Derivative Security derives
its value from. See Exchange Rule 14.11(j)(5).
12 See supra notes 7 and 8.
13 See Exchange Rules 5.5 and 14.1(j)(5)(B).
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17:48 Dec 09, 2014
Jkt 235001
reasonably designed policies and
procedures to prevent the misuse of
material non-public information with
regard to also acting as a Market Maker
in any Related Instruments.14 In the
context of approving a more flexible,
principled-based approach to
information barriers by NYSE Arca, the
Commission stated that, ‘‘while
information barriers are not specifically
required under the proposal, a [firm’s]
business model or business activities
may dictate that an information barrier
or a functional separation be part of the
appropriate set of policies and
procedures that would be reasonably
designed to achieve compliance with
applicable securities law and
regulations, and with applicable
Exchange rules.’’ 15 Rule 14.11(j)(5)(B)
will continue to prohibit Market Makers
from using material non-public
information in connection with trading
a Related Instrument. Rule 14.11(j)(5)(B)
will also continue to require that, in
addition to the existing obligations
under Exchange rules regarding the
production of books and records, a
Market Maker shall, upon request by the
Exchange, make available to the
Exchange any books, records or other
information pertaining to any Related
Instrument trading account or to the
account of any registered or nonregistered employee affiliated with the
Market Maker for which Related
Instruments are traded. Lastly, under
Exchange Rule 14.11(j)(6) the Exchange
will enter into comprehensive
surveillance sharing agreement with
other markets that offer trading in
Related Instruments to the same extent
as the listing exchange’s rules require
the listing exchange to enter into a
comprehensive surveillance sharing
agreement with such markets. This
amendment does not lessen the
protection of Members from the risks
associated with integrated market
making and any possible misuse of nonpublic information.
In addition to the proposal set forth
above, the Exchange also proposes to
amend a related cross-reference
contained in Exchange Rule 3.21.
Specifically, Rule 3.21 currently refers
to Rule 14.1(c) as the source of the
definition for UTP Derivative Securities
but that definition is, in fact, contained
in Rule 14.11(j).
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act 16 and furthers
the objectives of Section 6(b)(5) of the
Act,17 in that it is designed promote just
and equitable principles of trade,
remove impediments to, and perfect the
mechanism of, a free and open market
and a national market system, and, in
general, protect investors and the public
interest. In addition, the Exchange
believes that the proposed rule change
is not designed to permit unfair
discrimination between customers,
issuers, brokers or dealers. The
proposed rule change is substantially
similar to the existing NYSE Arca Rule
5.1(a)(2)(v) and Nasdaq Rule 4630(e).18
In addition, the Exchange believes that
amending Exchange Rule 14.11(j)(5) to
permit a Member acting as a registered
Market Maker in a UTP Derivative
Security on the Exchange the flexibility
to act or register as a market maker in
any Reference Asset that a UTP
Derivative Security derives its value
from consistent with Commission and
Exchange Rules will remove
impediments to and perfect the
mechanism of a free and open market by
providing the same flexibility to the
Exchange that is already available to
NYSE Arca and Nasdaq regarding the
market maker activities for derivativerelated Securities. Additionally,
Exchange Rule 14.11(j)(5), as amended,
would continue to serve to prevent
fraudulent and manipulative acts and
practices, as well as to protect investors
and the public interest from concerns
that may be associated with integrated
market making and any possible misuse
of non-public information. Finally, the
Exchange believes that the correction to
the cross-reference contained in Rule
3.21 is consistent with the Act in that
it will protect investors and the public
interest by avoiding potential confusion
with respect to Exchange Rules.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change would not
impose any burden on competition. On
the contrary, the Exchange believes that
the proposal will promote competition
because it is a competitive response to
recently amended NYSE Arca and
Nasdaq rules which permit market
makers to trade in the reference assets
or components underlying the
derivative security on the same terms as
that proposed by the Exchange.19 Thus,
the Exchange believes this proposed
rule change is necessary to permit fair
14 15
16 15
15 See
17 15
U.S.C. 78o(g).
Securities Exchange Act Release No. 60604
(September 1, 2009), 74 FR 46272 (September 8,
2009) (SR–NYSEArca–2009–78).
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
18 See supra notes 7 and 8.
19 See supra notes 7 and 8.
E:\FR\FM\10DEN1.SGM
10DEN1
Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices
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
Because the proposed rule change
does not: (i) Significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative prior to 30 days from the date
on which it was filed, or such shorter
time as the Commission may designate,
if consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 20 and Rule 19b–4(f)(6)(iii)
thereunder.21
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Commission believes that
waiver of the 30-day operative delay
period is consistent with the protection
of investors and the public interest. The
Commission notes that the proposal
would allow Market Makers in a UTP
Derivative Security on the Exchange to
act or register as a Market Maker in any
Related Instruments. The Commission
believes that proposal could allow the
Exchange to attract more Market Makers
to the Exchange, thereby potentially
increasing liquidity in UTP Derivative
Securities, provide more price
competition, and enhance the markets
for those securities. The Commission
further notes that the proposal is similar
to the rules of other national securities
exchanges.22 Therefore, the Commission
designates the proposed rule change to
be operative upon filing.23
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
mstockstill on DSK4VPTVN1PROD with NOTICES
20 15
U.S.C. 78s(b)(3)(A).
21 17 CFR 240.19b–4(f)(6)(iii). As required under
Rule 19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change.
22 See NYSE Arca Equities Rule 5.1(a)(2)(v) and
Nasdaq Rule 4630(e).
23 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 Sep<11>2014
17:48 Dec 09, 2014
Jkt 235001
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. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 24 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
73369
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–
2014–057 and should be submitted on
or before December 31, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Kevin M. O’Neill,
Deputy Secretary.
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:
[FR Doc. 2014–28905 Filed 12–9–14; 8:45 am]
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–2014–057 on the subject line.
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Rule 11.1 of BATS
Y-Exchange, Inc.
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–BATS–2014–057. 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 such
filing will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73744; File No. SR–BYX–
2014–036]
December 4, 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 November
28, 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 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 the Substance
of the Proposed Rule Change
The Exchange filed a proposal to
amend Rule 11.1 to accept orders
beginning at 6:00 a.m. Eastern Time.
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
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
24 15
PO 00000
U.S.C. 78s(b)(2)(B).
Frm 00093
Fmt 4703
Sfmt 4703
E:\FR\FM\10DEN1.SGM
10DEN1
]]>Agencies
[Federal Register Volume 79, Number 237 (Wednesday, December 10, 2014)]
[Notices]
[Pages 73367-73369]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-28905]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73743; File No. SR-BATS-2014-057]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 14.11(j)(5) of BATS Exchange, Inc., To Remove the Restriction
Prohibiting Market Makers in UTP Derivative Securities From Acting or
Registering as a Market Maker in Any Reference Asset of That UTP
Derivative Security or Any Derivative Instrument Based on Such
Reference Asset
December 4, 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 November 21, 2014, BATS Exchange, Inc. (``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
has designated this proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with
the Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend Rule 14.11(j)(5) to
harmonize its restrictions on Market Makers \5\ in UTP Derivative
Securities \6\ with NYSE Arca, Inc. (``NYSE Arca'') Rule 5.1(a)(2)(v)
\7\ and the Nasdaq Stock Market LLC (``Nasdaq'') Rule 4630(e).\8\
---------------------------------------------------------------------------
\5\ The term ``Market Maker'' is defined as ``a Member that acts
as a Market Maker pursuant to Chapter XI.'' See Exchange Rule
1.5(l).
\6\ The term ``UTP Derivative Security'' is defined as ``[a]ny
UTP Security that is a `new derivative securities product' as
defined in Rule 19b-4(e) under the Exchange Act . . . and traded
pursuant to Rule 19b-4(e) under the Exchange Act.'' See Exchange
Rule 14.11(j).
\7\ See Securities Exchange Act Release No. 67066 (May 29,
2012), 77 FR 33010 (June 4, 2012) (SR-NYSEArca-2012-46) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Regarding
the Extension of Unlisted Trading Privileges to New Derivative
Securities Products That Are Listed on Another Exchange and to Make
Other Conforming and Technical Amendments). The Commission also
waived the 30-day operative delay for SR-NYSEArca-2012-46 under Rule
19b-4(f)(6) of the Act. Id.
\8\ See Securities Exchange Act Release No. 69858 (June 25,
2013), 78 FR 39432 (July 1, 2013) (SR-Nasdaq-2013-085) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change [sic]
Rule 4630 to Remove a Restriction on a Member Acting as a Registered
Market Maker in a Commodity-Related Security).
---------------------------------------------------------------------------
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 proposes to amend Rule 14.11(j)(5) to harmonize its
restrictions on Market Makers in UTP Derivative Securities with NYSE
Arca Rule 5.1(a)(2)(v) \9\ and Nasdaq Rule 4630(e).\10\ The purpose of
the proposed rule change is to remove the restriction that a Member
acting as a registered Market Maker in a UTP Derivative Security on the
Exchange will not act or
[[Page 73368]]
register as a market maker in any Reference Asset \11\ that a UTP
Derivative Security derives its value from. The Exchange also proposes
to amend a related cross-reference contained in Exchange Rule 3.21.
---------------------------------------------------------------------------
\9\ See supra note 7.
\10\ See supra note 8.
\11\ A ``Reference Asset'' is defined as one or more currencies,
or commodities, or derivatives based on one or more currencies, or
commodities, or is based on a basket or index comprised of
currencies or commodities that a UTP Derivative Security derives its
value from. See Exchange Rule 14.11(j)(5).
---------------------------------------------------------------------------
Exchange Rule 14.11(j)(5) prohibits a Market Maker in a UTP
Derivative Security from acting or registering as a market maker on
another exchange in any Reference Asset of that UTP Derivative
Security, or any derivative instrument based on a Reference Asset of
that UTP Derivative Security (collectively, with Reference Assets,
``Related Instruments''). NYSE Arca Rule 5.1(a)(2)(v) and Nasdaq Rule
4630(e) recently amended their respective rules to permit market makers
to trade in securities underlying the derivative security so long as
that market maker discloses to NYSE Arca or Nasdaq all accounts within
which it trades the underlying securities.\12\ As amended, Exchange
Rule 14.11(j)(5), would similarly remove this prohibition, which states
that a Market Maker in a UTP Derivative Security is prohibited from
acting or registering as a market maker on another exchange in any
Related Instruments.
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\12\ See supra notes 7 and 8.
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Similar to NYSE Arca Rule 5.1(a)(2)(v) and Nasdaq Rule 4630(e),
amended Rule 14.11(j)(5) would require a Member acting as a registered
Market Maker in a UTP Derivative Security to file with the Exchange, in
a manner prescribed by the Exchange, and to keep a current list
identifying all accounts for trading the underlying physical asset or
commodity, related futures or options on futures, or any other related
derivatives, which the Member acting as registered Market Maker may
have or over which it may exercise investment discretion. Rule
14.11(j)(5) would also prohibit a Member from acting as registered
Market Maker in the UTP Derivative Security from trading in the
underlying physical asset or commodity, related futures or options on
futures, or any other related derivatives in an account in which a
Member acting as a registered Market Maker, directly or indirectly,
controls trading activities, or has a direct interest in the profits or
losses thereof, that has not been reported to the Exchange.
Exchange Rules \13\ ensure that Market Makers in UTP Derivative
Securities would continue to have in place reasonably designed policies
and procedures to prevent the misuse of material non-public information
with regard to also acting as a Market Maker in any Related
Instruments.\14\ In the context of approving a more flexible,
principled-based approach to information barriers by NYSE Arca, the
Commission stated that, ``while information barriers are not
specifically required under the proposal, a [firm's] business model or
business activities may dictate that an information barrier or a
functional separation be part of the appropriate set of policies and
procedures that would be reasonably designed to achieve compliance with
applicable securities law and regulations, and with applicable Exchange
rules.'' \15\ Rule 14.11(j)(5)(B) will continue to prohibit Market
Makers from using material non-public information in connection with
trading a Related Instrument. Rule 14.11(j)(5)(B) will also continue to
require that, in addition to the existing obligations under Exchange
rules regarding the production of books and records, a Market Maker
shall, upon request by the Exchange, make available to the Exchange any
books, records or other information pertaining to any Related
Instrument trading account or to the account of any registered or non-
registered employee affiliated with the Market Maker for which Related
Instruments are traded. Lastly, under Exchange Rule 14.11(j)(6) the
Exchange will enter into comprehensive surveillance sharing agreement
with other markets that offer trading in Related Instruments to the
same extent as the listing exchange's rules require the listing
exchange to enter into a comprehensive surveillance sharing agreement
with such markets. This amendment does not lessen the protection of
Members from the risks associated with integrated market making and any
possible misuse of non-public information.
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\13\ See Exchange Rules 5.5 and 14.1(j)(5)(B).
\14\ 15 U.S.C. 78o(g).
\15\ See Securities Exchange Act Release No. 60604 (September 1,
2009), 74 FR 46272 (September 8, 2009) (SR-NYSEArca-2009-78).
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In addition to the proposal set forth above, the Exchange also
proposes to amend a related cross-reference contained in Exchange Rule
3.21. Specifically, Rule 3.21 currently refers to Rule 14.1(c) as the
source of the definition for UTP Derivative Securities but that
definition is, in fact, contained in Rule 14.11(j).
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \16\ and furthers the objectives of
Section 6(b)(5) of the Act,\17\ in that it is designed promote just and
equitable principles of trade, remove impediments to, and perfect the
mechanism of, a free and open market and a national market system, and,
in general, protect investors and the public interest. In addition, the
Exchange believes that the proposed rule change is not designed to
permit unfair discrimination between customers, issuers, brokers or
dealers. The proposed rule change is substantially similar to the
existing NYSE Arca Rule 5.1(a)(2)(v) and Nasdaq Rule 4630(e).\18\ In
addition, the Exchange believes that amending Exchange Rule 14.11(j)(5)
to permit a Member acting as a registered Market Maker in a UTP
Derivative Security on the Exchange the flexibility to act or register
as a market maker in any Reference Asset that a UTP Derivative Security
derives its value from consistent with Commission and Exchange Rules
will remove impediments to and perfect the mechanism of a free and open
market by providing the same flexibility to the Exchange that is
already available to NYSE Arca and Nasdaq regarding the market maker
activities for derivative-related Securities. Additionally, Exchange
Rule 14.11(j)(5), as amended, would continue to serve to prevent
fraudulent and manipulative acts and practices, as well as to protect
investors and the public interest from concerns that may be associated
with integrated market making and any possible misuse of non-public
information. Finally, the Exchange believes that the correction to the
cross-reference contained in Rule 3.21 is consistent with the Act in
that it will protect investors and the public interest by avoiding
potential confusion with respect to Exchange Rules.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ See supra notes 7 and 8.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change would not impose any burden on
competition. On the contrary, the Exchange believes that the proposal
will promote competition because it is a competitive response to
recently amended NYSE Arca and Nasdaq rules which permit market makers
to trade in the reference assets or components underlying the
derivative security on the same terms as that proposed by the
Exchange.\19\ Thus, the Exchange believes this proposed rule change is
necessary to permit fair
[[Page 73369]]
competition among national securities exchanges.
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\19\ See supra notes 7 and 8.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not: (i) Significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6)(iii) thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change.
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Commission believes that waiver of the 30-day operative
delay period is consistent with the protection of investors and the
public interest. The Commission notes that the proposal would allow
Market Makers in a UTP Derivative Security on the Exchange to act or
register as a Market Maker in any Related Instruments. The Commission
believes that proposal could allow the Exchange to attract more Market
Makers to the Exchange, thereby potentially increasing liquidity in UTP
Derivative Securities, provide more price competition, and enhance the
markets for those securities. The Commission further notes that the
proposal is similar to the rules of other national securities
exchanges.\22\ Therefore, the Commission designates the proposed rule
change to be operative upon filing.\23\
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\22\ See NYSE Arca Equities Rule 5.1(a)(2)(v) and Nasdaq Rule
4630(e).
\23\ 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).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \24\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\24\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BATS-2014-057 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-BATS-2014-057. 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 such filing will also be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BATS-2014-057 and should be
submitted on or before December 31, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-28905 Filed 12-9-14; 8:45 am]
BILLING CODE 8011-01-P
