Automated Matching Systems Exchange, LLC; Notice of Filing of Amendment No. 1 to an Application for Limited Volume Exemption From Registration as a National Securities Exchange Under Section 5 of the Securities Exchange Act of 1934, 78507-78509 [2014-30437]
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Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices
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[FR Doc. 2014–30497 Filed 12–29–14; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73911; File No. 10–214]
Automated Matching Systems
Exchange, LLC; Notice of Filing of
Amendment No. 1 to an Application for
Limited Volume Exemption From
Registration as a National Securities
Exchange Under Section 5 of the
Securities Exchange Act of 1934
mstockstill on DSK4VPTVN1PROD with NOTICES
December 22, 2014.
On July 7, 2014, Automated Matching
Systems Exchange, LLC (‘‘AMSE’’)
submitted to the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) an application seeking a
limited volume exemption under
Section 5 of the Securities Exchange Act
(‘‘Exchange Act’’) from registration as a
national securities exchange under
Section 6 of the Exchange Act.1 Notice
of AMSE’s exemption application was
published for comment in the Federal
Register on July 29, 2014.2 On October
23, 2014, the Commission issued an
1 The
Commission notes that AMSE’s application
only seeks a limited volume exemption under
Section 5 of the Exchange Act from registration as
a national securities exchange under Section 6 of
the Exchange Act. AMSE’s application does not
seek to register as a national securities exchange.
2 See Securities Exchange Act Release No. 72661
(July 23, 2014), 79 FR 44070 (‘‘Notice’’).
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22:38 Dec 29, 2014
Jkt 235001
order instituting proceedings to
determine whether to grant or deny
AMSE’s exemption application.3 On
November 10, 2014, AMSE submitted
Amendment No. 1 to its exemption
application. The Commission is
publishing this notice in order to solicit
views of interested persons on AMSE’s
exemption application as amended by
Amendment No. 1.
I. Description of AMSE’s System
AMSE proposes to conduct business
in reliance upon an exemption from
registration as a national securities
exchange pursuant to Section 5 of the
Exchange Act.4 In general, AMSE seeks
to operate as an exchange for alternative
trading systems.5 AMSE proposes to
operate solely on an ‘‘off-order-book’’
trading basis. AMSE does not intend to
have a physical exchange trading floor,
centralized order book, or specialists or
market makers with affirmative and
negative market making obligations.
Each member of AMSE would maintain
its own automated matching system or
electronic order book. Each member of
AMSE would adopt its own rules
governing the execution and priority of
orders on its system. Trades would
occur when an order to buy and an
order to sell match on a member’s
electronic order book. Each member
would report its transactions to AMSE
at such intervals as required by AMSE.
II. Amendment No. 1 to AMSE’s
Exemption Application
On November 10, 2014, AMSE
submitted Amendment No. 1 to its
exemption application. AMSE has
represented that the only substantive
change to its exemption application
made by Amendment No. 1 is the
3 See Securities Exchange Act Release No. 73419
(October 23, 2014), 79 FR 64421 (October 29, 2014)
(‘‘Order Instituting Proceedings’’).
4 15 U.S.C. 78e.
5 For more detail on AMSE’s proposed system,
see AMSE’s full amended exemption application
and exhibits, which are published with this notice
on the Commission’s Web site at https://
www.sec.gov/rules/other.shtml.
PO 00000
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10
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30
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10
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........................
78507
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(hours)
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10,001
addition of the following paragraph to
Exhibit E: 6
The Exchange will bring together orders for
multiple buyers and sellers and such will be
done by the use of consolidated quotation
systems which effect transactions for
multiple buyers and sellers. The consolidated
quotation systems will display, or otherwise
represent, trading interests entered on the
AMSE system to its system users. AMSE may
use a centralized order router which would
match trading interests on the electronic
order book of one member with the trading
interests on the electronic order book of a
second member.
III. Additional Grounds for Denial
Under Consideration
In the Order Instituting Proceedings,
the Commission provided notice of the
grounds for denial under
consideration.7 Specifically, the
Commission noted that it was
concerned that AMSE’s exemption
application does not meet a key
threshold requirement for being granted
an exemption from exchange
registration—namely, that the applicant
actually be an ‘‘exchange’’ as defined
under Section 3(a)(1) of the Exchange
Act and Rule 3b–16 thereunder.8 The
Commission continues to have this
concern.
The Commission is providing notice
of additional grounds for denial under
consideration. Specifically, the
Commission is concerned that it would
not be necessary or appropriate in the
public interest or for the protection of
investors to grant a limited volume
exemption under Section 5 of the
Exchange Act because it appears from
the exemption application that the
operation of the proposed exchange
would be inconsistent with the
Exchange Act.
6 See email from Michael Stegawski, Chief
Regulatory Officer, AMSE, to SEC staff, dated
November 14, 2014.
7 See Order Instituting Proceedings, supra note 3,
at 64422.
8 See Regulation ATS Adopting Release, 63 FR at
70898–70901 (discussing the Commission’s revised
interpretation of the ‘‘exchange’’ definition). Among
other things, the Commission stated that ‘‘the first
essential element of an exchange is the bringing
together of orders of multiple buyers and sellers.’’
Id. at 70900.
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78508
Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
AMSE’s exemption application states
that AMSE would operate as a selfregulatory organization that would
exercise self-regulatory authority over
its members.9 A ‘‘self-regulatory
organization’’ is defined under Section
3(a)(26) of the Exchange Act as ‘‘any
national securities exchange, registered
securities association, or registered
clearing agency. . . .’’ 10 Section 5 of
the Exchange Act provides that an
exchange must be either (1) registered as
a national securities exchange under
Section 6 of the Exchange Act or (2)
exempted from such registration on the
basis of limited volume of transactions
effected on the exchange.11 An
exchange can only become a ‘‘national
securities exchange,’’ and thus a selfregulatory organization, by registering
under Section 6 of the Exchange Act.12
An exchange that is exempt under
Section 5 of the Exchange Act on the
basis of limited volume of transactions,
however, is relieved from registering as
a national securities exchange under
Section 6 of the Exchange Act and
therefore is not a self-regulatory
organization.13 If the Commission were
to grant AMSE’s exemption application,
however, AMSE would not be a
registered national securities exchange
and, therefore, would not become a selfregulatory organization as defined under
Section 3(a)(26) of the Exchange Act.14
9 See, e.g., AMSE Operating Agreement Article III,
Section 1(e) (‘‘In light of the unique nature of the
Company, its operations, its status as a SRO. . . .’’
(emphasis added)); Article XI, Section 2 (‘‘All
meetings of the Board (and any committees of the
Board) pertaining to the self-regulatory function of
the Company (including disciplinary
matters). . . .’’ (emphasis added)); and Article XI,
Section 3 (‘‘to the extent necessary or appropriate
to discharge properly the self-regulatory
responsibilities of the Company.’’ (emphasis
added)).
10 15 U.S.C. 78c(a)(26).
11 15 U.S.C. 78e.
12 15 U.S.C. 78f(a).
13 In an order granting a limited volume
exemption from registration as a national securities
exchange under Section 5 of the Exchange Act to
Wunsch Auction Systems Inc., the Commission
stated ‘‘[b]y virtue of this exemption from
registration, the Wunsch System falls outside the
definition of a national securities exchange because
the term ‘‘national securities exchange’’ implies a
registered entity (see, e.g., sections 3(a)(26) of the
[Exchange] Act (defining the term ‘‘self-regulatory
organization’’) and section 6(a) of the [Exchange]
Act.’’ See Securities Exchange Act Release No.
28899 (February 20, 1991), 56 FR 8377, 8382
(February 28, 1991) (File No. 10–100).
14 The Commission notes that, even if AMSE’s
exemption application were to be approved, the
broker-dealer members of AMSE would not be able
to satisfy their requirement to be members of a selfregulatory organization by their membership with
AMSE; rather such broker-dealers would be
required to be members of a registered securities
association or a national securities exchange if such
broker-dealers effect transactions solely on that
exchange, pursuant to Section 15(b)(1)(B) of the
Exchange Act. See 15 U.S.C. 78o(b)(1)(B).
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Accordingly, it appears that any
attempts by AMSE to hold itself out as
a self-regulatory organization while
simultaneously seeking an exemption
under Section 5 would be contrary to
the Exchange Act.
The Commission notes that it has not
reached any conclusions with respect to
AMSE’s exemption application. Rather,
the Commission seeks and encourages
interested persons to provide additional
comment on the exemption application
as amended by Amendment No. 1.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning AMSE’s
exemption application as amended by
Amendment No. 1, including whether
AMSE’s exemption application as
amended by Amendment No. 1 is
consistent with the Exchange Act.
1. While the Commission requests
comment on all aspects of AMSE’s
exemption application as amended by
Amendment No. 1, the Commission
specifically requests comment on
whether statements made in
Amendment No. 1 are consistent with
other statements in the exemption
application, including those made in
Exhibit E thereto. For example:
• In Amendment No. 1, in Exhibit E,
AMSE states that ‘‘[t]he Exchange will
bring together orders for multiple buyers
and sellers and such will be done by the
use of consolidated quotation systems
which effect transactions for multiple
buyers and sellers. The consolidated
quotation systems will display, or
otherwise represent, trading interests
entered on the AMSE system to its
system users. AMSE may use a
centralized order router which would
match trading interests on the electronic
order book of one member with the
trading interests on the electronic order
book of a second member.’’ 15
• But Exhibit E to AMSE’s exemption
application also states ‘‘[t]he Exchange
has designed its System to allow its
Exchange Members to individually
determine the best method for display of
quotations and entry of orders through
the Exchange. Thus, Exchange Members
may develop their own customized
electronic order books and routing
systems, but shall report their
transactions to the Exchange at such
intervals as required by the Exchange.’’
In addition, Exhibit E states ‘‘[t]rades
shall occur when an order to buy and
an order to sell match on the Exchange
Member’s electronic order book. Each
Exchange Member shall adopt rules to
15 See
PO 00000
supra note 5.
Frm 00128
Fmt 4703
Sfmt 4703
govern the execution and priority of
orders.’’
2. The Commission specifically
requests comment on whether the
following are sufficiently clear from
AMSE’s exemption application, as
amended by Amendment No. 1:
• How would AMSE’s consolidated
quotation systems, which according to
AMSE ‘‘will display, or otherwise
represent, trading interests entered on
the AMSE system to its system users,’’
effect transactions?
• If AMSE’s consolidated quotation
systems do effect transactions, how is
that consistent with the statement in
Exhibit E that ‘‘[t]rades shall occur
when an order to buy and an order to
sell match on the Exchange Member’s
electronic order book?’’
• If AMSE’s consolidated quotation
systems do effect transactions, what are
the established non-discretionary
methods (e.g., execution priority rules)
by which orders from members interact
with each other through AMSE’s
consolidated quotation systems?
• Amendment No. 1 states that
‘‘AMSE may use a centralized order
router’’ (emphasis added). Under what
circumstances would AMSE use or not
use the centralized order router? How
would the centralized order router
function? What methods (discretionary
or non-discretionary) would determine
how the centralized order router ‘‘would
match trading interests on the electronic
order book of one member with the
trading interests on the electronic order
book of a second member?’’
• What does it mean for AMSE’s
centralized order router to ‘‘match
trading interest?’’ Does ‘‘match trading
interest’’ mean bringing together orders
using established non-discretionary
methods in the consolidated quotation
system, or does it mean routing an order
from one member’s order book to
another member’s order book for a
transaction to occur on the member’s
order book? If the former, what are the
established non-discretionary methods
by which orders from members interact
with each other through the centralized
router (e.g., execution priority rules)?
• What other functions, if any, does
the centralized order router do other
than provide the technology and
systems to route trading interest from
one member’s order book to another
member’s order book? In particular,
does the centralized order router decide
when to send trading interest from one
member’s electronic order book to
another member’s electronic order book,
or does the AMSE member have to take
action to route the trading interest? If
the centralized order router decides
when to route trading interest from one
E:\FR\FM\30DEN1.SGM
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Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices
member’s book to another member’s
book, under what rules or protocols
does it make such decisions?
• Would an AMSE member be
required to use AMSE’s consolidated
quotations systems or would the AMSE
member be allowed to display trading
interest submitted to its order book
through other means, including its own
data feed?
• Are members required to use
AMSE’s centralized order router? Are
members required to route trading
interest to other members if an
execution could occur, or is routing
between members discretionary? For
example, assume Member 1’s order book
has no sell interest in XYZ stock. If
Member 1 receives buy interest in XYZ
stock that could execute against sell
interest in XYZ stock on Member 2’s
order book, would Member 1 be
required to route such buy interest to
Member 2 or could Member 1 post such
buy interest to its order book?
3. The Commission specifically
requests comment on whether
statements made in AMSE’s exemption
application pertaining to its intent to
operate as an SRO are consistent with
statements in the application pertaining
to its exemption request. As noted
above, AMSE’s application states that it
intends to operate as an SRO. But,
AMSE’s application also states that it is
seeking an exemption from registering
as a national securities exchange. If
AMSE were granted an exemption from
registering as a national securities
exchange, AMSE would not be a
registered national securities exchange
and hence would not be an SRO. The
Commission seeks comment on the
inconsistencies between these
statements in AMSE’s application.
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/other.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number 10–
214 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, Station Place, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number 10–214. 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
VerDate Sep<11>2014
21:42 Dec 29, 2014
Jkt 235001
Internet Web site (https://www.sec.gov/
rules/other.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to AMSE’s exemption
application filed with the Commission,
and all written communications relating
to the application 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. 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 10–214 and
should be submitted on or before
January 20, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–30437 Filed 12–29–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31394; 812–14347]
Pacer Funds Trust, et al.; Notice of
Application
December 22, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
2(a)(32), 5(a)(1), 22(d), and 22(e) of the
Act and rule 22c–1 under the Act, under
sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and
17(a)(2) of the Act, and under section
12(d)(1)(J) for an exemption from
sections 12(d)(1)(A) and 12(d)(1)(B) of
the Act.
AGENCY:
Summary of Application:Applicants
request an order that would permit (a)
series of certain open-end management
investment companies to issue shares
(‘‘Shares’’) redeemable in large
aggregations only (‘‘Creation Units’’); (b)
secondary market transactions in Shares
16 17
PO 00000
CFR 200.30–3(a)(71)(ii).
Frm 00129
Fmt 4703
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78509
to occur at negotiated market prices
rather than at net asset value (‘‘NAV’’);
(c) certain series to pay redemption
proceeds, under certain circumstances,
more than seven days after the tender of
Shares for redemption; (d) certain
affiliated persons of the series to deposit
securities into, and receive securities
from, the series in connection with the
purchase and redemption of Creation
Units; and (e) certain registered
management investment companies and
unit investment trusts outside of the
same group of investment companies as
the series to acquire Shares.
Applicants: Pacer Funds Trust (the
‘‘Trust’’), Pacer Advisors, Inc. (‘‘Initial
Adviser’’), and Pacer Financial, Inc. (the
‘‘Distributor’’).
Filing Dates: The application was
filed on August 15, 2014, and amended
on September 24, 2014, and December
4, 2014.
Hearing or Notification of Hearing: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on January 16, 2015, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
Secretary, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–1090;
Applicants, 16 Industrial Blvd., Suite
201, Paoli, PA 19301.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Christine Y. Greenlees, Senior Counsel,
at (202) 551–6879, or David P. Bartels,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
SUPPLEMENTARY INFORMATION:
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]]>Agencies
[Federal Register Volume 79, Number 249 (Tuesday, December 30, 2014)]
[Notices]
[Pages 78507-78509]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30437]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73911; File No. 10-214]
Automated Matching Systems Exchange, LLC; Notice of Filing of
Amendment No. 1 to an Application for Limited Volume Exemption From
Registration as a National Securities Exchange Under Section 5 of the
Securities Exchange Act of 1934
December 22, 2014.
On July 7, 2014, Automated Matching Systems Exchange, LLC
(``AMSE'') submitted to the Securities and Exchange Commission (``SEC''
or ``Commission'') an application seeking a limited volume exemption
under Section 5 of the Securities Exchange Act (``Exchange Act'') from
registration as a national securities exchange under Section 6 of the
Exchange Act.\1\ Notice of AMSE's exemption application was published
for comment in the Federal Register on July 29, 2014.\2\ On October 23,
2014, the Commission issued an order instituting proceedings to
determine whether to grant or deny AMSE's exemption application.\3\ On
November 10, 2014, AMSE submitted Amendment No. 1 to its exemption
application. The Commission is publishing this notice in order to
solicit views of interested persons on AMSE's exemption application as
amended by Amendment No. 1.
---------------------------------------------------------------------------
\1\ The Commission notes that AMSE's application only seeks a
limited volume exemption under Section 5 of the Exchange Act from
registration as a national securities exchange under Section 6 of
the Exchange Act. AMSE's application does not seek to register as a
national securities exchange.
\2\ See Securities Exchange Act Release No. 72661 (July 23,
2014), 79 FR 44070 (``Notice'').
\3\ See Securities Exchange Act Release No. 73419 (October 23,
2014), 79 FR 64421 (October 29, 2014) (``Order Instituting
Proceedings'').
---------------------------------------------------------------------------
I. Description of AMSE's System
AMSE proposes to conduct business in reliance upon an exemption
from registration as a national securities exchange pursuant to Section
5 of the Exchange Act.\4\ In general, AMSE seeks to operate as an
exchange for alternative trading systems.\5\ AMSE proposes to operate
solely on an ``off-order-book'' trading basis. AMSE does not intend to
have a physical exchange trading floor, centralized order book, or
specialists or market makers with affirmative and negative market
making obligations. Each member of AMSE would maintain its own
automated matching system or electronic order book. Each member of AMSE
would adopt its own rules governing the execution and priority of
orders on its system. Trades would occur when an order to buy and an
order to sell match on a member's electronic order book. Each member
would report its transactions to AMSE at such intervals as required by
AMSE.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78e.
\5\ For more detail on AMSE's proposed system, see AMSE's full
amended exemption application and exhibits, which are published with
this notice on the Commission's Web site at https://www.sec.gov/rules/other.shtml.
---------------------------------------------------------------------------
II. Amendment No. 1 to AMSE's Exemption Application
On November 10, 2014, AMSE submitted Amendment No. 1 to its
exemption application. AMSE has represented that the only substantive
change to its exemption application made by Amendment No. 1 is the
addition of the following paragraph to Exhibit E: \6\
---------------------------------------------------------------------------
\6\ See email from Michael Stegawski, Chief Regulatory Officer,
AMSE, to SEC staff, dated November 14, 2014.
The Exchange will bring together orders for multiple buyers and
sellers and such will be done by the use of consolidated quotation
systems which effect transactions for multiple buyers and sellers.
The consolidated quotation systems will display, or otherwise
represent, trading interests entered on the AMSE system to its
system users. AMSE may use a centralized order router which would
match trading interests on the electronic order book of one member
with the trading interests on the electronic order book of a second
member.
III. Additional Grounds for Denial Under Consideration
In the Order Instituting Proceedings, the Commission provided
notice of the grounds for denial under consideration.\7\ Specifically,
the Commission noted that it was concerned that AMSE's exemption
application does not meet a key threshold requirement for being granted
an exemption from exchange registration--namely, that the applicant
actually be an ``exchange'' as defined under Section 3(a)(1) of the
Exchange Act and Rule 3b-16 thereunder.\8\ The Commission continues to
have this concern.
---------------------------------------------------------------------------
\7\ See Order Instituting Proceedings, supra note 3, at 64422.
\8\ See Regulation ATS Adopting Release, 63 FR at 70898-70901
(discussing the Commission's revised interpretation of the
``exchange'' definition). Among other things, the Commission stated
that ``the first essential element of an exchange is the bringing
together of orders of multiple buyers and sellers.'' Id. at 70900.
---------------------------------------------------------------------------
The Commission is providing notice of additional grounds for denial
under consideration. Specifically, the Commission is concerned that it
would not be necessary or appropriate in the public interest or for the
protection of investors to grant a limited volume exemption under
Section 5 of the Exchange Act because it appears from the exemption
application that the operation of the proposed exchange would be
inconsistent with the Exchange Act.
[[Page 78508]]
AMSE's exemption application states that AMSE would operate as a
self-regulatory organization that would exercise self-regulatory
authority over its members.\9\ A ``self-regulatory organization'' is
defined under Section 3(a)(26) of the Exchange Act as ``any national
securities exchange, registered securities association, or registered
clearing agency. . . .'' \10\ Section 5 of the Exchange Act provides
that an exchange must be either (1) registered as a national securities
exchange under Section 6 of the Exchange Act or (2) exempted from such
registration on the basis of limited volume of transactions effected on
the exchange.\11\ An exchange can only become a ``national securities
exchange,'' and thus a self-regulatory organization, by registering
under Section 6 of the Exchange Act.\12\ An exchange that is exempt
under Section 5 of the Exchange Act on the basis of limited volume of
transactions, however, is relieved from registering as a national
securities exchange under Section 6 of the Exchange Act and therefore
is not a self-regulatory organization.\13\ If the Commission were to
grant AMSE's exemption application, however, AMSE would not be a
registered national securities exchange and, therefore, would not
become a self-regulatory organization as defined under Section 3(a)(26)
of the Exchange Act.\14\ Accordingly, it appears that any attempts by
AMSE to hold itself out as a self-regulatory organization while
simultaneously seeking an exemption under Section 5 would be contrary
to the Exchange Act.
---------------------------------------------------------------------------
\9\ See, e.g., AMSE Operating Agreement Article III, Section
1(e) (``In light of the unique nature of the Company, its
operations, its status as a SRO. . . .'' (emphasis added)); Article
XI, Section 2 (``All meetings of the Board (and any committees of
the Board) pertaining to the self-regulatory function of the Company
(including disciplinary matters). . . .'' (emphasis added)); and
Article XI, Section 3 (``to the extent necessary or appropriate to
discharge properly the self-regulatory responsibilities of the
Company.'' (emphasis added)).
\10\ 15 U.S.C. 78c(a)(26).
\11\ 15 U.S.C. 78e.
\12\ 15 U.S.C. 78f(a).
\13\ In an order granting a limited volume exemption from
registration as a national securities exchange under Section 5 of
the Exchange Act to Wunsch Auction Systems Inc., the Commission
stated ``[b]y virtue of this exemption from registration, the Wunsch
System falls outside the definition of a national securities
exchange because the term ``national securities exchange'' implies a
registered entity (see, e.g., sections 3(a)(26) of the [Exchange]
Act (defining the term ``self-regulatory organization'') and section
6(a) of the [Exchange] Act.'' See Securities Exchange Act Release
No. 28899 (February 20, 1991), 56 FR 8377, 8382 (February 28, 1991)
(File No. 10-100).
\14\ The Commission notes that, even if AMSE's exemption
application were to be approved, the broker-dealer members of AMSE
would not be able to satisfy their requirement to be members of a
self-regulatory organization by their membership with AMSE; rather
such broker-dealers would be required to be members of a registered
securities association or a national securities exchange if such
broker-dealers effect transactions solely on that exchange, pursuant
to Section 15(b)(1)(B) of the Exchange Act. See 15 U.S.C.
78o(b)(1)(B).
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The Commission notes that it has not reached any conclusions with
respect to AMSE's exemption application. Rather, the Commission seeks
and encourages interested persons to provide additional comment on the
exemption application as amended by Amendment No. 1.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning AMSE's exemption application as amended by
Amendment No. 1, including whether AMSE's exemption application as
amended by Amendment No. 1 is consistent with the Exchange Act.
1. While the Commission requests comment on all aspects of AMSE's
exemption application as amended by Amendment No. 1, the Commission
specifically requests comment on whether statements made in Amendment
No. 1 are consistent with other statements in the exemption
application, including those made in Exhibit E thereto. For example:
In Amendment No. 1, in Exhibit E, AMSE states that ``[t]he
Exchange will bring together orders for multiple buyers and sellers and
such will be done by the use of consolidated quotation systems which
effect transactions for multiple buyers and sellers. The consolidated
quotation systems will display, or otherwise represent, trading
interests entered on the AMSE system to its system users. AMSE may use
a centralized order router which would match trading interests on the
electronic order book of one member with the trading interests on the
electronic order book of a second member.'' \15\
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\15\ See supra note 5.
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But Exhibit E to AMSE's exemption application also states
``[t]he Exchange has designed its System to allow its Exchange Members
to individually determine the best method for display of quotations and
entry of orders through the Exchange. Thus, Exchange Members may
develop their own customized electronic order books and routing
systems, but shall report their transactions to the Exchange at such
intervals as required by the Exchange.'' In addition, Exhibit E states
``[t]rades shall occur when an order to buy and an order to sell match
on the Exchange Member's electronic order book. Each Exchange Member
shall adopt rules to govern the execution and priority of orders.''
2. The Commission specifically requests comment on whether the
following are sufficiently clear from AMSE's exemption application, as
amended by Amendment No. 1:
How would AMSE's consolidated quotation systems, which
according to AMSE ``will display, or otherwise represent, trading
interests entered on the AMSE system to its system users,'' effect
transactions?
If AMSE's consolidated quotation systems do effect
transactions, how is that consistent with the statement in Exhibit E
that ``[t]rades shall occur when an order to buy and an order to sell
match on the Exchange Member's electronic order book?''
If AMSE's consolidated quotation systems do effect
transactions, what are the established non-discretionary methods (e.g.,
execution priority rules) by which orders from members interact with
each other through AMSE's consolidated quotation systems?
Amendment No. 1 states that ``AMSE may use a centralized
order router'' (emphasis added). Under what circumstances would AMSE
use or not use the centralized order router? How would the centralized
order router function? What methods (discretionary or non-
discretionary) would determine how the centralized order router ``would
match trading interests on the electronic order book of one member with
the trading interests on the electronic order book of a second
member?''
What does it mean for AMSE's centralized order router to
``match trading interest?'' Does ``match trading interest'' mean
bringing together orders using established non-discretionary methods in
the consolidated quotation system, or does it mean routing an order
from one member's order book to another member's order book for a
transaction to occur on the member's order book? If the former, what
are the established non-discretionary methods by which orders from
members interact with each other through the centralized router (e.g.,
execution priority rules)?
What other functions, if any, does the centralized order
router do other than provide the technology and systems to route
trading interest from one member's order book to another member's order
book? In particular, does the centralized order router decide when to
send trading interest from one member's electronic order book to
another member's electronic order book, or does the AMSE member have to
take action to route the trading interest? If the centralized order
router decides when to route trading interest from one
[[Page 78509]]
member's book to another member's book, under what rules or protocols
does it make such decisions?
Would an AMSE member be required to use AMSE's
consolidated quotations systems or would the AMSE member be allowed to
display trading interest submitted to its order book through other
means, including its own data feed?
Are members required to use AMSE's centralized order
router? Are members required to route trading interest to other members
if an execution could occur, or is routing between members
discretionary? For example, assume Member 1's order book has no sell
interest in XYZ stock. If Member 1 receives buy interest in XYZ stock
that could execute against sell interest in XYZ stock on Member 2's
order book, would Member 1 be required to route such buy interest to
Member 2 or could Member 1 post such buy interest to its order book?
3. The Commission specifically requests comment on whether
statements made in AMSE's exemption application pertaining to its
intent to operate as an SRO are consistent with statements in the
application pertaining to its exemption request. As noted above, AMSE's
application states that it intends to operate as an SRO. But, AMSE's
application also states that it is seeking an exemption from
registering as a national securities exchange. If AMSE were granted an
exemption from registering as a national securities exchange, AMSE
would not be a registered national securities exchange and hence would
not be an SRO. The Commission seeks comment on the inconsistencies
between these statements in AMSE's application.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/other.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number 10-214 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, Station Place, 100 F Street NE., Washington,
DC 20549-1090.
All submissions should refer to File Number 10-214. 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/other.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to AMSE's exemption application filed with the
Commission, and all written communications relating to the application
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. 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 10-214
and should be submitted on or before January 20, 2015.
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\16\ 17 CFR 200.30-3(a)(71)(ii).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-30437 Filed 12-29-14; 8:45 am]
BILLING CODE 8011-01-P
