Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Certain Rules To Adopt or Align System Functionality With That Currently Offered by BATS Exchange, Inc. and BATS Y-Exchange, Inc., 2125-2142 [2015-00531]
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rljohnson on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 10 / Thursday, January 15, 2015 / Notices
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget (‘‘OMB’’) for
extension and approval.
Regulation G (17 CFR 244.100–
244.102) under the Securities Exchange
Act of 1934 (the ‘‘Exchange Act’’) (15
U.S.C. 78a et seq.) requires publicly
reporting companies that disclose or
releases financial information in a
manner that is calculated or presented
other than in accordance with generally
accepted accounting principles
(‘‘GAAP’’) to provide a reconciliation of
the non-GAAP financial information to
the most directly comparable GAAP
financial measure. Regulation G
implemented the requirements of
Section 401 of the Sarbanes-Oxley Act
of 2002 (15 U.S.C. 7261). We estimate
that approximately 14,000 public
companies must comply with
Regulation G approximately six times a
year for a total of 84,000 responses
annually. We estimated that it takes
approximately 0.5 hours per response
(84,000 x 0.5 hours) for a total reporting
burden of 42,000 hours annually.
Written comments are invited on: (a)
Whether this collection of information
is necessary for the proper performance
of the functions of the agency, including
whether the information will have
practical utility; (b) the accuracy of the
agency’s estimate of the burden imposed
by the collections of information; (c)
ways to enhance the quality, utility, and
clarity of the information collected; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
Please direct your written comments
to Pamela Dyson, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE., Washington,
DC 20549; or send an email to: PRA_
Mailbox@sec.gov.
Dated: January 9, 2015.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2015–00534 Filed 1–14–15; 8:45 am]
BILLING CODE 8011–01–P
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SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request Copies Available
From: U.S. Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
Extension:
Regulation BTR;
OMB Control No. 3235–0579, SEC File No.
270–521.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget (‘‘OMB’’) for
extension and approval.
Regulation Blackout Trade Restriction
(‘‘Regulation BTR’’) (17 CFR 245.100–
245.104) clarifies the scope and
application of Section 306(a) of the
Sarbanes-Oxley Act of 2002 (‘‘Act’’) (15
U.S.C. 7244(a)). Section 306(a)(6) [15
U.S.C.7244(a)(6)] of the Act requires an
issuer to provide timely notice to its
directors and executive officers and to
the Commission of the imposition of a
blackout period that would trigger the
statutory trading prohibition of Section
306(a)(1) [15 U.S.C. 7244(a)(1)]. Section
306(a) of the Act prohibits any director
or executive officer of an issuer of any
equity security, directly or indirectly,
from purchasing, selling or otherwise
acquiring or transferring any equity
security of that issuer during any
blackout period with respect to such
equity security, if the director or
executive officer acquired the equity
security in connection with his or her
service or employment. Approximately
1,230 issuers file Regulation BTR
notices approximately 5 times a year for
a total of 6,150 responses. We estimate
that it takes approximately 2 hours to
prepare the blackout notice for a total
annual burden of 2,460 hours. The
issuer prepares 75% of the 2,460 annual
burden hours for a total reporting
burden of (1,230 × 2 × 0.75) 1,845 hours.
In addition, we estimate that an issuer
distributes a notice to five directors and
executive officers at an estimated 5
minutes per notice (1,230 blackout
period × 5 notices × 5 minutes) for a
total reporting burden of 512 hours. The
combined annual reporting burden is
(1,845 hours + 512 hours) 2,357 hours.
Written comments are invited on: (a)
Whether this collection of information
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2125
is necessary for the proper performance
of the functions of the agency, including
whether the information will have
practical utility; (b) the accuracy of the
agency’s estimate of the burden imposed
by the collection of information; (c)
ways to enhance the quality, utility, and
clarity of the information collected; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
Please direct your written comment to
Pamela Dyson, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE., Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: January 9, 2015.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2015–00533 Filed 1–14–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74028; File No. SR–EDGA–
2015–03]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Certain Rules
To Adopt or Align System
Functionality With That Currently
Offered by BATS Exchange, Inc. and
BATS Y-Exchange, Inc.
January 9, 2015.
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 January
9, 2015, EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange has
designated this proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A) of the
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 80, No. 10 / Thursday, January 15, 2015 / Notices
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 certain rules to adopt or align
system functionality with that currently
offered by BATS Exchange, Inc. (‘‘BZX’’)
and BATS Y-Exchange, Inc. (‘‘BYX’’,
collectively with BZX, ‘‘BATS’’) in
order to provide a consistent technology
offering amongst the Exchange and its
affiliates. These changes are described
in detail below and include amending:
(i) Rule 11.1 regarding the Exchange’s
trading sessions and hours of operation;
(ii) Rule 11.6, Definitions; (iii) Rule
11.7, Opening Process; (iv) Rule 11.8,
Order Types; (v) Rule 11.9, Priority of
Orders; (vi) Rule 11.10, Order
Execution; and (vii) Rule 11.11, Routing
to Away Trading Centers.
The proposed rule change does not
propose to implement new or unique
functionality that has not been
previously filed with the Commission or
is not available on BATS. The Exchange
notes that the proposed rule text is
based on the rules and is different only
to the extent necessary to conform to the
Exchange’s current rules.
The Exchange does not believe that
the proposed rule change will have any
direct or significant indirect effect on
any other Exchange rule in effect at the
time of this filing.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.directedge.com/, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
rljohnson on DSK3VPTVN1PROD with NOTICES
II. Self-Regulatory Organization’s
Statement of the Purpose of, and the
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.
3 15
4 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii).
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Earlier this year, the Exchange and its
affiliate, EDGX Exchange, Inc. (‘‘EDGX’’)
received approval to effect a merger (the
‘‘Merger’’) of the Exchange’s parent
company, Direct Edge Holdings LLC,
with BATS Global Markets, Inc., the
parent of BATS (together with BATS,
EDGA and EDGX, the ‘‘BGM Affiliated
Exchanges’’).5 In the context of the
Merger, the BGM Affiliated Exchanges
are working to migrate EDGX and EDGA
onto the BATS technology platform, and
align certain system functionality,
retaining only intended differences
between the BGM Affiliated Exchanges.
As a result of these efforts, the Exchange
proposes to amend: (i) Rule 11.1
regarding the Exchange’s trading
sessions and hours of operation; (ii)
Rule 11.6, Definitions; (iii) Rule 11.7,
Opening Process; (iv) Rule 11.8, Order
Types; (v) Rule 11.9, Priority of Orders;
(vi) Rule 11.10, Order Execution; and
(vii) Rule 11.11, Routing to Away
Trading Centers.
The proposed amendments are
intended to align certain system
functionality with that currently offered
by BATS in order to provide a
consistent technology offering for
Users 6 of the BGM Affiliated
Exchanges. The Exchange notes that the
proposed rule text is based on the BATS
Rule and is different only to the extent
necessary to conform to the Exchange’s
current rules.7 The proposed
amendments do not propose to
implement new or unique functionality
that has not been previously filed with
the Commission or is not available on
BZX or BYX.
Rule 11.1, Hours of Trading and Trading
Days
Current Functionality. Rule 11.1 sets
forth when orders may be entered into
the System 8 and outlines a User’s
5 See Securities Exchange Act Release No. 71449
(January 30, 2014), 79 FR 6961 (February 5, 2014)
(SR–EDGX–2013–43; SR–EDGA–2013–34).
6 The term ‘‘User’’ is defined as ‘‘any Member or
Sponsored Participant who is authorized to obtain
access to the System pursuant to Rule 11.3.’’ See
Exchange Rule 1.5(ee).
7 To the extent a proposed rule change is based
on an existing BATS Rule, the language of the
BATS and Exchange Rules may differ to extent
necessary to conform with existing Exchange rule
text or to account for details or descriptions
included in the Exchange Rules but not currently
included in BATS rules based on the current
structure of such rules.
8 Exchange Rule 1.5(cc) defines ‘‘System’’ as ‘‘the
electronic communications and trading facility
designated by the Board through which securities
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ability to select the trading sessions for
which an order may be eligible for
execution. Proposed Rule 11.1(a)(1),
Session Indicator, describes each of the
Exchange’s existing trading sessions. A
User may select the particular trading
sessions for which their order(s) may be
eligible for execution. Specifically,
orders designated as: ‘‘Pre-Opening
Session’’ are eligible for execution
between 8:00 a.m. Eastern Time and
4:00 p.m. Eastern Time; ‘‘Regular
Session’’ are eligible for execution
between the completion of the Opening
Process or a Contingent Open as defined
in proposed Rule 11.7 (described
below), whichever occurs first, and 4:00
p.m. Eastern Time, unless otherwise
noted; 9 ‘‘Post-Closing Session’’ are
eligible for execution between the start
of the Regular Session and 8:00 p.m.
Eastern Time; and ‘‘All Sessions’’ are
eligible for execution between 8:00 a.m.
and 8:00 p.m. Eastern Time.
Under Rule 11.1(a)(1), orders may be
entered into the System from 6:00 a.m.
until 8:00 p.m. Eastern Time, but orders
entered between 6:00 a.m. and 8:00 a.m.
Eastern Time are not eligible for
execution until the start of the session
selected by the User. All orders are
eligible for execution during the Regular
Session. A User may designate that their
order to be eligible for the Pre-Opening
and/or Post-Closing Sessions. If the User
does not select a particular session or
sessions, the order will default to the
Regular Session only.
Proposed Functionality. To align with
BATS functionality, the Exchange
proposes to amend Rule 11.1(a)(1) to
allow Users to designate when their
order is eligible for execution by
selecting the desired Time-In-Force
(‘‘TIF’’) instruction under Exchange
Rule 11.6(q) 10 and not by selecting a
particular trading session, as is
currently required. Therefore, the
Exchange proposes to delete references
to the Pre-Opening Session, Regular
Session, Post-Closing Session, and All
Sessions indicators set forth under Rule
11.1(a)(1)(A)–(D). These session
indicators will no longer be available
upon completion of the technology
integration and Users will designate the
session(s) during which their order is
eligible for execution by selecting the
orders of Users are consolidated for ranking,
execution and, when applicable, routing away.’’
9 Beginning at 9:30:00 a.m. Eastern Time, the
System will accept: (i) Incoming orders designated
as Intermarket Sweep Orders (‘‘ISOs’’), and (ii)
orders with a time-in-force instruction other than
Regular Hours Only. This is to assist Members’
compliance with Rule 611 of Regulation NMS.
10 The Exchange also proposes to and its TIF
instructions under Rule 11.6(q) to align with BATS
Rule 11.9(b). The changes are described in more
detail below.
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desired TIF instruction under Exchange
Rule 11.6(q). The Exchange also
proposes to no longer default orders to
the Regular Session where another
session indicator is not selected by the
User. Thus, Users will be required to
select a TIF instruction. Pre-Opening
Session 11 and Post-Closing Session 12
will continue to be defined under
Exchange Rule 1.5. The Exchange also
proposes to retain but relocate the
definition of Regular Session to Rule 1.5
as new paragraph (hh).
The Exchange also proposes to amend
Rule 11.1(a)(1) to align with recent rule
changes filed with the Commission by
BATS.13 As proposed, orders entered
between 6:00 a.m. and 8:00 a.m. Eastern
Time are not eligible for execution until
the start of the Pre-Opening Session or
Regular Trading Hours, depending on
the time-in-force selected by the User.
The Exchange proposes to further
amend Rule 11.1(a)(1) to state that the
following orders will not be accepted
prior to 8:00 a.m. Eastern Time: orders
with a Post Only instruction, ISOs,
Market Orders with a TIF instruction
other than Regular Hours Only (‘‘RHO’’),
orders with a Minimum Execution
Quantity instruction that also include a
TIF instruction of RHO, and all orders
with a TIF instruction of Immediate or
Cancel (‘‘IOC’’) or Fill Or Kill (‘‘FOK’’).
At the commencement of the PreOpening Session, orders entered
between 6:00 a.m. and 8:00 a.m. Eastern
Time orders will be handled in time
sequence, beginning with the order with
the oldest time stamp, and will be
placed on the EDGA Book, routed,
cancelled, or executed in accordance
with the terms of the order.
rljohnson on DSK3VPTVN1PROD with NOTICES
Rule 11.6, Definitions
Rule 11.6, Definitions, sets forth in
one rule current defined terms and
order instructions that are utilized in
Chapter XI. Rule 11.6 also includes
additional defined terms and
instructions to aid in describing System
functionality and the operation of the
Exchange’s order types. The Exchange
proposes to amend Rule 11.6 to align
certain sections with BATS
functionality and rules as part of the
technology integration. These changes
are described below and include: (i)
Amending subparagraph (a) regarding
11 Pre-Opening Session is defined as ‘‘the time
between 8:00 a.m. and 9:30 a.m. Eastern Time.’’ See
Exchange Rule 1.5(s).
12 Post-Closing Session is defined as ‘‘the time
between 4:00 p.m. and 8:00 p.m. Eastern Time.’’ See
Exchange Rule 1.5(r).
13 See Securities Exchange Act Release Nos.
73745 (December 4, 2014), 79 FR 73359 (December
10, 2014) (SR–BATS–2014–062); 73744 (December
4, 2014), 79 FR 73369 (December 10, 2014) (SR–
BYX–2014–036).
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Attribution; (ii) amending paragraph (d)
regarding Discretionary Range; (iii)
amending paragraph (h) regarding
Minimum Execution Quantity; (iv)
amending subparagraph (j) regarding the
Pegged order instruction; (v) amending
subparagraph (k) regarding the
definition of Permitted Price; (vi)
amending subparagraph (l)(1)(A)
regarding the Price Adjust Re-Pricing
instruction to allow for multiple repricing; (vii) renaming the Hide Not
Slide re-pricing instruction under Rule
11.8(l)(1)(B) as Displayed Price Sliding
and amending the rule to allow for
multiple re-pricing; (viii) deleting
subparagraph (l)(1)(B)(i) to
decommission the Routed and Returned
Re-Pricing instruction; (ix) amending
subparagraph (l)(2) to decommission
Short Sale Price Adjust and Short Sale
Price Sliding, and adopt the BATS short
sale re-pricing process; (x) amending
subparagraph (l)(3) regarding the repricing of Non-Displayed Orders; (xi)
amending subparagraph (m)(1)
regarding Replenishment Amounts; (xii)
amending subparagraph (m)(2)
regarding the Super Aggressive order
instruction; and (xiii) amending
subparagraph (q) regarding TIF
instructions. As stated above, the
proposed amendments to Rule 11.6 do
not propose to implement new or
unique functionality that has not been
previously filed with the Commission or
is not available on BZX or BYX.14 Each
of these amendments are described in
more detail below.
Attribution (Rule 11.6(a))
Pursuant to Rule 11.6(a), where a User
includes an Attributable instruction
with an order, the User’s Market
Participant Identifier (‘‘MPID’’) is visible
via the Exchange’s Book Feed.15
Conversely, if an order is to be NonAttributable,16 the User’s MPID is not
visible via the Exchange’s Book Feed.
Under Exchange Rule 11.6(a)(1), unless
the User elects otherwise, all orders are
automatically defaulted by the System
to Non-Attributable. Further, under Rule
11.6(a)(2), a User may elect an order to
be Attributable on an order-by-order
basis or instruct the Exchange to default
all of its orders as Attributable on a portby-port basis. However, pursuant to
Rule 11.6(a), if a User instructs the
Exchange to default all its orders as
Attributable on a particular port, such
14 See
supra note 7.
EDGA Rule 11.6(a). The EDGA Book Feed
is a data feed that contains all displayed orders for
listed securities trading on EDGA, order executions,
order cancellations, order modifications, order
identification numbers, and administrative
messages. See Exchange Rule 13.8(a).
16 See Exchange Rule 11.6(a)(1).
15 See
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2127
User would not be able to designate any
order from that port as NonAttributable.
The Exchange proposes to amend
Rule 11.6(a)(2) to provide Users with
additional flexibility when designating
all of its orders as Attributable on a
particular port consistent with BATS
functionality. As amended, Rule
11.6(a)(2) would provide a User that
instructs the Exchange to default all of
its orders as Attributable on a particular
port the ability to override that setting
and designate an individual order from
that port as Non-Attributable. This
proposed rule change is representative
of additional detail with regard to the
operation of orders with an Attributable
instruction in the Exchange’s rules.
While the proposed rule change is not
directly based on an existing BATS
Rule, as BATS rules do not currently
address port level settings with respect
to attribution, the Exchange believes
that amending its current rule text to
accurately describe how a Member may
designate their orders as Attributable or
Non-Attributable will provide them
with increased transparency regarding
how the System operates.
Cancel Back (Rule 11.6(b))
Cancel Back is an instruction a User
may attach to an order instructing the
System to cancel an order, when, if
displayed by the System on the EDGA
Book 17 at the time of entry, the order
would create a violation of Rule 610(d)
of Regulation NMS, Rule 201 of
Regulation SHO, or the order cannot
otherwise be executed or posted by the
System to the EDGA Book at its limit
price.
The Exchange proposes to amend the
definition of Cancel Back to remove the
requirement that the order only be
cancelled where it creates a violation of
Rule 610(d) of Regulation NMS, Rule
201 of Regulation SHO, or cannot
otherwise be executed or posted by the
System to the EDGA Book at its limit
price upon entry. Removal of the phrase
‘‘upon entry’’ from Rule 11.6(b) would
enable an order with a Cancel Back
instruction that is posted to the EDGA
Book to be cancelled if it subsequently
creates a violation of Rule 610(d) of
Regulation NMS, Rule 201 of Regulation
SHO, or the cannot otherwise be
executed or continue to be posted by the
System to the EDGA Book at its limit
price. The proposed amendment would
align the operation of the Exchange’s
17 The term ‘‘EDGA Book’’ is defined as ‘‘the
System’s electronic file of orders.’’ See EDGA Rule
1.5(d).
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Cancel Back instruction with current
BATS Rule 11.13.18
Discretionary Range (Rule 11.6(d))
Discretionary Range is an instruction
the User may attach to an order to buy
(sell) a stated amount of a security at a
specified, displayed price with
discretion to execute up (down) to a
specified, non-displayed price. The
Exchange proposes to remove the
prohibition that the Discretionary Range
of an order to buy (sell) cannot be more
than $0.99 higher (lower) than the
order’s displayed price because, upon
migration of the Exchange onto BATS
technology, the Discretionary Range of
an order will not be limited to $0.99.
This proposed rule change is
representative of additional detail with
regard to the operation of orders with
Discretionary Range in the Exchange’s
rules. In addition, no such limitation is
included in BATS or BYX Rules
11.9(c)(10) regarding Discretionary
Orders and the BATS systems
effectively do not incorporate such a
limitation.
Minimum Execution Quantity (Rule
11.6(h))
Minimum Execution Quantity is an
instruction a User may attach to an
order with a Non-Displayed 19
instruction requiring the System to
execute the order only to the extent that
a minimum quantity can be satisfied by
execution against a single order or
multiple aggregated orders
simultaneously. Unless the User elects
otherwise, any shares remaining after a
partial execution will be executed at a
size that is equal to or exceeds the
Minimum Execution Quantity. Thus,
under current Exchange Rules and
functionality a User can elect that a
Minimum Execution Quantity only
apply to an initial execution but not any
remaining shares after such execution.
The Exchange proposes to amend
Minimum Execution Quantity to reflect
that, upon migration of the Exchange
onto BATS technology, any shares
remaining after a partial execution will
continue to be executed at a size that is
equal to or exceeds the Minimum
rljohnson on DSK3VPTVN1PROD with NOTICES
18 Under
BATS Rule 11.13, ‘‘an order will be
cancelled back to the User if, based on market
conditions, User instructions, applicable Exchange
Rules and/or the Act and the rules and regulations
thereunder, such order is not executable, cannot be
routed to another Trading Center pursuant to Rule
11.13(a)(2) below and cannot be posted to the BATS
Book.’’ The cancelling back of an order under Rule
11.13 is not limited to cancellation upon entry. See
also BATS Rule 11.9(g)(1)(D).
19 The term ‘‘Non-Displayed’’ is defined as ‘‘[a]n
instruction the User may attach to an order stating
that the order is not to be displayed by the System
on the EDGA Book.’’ See Exchange Rule 1.5(e)(2).
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Execution Quantity, regardless of the
Users instructions. A User who wishes
otherwise may cancel and resubmit
their order without a Minimum
Execution Quantity. In addition,
currently the Minimum Execution
Quantity instruction will not apply
where the number of shares remaining
after a partial execution are less than the
quantity provided in the instruction. As
amended, in such case, the Minimum
Execution Quantity will equal the
number of remaining shares, which is
similar to current Exchange
functionality. Like above, a User who
wishes otherwise may cancel and
resubmit their order with a new
Minimum Execution Quantity. As
amended, the Minimum Execution
Quantity instruction will operate
similarly to the BATS Minimum
Quantity Order under BATS Rule
11.9(c)(5).20
Pegged (Rule 11.6(j))
Current Functionality. An order with
a Pegged instruction enables a User to
specify that the order’s price will peg to
a price a certain amount away from the
NBB or NBO (offset). If an order with a
Pegged instruction displayed on the
Exchange would lock the market, the
price of the order will be automatically
adjusted by the System to one Minimum
Price Variation below the current NBO
(for bids) or to one Minimum Price
Variation above the current NBB (for
offers). A new time stamp is created for
the order each time it is automatically
adjusted and orders with a Pegged
instruction are not eligible for routing
pursuant to Rule 11.11. For purposes of
the Pegged instruction, the System’s
calculation of the NBBO does not take
into account any orders with Pegged
instructions that are resting on the
EDGA Book. An order with a Pegged
instruction is cancelled if an NBB or
NBO, as applicable, is no longer
available.
An order with a Pegged instruction
may be a Market Peg or Primary Peg. An
order that includes a Primary Peg
instruction will have its price pegged by
the System to the NBB, for a buy order,
or the NBO for a sell order. A User may,
20 See Securities Exchange Act Release Nos.
72646 (July 21, 2014), 79 FR 43516 (July 25, 2014)
(SR–BATS–2014–027) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
to Rules 11.9, 11.12, 11.18, 21.1 and 21.7 of BATS
Exchange, Inc.); 72647 (July 21, 2014), 79 FR 43522
(July 25, 2014) (SR–BYX–2014–010) (Notice of
Filing and Immediate Effectiveness of a Proposed
Rule Change to Rules 11.9, 11.12, and 11.18 of
BATS Y–Exchange, Inc.). As amended, Exchange
Rule 11.6(h) only differs from BATS Rule 11.9(c)(5)
to extent necessary to conform with existing rule
text or to account for details or descriptions
currently included in the Exchange’s Rule that are
not included in BATS Rule 11.9(c)(5).
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but is not required to, select an offset
equal to or greater than one Minimum
Price Variation 21 above or below the
NBB or NBO that the order is pegged to.
An order with a Primary Peg instruction
is currently eligible to join the
Exchange’s Best Bid or Offer (‘‘Exchange
BBO’’) when the EDGA Book has been
locked or crossed by another market. If
an order with a Primary Peg instruction
creates a Locking Quotation 22 or
Crossing Quotation,23 the price of the
order is automatically adjusted by the
System to one Minimum Price Variation
below the current NBO (for bids) or to
one Minimum Price Variation above the
current NBB (for offers).
An order that includes a Market Peg
instruction will have its price pegged by
the System to the NBB, for a sell order,
or the NBO, for a buy order. An order
with a Market Peg instruction that is to
be displayed by the System on the
EDGA Book must include an offset for
an order to buy (sell) that is equal to or
greater than one Minimum Price
Variation below (above) the NBO (NBB)
that the order is pegged to. If a User does
not select an offset, the System will
automatically include an offset on an
order to buy (sell) that is equal to one
Minimum Price Variation below (above)
the NBO (NBB) that the order is pegged
to. For an order with a Non-Displayed
instruction, a User may, but is not
required to, select an offset for an order
to buy (sell) that is equal to or greater
than one Minimum Price Variation
below (above) the NBO (NBB) that the
order is pegged to.
Proposed Functionality. The
Exchange proposes to amend the Pegged
instruction under Rule 11.6(j) to align
21 The term ‘‘Minimum Price Variation’’ is
defined as ‘‘[b]ids, offers, or orders in securities
traded on the Exchange shall not be made in an
increment smaller than: (i) $0.01 If those bids,
offers, or orders are priced equal to or greater than
$1.00 per share; or (ii) $0.0001 if those bids, offers,
or orders are priced less than $1.00 per share; or
(iii) any other increment established by the
Commission for any security which has been
granted an exemption from the minimum price
increments requirements of SEC Rule 612(a) or
612(b) of Regulation NMS.’’ See Exchange Rule
11.6(i).
22 The term ‘‘Locking Quotation’’ is defined as
‘‘[t]he display of a bid for an NMS stock at a price
that equals the price of an offer for such NMS stock
previously disseminated pursuant to an effective
national market system plan, or the display of an
offer for an NMS stock at a price that equals the
price of a bid for such NMS stock previously
disseminated pursuant to an effective national
market system plan in violation of Rule 610(d) of
Regulation NMS.’’ See Exchange Rule 11.6(g).
23 The term ‘‘Crossing Quotation’’ is defined as
‘‘[t]he display of a bid (offer) for an NMS stock at
a price that is higher (lower) than the price of an
offer (bid) for such NMS stock previously
disseminated pursuant to an effective national
market system plan in violation of Rule 610(d) of
Regulation NMS.’’ See Exchange Rule 11.6(c).
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with BATS Rule 11.9(c)(8).24 First, the
Exchange proposes to no longer cancel
an order with a Pegged instruction
where the NBB or NBO, as applicable,
is no longer available. In such case,
instead of being cancelled, the order
will not be eligible for execution. The
order will receive a new time stamp and
be eligible for execution where the NBB
or NBO it is pegged to becomes
available.
Second, the Exchange proposes to
amend the Market Peg instruction under
Rule 11.6(j)(1) to state that such orders
are not eligible for display on the EDGA
Book. As a result, the Exchange also
proposes to delete the requirement that
an order with a Market Peg instruction
that is to be displayed on the EDGA
Book must include an offset for an order
to buy (sell) that is equal to or greater
than one Minimum Price Variation
below (above) the NBO (NBB) that the
order is pegged to.
Third, the Exchange proposes to
amend the Primary Peg instruction
under Rule 11.6(j)(2) to define an offset
equal to or greater than one Minimum
Price Variation above or below the NBB
or NBO that the order is pegged to as the
‘‘Primary Offset Amount’’. The
Exchange also proposes to specify that
the Primary Offset Amount for an order
with a Primary Peg instruction that is to
be displayed on the EDGA Book must
result in the price of such order being
inferior to or equal to the inside quote
on the same side of the market.
Fourth, the Exchange proposes to
amend the provisions governing the
operation of an order with a Primary Peg
instruction during a locked or crossed
market. As proposed, an order with a
Primary Peg instruction will no longer
be able to join the Exchange BBO when
the EDGX Book [sic] is locked or crossed
by another market. When the EDGX
Book [sic] is crossed by another market,
the Exchange proposes to automatically
adjust an order with a Primary Peg
instruction to the current NBO (for bids)
or the current NBB (for offers). For
example, assume the NBBO is $10.08 x
$10.09. An order with a Primary Peg
instruction to buy with a limit price of
$10.10 is entered and displayed by the
24 See Securities Exchange Act Release Nos.
73188 (September 23, 2014), 79 FR 58004
(September 26, 2014) (SR–BATS–2014–041) (Notice
of Filing and Immediate Effectiveness of a Proposed
Rule Change to Rule 11.9 of BATS Exchange, Inc.);
73190 (September 23, 2014), 79 FR 58019
(September 26, 2014) (SR–BYX–2014–022) (Notice
of Filing and Immediate Effectiveness of a Proposed
Rule Change to Rule 11.9 of BATS Y-Exchange,
Inc.). As amended, Exchange Rule 11.6(j) only
differs from BATS Rule 11.9(c)(8) to extent
necessary to conform with existing rule text or to
account for details or descriptions currently
included in the Exchange’s Rule that are not
included in BATS Rule 11.9(c)(8).
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System at $10.08, the current NBB.
Assume the NBO updates to $10.07,
resulting in a crossed market. The order
with a Primary Peg instruction to buy
would then be pegged and displayed at
$10.07, the updated NBO.
Rule 11.6(j)(2) will continue to require
that an order with a Primary Peg
instruction that would otherwise be a
Locking Quotation or Crossing
Quotation be automatically adjusted by
the System to one Minimum Price
Variation below the current NBO (for
bids) or to one Minimum Price Variation
above the current NBB (for offers). For
example, assume the NBBO is $10.09 ×
$10.08, resulting in a crossed market.
An order with a Primary Peg instruction
to buy with a limit price of $10.10 is
entered and displayed by the System at
$10.07, one Minimum Price Variation
below the current NBB. Assume the
NBBO is updated to $10.08 × $10.09, the
order with a Primary Peg instruction to
buy would then be pegged and
displayed at $10.08, the updated NBB
now that the market is no longer
crossed. This proposed rule change is
representative of additional detail with
regard to the operation of orders with a
Pegged instruction during locked or
crossed markets that is currently
included in Rule 11.6(j) and is
consistent with Exchange’s current repricing options under Rule 11.6(l), as
well as Exchange Rule 11.10(f) and
BATS Rule 11.20(a)(3), which outline
the prohibition against displaying
locking and crossing quotations under
Rule 610 of Regulation NMS.
Permitted Price (Rule 11.6(k))
Permitted Price is currently defined as
the price at which a sell order will be
priced, ranked and displayed at one
Minimum Price Variation above the
NBB. As amended, the definition of
Permitted Price will only state that it is
the price that the order is displayed at
one Minimum Price Variation above the
NBBO.25 This is to update the definition
of Permitted Price to reflect the
decommissioning of the Short Sale Price
Adjust and Short Sale Price Sliding
instructions and the proposed
amendment that an order with both a
Short Sale instruction and Hide Not
Slide instruction will be ranked at the
mid-point of the NBBO, but displayed at
the Permitted Price discussed below.
While the amended definition of
Permitted Price is not identical to the
definition of Permitted Price under
BATS Rules, any differences are
25 The proposed definition of Permitted Price is
also similar to that of other exchange. See e.g.,
Nasdaq Rule 4763(e); NYSE MKT Rule 440B(e);
Rule 7016(f)(v)(C).
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2129
necessary to conform the proposed rule
text with the other proposed rule
changes described above.
Re-Pricing (Rule 11.6(l))
The Exchange currently offers repricing instructions which, in all cases,
result in the ranking and/or display of
an order at a price other than the order’s
limit price in order to comply with
applicable securities laws and Exchange
Rules. Specifically, the Exchange’s repricing instructions are designed to
permit Users to comply with Rule
610(d) of Regulation NMS or Rule 201
of Regulation SHO. Rule 11.6(l) sets
forth the re-pricing instructions
currently available to Users with regard
to Regulation NMS compliance—Price
Adjust, Hide Not Slide, and Routed and
Returned Re-Pricing, and with regard to
Regulation SHO compliance—Short
Sale Price Adjust and Short Sale Price
Sliding. The Exchange now proposes to
amend its re-pricing instructions to
streamline the re-pricing options
available to Users in order to align
Exchange functionality with that of
BATS.
Re-Pricing Instructions To Comply With
Rule 610(d) of Regulation NMS
The Exchange proposes to amend its
re-pricing instructions to comply with
Rule 610(d) of Regulation NMS as
follows: (i) Amend the Price Adjust
instruction to enable Users to elect that
their order be adjusted multiple times in
response to changes in the NBBO;
rename the Hide Not Slide instruction
as Displayed Price Sliding and amend it
to allow for multiple re-pricing; and (iii)
delete Routed and Returned Re-Pricing.
Routed and Returned Re-Pricing (Rule
11.6(l)(1)(B)(i)). The Exchange proposes
to delete the Routed and Returned RePricing instruction under Rule
11.6(l)(1)(B)(i). Pursuant to current
Exchange Rules and Functionality,
under the Routed and Returned RePricing instruction, a Limit Order that is
returned to the EDGA Book after being
routed to an away Trading Center with
a limit price that would cause the order
to be a Locking Quotation or Crossing
Quotation will be displayed by the
System on the EDGA Book at a price
that is one Minimum Price Variation
lower (higher) than the Locking Price 26
for orders to buy (sell), will be ranked
at the Locking Price with the ability to
execute at the Locking Price. Each time
the NBBO is updated, a buy (sell) order
26 The term ‘‘Locking Price’’ is defined as ‘‘the
price at which an order to buy (sell), that if
displayed by the System on the EDGA Book, either
upon entry into the System, or upon return to the
System after being routed away, would be a Locking
Quotation.’’ See Exchange Rule 11.6(i).
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subject to the Routed and Returned RePricing instruction will be further
adjusted so that it continues to be
displayed by the System on the EDGA
Book at one Minimum Price Variation
below (above) the NBO (NBB) and will
be ranked at the Locking Price with the
ability to execute at the Locking Price
until the price of such order reaches its
limit price, at which point it will remain
displayed by the System on the EDGA
Book at that price and cease to be
further adjusted pursuant to the Routed
and Returned Re-Pricing instruction.
The order will receive a new time stamp
when it is returned to the EDGA Book
and each time it is subsequently reranked.
Upon completion of the migration of
the Exchange to BATS technology, Limit
Orders that are returned to the EDGA
Book after being routed to an away
Trading Center with a limit price that
would cause the order to be a Locking
Quotation or Crossing Quotation will be
subject to the Exchange’s standard repricing instructions; i.e., automatically
defaulted by the System to the Price
Adjust Re-Pricing instruction, unless the
User affirmatively elects the Cancel
Back instruction or the Hide Not Slide
instruction. The Exchange also proposes
to remove a reference to the Routed and
Returned Re-Pricing instruction from
Rule 11.6(l)(1)(B).
Price Adjust Re-Pricing (Rule
11.6(l)(1)(A)). Under the Price Adjust
instruction, where a buy (sell) order
would be a Locking Quotation or
Crossing Quotation if displayed by the
System on the EDGA Book at the time
of entry, the order will be displayed and
ranked 27 at a price that is one Minimum
Price Variation lower (higher) than the
Locking Price. The order will be
displayed and ranked by the System on
the EDGA Book at the Locking Price if:
(i) The NBBO changes such that the
order, if displayed at the Locking Price,
would not be a Locking Quotation or
Crossing Quotation, including where an
ISO with a TIF instruction of Day is
entered into the System and displayed
on the EDGA Book on the same side of
the market as the order at a price that
is equal to or more aggressive than the
Locking Price.28 An order re-priced as
set forth above would not be subject to
further re-ranking and will be displayed
by the System on the EDGA Book at the
Locking Price until executed or
cancelled by the User. The order will
receive a new time stamp at the time it
is re-ranked.
The Exchange proposes to amend the
Price Adjust instruction to provide
Users with additional flexibility by
enabling them to elect that their order
be adjusted multiple times in response
to changes in the NBBO. The ranked
and displayed prices of an order subject
to the Price Adjust instruction will only
be adjusted once, unless the User elects
that the order be adjusted multiple
times in response to changes to the
prevailing NBBO. Unless a User has
elected the multiple re-pricing option,
the order would not be subject to further
re-ranking and will be displayed on the
EDGA Book at the Locking Price until
executed or cancelled by the User. An
order subject to the multiple re-pricing
option will be further re-ranked and redisplayed to the extent it can
permissibly be ranked and displayed at
a more aggressive price based on
changes to the prevailing NBBO.
Multiple re-pricing 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 re-pricing 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. The Exchange
notes that this functionality is identical
to the operation of BATS Rule
11.9(g)(2).29 The Exchange does not
propose to amend any other aspect of
the Price Adjust instruction.
As an example of multiple re-pricing
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 nonroutable 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
27 For purposes of the description of the repricing instructions under proposed Rule 11.6(l),
the terms ‘‘ranked’’ and ‘‘priced’’ are synonymous
and used interchangeably.
28 See Division of Trading and Markets: Response
to Frequently Asked Questions Concerning Rule
611 and Rule 610 of Regulation NMS, Question
5.02, available at https://www.sec.gov/divisions/
marketreg/nmsfaq610–11.htm (last visited March 6,
2014).
29 See Securities Exchange Act Release Nos.
73359 (October 15, 2014), 79 FR 63003 (October 21,
2014) (SR–BATS–2014–038) (Order Granting
Approval of Proposed Rule Change to Rule 11.9 of
the BATS Exchange, Inc. to Add Price Adjust
Functionality); and 73366 (October 15, 2014), 79 FR
62993 (October 21, 2014) (SR–EDGA–2014–019)
[sic] (Order Granting Approval of Proposed Rule
Change to Rule 11.9 of the BATS Y-Exchange, Inc.
to Add Price Adjust Functionality).
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Exchange would un-slide the bid to buy
and rank and display it at $10.12. Under
existing Price Adjust functionality, the
Exchange does not further adjust the
ranked or displayed price following this
un-slide. However, under multiple repricing 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.
Hide Not Slide Re-Pricing (Rule
11.6(l)(1)(B)). The Exchange proposes to
rename the Hide Not Slide Re-Pricing
instruction under Rule 11.6(l)(1)(B) as
Displayed Price Sliding and to amend
the rule to allow for multiple repricing.30 Under the renamed Displayed
Price Sliding instruction, where an
order would be a Locking Quotation or
Crossing Quotation if displayed by the
System on the EDGA Book at the time
of entry, the order will be displayed at
a price that is one Minimum Price
Variation lower (higher) than the
Locking Price for orders to buy (sell),
will be ranked at the Locking Price with
the ability to execute at the Locking
Price; provided, however, that if a
contra-side order that equals the
Locking Price is displayed by the
System on the EDGA Book, the order’s
ability to execute at the Locking Price
will be suspended unless and until
there is no contra-side displayed order
on the EDGA Book that equals the
Locking Price. However, in such case,
an order subject to the Displayed Price
Sliding instruction may execute against
other orders at its displayed price.
Where the NBBO changes such that the
order, if displayed by the System on the
EDGA Book at the Locking Price, would
not be a Locking Quotation or Crossing
Quotation, the System will rank and
display such orders at the Locking Price.
The order will not be subject to further
re-ranking and will be displayed on the
EDGA Book at the Locking Price
retaining its time stamp until executed
or cancelled by the User. Currently, an
order subject to the Displayed Price
Sliding instruction will only receive a
new time stamp when it is re-ranked by
30 The Exchange notes that it is proposing to rename the Hide Not Slide Re-Pricing instruction to
the Displayed Price Sliding instruction, which is
the same name used to describe analogous
functionality on BATS. The Exchange understands
that, its affiliate, EDGX, will retain the current name
with respect to the Hide Not Slide Re-Pricing
instruction because such functionality is
distinguishable from Displayed Price Sliding
functionality. The primary difference between Hide
Not Slide functionality and Displayed Price Sliding
functionality is that an order with a Hide Not Slide
re-pricing instruction will be ranked at the midpoint of the NBBO with discretion to execute at the
Locking Price whereas an order with a Displayed
Price Sliding instruction (including an analogous
order on BZX or BYX) is ranked at the Locking
Price.
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the System upon clearance of a Locking
Quotation due to the receipt of an ISO
with a TIF instruction of Day that
establishes a new NBBO at the Locked
Price in accordance with Rule
11.9(a)(2)(B).
Like as proposed for the Price Adjust
instruction described above, the
Exchange proposes to amend the
Displayed Price Sliding instruction to
provide Users with additional flexibility
by enabling them to elect that their
order be adjusted multiple times in
response to changes in the NBBO. The
ranked and displayed prices of an order
subject to the Displayed Price Sliding
instruction will only be adjusted once,
unless the User elects that the order be
adjusted multiple times in response to
changes to the prevailing NBBO. Unless
a User has elected the multiple repricing option, the order would not be
subject to further re-ranking and will be
displayed on the EDGA Book at the
Locking Price until executed or
cancelled by the User. An order subject
to the multiple re-pricing option will be
further re-ranked and re-displayed to
the extent it can permissibly be ranked
and displayed at a more aggressive price
based on changes to the prevailing
NBBO. Multiple re-pricing pursuant to
Displayed Price Sliding would be
optional and would have to be explicitly
selected by a User before it will be
applied. Orders subject to multiple repricing for Displayed Price Sliding 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. The Exchange notes
that this functionality is identical to the
operation of BATS Rule 11.9(g)(1).31 To
account for option multiple price
sliding, the Exchange proposes to state
that an order subject to the Displayed
Price Sliding instruction will receive a
new time stamp each time is re-ranked,
which will include when the order is reranked by the System upon clearance of
a Locking Quotation due to the receipt
of an ISO with a TIF instruction of Day
that establishes a new NBBO at the
Locked Price in accordance with Rule
11.9(a)(2)(B).The Exchange does not
31 See Securities Exchange Act Release Nos.
67657 (August 14, 2012), 77 FR 50199 (August 20,
2012) (SR–BATS–2012–035) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
by the BATS Exchange, Inc. to Amend BATS Rules
Related to Price Sliding Functionality); and 67656
(August 14, 2012), 77 FR 50193 (August 20, 2012)
(SR–BYX–2012–018) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
by the BATS Y-Exchange, Inc. to Amend BYX Rules
Related to Price Sliding Functionality).
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propose to amend any other aspect of
the Displayed Price Sliding instruction.
As an example of multiple Displayed
Price Sliding, 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 the order
to buy at $10.12 and display the order
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 display it at its ranked price (and
limit price) of $10.12.
Re-Pricing Instructions To Comply With
Rule 201 of Regulation SHO
The Exchange proposes to amend its
Re-Pricing instructions to comply with
Rule 201 of Regulation SHO by deleting
Short Sale Price Adjust and Short Sale
Price Sliding and adopting a new,
streamlined rule to align with BATS
Rule 11.9(g)(5).
Current Functionality. The Exchange
currently offers two re-pricing
instructions to comply with Rule 201 of
Regulation SHO—Short Sale Price
Adjust and Short Sale Price Sliding.
Under the Short Sale Price Adjust
instruction, an order to sell with a Short
Sale instruction will be ranked and
displayed by the System on the EDGA
Book at the Permitted Price. Following
the initial ranking, the order will, to the
extent the NBB declines, continue to be
re-ranked and displayed by the System
on the EDGA Book at the Permitted
Price down to the order’s limit price.
The Short Sale Price Sliding instruction
operates similarly to the Short Sale
Price Adjust instruction; except that
after its initial ranking, the order will,
to the extent the NBB declines, be reranked and displayed by the System on
the EDGA Book one additional time at
a price that is equal to the NBB at the
time the order was received by the
System. In both cases, the order to sell
with a Short Sale instruction will
receive a new time stamp each time it
is re-ranked.
Proposed Functionality. The
Exchange proposes to delete the Short
Sale Price Adjust and Short Sale Price
Sliding and adopt a new, streamlined
rule to align with BATS Rule 11.9(g)(5).
Under the amended Rule 11.6(l)(2), an
order to sell with a Short Sale
instruction that, at the time of entry,
could not be executed or displayed in
compliance with Rule 201 of Regulation
SHO will be re-priced by the System at
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2131
the Permitted Price. Like BATS Rule
11.9(g)(5), proposed Exchange Rule
11.6(l)(2)(A) would state that the default
short sale re-pricing process will only
re-price an order upon entry.
As proposed, depending upon the
instructions of a User, to reflect declines
in the NBB the System will continue to
re-price and re-display a short sale order
at the Permitted Price down to the
order’s limit price. In the event the NBB
changes such that the price of an order
with a Non-Displayed instruction
subject to Rule 201 of Regulation SHO
would be a Locking Quotation or
Crossing Quotation, the order will
receive a new time stamp, and will be
re-priced by the System to the Permitted
Price. Like the Short Sale Price Adjust
process that is to be decommissioned,
an order to sell with a Short Sale
instruction that is re-priced will be
ranked at the Permitted Price.
Like BATS Rule 11.9(g)(5), amended
Rule 11.6(l)(2) would state that: (i)
When a Short Sale Circuit Breaker is in
effect, the System will execute a sell
order with a Displayed and Short Sale
instruction at the price of the NBB if, at
the time of initial display of the sell
order with a Short Sale instruction, the
order was at a price above the then
current NBB; (ii) orders with a Short
Exempt instruction will not be subject
to re-pricing under amended Rule
11.6(l)(2); and (iii) the re-pricing
instructions to comply with Rule 610(d)
of Regulation NMS will be continue to
be ignored for an order to sell with a
Short Sale instruction when a Short Sale
Circuit Breaker is in effect and the repricing instructions to comply with
Rule 201 of Regulation SHO under this
Rule will apply.
Re-Pricing of Orders With a NonDisplayed Instruction (Rule 11.6(l)(3))
Rule 11.6(l)(3) currently sets forth the
re-pricing process for orders with a NonDisplayed instruction to avoid
potentially trading through Protected
Quotations of external markets.
Currently, under Rule 11.6(l)(3), a nonroutable order with a Non-Displayed
instruction that would be a Crossing
Quotation of an external market will be
ranked at the Locking Price, unless the
User affirmatively elects that the order
Cancel Back. Rule 11.6(l)(3) states that
to avoid potentially trading through
Protected Quotations of external
markets, a non-routable order with a
Non-Displayed instruction that would
be a Crossing Quotation of an external
market will be ranked at the Locking
Price, unless the User affirmatively
elects that the order Cancel Back. Each
time the NBBO is updated and the order
continues to be a Locking Quotation or
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Crossing Quotation of an external
market, the order will be adjusted so
that it continues to be ranked at the
current Locking Price. Once an order
with a Non-Displayed instruction has
been ranked at its limit price it will only
be adjusted in the event the NBBO is
updated and the order would again be
a Crossing Quotation of an external
market. The order will receive a new
time stamp each time it is subsequently
re-ranked. For example, assume the
NBBO is $24.00 × $26.00 and there are
no orders resting on the EDGA Book. If
an incoming order with a NonDisplayed instruction is entered into the
System to buy at $27.00, it will be
ranked by the System at $26.00, the
Locking Price. Assume the NBBO
changes to $24.00 × $25.00. The buy
order with a Non-Displayed instruction
will be re-ranked at $25.00, the new
Locking Price, and be given a new time
stamp.
The Exchange proposes to amend
Rule 11.6(l)(3) to align with BATS Rule
11.9(g)(4).32 As amended, an order with
a Non-Displayed instruction that has
been re-ranked by the System in
accordance with Rule 11.6(l)(3) will not
be re-ranked by the System each time
the NBBO is adjusted. Rather, such
order will only be re-ranked by the
System should it is again be Crossing
Quotation of an external market upon
the NBBO being updated. Assume the
same facts as the above example.
Assume the NBBO again changes to
$24.00 × $27.00. The buy order with a
Non-Displayed instruction will be
remain ranked at $25.00 because it is
not a Crossing Quotation upon the
NBBO changing. However, assume the
NBBO changed to $23.00 × $24.00. The
buy order with a Non-Displayed
instruction will be remain ranked at
$24.00, and be given a new time stamp,
because it would be a Crossing
Quotation if it remained ranked at
$25.00.
Reserve Quantity and Replenishment
Amounts (Rule 11.6(m))
Current Functionality. If the portion
of the order with a Displayed
instruction is reduced to less than a
Round Lot, the System will, in
accordance with the User’s instruction,
replenish the displayed quantity from
the Reserve Quantity by at least a single
Round-Lot using either the Random or
Fixed Replenishment instructions. A
new time stamp is created for the
displayed quantity of the order each
time it is replenished from the Reserve
Quantity, while the Reserve Quantity
retains the time stamp of its original
entry. Where the combined amount of
the displayed quantity and Reserve
Quantity of an order are reduced to less
than one Round Lot, the order converts
to an order with a Displayed instruction
and be treated as Displayed for purposes
of execution priority under Rule 11.9.
Proposed Functionality. The
Exchange proposes to amend Rule
11.6(m) to align with BATS Rule
11.9(c)(1).33 First, the Exchange
proposes to no longer require that the
displayed quantity from the Reserve
Quantity be replenished by at least a
single Round-Lot. Instead, the displayed
quantity will be replenished in
accordance with the replenishment
instruction the User selects.
Specifically, like on BATS, Users will
be required to designate the original
display quantity of an order, which is
also the amount to which an order is
replenished (unless the remainder of an
order is smaller than the original
displayed quantity) under the current
replenishment functionality. The
Exchange refers to this quantity as ‘‘max
floor’’ in its specifications. The
Exchange proposes to add a defined
term of ‘‘Max Floor’’ to Rule 11.6(m),
which would be a mandatory value
entered by a User that will determine
the quantity of the order to be initially
displayed by the System and will also
be used to determine the replenishment
amount under both replenishment
options described below. If the
remainder of an order is less than the
replenishment amount, the Exchange
will replenish and display the entire
remainder of the order.
Second, the Exchange proposes to
amend the time stamp functionality of
an order with a Reserve Quantity.
Currently, when an order is replenished
from Reserve Quantity, the displayed
quantity receives a new time stamp
while the Reserve Quantity retains the
time stamp of its original entry. As
amended, a new time stamp will be
created for the displayed quantity and
Reserve Quantity of the order each time
it is replenished from the Reserve
Quantity. This functionality is identical
to functionality set forth in BATS Rule
11.12(a)(5).34
Random Replenishment is an
instruction that a User may attach to an
order with Reserve Quantity where
replenishment quantities for the order
are randomly determined by the System
within a replenishment range
established by the User. The Exchange
proposes to minor amendments to the
operation of Random Replenishment to
33 See
32 Id.
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supra note 20.
35 Id.
34 Id.
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align with BATS Rule 11.9(c)(1).35
Currently, both the actual quantity of
the order that will be initially displayed
by the System on the EDGA Book and
subsequent displayed replenishment
quantities are randomly determined by
the System within a replenishment
range established by the User. As
amended, only the replenishment
quantities for the order will be
randomly determined by the System
within a replenishment range
established by the User. A User will be
required to select a replenishment value
and Max Floor. The Max Floor will be
the initial quantity to be displayed. The
displayed replenishment quantities will
then be determined by the System by
randomly selecting a number of shares
within a replenishment range that is
between: (i) The Max Floor minus the
replenishment value; and (ii) the Max
Floor plus the replenishment value. The
displayed replenishment quantities
randomly determined by the System
will no longer be limited to Round Lots.
Nor will the replenishment quantity be
within a replenishment range that is
between the quantity around which the
replenishment range is established plus
or minus the replenishment value. In
addition, the Exchange will no longer
prohibit the displayed replenishment
quantity from: (i) Exceeding the
remaining Reserve Quantity of the
order; (ii) from being less than a single
Round Lot or greater than the remaining
unexecuted shares in the order.
In addition to the changes set forth
above, the Exchange proposes to modify
Rule 11.10(e)(3) to state that the Max
Floor set for an order can be modified
through the use of a replace message
rather than requiring a User to cancel
and re-enter an order. The Exchange
also proposes to modify Rule 11.9(a)(4)
to align with BATS Rule 11.12(a)(3)36 to
make clear that a modification to the
Max Floor of an order with a Reserve
Quantity will not cause such order to
lose priority. When a replenishment
occurs (based on the new Max Floor),
the order will receive a new timestamp,
and thus, will have a new priority.
Under Fixed Replenishment, the
displayed quantity of an order is
replenished for a Fixed Replenishment
quantity designated by the User. The
Fixed Replenishment quantity for the
order equals the initial displayed
quantity designated by the User. The
Exchange proposes to amend Rule
11.6(m) to specify that the Fixed
Replenishment quantity will be the Max
Floor designated by the User. In
addition, Rule 11.6(m) will also specify
36 Id.
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that Fixed Replenishment will apply to
any order for which Random
Replenishment has not been selected.
Lastly, like proposed for Random
Replenishment discussed above, the
Exchange will no longer prohibit the
displayed replenishment quantity from
being less than a single Round Lot or
greater than the remaining unexecuted
shares in the order. As amended, Fixed
Replenishment will be identical to
BATS Rule 11.9(c)(1)(B).37
Super Aggressive (Rule 11.6(n)(2))
Super Aggressive is an order
instruction that directs the System to
route the order if an away Trading
Center locks or crosses the limit price of
the order resting on the EDGA Book.
Like BATS Rule 11.13(a)(4)(B), the
Exchange proposes to also permit a User
to designate an order as Super
Aggressive solely to routable orders
posted to the EDGA Book with
remaining size of an Odd Lot.38 To the
extent the amended text of Exchange
Rule 11.6(n)(2) differs from BATS Rule
11.13(a)(4)(B), such differences are
necessary to conform the rule with
existing rule text, and in this case, to
account for details or descriptions
currently included in BATS Rule
11.9(d) [sic] that are not necessary under
the structure of the Exchange’s Rules.
Time-In-Force (Rule 11.6(q))
The Exchange proposes to amend its
TIF instructions to align with BATS
Rule 11.9(b). To the extent the amended
text of Exchange Rule 11.6(q) differs
from BATS Rule 11.9(b), such
differences are necessary to conform the
rule with existing Exchange rule text or
to account for details or descriptions
currently included in the Exchange’s
Rule but not included in BATS Rule
11.9(b). Where necessary, the Exchange
has proposed rule changes consistent
with the Exchange’s operation on BATS
technology, which the Exchange also
believes are consistent with User
expectations of how the System
operates.
37 See
supra note 20.
Securities Exchange Act Release Nos.
73295 (October 3, 2014), 79 FR 61117 (October 9,
2014) (SR–BATS–2014–044) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
to Rules 11.13 and 21.9 of the BATS Exchange,
Inc.); and 73296 (October 3, 2014), 79 FR 61121
(October 9, 2014) (SR–BYX–2014–026) (Notice of
Filing and Immediate Effectiveness of Proposed
Rule Change to Rule 11.13 of the BATS Y-Exchange,
Inc.). As amended, Exchange Rule 11.6(n)(2) only
differs from BATS Rule 11.13(a)(4)(B) to extent
necessary to conform the rule with existing
Exchange rule text or to account for details or
descriptions currently included in the Exchange’s
Rule but not included in BATS Rule 11.13(a)(4)(B).
An ‘‘Odd Lot’ is defined as ‘‘any amount less than
a Round Lot. See Exchange Rule 11.8(s)(2).
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38 See
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First, the Exchange proposes minor
modifications to align the definition of
IOC with BATS Rule 11.9(b)(1), the
most notable of which is to specify that
an order with a TIF instruction of IOC
is eligible for routing. BATS rules do not
restrict an order with an IOC instruction
from being eligible for routing. In
addition, permitting orders with an IOC
instruction to be eligible for routing is
consistent with BATS technology as
well as with Users’ expectations to use
orders with an IOC instruction in
combination with available routing
functionality and strategies. As
amended, an IOC would be an
instruction the User may attach to an
order stating the order is to be executed
in whole or in part as soon as such order
is received. The portion not executed
immediately on the Exchange or another
trading center is treated as cancelled
and is not posted to the EDGA Book.
Second, the Exchange proposes to
amend the definition of the Day TIF
instruction to state that an order with a
TIF instruction of Day, if not executed,
expires at the end of Regular Trading
Hours and not at the end of the
specified trading session. In addition,
orders with a Day TIF instruction will
be eligible for execution as soon as
received by the Exchange. Therefore, the
Exchange proposes to no longer require
that any order with a Day instruction
entered into the System before the start
of the specified trading session will be
placed by the System in a pending state
and activated for potential execution
upon the start of that trading session.
Lastly, any Day Order entered into the
System before the opening for business
on the Exchange as determined
pursuant to Rule 11.1 (which is
currently 6:00 a.m.), or after the closing
of Regular Trading Hours, will be
rejected.
Third, Good-‘til Time will be renamed
as Good-‘til Day (‘‘GTD’’). GTD will
continue to be defined as an instruction
the User may attach to an order
specifying the time of day at which the
order expires. Any unexecuted portion
of an order with a TIF instruction of
GTD will be continue to be cancelled at
the expiration of the User’s specified
time, which can be no later than the
close of the Post-Market Session. A User
will no longer be able to designate that
an order with a GTD instruction be
cancelled at the end of a specified
trading session(s).
Lastly, the Exchange proposes to
adopt two new TIF instructions which
are currently available on BATS: 39
Good ‘til Extended Day (‘‘GTX’’) and
RHO. GTX will be defined as an
39 See
PO 00000
supra note 20.
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2133
instruction the User may attach to an
order to buy or sell which, if not
executed, will be cancelled by the close
of the Post-Market Session. RHO will be
defined as an instruction a User may
attach to an order designating it for
execution only during Regular Trading
Hours, which includes the Opening
Process and Re-Opening Process
following a halt suspension or pause.
The proposed definition of RHO under
Exchange Rule 11.6(q)(6) is substantially
similar to BYX Rule 11.9(b)(7) and any
differences are necessary to conform the
rule with existing Exchange rule text or
to account for details or descriptions
currently included in the Exchange’s
rules but not in BYX Rule 11.9(b)(7).
The Exchange notes that the proposed
definition of RHO is also similar to BZX
Rule 11.9(b)(7) but such rule includes
additional detail not necessary in the
proposed rule because the Exchange
does not have any listed securities or a
separate process for handling such
listed securities whereas BZX does.
Rule 11.7, Opening Process
The Exchange proposes to amend
Rule 11.7 regarding the Opening Process
to align with BATS Rule 11.24 and BYX
Rule 11.23.40 The Exchange proposes to
modify paragraph (a) to specify that buy
or sell orders that wish to participate in
the Opening Process are to include a TIF
instruction of RHO and that any order
that does not include a TIF instruction
of RHO will not be eligible for
participation in the Opening Process.
Paragraph (a)(1) would be amended to
make clear that only orders without a
TIF instruction of RHO and ISOs
designated RHO may execute against
eligible Pre-Opening Session contra-side
interest resting in the EDGA Book in the
time period between the start of 9:30
a.m. Eastern Time and the Exchange’s
Opening Process or a Contingent Open,
as described in paragraph (b) and (d).41
Orders with a TIF instruction of IOC or
FOK will continue to be eligible for
execution during this time period as
they would be considered orders
without a TIF instruction of RHO.
Paragraph (a)(1) would also state that
40 See Securities Exchange Act Release Nos.
73473 (October 30, 2014), 79 FR 65744 (November
5, 2014) (SR–BATS–2014–037) (Order Granting
Approval of Proposed Rule Change to Establish an
Opening Process for Non-BATS-Listed Securities);
and 73472 (November 5, 2014), 79 FR 65735
(October 9, 2014) (SR–BYX–2014–018) (Order
Granting Approval of Proposed Rule Change to
Establish an Opening Process). As amended,
Exchange Rule 11.7 only differs from BZX Rule
11.24 and BYX Rule 11.23 to extent necessary to
conform the rule with existing Exchange rule text
or to account for details or descriptions currently
included in the Exchange’s Rule but not contained
in BZX or BYX rules.
41 See supra note 9.
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any unexecuted portion of an ISO that
is designated RHO will be converted
into a non-ISO and be queued for
participation in the Opening Process.
Paragraph (a)(2) would be amended to
state that all orders that include a TIF
instruction of RHO may participate in
the Opening Process except: Limit
Orders with a Post Only instruction, the
Discretionary Range of Limit Orders,
and ISOs not modified by Rule
11.7(a)(1), and orders with a Minimum
Execution Quantity instruction. Limit
Orders with a Discretionary Range may
participate up to their ranked limit price
for buy orders or down to their ranked
limit price for sell orders, rather than up
or down to their discretionary price, as
is currently allowed. Orders with a TIF
instruction of IOC or FOK will continue
to be ineligible for execution in the
Opening Process as they would not be
able to also include a TIF instruction of
RHO. Orders with a Stop Price or Stop
Limit Price instruction will be eligible
to participate in the Opening Process
where their stop prices have been
trigged.
Paragraph (b) defines the process by
which the System will attempt to match
buy and sell orders that are executable
at the midpoint of the NBBO. The
Exchange does not propose to alter this
process other than to define it as the
Opening Match. In addition, the
Exchange propose to include in
paragraph (b) that all ERSTP modifiers,
as defined in Rule 11.10(d), will be
ignored as it relates to executions
occurring during the Opening Match.
Paragraph (d) sets forth the
Exchange’s Contingent Open process
that occurs when the conditions to
establish the price of the Opening
Process set forth under Rule 11.7(c) do
not occur by 9:45:00 a.m. Eastern Time.
In such case, orders will be placed on
the EDGA Book, routed, cancelled, or
executed in accordance with the terms
of the order. The Exchange proposes to
state under paragraph (d) that the orders
will be handled in time sequence,
beginning with the order with the oldest
times [sic] stamp.
Paragraph (e) or Exchange Rule 11.7
states that re-openings after a halt,
suspension or pause will occur at the
midpoint of the: (i) First NBBO
subsequent to the first reported trade on
the listing exchange following the
resumption of trading after a halt,
suspension, or pause; or (ii) then
prevailing NBBO when the first twosided quotation published by the listing
exchange following the resumption of
trading after a halt, suspension, or pause
if no first trade is reported by the listing
exchange within one second of
publication of the first two-sided
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quotation by the listing exchange. The
Exchange proposes to add additional
language to paragraph (e) to align with
BATS Rule 11.24 and BYX Rule 11.23.
First, the Exchange proposes to specify
that while a security is subject to a halt,
suspension, or pause in trading, the
Exchange will accept orders eligible
pursuant to paragraph (a)(2) described
above for queuing prior to the
resumption of trading in the security for
participation in the Re-Opening Process.
In addition, proposed paragraph (e)(2)
would specify that the Re-Opening
Process will occur in the same manner
described in paragraphs (a)(2) and (b) of
Rule 11.7, with the following
exceptions: (1) Orders without a TIF
instruction of RHO will be eligible for
participation in the Re-Opening Process,
but orders that include a TIF instruction
of IOC or FOK, a Post Only instruction
or Minimum Execution Quantity
instruction will be cancelled or rejected,
as applicable, and any ISO that does not
include a TIF instruction of IOC or FOK
will be converted into a non-ISO and be
queued for participation in the ReOpening Process. Proposed paragraph
(e)(2) would state that where neither of
the conditions required to establish the
price of the Re-Opening Process in
paragraph (1) above have occurred, the
security may be opened for trading at
the discretion of the Exchange. Where
the security is opened by the Exchange
subject to this discretion, orders will be
handled in the same manner described
in paragraph (d) regarding a Contingent
Open. Proposed paragraphs (e)(1)–(2)
would be substantially similar to the
functionality set forth in BATS Rule
11.24(e)(1)–(2) and BYX Rule
11.23(e)(1)–(2).
Rule 11.8, Order Types
The Exchange proposes to amend the
order types set forth under Rule 11.8 to
align their operation with existing BATS
Rule and functionality.
Market Orders (Rule 11.8(a)). The
Exchange proposes to amend paragraph
(a)(2) to state that Market Orders may
also include a TIF instruction of RHO
and any portion of a Market Order with
a TIF instruction of RHO will be
cancelled immediately following the
Opening or Re-Opening Process in
which it is not executed, unless it is
eligible to be displayed on the EDGA
Book pursuant to Rule 11.8(a)(4). A
Market Order being canceled
immediately following the Opening or
Re-Opening Process if not executed is a
natural extension of the Opening
Process. Exchange Rule 11.7(b) states
that upon conclusion of the Opening
Process, any remaining orders will be
placed on the EDGA Book, cancelled,
PO 00000
Frm 00043
Fmt 4703
Sfmt 4703
executed, or routed to an away in
accordance with Rule 11.11. As a result,
the Market Order will be cancelled
unless it is eligible to be displayed on
the EDGA Book pursuant to Rule
11.8(a)(4).
Under current Rule 11.10(a)(3)(A),
where a non-routable buy (sell) Market
Order is entered into the System and the
NBO (NBB) is greater (less) than the
Upper (Lower) Price Band, such order
will be posted by the System to the
EDGA Book and priced at the Upper
(Lower) Price Band, unless (i) the order
includes a TIF instruction of IOC or
FOK, in which case it will be cancelled
if not executed, or (ii) the User entered
a Cancel Back instruction. The
Exchange proposes to specify,
consistent with BATS Rule 11.9(a)(2),42
that a Market Order to buy (sell) that is
posted by the System to the EDGA Book
and displayed at the Upper (Lower)
Price Band will be re-priced and
displayed at the Upper (Lower) Price
Band if Price Bands move such that the
price of the resting Market Order to buy
(sell) would be above (below) the Upper
(Lower) Price Band or if the Price Bands
move such that the order is no longer
posted and displayed at the most
aggressive permissible price. The
System shall re-price such displayed
interest to the most aggressive
permissible price until the order is
executed in its entirety or cancelled. In
addition, the amended rule would state
that a Market Order that includes both
a TIF instruction of RHO and a Short
Sale instruction that cannot be executed
because of the existence of a Short Sale
Circuit Breaker will be posted and
displayed by the System to the EDGA
Book and priced in accordance with the
Short Sale Re-Price instruction
described in Rule 11.6(l)(2).
Currently, with the exception of a
Market Order with a Destination-onOpen instruction, any portion of a
Market Order that would execute at a
price more than the greater of $0.50 or
5 percent worse than the consolidated
last sale as published by the responsible
single plan processor at the time the
order is entered into the System will be
cancelled. As amended, such order will
be cancelled where they would execute
at a price more than $0.50 or 5 percent
worse than the NBBO at the time the
order initially reaches the Exchange,
42 See Securities Exchange Act Release Nos.
73875 (December 18, 2014) (SR–BATS–2014–068)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Rules 11.0(a)(2) and
11.18(e) of the BATS Exchange, Inc.); and 73874
(December 18, 2014) (SR–BYX–2014–039) (Notice
of Filing and Immediate Effectiveness of a Proposed
Rule Change to Rules 11.0(a)(2) and 11.18(e) of the
BATS Y-Exchange, Inc.).
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whichever is greater. This is identical to
BATS Rule 11.9(a)(2).
Limit Orders (Rule 11.8(b)). The
Exchange proposes to state that a Limit
Order may also include a TIF
instruction of RHO or GTX, in addition
to IOC, FOK, Day or GTD. In addition,
Limit Orders with a TIF instruction of
IOC that do not include a Book Only 43
instruction and will be eligible for
routing away pursuant to Rule 11.11,
while Limit Orders with a TIF
instruction of FOK will not. This is
designed to provide additional detail
regarding the operation of Limit Order
and is consistent with BATS Rule
11.13(a)(2), which states, in sum, that
‘‘[w]ith respect to an order that is
eligible for routing, the System will
designate orders as IOCs and will cause
such orders to be routed to one or more
Trading Centers.’’
Rule 11.8(b)(11) describes the
application of the re-pricing instruction
to comply with Regulation SHO to Limit
Orders. The Exchange proposes to
amend this paragraph to reflect the
decommissioning of Short Sale Price
Adjust and Short Sale Price Sliding in
order to align and streamline its short
sale pricing functionality with BATS
Rule 11.9(g)(5) with no substantive
differences from existing BATS Rules or
functionality. The Exchange proposes to
replace the reference to the Hide Not
Slide instruction in Rule 11.8(b)(11)
with Displayed Price Sliding to reflect
the name change discussed above. The
Exchange also proposes to delete Rule
11.8(b)(12) regarding the re-pricing of
Routed and Returned orders as this
functionality will not be available upon
the Exchange being migrated to BATS
technology as discussed above. Lastly,
the Exchange proposes to renumber
Rule 11.8(b)(13) regarding the re-pricing
of non-displayed orders as 11.8(b)(12).
ISOs (Rule 11.8(c)). The Exchange
proposes to state that an ISO may also
include a TIF instruction of RHO or
GTX, in addition to IOC, Day or GTD.
The Exchange also proposes to amend
Rule 11.8(c) to reflect the ISO with a
Post Only and TIF instruction of GTD,
GTX, or Day will no longer be eligible
for the Re-Pricing Instructions to
Comply with Rule 610 of Regulation
NMS or Rule 201 of Regulation SHO.
Also, as amended, an ISO that includes
a Post Only instruction and a TIF
instruction of GTD, GTX, or Day will be
cancelled if the System is displaying
orders at the Locking Price at the time
of entry unless such order removes
43 Book Only is an order instruction stating that
an order will be matched against an order on the
EDGA Book or posted to the EDGA Book, but will
not route to an away Trading Center. See EDGA
Rule 11.6(n)(3).
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liquidity pursuant to current Rule
11.6(n)(4), which governs the execution
of orders with a Post Only instruction
against resting liquidity on the EDGA
Book. Such orders that also include a
Short Sale instruction that cannot be
executed or displayed at their limit
price at the time of entry because of the
existence of a Short Sale Circuit Breaker
will also be cancelled. This proposed
rule change is representative of
additional detail with regard to the repricing of ISOs that, if displayed on the
EDGA Book, would be a Locking or
Crossing Quotation in the Exchange’s
rules. Cancelling ISOs in the above
situations is reasonable because ISOs
would no longer be eligible for the RePricing Instructions to comply with
Rule 610 of Regulation NMS or 201 of
Regulation SHO, thereby ensuring the
Exchange does not post an order that
would lock or cross the market or
violate Rule 201 of Regulation SHO
consistent with BATS functionality. The
Exchange notes, however, that absent a
Short Sale Circuit Breaker being in
effect, an ISO that includes a Post Only
instruction and TIF instruction of GTD,
GTX, or Day will remove liquidity when
the System is displaying an order at the
Locking price if the value of such
execution equals or exceeds the value of
such execution if the order instead
posted to the EDGA Book and provided
liquidity, including applicable fees and
rebates, under current Rule 11.6(n)(4).
MidPoint Peg Orders (Rule 11.8(d)).
The Exchange proposes amend Rule
11.8(d) to reflect the operation of
MidPoint Peg Orders once the Exchange
is migrated onto BATS technology. As
amended, a MidPoint Peg Order maybe
pegged to the less aggressive of the
midpoint of the NBBO or one minimum
price variation inside the same side of
the NBBO as the order, in addition to
the mid-point of the NBBO. This is
identical to current BATS Rule
11.9(c)(9). In addition, the rule would
specify that a MidPoint Peg Order will
not be eligible for execution when an
NBBO is not available. In such case, a
MidPoint Peg Order would rest on the
EDGA Book and would not be eligible
for execution in the System until an
NBBO is available. The Exchange
believes MidPoint Peg Orders being
ineligible for execution when no NBBO
exists is reasonable and consistent with
a User’s intent and the purpose of the
order type. A User entering an MidPoint
Peg Order is doing so to receive an
execution at the mid-point of the NBBO
and a mid-point does not exist in the
absence of an NBBO. The MidPoint Peg
Order will receive a new time stamp
when an NBBO becomes available and
PO 00000
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2135
a new midpoint of the NBBO is
established. In such case, all MidPoint
Peg Orders that are ranked at the
midpoint of the NBBO will retain their
priority as compared to each other based
upon the time such orders were initially
received by the System.
The Exchange proposes to state that a
MidPoint Peg Order may also include a
TIF instruction of RHO or GTX, in
addition to IOC, FOK, Day or GTD. In
addition, Users will be able to enter
MidPoint Peg Orders as an Odd Lot, in
addition to a Round Lot or Mixed Lot.
Currently, MidPoint Peg Orders may
only be executed during Regular
Trading Hours. Upon migration of the
Exchange onto BATS technology,
MidPoint Peg Orders will also be
eligible for execution during the PreOpening Session, Regular Session and
Post Closing Session. While MidPoint
Peg Orders may be submitted to be
executed during the Opening Process
described in Rule 11.7(c), any Minimum
Execution Quantity instruction on
aMidPoint Peg Order will not be applied
during the Opening Process. Lastly, the
Exchange proposes to specify that
MidPoint Peg Orders may include a
Book Only or Post Only instruction.
MidPoint Discretionary Order (Rule
11.8(e)). In sum, a MidPoint
Discretionary Order (‘‘MDO’’) is a limit
order to buy that is displayed at and
pegged to the NBB, with discretion to
execute at prices up to and including
the midpoint of the NBBO, and a limit
order to sell that is displayed at and
pegged to the NBO, with discretion to
execute at prices down to and including
the midpoint of the NBBO. The
Exchange proposes to amend Rule
11.8(e)(1) to specify that an MDO may
include a TIF instruction of RHO or
GTX, in addition to GTD or Day. The
Exchange also proposes to state that
MDOs may be entered as Odd Lots, in
addition to Round Lots and Mixed Lots.
Currently, MDOs may only be executed
during Regular Trading Hours. Upon
migration of the Exchange onto BATS
technology, MDOs will also be eligible
for execution during the Pre-Opening
Session and Post Closing Session. The
Exchange does not proposes any other
changes to MDO.
In addition, similar to the changes to
orders with a Primary Peg instruction
described above, the Exchange proposes
to amend the provisions governing
when an MDO is locked or crossed by
another market and when an MDO
would itself create a Locking or Crossing
Quotation (i.e., locking or crossing
another market’s quotation). As
proposed, an MDO will no longer be
able to join the Exchange BBO when the
EDGA Book is locked by another
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market. When the EDGA Book is crossed
by another market, the Exchange
proposes to automatically adjust an
MDO to the current NBO (for bids) or
the current NBB (for offers). Rule
11.8(e)(7) will continue to require that
an MDO that would otherwise be a
Locking Quotation or Crossing
Quotation be automatically adjusted by
the System to one Minimum Price
Variation below the current NBO (for
bids) or to one Minimum Price Variation
above the current NBB (for offers) with
no discretion to execute to the midpoint
of the NBBO. This proposed rule change
is representative of additional detail
with regard to the operation of MDOs
during locked or crossed markets that is
currently included in Rule 11.8(e)(7)
and is consistent with Exchange’s
current re-pricing options under Rule
11.6(l), as well as Exchange Rule
11.10(f) and BATS Rule 11.20(a)(3)
outlining the prohibition against locked
and crossed markets under Rule 610 of
Regulation NMS.
NBBO Offset Peg Order (Rule 11.8(f)).
The Exchange proposes to change the
name of the NBBO Offset Peg Order to
the Market Maker Peg Order, which is
the equivalent order type on BATS.44 A
Market Maker Peg Order is a Limit
Order that, upon entry or at the
beginning of Regular Trading Hours, as
applicable, will be automatically priced
by the System at the Designated
Percentage 45 away from the last
reported sale, rather than then current
NBO (in the case of an order to buy) or
NBB (in the case of an order to sell), as
is currently the case. A Market Maker
Peg order may also include a TIF
instruction of RHO or GTD, in addition
to Day. Market Maker Peg Orders may
also be entered as Odd Lots, in addition
to Round Lots and Mixed Lots.
The Exchange also proposes to add
definitions for Designated Percentage
and Defined Limit under Rule 11.8(f) to
account for securities priced below $1.
For purposes of Market Maker Peg Order
pricing, the Designated Percentage shall
be the same as set forth in Rules
11.20(d)(2)(D) and 11.20(d)(2)(E), except
that the Designated Percentage for
securities priced below $1 as set forth in
Rule 11.20(d)(2)(E) shall be 28%. For
purposes of Market Maker Peg Order
pricing, the Defined Limit shall be the
same as set forth in Rules 11.20(d)(2)(F)
and 11.20(d)(2)(G), except that the
Defined Limit for securities priced
below $1 as set forth in Rule
11.20(d)(2)(G) shall be 29.5%. The
proposed changes to Rule 11.8(f) are
44 See
BATS Rule 11.9(c)(16).
45 The term Designated Percentage is defined in
Exchange Rule 11.20(d)(2)(D) and (E).
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similar to the functionality set forth in
BATS Rule 11.9(c)(16).
Route Peg Order (Rule 11.8(g)). The
Exchange proposes to change the name
of the Route Peg Order to the
Supplemental Peg Order, which is the
equivalent order type on BATS.46 The
Exchange also proposes to specify that
a Supplemental Peg Order to buy (sell)
will not be eligible for execution when
an NBB (NBO) is not available. In such
case, a Supplemental Peg Order to buy
(sell) would rest on the EDGA Book and
would not be eligible for execution in
the System until an NBB (NBO) exists.
This functionality is similar to that
proposed for the MPM Order described
above, and is based upon BATS Rule
11.9(c)(19). The Exchange believes
Supplemental Peg Orders being
ineligible for execution when an NBB or
NBO is not available is reasonable and
consistent with a User’s intent and the
purpose of the order type. A User
entering a Supplemental Peg Order is
doing so to receive an execution at the
NBBO against an order that is in the
process of being routed away. If no
NBBO exists, there is no price at which
to execute the Supplemental Peg Order.
A Supplemental Peg Order may
include a TIF instruction of GTX or
RHO, in addition to GTD or Day.
Supplemental Peg Orders may also be
entered as Odd Lots, in addition to
Round Lots and Mixed Lots. As
amended, a Supplemental Peg Order
will be eligible for execution during the
Pre-Opening Session, Regular Session,
and Post-Closing Session. Therefore, the
Exchange proposes to remove the
restriction that Supplemental Peg
Orders: (i) May only be entered,
cancelled, and cancelled/replaced prior
to and during the Regular Session; (ii)
are only eligible for execution during
the Regular Session, but not until such
time that orders in that security during
the Regular Session can be posted by the
System to the EDGA Book. Any
remaining unexecuted Supplemental
Peg Orders are cancelled at the
conclusion of the Regular Session.
Supplemental Peg Orders will continue
to be ineligible for execution in the
Opening Process. The proposed changes
to Rule 11.8(g) regarding Route Peg
Orders are similar to BATS Rule
11.9(c)(19).
Rule 11.9, Priority of Orders
The Exchange proposes to amend
Rule 11.9 to align with BATS
functionality and BATS Rule 11.12
regarding how orders with certain
instructions are to be ranked by the
System: (i) At a price other than the
46 See
PO 00000
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Frm 00045
Fmt 4703
Sfmt 4703
midpoint of the NBBO; (ii) at the
midpoint of the NBBO; and (iii) where
buy (sell) orders utilize instructions that
cause them to be ranked by the System
upon clearance of a Locking
Quotation.47 The proposed amendment
to Rules 11.9(a)(4) and (6) are described
under the amendments to Reserve
Quantity discussed above.
Rule 11.9(a)(2)(A) currently states that
the System will execute equally priced
trading interest within the System in
time priority in the following order: (i)
The portion of a Limit order with a
Displayed instruction; (ii) Limit Orders
with a Non-Displayed instruction and
the Reserve Quantity of Limit Orders;
(iii) MidPoint Discretionary Orders
executed within their Discretionary
Range and Limit Orders executed within
their Discretionary Range; and (iv)
Route Peg Orders. As amended, the
System will rank equally priced trading
interest in such circumstances in the
following order: (i) The portion of a
Limit Order with a Displayed
instruction; (ii) Limit Orders with a
Non-Displayed instruction; (iii) Orders
with a Pegged and Non-Displayed
instruction; (iv) MidPoint Peg Orders;
(v) Reserve Quantity of Limit Orders;
(vi) MidPoint Discretionary Orders
executed within their Discretionary
Range and Limit Orders executed within
their Discretionary Range; and (vii)
Supplemental Peg Orders. Orders will
be substantially ranked in same order
except that, as amended, orders with a
Pegged and Non-Displayed instruction
will be distinguished from and placed
behind Limit Orders with a NonDisplayed Instruction. In turn, the
Reserve Quantity of Limit Orders will be
separated from and placed behind Limit
Orders with a Non-Displayed
instruction and orders with a Pegged
and Non-Displayed instruction. The
Exchange believes it is reasonable to
rank orders with a Pegged and NonDisplayed instruction behind Limit
Orders with a Displayed instruction and
Limit Orders with a Non-Displayed
instruction because this priority
sequence incentivizes the use of
displayed liquidity on the EDGA Book
as well as orders that provide liquidity
at a specific limit price. These proposed
changes are substantially similar to
BATS functionality and Rules
11.12(a)(2). The Exchange notes that
BATS Rule 11.12(a)(2) does not
currently specify that BATS Pegged
Orders referenced in the priority rule
are limited to Pegged Orders that are not
47 For purposes of priority under proposed Rule
11.9(a)(2)(A) and (B), the Exchange notes that orders
of Odd Lot, Round Lot, or Mixed Lot size are treated
equally.
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displayed on BATS, however, the
Exchange represents that BATS
technology does treat Pegged Orders
displayed on BATS as displayed orders
and that only Pegged Orders that are not
displayed on BATS are afforded later
priority than displayed orders and other
non-displayed orders. Thus, the
Exchange’s proposal (which would limit
the later priority treatment to orders
with a Pegged instruction and a NonDisplayed instruction) is consistent with
BATS technology.
Lastly, the Exchange does not propose
to make any changes to the ranking of
orders that are re-ranked upon clearance
of a Locking Quotation under Rule
11.9(a)(2)(B) other than to; (i) Remove a
reference to the Routed and Returned
Re-Pricing instruction because, as
described above, it will be
decommissioned upon migration of the
Exchange onto BATS technology; and
(ii) replace the term Hide Not Slide with
Displayed Price Sliding to reflect the
name change discussed above.
Rule 11.10, Order Execution
Rule 11.10(a)(2) summarizes the
Exchange compliance with Regulation
NMS. The rule states that for any
execution to occur during Regular
Trading Hours, the price must be equal
to or better than the Protected NBBO,
unless the order is marked ISO or unless
the execution falls within another
exception set forth in Rule 611(b) of
Regulation NMS. For any execution to
occur during the Pre-Opening Session or
the Post-Closing Session, the price must
be equal to or better than the highest bid
or lowest offer in the EDGA Book or
disseminated by the responsible single
plan processor, unless the order is
marked ISO. To align Rule 11.10(a)(2)
with BATS Rule 11.13, the Exchange
proposed to further state that such
executions may occur during the PreOpening Session or the Post-Closing
Session where a Protected Bid is
crossing a Protected Offer. A User may,
in such circumstance, instruct the
Exchange to cancel any incoming order
from such User in the event a Protected
Bid is crossing a Protected Offer.
To further align Exchange Rule
11.10(a)(2) with BATS Rule 11.13, Rule
11.10(a)(2) will state that
notwithstanding the above, in the event
that a Protected Bid is crossing a
Protected Offer, whether during or
outside of Regular Trading Hours,
unless an order is marked ISO, the
Exchange will not execute any portion
of a bid at a price more than the greater
of 5 cents or 0.5 percent higher than the
lowest Protected Offer or any portion of
an offer that would execute at a price
more than the greater of 5 cents or 0.5
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percent lower than the highest Protected
Bid.
The Exchange also proposes to amend
Rule 11.12(e)(3) to mirror BATS Rule
11.9(e)(3). Rule 11.12 currently states
that only the price and quantity terms
of the order may be changed by a
Replace Message (including changing a
Limit Order to a Market Order). As
amended, Rule 11.12 would also allow
the Stop Price, the sell long indicator,
Short Sale instruction, and Max Floor to
be changed by a Replace Message.
Rule 11.11, Routing to Away Trading
Centers
The Exchange proposes to amend
Rule 11.11, which describe the
Exchange’s routing options align with
BATS Rule 11.13.48 In doing so, the
Exchange proposes to eliminate obsolete
routing options, modify certain routing
options, and add to Rule 11.11 to offer
many of the same routing options
offered by BATS. The Exchange notes
that the proposed rule text is based on
the Rule 11.13 of BATS and is different
only to the extent necessary to conform
to the Exchange’s current rules. The
Exchange believes that it is appropriate
to amend its routing options as
described below to ensure consistency
with BATS Rule upon migration of the
Exchange onto BATS technology.
Deletions. The Exchange also
proposes to delete from Rule 11.11 the
following routing options that will be
decommissioned upon migration of the
Exchange onto BATS technology:
ROBA, ROBX, ROBY, ROPA, IOCX,
IOCT, and SWPC. Each of these routing
options are described below.
• ROBA. The Exchange proposes to
delete the ROBA routing option under
which an order checks the System for
available shares and then is sent, with
a Time-in-Force instruction of IOC, to
BATS. If shares remain unexecuted after
routing, they are posted on the EDGA
Book, unless otherwise instructed by the
User.
• ROBX. The Exchange proposes to
delete the ROBX routing option under
which an order checks the System for
available shares and then is sent, with
a Time-in-Force instruction of IOC, to
Nasdaq BX Exchange. If shares remain
unexecuted after routing, they are
posted on the EDGA Book, unless
otherwise instructed by the User.
• ROBY. The Exchange proposes to
delete the ROBY routing option under
which an order checks the System for
available shares and then is sent, with
48 The Exchange notes that BATS recently
amended its Rule 11.13 to harmonize certain of its
routing options with the Exchange. See supra note
38.
PO 00000
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2137
a Time-in-Force instruction of IOC, to
BYX. If shares remain unexecuted after
routing, they are posted on the EDGA
Book, unless otherwise instructed by the
User.
• ROPA. The Exchange proposes to
delete the ROPA routing option under
which an order checks the System for
available shares and then is sent, with
a Time-in-Force instruction of IOC, to
NYSE Arca. If shares remain unexecuted
after routing, they are posted on the
EDGA Book, unless otherwise instructed
by the User.
• IOCX. The Exchange proposes to
delete the IOCX routing option under
which an order checks the System for
available shares and then is sent, with
a Time-in-Force instruction of IOC, to
EDGA. If shares remain unexecuted after
routing, they are posted on the EDGA
Book, unless otherwise instructed by the
User.
• IOCT. The Exchange proposes to
delete the IOCT routing option under
which an order checks the System for
available shares and then is sent to
destinations on the System routing
table. If shares remain unexecuted after
routing, they are sent, with a Time-inForce instruction of IOC, to EDGA. If
shares remain unexecuted after routing,
they are posted on the EDGA Book,
unless otherwise instructed by the User.
• SWPC. The Exchange proposes to
delete the SWPC routing option under
which an order checks the System for
available shares and then is sent to only
Protected Quotations and only for
displayed size. To the extent that any
portion of the order is unexecuted, the
remainder is posted on the EDGA Book
at the order’s limit price. The entire
SWPC order will not be cancelled back
to the User immediately if at the time of
entry there is an insufficient share
quantity in the SWPC order to fulfill the
displayed size of all Protected
Quotations. The Exchange also proposes
to delete a reference to SWPC in Rule
11.11(d).
The Exchange believes that it is
appropriate to eliminate the above
routing options because they will be
decommissioned upon migration of the
Exchange onto BATS technology and
are unlikely to be offered by the
Exchange in the near future.
Additions. The Exchange proposes to
add a Destination Specific routing
option, which is currently offered by
BATS.49 Destination Specific is a
routing option under which an order
checks the System for available shares
and then is sent to an away trading
center or centers specified by the User.
The Destination Specific routing option
49 See
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is also similar to the Exchange’s current
Destination Specified order instruction
in Rule 11.6(n)(5), in that both allow the
User to select the destination the order
shall be routed to. The only differences
are that under the Destination Specific
order instruction, the order is first
exposed to the EDGA Book before
routing and if the order is not executed
in full after routing away will be
processed by the Exchange as described
in Exchange Rule 11.10(a)(4), unless the
User has provided instructions that the
order reside on the book of the relevant
away Trading Center.
The Exchange also proposes to add a
Post to Away routing option, which is
currently offered by BATS.50 Post to
Away is a routing option under which
the System will route the remainder of
a routed order to and posts such order
on the order book of a destination on the
System routing table as specified by the
User. The Post to Away routing option
is an alternative to either cancelling a
routed order back to a User or posting
such order to the BATS Book to the
extent an order is not completely filled
through the routing process. The Post to
Away routing option can be combined
with the following routing options:
ROUT, ROUX, ROUE, ROUD, ROUZ,
ROUQ, RDOT, RDOX, ROBB, ROCO,
ROLF, INET, IOCM and ICMT.51 As a
result of adding the Post to Away
routing option, the Exchange proposes
to amend Rule 11.11(g)(3) to remove
now redundant language that a User
may instruct that any remainder of the
order may be posted to the EDGA Book
or another destination on the System
routing table.
Lastly, the Exchange also proposes to
specify for ROOC, ROUE, ROUT and
ROUX that the entering User may select
either Route To Improve (‘‘RTI’’) or
Route To Fill (‘‘RTF’’). RTI may route to
multiple destinations at a single price
level simultaneously while RTF may
route to multiple destinations and at
multiple price levels simultaneously.
RTI is similar to the RTI routing option
available under BYX Rule
11.13(a)(3)(G).
Modifications. First, the Exchange
proposes to modify Rule 11.11(a)
regarding Regulation SHO to reflect the
elimination of Short Sale Price Adjust
and Short Sale Price Sliding discussed
rljohnson on DSK3VPTVN1PROD with NOTICES
50 See
BATS Rule 11.13(a)(3)(H).
51 The Exchange notes that Post to Away under
BATS Rule 11.13(a)(3)(H) may be combined with
less routing options than are proposed above. This
is because, due to the Exchange’s taker-maker
pricing model, Members may wish to send an order
to the Exchange in order to take liquidity and
receive a rebate, before being routed to and posted
on another Trading Center that incorporates a
maker-taker pricing model that provides a rebate to
orders that provide liquidity.
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above, as well as to replace the phrase
replace the phrase ‘‘the short sale price
restriction’’ with the defined term
‘‘Short Sale Circuit Breaker.’’ The later
change does not change the meaning of
Rule 11.11(a) and simply ensures a
consistent use of defined terms
throughout the Exchange’s Rules.
Second, the Exchange proposes to
modify the following routing options to
ensure consistency with BATS Rule:
ROUC, INET, ROLF, ROOC, SWPA, and
SWPB. Each of these modifications are
described below.
• ROUC. ROUC is a routing option
under which an order checks the
System for available shares and then is
sent to destinations on the System
routing table, Nasdaq OMX BX, and
NYSE. If shares remain unexecuted after
routing, they are posted on the EDGA
Book. The ROUC routing option
currently incorrectly states that any
remaining shares will be post to EDGA.
Therefore, the Exchange proposes to
correct the ROUC routing option to state
that any remaining shares will be posted
to the EDGX Book, rather than EDGA.
The Exchange also proposes to amend
the ROUC routing option to state that
any remaining shares will not be posted
to EDGX Book where the User instructs
the Exchange otherwise.
• INET. INET is a routing option
under which an order will check the
System for available shares and then
will be sent to Nasdaq. If shares remain
unexecuted after routing through the
INET routing option, they will be posted
on the Nasdaq book. The Exchange
proposes to amend the INET routing
option to state that any remaining shares
will not be posted to Nasdaq where the
User instructs the Exchange otherwise.
• ROLF. ROLF is a routing option
under which an order will check the
System for available shares and then
will be sent to LavaFlow ECN. The
Exchange proposes to amend the ROLF
routing option to states that any
remaining shares will be cancelled
unless the User instructs otherwise.
• ROOC. ROOC is a routing option for
orders that the entering firm wishes to
designate for participation in the
opening, re-opening (following a halt,
suspension, or pause), or closing
process of a primary listing market
(BATS, NYSE, Nasdaq, NYSE MKT, or
NYSE Arca) if received before the
opening/re-opening/closing time of such
market. The Exchange proposes to
amend the ROOC routing option to add
BATS to the list of primary listing
markets and to specify that, due to
current system limitations, orders in
BATS listed securities designated for
participation in the re-opening process
on BATS following a halt, suspension,
PO 00000
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Fmt 4703
Sfmt 4703
or pause will remain on the EDGA Book
and be eligible for execution once the
halt, suspension, or pause has been
lifted. Lastly, to ensure consistency with
the ROOC routing option available on
BATS, the Exchange proposes to states
that any remaining shares will either be
posted to the EDGA Book, executed, or
routed to destinations on the System
routing table, rather than like a ROUT
routing option under Rule 11.11(g)(3).
The proposed modifications to the
ROOC routing option is similar to the
ROOC routing option available under
BYX Rule 11.13(a)(3)(N).
• SWPA. SWPA is a routing option
under which an order checks the
System for available shares and then is
sent to only Protected Quotations and
only for displayed size. The entire
SWPA order will not be cancelled back
to the User immediately if at the time of
entry there is an insufficient share
quantity in the SWPA order to fulfill the
displayed size of all Protected
Quotations. The Exchange proposes to
amend the SWPA routing option to state
that, rather than cancelling any
remaining unexecuted shares, those
shares will be posted to the EDGA Book
at the order’s limit price, unless
otherwise instructed by the User. This is
consistent with BATS Rule
11.13(a)(2)(A), which states that any
unfilled balance of a Limit Order will be
posted to the BATS book.
• SWPB. SWPB is a routing option
under which an order checks the
System for available shares and then is
sent to only Protected Quotations and
only for displayed size. The entire
SWPB order will be cancelled back to
the User immediately if at the time of
entry there is an insufficient share
quantity in the SWPB order to fulfill the
displayed size of all Protected
Quotations. Like as proposes for SWPA
above, the Exchange proposes to amend
the SWPB routing option to state that,
rather than cancelling any remaining
unexecuted shares, those shares will be
posted to the EDGA Book at the order’s
limit price, unless otherwise instructed
by the User. This is consistent with
BATS Rule 11.13(a)(2)(A), which states
that any unfilled balance of a Limit
Order will be posted to the BATS book.
Implementation Date
The Exchange intends to implement
the proposed rule change on or about
January 12, 2015, which is the
anticipated date upon which the
migration of the Exchange to the BATS
technology platform will be complete.52
52 Implementation of the proposed rule change on
or about January 12, 2015 is contingent upon the
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2. Statutory Basis
The Exchange believes that the
proposed rule changes are consistent
with Section 6(b) of the Act 53 and
further the objectives of Section 6(b)(5)
of the Act 54 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) 55 of the
Act in that it seeks to assure fair
competition among brokers and dealers
and among exchange markets.
The proposed rule changes are
generally intended to add or align
certain system functionality currently
offered by BATS in order to provide a
consistent technology offering for the
BGM Affiliated Exchanges. A consistent
technology offering, in turn, will
simplify the technology
implementation, changes and
maintenance by Users of the Exchange
that are also participants on BATS. The
proposed rule changes would also
provide Users with access to
functionality that is generally available
on markets other than the BGM
Affiliated Exchanges and may result in
the efficient execution of such orders
and will provide additional flexibility as
well as increased functionality to the
Exchange’s System and its Users. The
proposed rule change does not propose
to implement new or unique
functionality that has not been
previously filed with the Commission or
is not available on BATS. The Exchange
notes that the proposed rule text is
based on the BATS Rule and is different
only to the extent necessary to conform
to the Exchange’s current rules. To the
extent a proposed rule change is based
on an existing BATS Rule, the language
of the BATS and Exchange Rules may
differ to extent necessary to conform
with existing Exchange rule text or to
account for details or descriptions
included in the Exchange’s Rules but
not in the applicable BATS rule. Where
possible, the Exchange has mirrored
BATS rules, because consistent rules
will simplify the regulatory
requirements and increase the
understanding of the Exchange’s
operations for Members of the Exchange
that are also participants on BATS. The
proposed rule change would provide
greater harmonization between the rules
of the BGM Affiliated Exchanges,
resulting in greater uniformity and less
burdensome and more efficient
regulatory compliance. As such, the
proposed rule change would foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities and would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system. The
Exchange also believes that the
proposed amendments will contribute
to the protection of investors and the
public interest by making the
Exchange’s rules easier to understand.
Where necessary, the Exchange has
proposed language consistent with the
Exchange’s operations on BATS
technology, even if there are specific
details not contained in the current
structure of BATS rules. The Exchange
believes it is consistent with the Act to
maintain its current structure and such
detail, rather than removing such details
simply to conform to the structure or
format of BATS rules, again because the
Exchange believes this will increase the
understanding of the Exchange’s
operations for all Members of the
Exchange.
Re-Pricing (Rule 11.6(l)). The
Exchange believes that the proposed
changes to Rule 11.6(l) are consistent
with Section 6(b)(5) of the Act,56 as well
as Rule 610 of Regulation NMS 57 and
Rule 201 of Regulation SHO.58 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.’’ 59 Such rules must be
‘‘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.’’ 60 Thus,
the amendments to the Price Adjust
instruction proposed by the Exchange
will assist Users by displaying orders at
permissible prices. Similarly, Rule 201
of Regulation SHO 61 requires trading
centers to establish, maintain, and
enforce written policies and procedures
reasonably designed to prevent the
execution or display of a short sale
Commission granting a waiver of the 30-day
operative delay. 17 CFR 240.19b–4(f)(6)(iii).
53 15 U.S.C. 78f(b).
54 15 U.S.C. 78f(b)(5).
55 15 U.S.C. 78k–1(a)(1).
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order at a price at or below the current
NBB under certain circumstances.
The Exchange believes that the
proposed optional multiple re-pricing
for Price Adjust and Displayed Price
Sliding are consistent with Section
6(b)(5) of the Act,62 as well as Rule 610
of Regulation NMS.63 The Exchange is
not modifying the overall functionality
of Price Adjust or Displayed Price
Sliding, which, to avoid locking or
crossing quotations of other market
centers, 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
multiple re-pricing under Price Adjust
and Displayed Price Sliding as well as
to align with other similar re-pricing
instructions under BATS Rules
11.9(g)(1) and (2).64 The Exchange also
believes decommissioning the Routed
and Returned Re-Pricing option is
consistent with the Act because those
Users who would wish to engage in
multiple re-pricing upon return to the
Exchange may select the option
multiple re-pricing for Price Adjust or
Displayed Price Sliding as discussed
above. Lastly, the Exchange also
believes renaming Hide Not Slide as
Displayed Price Sliding is consistent
with the Act because it would avoid
investor confusion with a similarly
named re-pricing instruction on
EDGX.65
The Exchange also believes that
cancelling ISOs with a TIF instruction
of GTD, GTX, or Day and not subjecting
them to the re-pricing instructions to
comply with Rule 610 of Regulation
NMS or Rule 201 of Regulation SHO is
consistent with Section 6(b)(5) of the
Act,66 as well as Rule 610 of Regulation
NMS 67 and Rule 201 of Regulation
SHO.68 As amended, an ISO that
includes a TIF instruction of GTD, GTX,
or Day will be cancelled if the System
is displaying orders at the Locking Price
at the time of entry. Such orders that
also include a Short Sale instruction
that cannot be executed or displayed at
their limit price at the time of entry
because of the existence of a Short Sale
Circuit Breaker will also be cancelled.
Such orders are cancelled in order to
avoid a potential violation of Rule
610(d) of Regulation NMS or Rule 201
62 15
U.S.C. 78f(b)(5).
CFR 242.610.
64 See supra note 29.
65 See EDGX Rule 11.6(l)(1)(B).
66 15 U.S.C. 78f(b)(5).
67 17 CFR 242.610.
68 17 CFR 242.201.
56 15
U.S.C. 78f(b)(5).
57 17 CFR 242.610.
58 17 CFR 242.201.
59 17 CFR 242.610(d).
60 Id.
61 17 CFR 242.201.
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of Regulation SHO and is, therefore,
consistent with the Act.
The Exchange believes that the
proposed changes to its Re-Pricing
Instructions to Comply with Rule 201 of
Regulation SHO are consistent with
Section 6(b)(5) of the Act,69 as well as
Rule 201 of Regulation SHO.70 The
Exchange proposes to streamline and
simplify its available re-pricing
instructions by deleting Short Sale Price
Adjust and Short Sale Price Sliding and
adopting a new, streamlined rule to
align with BATS Rule 11.9(g)(5), with
the following differences. Rule 11.6(l)(2)
states that an order to sell with a Short
Sale instruction and a Price Adjust
instruction that is re-priced will be
ranked at the Permitted Price and that
an order to sell with a Short Sale
instruction and a Hide Not Slide
instruction that is re-priced pursuant to
this paragraph will be ranked at the
Permitted Price. The Exchange’s short
sale price sliding will operate the same
for Users of Price Adjust on BATS while
Users who select Displayed Price
Sliding will be ranked at the Permitted
Price. The proposed rule change would
provide greater harmonization between
the rules of the BGM Affiliated
Exchanges, resulting in greater
uniformity and less burdensome and
more efficient regulatory compliance.
As such, the proposed rule change
would foster cooperation and
coordination with persons engaged in
facilitating transactions in securities and
would remove impediments to and
perfect the mechanism of a free and
open market and a national market
system.
Opening Process (Rule 11.7). The
amended description of the Opening
Process in Rule 11.7 is designed to
promote just and equitable principles of
trade and remove impediments to, and
perfect the mechanism of, a free and
open market system because it would
align with BZX Rule 11.24 and BYX
Rule 11.23 as it relates to: 71 (i) Which
orders may participate in the process;
(ii) how the price of the Opening
Transaction is determined; and (iii) the
process for late openings and reopenings. The Opening Process and
their related rules would be identical
across the BGM Affiliated Exchanges,
and will therefore, contribute to the
protection of investors and the public
interest by avoiding investor confusion
and providing consistent functionality
across the BGM Affiliated Exchanges.
Lastly, and as stated above, the
amendment to Rule 11.7 is based on
U.S.C. 78f(b)(5).
CFR 242.201.
71 See supra note 40.
BATS Rule 11.24 and BYX Rule 11.23,
both of which were recently approved
by the Commission.72
Order Types (Rule 11.8). The
Exchange believes that the proposed
changes to its order types under Rule
11.8 in order to align their functionality
with BATS rules are consistent with
Section 6(b)(5) of the Act,73 because
these changes are designed to provide
Members with additional specificity as
to how their orders will be handled
upon migration of the Exchange onto
BATS technologies, thereby fostering
cooperation and coordination with
persons engaged in facilitating
transactions in securities and removing
impediments to and perfecting the
mechanism of a free and open market
and a national market system. Each
order type was amended to update the
TIF instructions that would be available
upon migration of the Exchange onto
BATS technology. In addition, the
proposed amendments are designed to
align their operation with like order
types on BATS and do not propose any
additional functionality. For example,
Market Orders under Rule 11.8(a) is to
be amended to reflect the execution
parameters under BATS Rule 11.9(a)(2).
The amendments to Limit Orders under
Rule 11.8(b) and ISOs under Rule
11.8(c) are designed to update TIF
instruction available to each order type.
In addition, the changes are designed to
update the Re-Pricing options available
to Limit Order and ISOs to reflect the
decommissioning of Routed and
Returned as well as the streamlining of
the Re-Pricing Options to Comply with
Regulations SHO to align with BATS
rules. In sum, the amendments to
MidPoint Peg Orders under Rule
11.8(d), MidPoint Discretionary Orders
under Rule 11.8(e), and Supplemental
Peg Orders under rule 11.8(g) simply
clarify their operation during a locked
or crossed market as well as expand
their eligibility for execution from the
Regular Session or Regular Trading
Hours to also include the Pre-Opening
Session and Post-Closing Session. The
proposed changes to Rule 11.8(d)
regarding MidPoint Peg Orders are
based on BATS Rule 11.9(c)(9). Lastly,
the proposed changes to Rule 11.8(f)
regarding Market Maker Peg Orders are
based on BATS Rule 11.9(c)(17). The
proposed changes to Rule 11.8(g)
regarding Route Peg Orders are based on
BATS Rule 11.9(c)(19).
The proposed rule change does not
propose to implement new or unique
functionality that has not been
previously filed with the Commission or
69 15
70 17
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14:13 Jan 14, 2015
is not available on BATS. Therefore, the
proposed rule change would provide
greater harmonization between the rules
of the BGM Affiliated Exchanges,
resulting in greater uniformity and less
burdensome and more efficient
regulatory compliance. As such, the
proposed rule change would foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities and would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system.
Priority (Rule 11.9). The Exchange
also believes its proposed amendments
to Rule 11.9 to regarding the priority of
orders promotes just and equitable
principles of trade, remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system by
providing Members, Users, and the
investing public with greater
transparency regarding how the System
operates. The Exchange proposes to
amend Rule 11.9 to align with BATS
functionality and BATS Rules 11.12
regarding how orders with certain
instructions are to be ranked by the
System generally and where orders
utilize instructions that cause them to
be ranked by the System upon clearance
of a Locking Quotation providing
valuable, clear information to Members,
Users, and the investing public on how
their orders would be executed. As
amended, orders will be substantially
ranked in same order as under current
rules except that orders with a Pegged
instruction and Non-Displayed
instruction will be distinguished from
and placed behind Limit Orders with a
Non-Displayed Instruction. In turn, the
Reserve Quantity of Limit Orders will be
separated from and placed behind Limit
Orders with a Non-Displayed
instruction, orders with a Pegged and
Non-Displayed instruction, and
MidPoint Peg Orders. These changes are
made to align Exchange Rule 11.9 with
the functionality set forth in BATS Rule
11.12, as described above. The Exchange
believes that the proposed rule changes
regarding order priority will provide
greater transparency and further clarity
on how the various order types will be
assigned priority under various
scenarios, thereby assisting Members,
Users and the investing public in
understanding the manner in which the
System may execute their orders.
Routing (Rule 11.11). The Exchange
believes that the proposed changes to
Rule 11.11) [sic] are consistent with
Section 6(b)(5) of the Act.74 As noted
above, the proposed rule changes to add
72 Id.
73 15
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74 15
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U.S.C. 78f(b)(5).
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Federal Register / Vol. 80, No. 10 / Thursday, January 15, 2015 / Notices
functionality are intended to add certain
system functionality currently offered
by BATS in order to provide consistent
routing options across the BGM
Affiliated Exchanges. A consistent
offering, in turn, will simplify the
implementation, changes and
maintenance by Users of the Exchange
that are also participants on BATS. The
proposed rule changes would also
provide Users with access to
functionality that may result in the
efficient execution of such orders and
will provide additional flexibility as
well as increased functionality to the
Exchange’s System and its Users. As
explained elsewhere in this proposal, all
of the proposed routing options are
similar to routing strategies on other
market centers, including BATS. The
proposed rule change would provide
greater harmonization between the
routing options available amongst the
BGM Affiliated Exchanges, resulting in
greater uniformity and less burdensome
and more efficient regulatory
compliance.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange reiterates that the proposed
rule change is being proposed in the
context of the technology integration of
the BGM Affiliated Exchanges. Thus,
the Exchange believes this proposed
rule change is necessary to permit fair
competition among national securities
exchanges. In addition, the Exchange
believes the proposed rule change will
benefit Exchange participants in that it
is one of several changes necessary to
achieve a consistent technology offering
by the BGM Affiliated Exchanges.
rljohnson on DSK3VPTVN1PROD with NOTICES
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 foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
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14:13 Jan 14, 2015
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19(b)(3)(A) of the Act 75 and Rule 19b–
4(f)(6) thereunder.76
A proposed rule change filed under
Rule 19b–4(f)(6) 77 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),78 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest.
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange represents that
since completion of the Merger, both
Members and the BGM Affiliated
Exchange have made numerous systems
changes in preparation for the
technology migration occurring on
January 12, 2015. The Exchange has
issued frequent updates to Members
informing them the BGM Affiliated
Exchange technology migration changes
as well as its anticipated time line so
that Members may make the requisite
system changes. In addition, the
Exchange has conducted multiple
testing opportunities for Members to
ensure both the Member’s and Exchange
system will operate in accordance with
the proposed rule change on January 12,
2015. Based on these representations,
the Commission believes that waiver of
the operative delay is consistent with
the protection of investors and the
public interest. Therefore, the
Commission designates the proposal
operative upon filing.79
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
75 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). Rule 19b–4(f)(6)
requires a self-regulatory organization to give the
Commission written notice of its intent to file the
proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
77 17 CFR 240.19b–4(f)(6).
78 17 CFR 240.19b–4(f)(6)(iii).
79 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).
76 17
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2141
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 No. SR–
EDGA–2015–03 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File No.
SR–EDGA–2015–03. This file number
should be included on the subject line
if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–EDGA–
2015–03 and should be submitted on or
before February 5, 2015.
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Federal Register / Vol. 80, No. 10 / Thursday, January 15, 2015 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.80
Brent J. Fields,
Secretary.
[FR Doc. 2015–00531 Filed 1–14–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74021; File No. SR–FINRA–
2014–030]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Designation
of Longer Period for Commission
Action on Proceedings To Determine
Whether To Approve or Disapprove
Proposed Rule Change Relating to
Quotation Requirements for Unlisted
Equity Securities and Deletion of the
Rules Related to the OTC Bulletin
Board Service
January 9, 2015.
On June 27, 2014, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act ’’ or ‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt rules relating to
quotation requirements for over-thecounter (‘‘OTC’’) equity securities and to
delete the rules relating to the OTC
Bulletin Board Service (‘‘OTCBB’’) and
thus cease its operation. The proposed
rule change was published for comment
in the Federal Register on July 15,
2014.3 On August 8, 2014, FINRA
consented to extending the time period
for the Commission to either approve or
disapprove the proposed rule change, or
to institute proceedings to determine
whether to approve or disapprove the
proposed rule change, to October 10,
2014. The Commission received one
comment letter on the proposed rule
change.4
On October 7, 2014, the Commission
instituted proceedings 5 to determine
whether to approve or disapprove the
proposed rule change under Section
19(b)(2)(B) of the Act.6 The Commission
80 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. 72575
(July 9, 2014), 79 FR 41339 (‘‘Notice’’).
4 See Letter from Daniel Zinn, General Counsel,
OTC Markets Group Inc., dated August 5, 2014
(‘‘OTC Markets Letter’’).
5 See Securities Exchange Act Release No. 73313,
79 FR 61677 (October 14, 2014) (‘‘Order Instituting
Proceedings’’).
6 15 U.S.C. 78s(b)(2)(B).
rljohnson on DSK3VPTVN1PROD with NOTICES
1 15
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thereafter received three comment
letters in response to the Order
Instituting Proceedings.7
Section 19(b)(2) of the Act 8 provides
that, after initiating disapproval
proceedings, the Commission shall issue
an order approving or disapproving the
proposed rule change not later than 180
days after the date of publication of
notice of the filing of the proposed rule
change. The Commission may extend
the period for issuing an order
approving or disapproving the proposed
rule change, however, by not more than
60 days if the Commission determines
that a longer period is appropriate and
publishes the reasons for such
determination. The proposed rule
change was published for comment in
the Federal Register on July 15, 2014.
January 11, 2015 is 180 days from that
date, and March 12, 2015 is an
additional 60 days from that date.
The Commission finds it appropriate
to designate a longer period within
which to issue an order approving or
disapproving the proposed rule change
so that it has sufficient time to consider
the proposed rule change and the issues
raised in the comment letters that have
been submitted in connection with the
proposal. As the Commission noted in
the Order Instituting Proceedings, the
proposal raises questions as to whether
FINRA’s proposed rule change is
consistent with the requirements of
Sections 15A(b)(6),9 15A(b)(11),10 and
17B 11 of the Act. Specifically, FINRA’s
proposal to delete the rules governing
the OTCBB, and thus cease operation of
the only self-regulatory organization
(‘‘SRO’’) facility that collects, publishes
and distributes quotations in OTC
equity securities, raises questions as to
whether the proposal is consistent with
the requirements of the Act, particularly
under circumstances where non-SRO
quotation systems are experiencing
operational difficulties. In such an
event, reliable and accurate quotation
information for OTC equity securities
may not be widely available to investors
through such non-SRO systems.
Extending the time within which to
approve or disapprove the proposed
rule change will enable the Commission
to more fully consider these issues and
7 See Letter from Dr. Lee Jackson, PAHCII, dated
October 8, 2014 (‘‘PAHCII Letter’’); Letter from
Barry Scadden, Vice President, ATS Trade Support
and Operations, Global OTC, dated October 10,
2014 (‘‘Global OTC Letter’’); and Letter from
Michael R. Trocchio, Sidley Austin LLP, on behalf
of OTC Markets Group Inc., dated November 4,
2014 (‘‘Sidley Letter’’).
8 15 U.S.C. 78s(b)(2).
9 15 U.S.C. 78o–3(b)(6).
10 15 U.S.C. 78o–3(b)(11).
11 15 U.S.C. 78q–2.
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the other issues raised in the comment
letters.
Accordingly, the Commission,
pursuant to Section 19(b)(2) of the
Act,12 designates March 12, 2015, as the
date by which the Commission should
either approve or disapprove the
proposed rule change (File No. SR–
FINRA–2014–030).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Brent J. Fields,
Secretary.
[FR Doc. 2015–00523 Filed 1–14–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74024; File No. SR–EDGX–
2014–37]
Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Related to Fees for
Use of EDGX Exchange, Inc.
January 9, 2015.
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 December
30, 2014, EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) 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 Exchange has
designated the proposed rule change as
one establishing or changing a member
due, fee, or other charge imposed by the
Exchange under Section 19(b)(3)(A)(ii)
of the Act 3 and Rule 19b4(f)(2)
thereunder,4 which renders the
proposed rule change effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested person.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to
amend its fees and rebates applicable to
Members 5 of the Exchange pursuant to
12 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(57).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 The term ‘‘Member’’ is defined as ‘‘any
registered broker or dealer, or any person associated
with a registered broker or dealer, that has been
admitted to membership in the Exchange. A
13 17
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]]>Agencies
[Federal Register Volume 80, Number 10 (Thursday, January 15, 2015)]
[Notices]
[Pages 2125-2142]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00531]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74028; File No. SR-EDGA-2015-03]
Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Certain Rules To Adopt or Align System Functionality With That
Currently Offered by BATS Exchange, Inc. and BATS Y-Exchange, Inc.
January 9, 2015.
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 January 9, 2015, EDGA Exchange, Inc. (the ``Exchange'' or
``EDGA'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Exchange has
designated this proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the
[[Page 2126]]
Act \3\ and Rule 19b-4(f)(6)(iii) thereunder,\4\ which renders it
effective upon filing with the Commission. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend certain rules to adopt or
align system functionality with that currently offered by BATS
Exchange, Inc. (``BZX'') and BATS Y-Exchange, Inc. (``BYX'',
collectively with BZX, ``BATS'') in order to provide a consistent
technology offering amongst the Exchange and its affiliates. These
changes are described in detail below and include amending: (i) Rule
11.1 regarding the Exchange's trading sessions and hours of operation;
(ii) Rule 11.6, Definitions; (iii) Rule 11.7, Opening Process; (iv)
Rule 11.8, Order Types; (v) Rule 11.9, Priority of Orders; (vi) Rule
11.10, Order Execution; and (vii) Rule 11.11, Routing to Away Trading
Centers.
The proposed rule change does not propose to implement new or
unique functionality that has not been previously filed with the
Commission or is not available on BATS. The Exchange notes that the
proposed rule text is based on the rules and is different only to the
extent necessary to conform to the Exchange's current rules.
The Exchange does not believe that the proposed rule change will
have any direct or significant indirect effect on any other Exchange
rule in effect at the time of this filing.
The text of the proposed rule change is available at the Exchange's
Web site at https://www.directedge.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 the
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Earlier this year, the Exchange and its affiliate, EDGX Exchange,
Inc. (``EDGX'') received approval to effect a merger (the ``Merger'')
of the Exchange's parent company, Direct Edge Holdings LLC, with BATS
Global Markets, Inc., the parent of BATS (together with BATS, EDGA and
EDGX, the ``BGM Affiliated Exchanges'').\5\ In the context of the
Merger, the BGM Affiliated Exchanges are working to migrate EDGX and
EDGA onto the BATS technology platform, and align certain system
functionality, retaining only intended differences between the BGM
Affiliated Exchanges. As a result of these efforts, the Exchange
proposes to amend: (i) Rule 11.1 regarding the Exchange's trading
sessions and hours of operation; (ii) Rule 11.6, Definitions; (iii)
Rule 11.7, Opening Process; (iv) Rule 11.8, Order Types; (v) Rule 11.9,
Priority of Orders; (vi) Rule 11.10, Order Execution; and (vii) Rule
11.11, Routing to Away Trading Centers.
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\5\ See Securities Exchange Act Release No. 71449 (January 30,
2014), 79 FR 6961 (February 5, 2014) (SR-EDGX-2013-43; SR-EDGA-2013-
34).
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The proposed amendments are intended to align certain system
functionality with that currently offered by BATS in order to provide a
consistent technology offering for Users \6\ of the BGM Affiliated
Exchanges. The Exchange notes that the proposed rule text is based on
the BATS Rule and is different only to the extent necessary to conform
to the Exchange's current rules.\7\ The proposed amendments do not
propose to implement new or unique functionality that has not been
previously filed with the Commission or is not available on BZX or BYX.
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\6\ The term ``User'' is defined as ``any Member or Sponsored
Participant who is authorized to obtain access to the System
pursuant to Rule 11.3.'' See Exchange Rule 1.5(ee).
\7\ To the extent a proposed rule change is based on an existing
BATS Rule, the language of the BATS and Exchange Rules may differ to
extent necessary to conform with existing Exchange rule text or to
account for details or descriptions included in the Exchange Rules
but not currently included in BATS rules based on the current
structure of such rules.
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Rule 11.1, Hours of Trading and Trading Days
Current Functionality. Rule 11.1 sets forth when orders may be
entered into the System \8\ and outlines a User's ability to select the
trading sessions for which an order may be eligible for execution.
Proposed Rule 11.1(a)(1), Session Indicator, describes each of the
Exchange's existing trading sessions. A User may select the particular
trading sessions for which their order(s) may be eligible for
execution. Specifically, orders designated as: ``Pre-Opening Session''
are eligible for execution between 8:00 a.m. Eastern Time and 4:00 p.m.
Eastern Time; ``Regular Session'' are eligible for execution between
the completion of the Opening Process or a Contingent Open as defined
in proposed Rule 11.7 (described below), whichever occurs first, and
4:00 p.m. Eastern Time, unless otherwise noted; \9\ ``Post-Closing
Session'' are eligible for execution between the start of the Regular
Session and 8:00 p.m. Eastern Time; and ``All Sessions'' are eligible
for execution between 8:00 a.m. and 8:00 p.m. Eastern Time.
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\8\ Exchange Rule 1.5(cc) defines ``System'' as ``the electronic
communications and trading facility designated by the Board through
which securities orders of Users are consolidated for ranking,
execution and, when applicable, routing away.''
\9\ Beginning at 9:30:00 a.m. Eastern Time, the System will
accept: (i) Incoming orders designated as Intermarket Sweep Orders
(``ISOs''), and (ii) orders with a time-in-force instruction other
than Regular Hours Only. This is to assist Members' compliance with
Rule 611 of Regulation NMS.
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Under Rule 11.1(a)(1), orders may be entered into the System from
6:00 a.m. until 8:00 p.m. Eastern Time, but orders entered between 6:00
a.m. and 8:00 a.m. Eastern Time are not eligible for execution until
the start of the session selected by the User. All orders are eligible
for execution during the Regular Session. A User may designate that
their order to be eligible for the Pre-Opening and/or Post-Closing
Sessions. If the User does not select a particular session or sessions,
the order will default to the Regular Session only.
Proposed Functionality. To align with BATS functionality, the
Exchange proposes to amend Rule 11.1(a)(1) to allow Users to designate
when their order is eligible for execution by selecting the desired
Time-In-Force (``TIF'') instruction under Exchange Rule 11.6(q) \10\
and not by selecting a particular trading session, as is currently
required. Therefore, the Exchange proposes to delete references to the
Pre-Opening Session, Regular Session, Post-Closing Session, and All
Sessions indicators set forth under Rule 11.1(a)(1)(A)-(D). These
session indicators will no longer be available upon completion of the
technology integration and Users will designate the session(s) during
which their order is eligible for execution by selecting the
[[Page 2127]]
desired TIF instruction under Exchange Rule 11.6(q). The Exchange also
proposes to no longer default orders to the Regular Session where
another session indicator is not selected by the User. Thus, Users will
be required to select a TIF instruction. Pre-Opening Session \11\ and
Post-Closing Session \12\ will continue to be defined under Exchange
Rule 1.5. The Exchange also proposes to retain but relocate the
definition of Regular Session to Rule 1.5 as new paragraph (hh).
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\10\ The Exchange also proposes to and its TIF instructions
under Rule 11.6(q) to align with BATS Rule 11.9(b). The changes are
described in more detail below.
\11\ Pre-Opening Session is defined as ``the time between 8:00
a.m. and 9:30 a.m. Eastern Time.'' See Exchange Rule 1.5(s).
\12\ Post-Closing Session is defined as ``the time between 4:00
p.m. and 8:00 p.m. Eastern Time.'' See Exchange Rule 1.5(r).
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The Exchange also proposes to amend Rule 11.1(a)(1) to align with
recent rule changes filed with the Commission by BATS.\13\ As proposed,
orders entered between 6:00 a.m. and 8:00 a.m. Eastern Time are not
eligible for execution until the start of the Pre-Opening Session or
Regular Trading Hours, depending on the time-in-force selected by the
User. The Exchange proposes to further amend Rule 11.1(a)(1) to state
that the following orders will not be accepted prior to 8:00 a.m.
Eastern Time: orders with a Post Only instruction, ISOs, Market Orders
with a TIF instruction other than Regular Hours Only (``RHO''), orders
with a Minimum Execution Quantity instruction that also include a TIF
instruction of RHO, and all orders with a TIF instruction of Immediate
or Cancel (``IOC'') or Fill Or Kill (``FOK''). At the commencement of
the Pre-Opening Session, orders entered between 6:00 a.m. and 8:00 a.m.
Eastern Time orders will be handled in time sequence, beginning with
the order with the oldest time stamp, and will be placed on the EDGA
Book, routed, cancelled, or executed in accordance with the terms of
the order.
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\13\ See Securities Exchange Act Release Nos. 73745 (December 4,
2014), 79 FR 73359 (December 10, 2014) (SR-BATS-2014-062); 73744
(December 4, 2014), 79 FR 73369 (December 10, 2014) (SR-BYX-2014-
036).
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Rule 11.6, Definitions
Rule 11.6, Definitions, sets forth in one rule current defined
terms and order instructions that are utilized in Chapter XI. Rule 11.6
also includes additional defined terms and instructions to aid in
describing System functionality and the operation of the Exchange's
order types. The Exchange proposes to amend Rule 11.6 to align certain
sections with BATS functionality and rules as part of the technology
integration. These changes are described below and include: (i)
Amending subparagraph (a) regarding Attribution; (ii) amending
paragraph (d) regarding Discretionary Range; (iii) amending paragraph
(h) regarding Minimum Execution Quantity; (iv) amending subparagraph
(j) regarding the Pegged order instruction; (v) amending subparagraph
(k) regarding the definition of Permitted Price; (vi) amending
subparagraph (l)(1)(A) regarding the Price Adjust Re-Pricing
instruction to allow for multiple re-pricing; (vii) renaming the Hide
Not Slide re-pricing instruction under Rule 11.8(l)(1)(B) as Displayed
Price Sliding and amending the rule to allow for multiple re-pricing;
(viii) deleting subparagraph (l)(1)(B)(i) to decommission the Routed
and Returned Re-Pricing instruction; (ix) amending subparagraph (l)(2)
to decommission Short Sale Price Adjust and Short Sale Price Sliding,
and adopt the BATS short sale re-pricing process; (x) amending
subparagraph (l)(3) regarding the re-pricing of Non-Displayed Orders;
(xi) amending subparagraph (m)(1) regarding Replenishment Amounts;
(xii) amending subparagraph (m)(2) regarding the Super Aggressive order
instruction; and (xiii) amending subparagraph (q) regarding TIF
instructions. As stated above, the proposed amendments to Rule 11.6 do
not propose to implement new or unique functionality that has not been
previously filed with the Commission or is not available on BZX or
BYX.\14\ Each of these amendments are described in more detail below.
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\14\ See supra note 7.
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Attribution (Rule 11.6(a))
Pursuant to Rule 11.6(a), where a User includes an Attributable
instruction with an order, the User's Market Participant Identifier
(``MPID'') is visible via the Exchange's Book Feed.\15\ Conversely, if
an order is to be Non-Attributable,\16\ the User's MPID is not visible
via the Exchange's Book Feed. Under Exchange Rule 11.6(a)(1), unless
the User elects otherwise, all orders are automatically defaulted by
the System to Non-Attributable. Further, under Rule 11.6(a)(2), a User
may elect an order to be Attributable on an order-by-order basis or
instruct the Exchange to default all of its orders as Attributable on a
port-by-port basis. However, pursuant to Rule 11.6(a), if a User
instructs the Exchange to default all its orders as Attributable on a
particular port, such User would not be able to designate any order
from that port as Non-Attributable.
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\15\ See EDGA Rule 11.6(a). The EDGA Book Feed is a data feed
that contains all displayed orders for listed securities trading on
EDGA, order executions, order cancellations, order modifications,
order identification numbers, and administrative messages. See
Exchange Rule 13.8(a).
\16\ See Exchange Rule 11.6(a)(1).
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The Exchange proposes to amend Rule 11.6(a)(2) to provide Users
with additional flexibility when designating all of its orders as
Attributable on a particular port consistent with BATS functionality.
As amended, Rule 11.6(a)(2) would provide a User that instructs the
Exchange to default all of its orders as Attributable on a particular
port the ability to override that setting and designate an individual
order from that port as Non-Attributable. This proposed rule change is
representative of additional detail with regard to the operation of
orders with an Attributable instruction in the Exchange's rules. While
the proposed rule change is not directly based on an existing BATS
Rule, as BATS rules do not currently address port level settings with
respect to attribution, the Exchange believes that amending its current
rule text to accurately describe how a Member may designate their
orders as Attributable or Non-Attributable will provide them with
increased transparency regarding how the System operates.
Cancel Back (Rule 11.6(b))
Cancel Back is an instruction a User may attach to an order
instructing the System to cancel an order, when, if displayed by the
System on the EDGA Book \17\ at the time of entry, the order would
create a violation of Rule 610(d) of Regulation NMS, Rule 201 of
Regulation SHO, or the order cannot otherwise be executed or posted by
the System to the EDGA Book at its limit price.
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\17\ The term ``EDGA Book'' is defined as ``the System's
electronic file of orders.'' See EDGA Rule 1.5(d).
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The Exchange proposes to amend the definition of Cancel Back to
remove the requirement that the order only be cancelled where it
creates a violation of Rule 610(d) of Regulation NMS, Rule 201 of
Regulation SHO, or cannot otherwise be executed or posted by the System
to the EDGA Book at its limit price upon entry. Removal of the phrase
``upon entry'' from Rule 11.6(b) would enable an order with a Cancel
Back instruction that is posted to the EDGA Book to be cancelled if it
subsequently creates a violation of Rule 610(d) of Regulation NMS, Rule
201 of Regulation SHO, or the cannot otherwise be executed or continue
to be posted by the System to the EDGA Book at its limit price. The
proposed amendment would align the operation of the Exchange's
[[Page 2128]]
Cancel Back instruction with current BATS Rule 11.13.\18\
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\18\ Under BATS Rule 11.13, ``an order will be cancelled back to
the User if, based on market conditions, User instructions,
applicable Exchange Rules and/or the Act and the rules and
regulations thereunder, such order is not executable, cannot be
routed to another Trading Center pursuant to Rule 11.13(a)(2) below
and cannot be posted to the BATS Book.'' The cancelling back of an
order under Rule 11.13 is not limited to cancellation upon entry.
See also BATS Rule 11.9(g)(1)(D).
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Discretionary Range (Rule 11.6(d))
Discretionary Range is an instruction the User may attach to an
order to buy (sell) a stated amount of a security at a specified,
displayed price with discretion to execute up (down) to a specified,
non-displayed price. The Exchange proposes to remove the prohibition
that the Discretionary Range of an order to buy (sell) cannot be more
than $0.99 higher (lower) than the order's displayed price because,
upon migration of the Exchange onto BATS technology, the Discretionary
Range of an order will not be limited to $0.99. This proposed rule
change is representative of additional detail with regard to the
operation of orders with Discretionary Range in the Exchange's rules.
In addition, no such limitation is included in BATS or BYX Rules
11.9(c)(10) regarding Discretionary Orders and the BATS systems
effectively do not incorporate such a limitation.
Minimum Execution Quantity (Rule 11.6(h))
Minimum Execution Quantity is an instruction a User may attach to
an order with a Non-Displayed \19\ instruction requiring the System to
execute the order only to the extent that a minimum quantity can be
satisfied by execution against a single order or multiple aggregated
orders simultaneously. Unless the User elects otherwise, any shares
remaining after a partial execution will be executed at a size that is
equal to or exceeds the Minimum Execution Quantity. Thus, under current
Exchange Rules and functionality a User can elect that a Minimum
Execution Quantity only apply to an initial execution but not any
remaining shares after such execution. The Exchange proposes to amend
Minimum Execution Quantity to reflect that, upon migration of the
Exchange onto BATS technology, any shares remaining after a partial
execution will continue to be executed at a size that is equal to or
exceeds the Minimum Execution Quantity, regardless of the Users
instructions. A User who wishes otherwise may cancel and resubmit their
order without a Minimum Execution Quantity. In addition, currently the
Minimum Execution Quantity instruction will not apply where the number
of shares remaining after a partial execution are less than the
quantity provided in the instruction. As amended, in such case, the
Minimum Execution Quantity will equal the number of remaining shares,
which is similar to current Exchange functionality. Like above, a User
who wishes otherwise may cancel and resubmit their order with a new
Minimum Execution Quantity. As amended, the Minimum Execution Quantity
instruction will operate similarly to the BATS Minimum Quantity Order
under BATS Rule 11.9(c)(5).\20\
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\19\ The term ``Non-Displayed'' is defined as ``[a]n instruction
the User may attach to an order stating that the order is not to be
displayed by the System on the EDGA Book.'' See Exchange Rule
1.5(e)(2).
\20\ See Securities Exchange Act Release Nos. 72646 (July 21,
2014), 79 FR 43516 (July 25, 2014) (SR-BATS-2014-027) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Rules 11.9, 11.12, 11.18, 21.1 and 21.7 of BATS Exchange, Inc.);
72647 (July 21, 2014), 79 FR 43522 (July 25, 2014) (SR-BYX-2014-010)
(Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change to Rules 11.9, 11.12, and 11.18 of BATS Y-Exchange, Inc.). As
amended, Exchange Rule 11.6(h) only differs from BATS Rule
11.9(c)(5) to extent necessary to conform with existing rule text or
to account for details or descriptions currently included in the
Exchange's Rule that are not included in BATS Rule 11.9(c)(5).
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Pegged (Rule 11.6(j))
Current Functionality. An order with a Pegged instruction enables a
User to specify that the order's price will peg to a price a certain
amount away from the NBB or NBO (offset). If an order with a Pegged
instruction displayed on the Exchange would lock the market, the price
of the order will be automatically adjusted by the System to one
Minimum Price Variation below the current NBO (for bids) or to one
Minimum Price Variation above the current NBB (for offers). A new time
stamp is created for the order each time it is automatically adjusted
and orders with a Pegged instruction are not eligible for routing
pursuant to Rule 11.11. For purposes of the Pegged instruction, the
System's calculation of the NBBO does not take into account any orders
with Pegged instructions that are resting on the EDGA Book. An order
with a Pegged instruction is cancelled if an NBB or NBO, as applicable,
is no longer available.
An order with a Pegged instruction may be a Market Peg or Primary
Peg. An order that includes a Primary Peg instruction will have its
price pegged by the System to the NBB, for a buy order, or the NBO for
a sell order. A User may, but is not required to, select an offset
equal to or greater than one Minimum Price Variation \21\ above or
below the NBB or NBO that the order is pegged to. An order with a
Primary Peg instruction is currently eligible to join the Exchange's
Best Bid or Offer (``Exchange BBO'') when the EDGA Book has been locked
or crossed by another market. If an order with a Primary Peg
instruction creates a Locking Quotation \22\ or Crossing Quotation,\23\
the price of the order is automatically adjusted by the System to one
Minimum Price Variation below the current NBO (for bids) or to one
Minimum Price Variation above the current NBB (for offers).
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\21\ The term ``Minimum Price Variation'' is defined as
``[b]ids, offers, or orders in securities traded on the Exchange
shall not be made in an increment smaller than: (i) $0.01 If those
bids, offers, or orders are priced equal to or greater than $1.00
per share; or (ii) $0.0001 if those bids, offers, or orders are
priced less than $1.00 per share; or (iii) any other increment
established by the Commission for any security which has been
granted an exemption from the minimum price increments requirements
of SEC Rule 612(a) or 612(b) of Regulation NMS.'' See Exchange Rule
11.6(i).
\22\ The term ``Locking Quotation'' is defined as ``[t]he
display of a bid for an NMS stock at a price that equals the price
of an offer for such NMS stock previously disseminated pursuant to
an effective national market system plan, or the display of an offer
for an NMS stock at a price that equals the price of a bid for such
NMS stock previously disseminated pursuant to an effective national
market system plan in violation of Rule 610(d) of Regulation NMS.''
See Exchange Rule 11.6(g).
\23\ The term ``Crossing Quotation'' is defined as ``[t]he
display of a bid (offer) for an NMS stock at a price that is higher
(lower) than the price of an offer (bid) for such NMS stock
previously disseminated pursuant to an effective national market
system plan in violation of Rule 610(d) of Regulation NMS.'' See
Exchange Rule 11.6(c).
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An order that includes a Market Peg instruction will have its price
pegged by the System to the NBB, for a sell order, or the NBO, for a
buy order. An order with a Market Peg instruction that is to be
displayed by the System on the EDGA Book must include an offset for an
order to buy (sell) that is equal to or greater than one Minimum Price
Variation below (above) the NBO (NBB) that the order is pegged to. If a
User does not select an offset, the System will automatically include
an offset on an order to buy (sell) that is equal to one Minimum Price
Variation below (above) the NBO (NBB) that the order is pegged to. For
an order with a Non-Displayed instruction, a User may, but is not
required to, select an offset for an order to buy (sell) that is equal
to or greater than one Minimum Price Variation below (above) the NBO
(NBB) that the order is pegged to.
Proposed Functionality. The Exchange proposes to amend the Pegged
instruction under Rule 11.6(j) to align
[[Page 2129]]
with BATS Rule 11.9(c)(8).\24\ First, the Exchange proposes to no
longer cancel an order with a Pegged instruction where the NBB or NBO,
as applicable, is no longer available. In such case, instead of being
cancelled, the order will not be eligible for execution. The order will
receive a new time stamp and be eligible for execution where the NBB or
NBO it is pegged to becomes available.
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\24\ See Securities Exchange Act Release Nos. 73188 (September
23, 2014), 79 FR 58004 (September 26, 2014) (SR-BATS-2014-041)
(Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change to Rule 11.9 of BATS Exchange, Inc.); 73190 (September 23,
2014), 79 FR 58019 (September 26, 2014) (SR-BYX-2014-022) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule
11.9 of BATS Y-Exchange, Inc.). As amended, Exchange Rule 11.6(j)
only differs from BATS Rule 11.9(c)(8) to extent necessary to
conform with existing rule text or to account for details or
descriptions currently included in the Exchange's Rule that are not
included in BATS Rule 11.9(c)(8).
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Second, the Exchange proposes to amend the Market Peg instruction
under Rule 11.6(j)(1) to state that such orders are not eligible for
display on the EDGA Book. As a result, the Exchange also proposes to
delete the requirement that an order with a Market Peg instruction that
is to be displayed on the EDGA Book must include an offset for an order
to buy (sell) that is equal to or greater than one Minimum Price
Variation below (above) the NBO (NBB) that the order is pegged to.
Third, the Exchange proposes to amend the Primary Peg instruction
under Rule 11.6(j)(2) to define an offset equal to or greater than one
Minimum Price Variation above or below the NBB or NBO that the order is
pegged to as the ``Primary Offset Amount''. The Exchange also proposes
to specify that the Primary Offset Amount for an order with a Primary
Peg instruction that is to be displayed on the EDGA Book must result in
the price of such order being inferior to or equal to the inside quote
on the same side of the market.
Fourth, the Exchange proposes to amend the provisions governing the
operation of an order with a Primary Peg instruction during a locked or
crossed market. As proposed, an order with a Primary Peg instruction
will no longer be able to join the Exchange BBO when the EDGX Book
[sic] is locked or crossed by another market. When the EDGX Book [sic]
is crossed by another market, the Exchange proposes to automatically
adjust an order with a Primary Peg instruction to the current NBO (for
bids) or the current NBB (for offers). For example, assume the NBBO is
$10.08 x $10.09. An order with a Primary Peg instruction to buy with a
limit price of $10.10 is entered and displayed by the System at $10.08,
the current NBB. Assume the NBO updates to $10.07, resulting in a
crossed market. The order with a Primary Peg instruction to buy would
then be pegged and displayed at $10.07, the updated NBO.
Rule 11.6(j)(2) will continue to require that an order with a
Primary Peg instruction that would otherwise be a Locking Quotation or
Crossing Quotation be automatically adjusted by the System to one
Minimum Price Variation below the current NBO (for bids) or to one
Minimum Price Variation above the current NBB (for offers). For
example, assume the NBBO is $10.09 x $10.08, resulting in a crossed
market. An order with a Primary Peg instruction to buy with a limit
price of $10.10 is entered and displayed by the System at $10.07, one
Minimum Price Variation below the current NBB. Assume the NBBO is
updated to $10.08 x $10.09, the order with a Primary Peg instruction to
buy would then be pegged and displayed at $10.08, the updated NBB now
that the market is no longer crossed. This proposed rule change is
representative of additional detail with regard to the operation of
orders with a Pegged instruction during locked or crossed markets that
is currently included in Rule 11.6(j) and is consistent with Exchange's
current re-pricing options under Rule 11.6(l), as well as Exchange Rule
11.10(f) and BATS Rule 11.20(a)(3), which outline the prohibition
against displaying locking and crossing quotations under Rule 610 of
Regulation NMS.
Permitted Price (Rule 11.6(k))
Permitted Price is currently defined as the price at which a sell
order will be priced, ranked and displayed at one Minimum Price
Variation above the NBB. As amended, the definition of Permitted Price
will only state that it is the price that the order is displayed at one
Minimum Price Variation above the NBBO.\25\ This is to update the
definition of Permitted Price to reflect the decommissioning of the
Short Sale Price Adjust and Short Sale Price Sliding instructions and
the proposed amendment that an order with both a Short Sale instruction
and Hide Not Slide instruction will be ranked at the mid-point of the
NBBO, but displayed at the Permitted Price discussed below. While the
amended definition of Permitted Price is not identical to the
definition of Permitted Price under BATS Rules, any differences are
necessary to conform the proposed rule text with the other proposed
rule changes described above.
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\25\ The proposed definition of Permitted Price is also similar
to that of other exchange. See e.g., Nasdaq Rule 4763(e); NYSE MKT
Rule 440B(e); Rule 7016(f)(v)(C).
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Re-Pricing (Rule 11.6(l))
The Exchange currently offers re-pricing instructions which, in all
cases, result in the ranking and/or display of an order at a price
other than the order's limit price in order to comply with applicable
securities laws and Exchange Rules. Specifically, the Exchange's re-
pricing instructions are designed to permit Users to comply with Rule
610(d) of Regulation NMS or Rule 201 of Regulation SHO. Rule 11.6(l)
sets forth the re-pricing instructions currently available to Users
with regard to Regulation NMS compliance--Price Adjust, Hide Not Slide,
and Routed and Returned Re-Pricing, and with regard to Regulation SHO
compliance--Short Sale Price Adjust and Short Sale Price Sliding. The
Exchange now proposes to amend its re-pricing instructions to
streamline the re-pricing options available to Users in order to align
Exchange functionality with that of BATS.
Re-Pricing Instructions To Comply With Rule 610(d) of Regulation NMS
The Exchange proposes to amend its re-pricing instructions to
comply with Rule 610(d) of Regulation NMS as follows: (i) Amend the
Price Adjust instruction to enable Users to elect that their order be
adjusted multiple times in response to changes in the NBBO; rename the
Hide Not Slide instruction as Displayed Price Sliding and amend it to
allow for multiple re-pricing; and (iii) delete Routed and Returned Re-
Pricing.
Routed and Returned Re-Pricing (Rule 11.6(l)(1)(B)(i)). The
Exchange proposes to delete the Routed and Returned Re-Pricing
instruction under Rule 11.6(l)(1)(B)(i). Pursuant to current Exchange
Rules and Functionality, under the Routed and Returned Re-Pricing
instruction, a Limit Order that is returned to the EDGA Book after
being routed to an away Trading Center with a limit price that would
cause the order to be a Locking Quotation or Crossing Quotation will be
displayed by the System on the EDGA Book at a price that is one Minimum
Price Variation lower (higher) than the Locking Price \26\ for orders
to buy (sell), will be ranked at the Locking Price with the ability to
execute at the Locking Price. Each time the NBBO is updated, a buy
(sell) order
[[Page 2130]]
subject to the Routed and Returned Re-Pricing instruction will be
further adjusted so that it continues to be displayed by the System on
the EDGA Book at one Minimum Price Variation below (above) the NBO
(NBB) and will be ranked at the Locking Price with the ability to
execute at the Locking Price until the price of such order reaches its
limit price, at which point it will remain displayed by the System on
the EDGA Book at that price and cease to be further adjusted pursuant
to the Routed and Returned Re-Pricing instruction. The order will
receive a new time stamp when it is returned to the EDGA Book and each
time it is subsequently re-ranked.
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\26\ The term ``Locking Price'' is defined as ``the price at
which an order to buy (sell), that if displayed by the System on the
EDGA Book, either upon entry into the System, or upon return to the
System after being routed away, would be a Locking Quotation.'' See
Exchange Rule 11.6(i).
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Upon completion of the migration of the Exchange to BATS
technology, Limit Orders that are returned to the EDGA Book after being
routed to an away Trading Center with a limit price that would cause
the order to be a Locking Quotation or Crossing Quotation will be
subject to the Exchange's standard re-pricing instructions; i.e.,
automatically defaulted by the System to the Price Adjust Re-Pricing
instruction, unless the User affirmatively elects the Cancel Back
instruction or the Hide Not Slide instruction. The Exchange also
proposes to remove a reference to the Routed and Returned Re-Pricing
instruction from Rule 11.6(l)(1)(B).
Price Adjust Re-Pricing (Rule 11.6(l)(1)(A)). Under the Price
Adjust instruction, where a buy (sell) order would be a Locking
Quotation or Crossing Quotation if displayed by the System on the EDGA
Book at the time of entry, the order will be displayed and ranked \27\
at a price that is one Minimum Price Variation lower (higher) than the
Locking Price. The order will be displayed and ranked by the System on
the EDGA Book at the Locking Price if: (i) The NBBO changes such that
the order, if displayed at the Locking Price, would not be a Locking
Quotation or Crossing Quotation, including where an ISO with a TIF
instruction of Day is entered into the System and displayed on the EDGA
Book on the same side of the market as the order at a price that is
equal to or more aggressive than the Locking Price.\28\ An order re-
priced as set forth above would not be subject to further re-ranking
and will be displayed by the System on the EDGA Book at the Locking
Price until executed or cancelled by the User. The order will receive a
new time stamp at the time it is re-ranked.
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\27\ For purposes of the description of the re-pricing
instructions under proposed Rule 11.6(l), the terms ``ranked'' and
``priced'' are synonymous and used interchangeably.
\28\ See Division of Trading and Markets: Response to Frequently
Asked Questions Concerning Rule 611 and Rule 610 of Regulation NMS,
Question 5.02, available at https://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm (last visited March 6, 2014).
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The Exchange proposes to amend the Price Adjust instruction to
provide Users with additional flexibility by enabling them to elect
that their order be adjusted multiple times in response to changes in
the NBBO. The ranked and displayed prices of an order subject to the
Price Adjust instruction will only be adjusted once, unless the User
elects that the order be adjusted multiple times in response to changes
to the prevailing NBBO. Unless a User has elected the multiple re-
pricing option, the order would not be subject to further re-ranking
and will be displayed on the EDGA Book at the Locking Price until
executed or cancelled by the User. An order subject to the multiple re-
pricing option will be further re-ranked and re-displayed to the extent
it can permissibly be ranked and displayed at a more aggressive price
based on changes to the prevailing NBBO. Multiple re-pricing 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 re-pricing 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. The Exchange notes that this functionality is identical to the
operation of BATS Rule 11.9(g)(2).\29\ The Exchange does not propose to
amend any other aspect of the Price Adjust instruction.
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\29\ See Securities Exchange Act Release Nos. 73359 (October 15,
2014), 79 FR 63003 (October 21, 2014) (SR-BATS-2014-038) (Order
Granting Approval of Proposed Rule Change to Rule 11.9 of the BATS
Exchange, Inc. to Add Price Adjust Functionality); and 73366
(October 15, 2014), 79 FR 62993 (October 21, 2014) (SR-EDGA-2014-
019) [sic] (Order Granting Approval of Proposed Rule Change to Rule
11.9 of the BATS Y-Exchange, Inc. to Add Price Adjust
Functionality).
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As an example of multiple re-pricing 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 existing Price Adjust functionality, the Exchange does
not further adjust the ranked or displayed price following this un-
slide. However, under multiple re-pricing 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.
Hide Not Slide Re-Pricing (Rule 11.6(l)(1)(B)). The Exchange
proposes to rename the Hide Not Slide Re-Pricing instruction under Rule
11.6(l)(1)(B) as Displayed Price Sliding and to amend the rule to allow
for multiple re-pricing.\30\ Under the renamed Displayed Price Sliding
instruction, where an order would be a Locking Quotation or Crossing
Quotation if displayed by the System on the EDGA Book at the time of
entry, the order will be displayed at a price that is one Minimum Price
Variation lower (higher) than the Locking Price for orders to buy
(sell), will be ranked at the Locking Price with the ability to execute
at the Locking Price; provided, however, that if a contra-side order
that equals the Locking Price is displayed by the System on the EDGA
Book, the order's ability to execute at the Locking Price will be
suspended unless and until there is no contra-side displayed order on
the EDGA Book that equals the Locking Price. However, in such case, an
order subject to the Displayed Price Sliding instruction may execute
against other orders at its displayed price. Where the NBBO changes
such that the order, if displayed by the System on the EDGA Book at the
Locking Price, would not be a Locking Quotation or Crossing Quotation,
the System will rank and display such orders at the Locking Price. The
order will not be subject to further re-ranking and will be displayed
on the EDGA Book at the Locking Price retaining its time stamp until
executed or cancelled by the User. Currently, an order subject to the
Displayed Price Sliding instruction will only receive a new time stamp
when it is re-ranked by
[[Page 2131]]
the System upon clearance of a Locking Quotation due to the receipt of
an ISO with a TIF instruction of Day that establishes a new NBBO at the
Locked Price in accordance with Rule 11.9(a)(2)(B).
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\30\ The Exchange notes that it is proposing to re-name the Hide
Not Slide Re-Pricing instruction to the Displayed Price Sliding
instruction, which is the same name used to describe analogous
functionality on BATS. The Exchange understands that, its affiliate,
EDGX, will retain the current name with respect to the Hide Not
Slide Re-Pricing instruction because such functionality is
distinguishable from Displayed Price Sliding functionality. The
primary difference between Hide Not Slide functionality and
Displayed Price Sliding functionality is that an order with a Hide
Not Slide re-pricing instruction will be ranked at the mid-point of
the NBBO with discretion to execute at the Locking Price whereas an
order with a Displayed Price Sliding instruction (including an
analogous order on BZX or BYX) is ranked at the Locking Price.
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Like as proposed for the Price Adjust instruction described above,
the Exchange proposes to amend the Displayed Price Sliding instruction
to provide Users with additional flexibility by enabling them to elect
that their order be adjusted multiple times in response to changes in
the NBBO. The ranked and displayed prices of an order subject to the
Displayed Price Sliding instruction will only be adjusted once, unless
the User elects that the order be adjusted multiple times in response
to changes to the prevailing NBBO. Unless a User has elected the
multiple re-pricing option, the order would not be subject to further
re-ranking and will be displayed on the EDGA Book at the Locking Price
until executed or cancelled by the User. An order subject to the
multiple re-pricing option will be further re-ranked and re-displayed
to the extent it can permissibly be ranked and displayed at a more
aggressive price based on changes to the prevailing NBBO. Multiple re-
pricing pursuant to Displayed Price Sliding would be optional and would
have to be explicitly selected by a User before it will be applied.
Orders subject to multiple re-pricing for Displayed Price Sliding 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. The Exchange notes that this
functionality is identical to the operation of BATS Rule
11.9(g)(1).\31\ To account for option multiple price sliding, the
Exchange proposes to state that an order subject to the Displayed Price
Sliding instruction will receive a new time stamp each time is re-
ranked, which will include when the order is re-ranked by the System
upon clearance of a Locking Quotation due to the receipt of an ISO with
a TIF instruction of Day that establishes a new NBBO at the Locked
Price in accordance with Rule 11.9(a)(2)(B).The Exchange does not
propose to amend any other aspect of the Displayed Price Sliding
instruction.
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\31\ See Securities Exchange Act Release Nos. 67657 (August 14,
2012), 77 FR 50199 (August 20, 2012) (SR-BATS-2012-035) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change by the
BATS Exchange, Inc. to Amend BATS Rules Related to Price Sliding
Functionality); and 67656 (August 14, 2012), 77 FR 50193 (August 20,
2012) (SR-BYX-2012-018) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the BATS Y-Exchange, Inc.
to Amend BYX Rules Related to Price Sliding Functionality).
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As an example of multiple Displayed Price Sliding, 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 the order to buy at $10.12 and display the
order 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 display
it at its ranked price (and limit price) of $10.12.
Re-Pricing Instructions To Comply With Rule 201 of Regulation SHO
The Exchange proposes to amend its Re-Pricing instructions to
comply with Rule 201 of Regulation SHO by deleting Short Sale Price
Adjust and Short Sale Price Sliding and adopting a new, streamlined
rule to align with BATS Rule 11.9(g)(5).
Current Functionality. The Exchange currently offers two re-pricing
instructions to comply with Rule 201 of Regulation SHO--Short Sale
Price Adjust and Short Sale Price Sliding. Under the Short Sale Price
Adjust instruction, an order to sell with a Short Sale instruction will
be ranked and displayed by the System on the EDGA Book at the Permitted
Price. Following the initial ranking, the order will, to the extent the
NBB declines, continue to be re-ranked and displayed by the System on
the EDGA Book at the Permitted Price down to the order's limit price.
The Short Sale Price Sliding instruction operates similarly to the
Short Sale Price Adjust instruction; except that after its initial
ranking, the order will, to the extent the NBB declines, be re-ranked
and displayed by the System on the EDGA Book one additional time at a
price that is equal to the NBB at the time the order was received by
the System. In both cases, the order to sell with a Short Sale
instruction will receive a new time stamp each time it is re-ranked.
Proposed Functionality. The Exchange proposes to delete the Short
Sale Price Adjust and Short Sale Price Sliding and adopt a new,
streamlined rule to align with BATS Rule 11.9(g)(5). Under the amended
Rule 11.6(l)(2), an order to sell with a Short Sale instruction that,
at the time of entry, could not be executed or displayed in compliance
with Rule 201 of Regulation SHO will be re-priced by the System at the
Permitted Price. Like BATS Rule 11.9(g)(5), proposed Exchange Rule
11.6(l)(2)(A) would state that the default short sale re-pricing
process will only re-price an order upon entry.
As proposed, depending upon the instructions of a User, to reflect
declines in the NBB the System will continue to re-price and re-display
a short sale order at the Permitted Price down to the order's limit
price. In the event the NBB changes such that the price of an order
with a Non-Displayed instruction subject to Rule 201 of Regulation SHO
would be a Locking Quotation or Crossing Quotation, the order will
receive a new time stamp, and will be re-priced by the System to the
Permitted Price. Like the Short Sale Price Adjust process that is to be
decommissioned, an order to sell with a Short Sale instruction that is
re-priced will be ranked at the Permitted Price.
Like BATS Rule 11.9(g)(5), amended Rule 11.6(l)(2) would state
that: (i) When a Short Sale Circuit Breaker is in effect, the System
will execute a sell order with a Displayed and Short Sale instruction
at the price of the NBB if, at the time of initial display of the sell
order with a Short Sale instruction, the order was at a price above the
then current NBB; (ii) orders with a Short Exempt instruction will not
be subject to re-pricing under amended Rule 11.6(l)(2); and (iii) the
re-pricing instructions to comply with Rule 610(d) of Regulation NMS
will be continue to be ignored for an order to sell with a Short Sale
instruction when a Short Sale Circuit Breaker is in effect and the re-
pricing instructions to comply with Rule 201 of Regulation SHO under
this Rule will apply.
Re-Pricing of Orders With a Non-Displayed Instruction (Rule 11.6(l)(3))
Rule 11.6(l)(3) currently sets forth the re-pricing process for
orders with a Non-Displayed instruction to avoid potentially trading
through Protected Quotations of external markets. Currently, under Rule
11.6(l)(3), a non-routable order with a Non-Displayed instruction that
would be a Crossing Quotation of an external market will be ranked at
the Locking Price, unless the User affirmatively elects that the order
Cancel Back. Rule 11.6(l)(3) states that to avoid potentially trading
through Protected Quotations of external markets, a non-routable order
with a Non-Displayed instruction that would be a Crossing Quotation of
an external market will be ranked at the Locking Price, unless the User
affirmatively elects that the order Cancel Back. Each time the NBBO is
updated and the order continues to be a Locking Quotation or
[[Page 2132]]
Crossing Quotation of an external market, the order will be adjusted so
that it continues to be ranked at the current Locking Price. Once an
order with a Non-Displayed instruction has been ranked at its limit
price it will only be adjusted in the event the NBBO is updated and the
order would again be a Crossing Quotation of an external market. The
order will receive a new time stamp each time it is subsequently re-
ranked. For example, assume the NBBO is $24.00 x $26.00 and there are
no orders resting on the EDGA Book. If an incoming order with a Non-
Displayed instruction is entered into the System to buy at $27.00, it
will be ranked by the System at $26.00, the Locking Price. Assume the
NBBO changes to $24.00 x $25.00. The buy order with a Non-Displayed
instruction will be re-ranked at $25.00, the new Locking Price, and be
given a new time stamp.
The Exchange proposes to amend Rule 11.6(l)(3) to align with BATS
Rule 11.9(g)(4).\32\ As amended, an order with a Non-Displayed
instruction that has been re-ranked by the System in accordance with
Rule 11.6(l)(3) will not be re-ranked by the System each time the NBBO
is adjusted. Rather, such order will only be re-ranked by the System
should it is again be Crossing Quotation of an external market upon the
NBBO being updated. Assume the same facts as the above example. Assume
the NBBO again changes to $24.00 x $27.00. The buy order with a Non-
Displayed instruction will be remain ranked at $25.00 because it is not
a Crossing Quotation upon the NBBO changing. However, assume the NBBO
changed to $23.00 x $24.00. The buy order with a Non-Displayed
instruction will be remain ranked at $24.00, and be given a new time
stamp, because it would be a Crossing Quotation if it remained ranked
at $25.00.
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\32\ Id.
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Reserve Quantity and Replenishment Amounts (Rule 11.6(m))
Current Functionality. If the portion of the order with a Displayed
instruction is reduced to less than a Round Lot, the System will, in
accordance with the User's instruction, replenish the displayed
quantity from the Reserve Quantity by at least a single Round-Lot using
either the Random or Fixed Replenishment instructions. A new time stamp
is created for the displayed quantity of the order each time it is
replenished from the Reserve Quantity, while the Reserve Quantity
retains the time stamp of its original entry. Where the combined amount
of the displayed quantity and Reserve Quantity of an order are reduced
to less than one Round Lot, the order converts to an order with a
Displayed instruction and be treated as Displayed for purposes of
execution priority under Rule 11.9.
Proposed Functionality. The Exchange proposes to amend Rule 11.6(m)
to align with BATS Rule 11.9(c)(1).\33\ First, the Exchange proposes to
no longer require that the displayed quantity from the Reserve Quantity
be replenished by at least a single Round-Lot. Instead, the displayed
quantity will be replenished in accordance with the replenishment
instruction the User selects. Specifically, like on BATS, Users will be
required to designate the original display quantity of an order, which
is also the amount to which an order is replenished (unless the
remainder of an order is smaller than the original displayed quantity)
under the current replenishment functionality. The Exchange refers to
this quantity as ``max floor'' in its specifications. The Exchange
proposes to add a defined term of ``Max Floor'' to Rule 11.6(m), which
would be a mandatory value entered by a User that will determine the
quantity of the order to be initially displayed by the System and will
also be used to determine the replenishment amount under both
replenishment options described below. If the remainder of an order is
less than the replenishment amount, the Exchange will replenish and
display the entire remainder of the order.
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\33\ See supra note 20.
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Second, the Exchange proposes to amend the time stamp functionality
of an order with a Reserve Quantity. Currently, when an order is
replenished from Reserve Quantity, the displayed quantity receives a
new time stamp while the Reserve Quantity retains the time stamp of its
original entry. As amended, a new time stamp will be created for the
displayed quantity and Reserve Quantity of the order each time it is
replenished from the Reserve Quantity. This functionality is identical
to functionality set forth in BATS Rule 11.12(a)(5).\34\
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\34\ Id.
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Random Replenishment is an instruction that a User may attach to an
order with Reserve Quantity where replenishment quantities for the
order are randomly determined by the System within a replenishment
range established by the User. The Exchange proposes to minor
amendments to the operation of Random Replenishment to align with BATS
Rule 11.9(c)(1).\35\ Currently, both the actual quantity of the order
that will be initially displayed by the System on the EDGA Book and
subsequent displayed replenishment quantities are randomly determined
by the System within a replenishment range established by the User. As
amended, only the replenishment quantities for the order will be
randomly determined by the System within a replenishment range
established by the User. A User will be required to select a
replenishment value and Max Floor. The Max Floor will be the initial
quantity to be displayed. The displayed replenishment quantities will
then be determined by the System by randomly selecting a number of
shares within a replenishment range that is between: (i) The Max Floor
minus the replenishment value; and (ii) the Max Floor plus the
replenishment value. The displayed replenishment quantities randomly
determined by the System will no longer be limited to Round Lots. Nor
will the replenishment quantity be within a replenishment range that is
between the quantity around which the replenishment range is
established plus or minus the replenishment value. In addition, the
Exchange will no longer prohibit the displayed replenishment quantity
from: (i) Exceeding the remaining Reserve Quantity of the order; (ii)
from being less than a single Round Lot or greater than the remaining
unexecuted shares in the order.
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\35\ Id.
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In addition to the changes set forth above, the Exchange proposes
to modify Rule 11.10(e)(3) to state that the Max Floor set for an order
can be modified through the use of a replace message rather than
requiring a User to cancel and re-enter an order. The Exchange also
proposes to modify Rule 11.9(a)(4) to align with BATS Rule
11.12(a)(3)\36\ to make clear that a modification to the Max Floor of
an order with a Reserve Quantity will not cause such order to lose
priority. When a replenishment occurs (based on the new Max Floor), the
order will receive a new timestamp, and thus, will have a new priority.
---------------------------------------------------------------------------
\36\ Id.
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Under Fixed Replenishment, the displayed quantity of an order is
replenished for a Fixed Replenishment quantity designated by the User.
The Fixed Replenishment quantity for the order equals the initial
displayed quantity designated by the User. The Exchange proposes to
amend Rule 11.6(m) to specify that the Fixed Replenishment quantity
will be the Max Floor designated by the User. In addition, Rule 11.6(m)
will also specify
[[Page 2133]]
that Fixed Replenishment will apply to any order for which Random
Replenishment has not been selected. Lastly, like proposed for Random
Replenishment discussed above, the Exchange will no longer prohibit the
displayed replenishment quantity from being less than a single Round
Lot or greater than the remaining unexecuted shares in the order. As
amended, Fixed Replenishment will be identical to BATS Rule
11.9(c)(1)(B).\37\
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\37\ See supra note 20.
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Super Aggressive (Rule 11.6(n)(2))
Super Aggressive is an order instruction that directs the System to
route the order if an away Trading Center locks or crosses the limit
price of the order resting on the EDGA Book. Like BATS Rule
11.13(a)(4)(B), the Exchange proposes to also permit a User to
designate an order as Super Aggressive solely to routable orders posted
to the EDGA Book with remaining size of an Odd Lot.\38\ To the extent
the amended text of Exchange Rule 11.6(n)(2) differs from BATS Rule
11.13(a)(4)(B), such differences are necessary to conform the rule with
existing rule text, and in this case, to account for details or
descriptions currently included in BATS Rule 11.9(d) [sic] that are not
necessary under the structure of the Exchange's Rules.
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\38\ See Securities Exchange Act Release Nos. 73295 (October 3,
2014), 79 FR 61117 (October 9, 2014) (SR-BATS-2014-044) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Rules
11.13 and 21.9 of the BATS Exchange, Inc.); and 73296 (October 3,
2014), 79 FR 61121 (October 9, 2014) (SR-BYX-2014-026) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Rule
11.13 of the BATS Y-Exchange, Inc.). As amended, Exchange Rule
11.6(n)(2) only differs from BATS Rule 11.13(a)(4)(B) to extent
necessary to conform the rule with existing Exchange rule text or to
account for details or descriptions currently included in the
Exchange's Rule but not included in BATS Rule 11.13(a)(4)(B). An
``Odd Lot' is defined as ``any amount less than a Round Lot. See
Exchange Rule 11.8(s)(2).
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Time-In-Force (Rule 11.6(q))
The Exchange proposes to amend its TIF instructions to align with
BATS Rule 11.9(b). To the extent the amended text of Exchange Rule
11.6(q) differs from BATS Rule 11.9(b), such differences are necessary
to conform the rule with existing Exchange rule text or to account for
details or descriptions currently included in the Exchange's Rule but
not included in BATS Rule 11.9(b). Where necessary, the Exchange has
proposed rule changes consistent with the Exchange's operation on BATS
technology, which the Exchange also believes are consistent with User
expectations of how the System operates.
First, the Exchange proposes minor modifications to align the
definition of IOC with BATS Rule 11.9(b)(1), the most notable of which
is to specify that an order with a TIF instruction of IOC is eligible
for routing. BATS rules do not restrict an order with an IOC
instruction from being eligible for routing. In addition, permitting
orders with an IOC instruction to be eligible for routing is consistent
with BATS technology as well as with Users' expectations to use orders
with an IOC instruction in combination with available routing
functionality and strategies. As amended, an IOC would be an
instruction the User may attach to an order stating the order is to be
executed in whole or in part as soon as such order is received. The
portion not executed immediately on the Exchange or another trading
center is treated as cancelled and is not posted to the EDGA Book.
Second, the Exchange proposes to amend the definition of the Day
TIF instruction to state that an order with a TIF instruction of Day,
if not executed, expires at the end of Regular Trading Hours and not at
the end of the specified trading session. In addition, orders with a
Day TIF instruction will be eligible for execution as soon as received
by the Exchange. Therefore, the Exchange proposes to no longer require
that any order with a Day instruction entered into the System before
the start of the specified trading session will be placed by the System
in a pending state and activated for potential execution upon the start
of that trading session. Lastly, any Day Order entered into the System
before the opening for business on the Exchange as determined pursuant
to Rule 11.1 (which is currently 6:00 a.m.), or after the closing of
Regular Trading Hours, will be rejected.
Third, Good-`til Time will be renamed as Good-`til Day (``GTD'').
GTD will continue to be defined as an instruction the User may attach
to an order specifying the time of day at which the order expires. Any
unexecuted portion of an order with a TIF instruction of GTD will be
continue to be cancelled at the expiration of the User's specified
time, which can be no later than the close of the Post-Market Session.
A User will no longer be able to designate that an order with a GTD
instruction be cancelled at the end of a specified trading session(s).
Lastly, the Exchange proposes to adopt two new TIF instructions
which are currently available on BATS: \39\ Good `til Extended Day
(``GTX'') and RHO. GTX will be defined as an instruction the User may
attach to an order to buy or sell which, if not executed, will be
cancelled by the close of the Post-Market Session. RHO will be defined
as an instruction a User may attach to an order designating it for
execution only during Regular Trading Hours, which includes the Opening
Process and Re-Opening Process following a halt suspension or pause.
The proposed definition of RHO under Exchange Rule 11.6(q)(6) is
substantially similar to BYX Rule 11.9(b)(7) and any differences are
necessary to conform the rule with existing Exchange rule text or to
account for details or descriptions currently included in the
Exchange's rules but not in BYX Rule 11.9(b)(7). The Exchange notes
that the proposed definition of RHO is also similar to BZX Rule
11.9(b)(7) but such rule includes additional detail not necessary in
the proposed rule because the Exchange does not have any listed
securities or a separate process for handling such listed securities
whereas BZX does.
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\39\ See supra note 20.
---------------------------------------------------------------------------
Rule 11.7, Opening Process
The Exchange proposes to amend Rule 11.7 regarding the Opening
Process to align with BATS Rule 11.24 and BYX Rule 11.23.\40\ The
Exchange proposes to modify paragraph (a) to specify that buy or sell
orders that wish to participate in the Opening Process are to include a
TIF instruction of RHO and that any order that does not include a TIF
instruction of RHO will not be eligible for participation in the
Opening Process. Paragraph (a)(1) would be amended to make clear that
only orders without a TIF instruction of RHO and ISOs designated RHO
may execute against eligible Pre-Opening Session contra-side interest
resting in the EDGA Book in the time period between the start of 9:30
a.m. Eastern Time and the Exchange's Opening Process or a Contingent
Open, as described in paragraph (b) and (d).\41\ Orders with a TIF
instruction of IOC or FOK will continue to be eligible for execution
during this time period as they would be considered orders without a
TIF instruction of RHO. Paragraph (a)(1) would also state that
[[Page 2134]]
any unexecuted portion of an ISO that is designated RHO will be
converted into a non-ISO and be queued for participation in the Opening
Process.
---------------------------------------------------------------------------
\40\ See Securities Exchange Act Release Nos. 73473 (October 30,
2014), 79 FR 65744 (November 5, 2014) (SR-BATS-2014-037) (Order
Granting Approval of Proposed Rule Change to Establish an Opening
Process for Non-BATS-Listed Securities); and 73472 (November 5,
2014), 79 FR 65735 (October 9, 2014) (SR-BYX-2014-018) (Order
Granting Approval of Proposed Rule Change to Establish an Opening
Process). As amended, Exchange Rule 11.7 only differs from BZX Rule
11.24 and BYX Rule 11.23 to extent necessary to conform the rule
with existing Exchange rule text or to account for details or
descriptions currently included in the Exchange's Rule but not
contained in BZX or BYX rules.
\41\ See supra note 9.
---------------------------------------------------------------------------
Paragraph (a)(2) would be amended to state that all orders that
include a TIF instruction of RHO may participate in the Opening Process
except: Limit Orders with a Post Only instruction, the Discretionary
Range of Limit Orders, and ISOs not modified by Rule 11.7(a)(1), and
orders with a Minimum Execution Quantity instruction. Limit Orders with
a Discretionary Range may participate up to their ranked limit price
for buy orders or down to their ranked limit price for sell orders,
rather than up or down to their discretionary price, as is currently
allowed. Orders with a TIF instruction of IOC or FOK will continue to
be ineligible for execution in the Opening Process as they would not be
able to also include a TIF instruction of RHO. Orders with a Stop Price
or Stop Limit Price instruction will be eligible to participate in the
Opening Process where their stop prices have been trigged.
Paragraph (b) defines the process by which the System will attempt
to match buy and sell orders that are executable at the midpoint of the
NBBO. The Exchange does not propose to alter this process other than to
define it as the Opening Match. In addition, the Exchange propose to
include in paragraph (b) that all ERSTP modifiers, as defined in Rule
11.10(d), will be ignored as it relates to executions occurring during
the Opening Match.
Paragraph (d) sets forth the Exchange's Contingent Open process
that occurs when the conditions to establish the price of the Opening
Process set forth under Rule 11.7(c) do not occur by 9:45:00 a.m.
Eastern Time. In such case, orders will be placed on the EDGA Book,
routed, cancelled, or executed in accordance with the terms of the
order. The Exchange proposes to state under paragraph (d) that the
orders will be handled in time sequence, beginning with the order with
the oldest times [sic] stamp.
Paragraph (e) or Exchange Rule 11.7 states that re-openings after a
halt, suspension or pause will occur at the midpoint of the: (i) First
NBBO subsequent to the first reported trade on the listing exchange
following the resumption of trading after a halt, suspension, or pause;
or (ii) then prevailing NBBO when the first two-sided quotation
published by the listing exchange following the resumption of trading
after a halt, suspension, or pause if no first trade is reported by the
listing exchange within one second of publication of the first two-
sided quotation by the listing exchange. The Exchange proposes to add
additional language to paragraph (e) to align with BATS Rule 11.24 and
BYX Rule 11.23. First, the Exchange proposes to specify that while a
security is subject to a halt, suspension, or pause in trading, the
Exchange will accept orders eligible pursuant to paragraph (a)(2)
described above for queuing prior to the resumption of trading in the
security for participation in the Re-Opening Process. In addition,
proposed paragraph (e)(2) would specify that the Re-Opening Process
will occur in the same manner described in paragraphs (a)(2) and (b) of
Rule 11.7, with the following exceptions: (1) Orders without a TIF
instruction of RHO will be eligible for participation in the Re-Opening
Process, but orders that include a TIF instruction of IOC or FOK, a
Post Only instruction or Minimum Execution Quantity instruction will be
cancelled or rejected, as applicable, and any ISO that does not include
a TIF instruction of IOC or FOK will be converted into a non-ISO and be
queued for participation in the Re-Opening Process. Proposed paragraph
(e)(2) would state that where neither of the conditions required to
establish the price of the Re-Opening Process in paragraph (1) above
have occurred, the security may be opened for trading at the discretion
of the Exchange. Where the security is opened by the Exchange subject
to this discretion, orders will be handled in the same manner described
in paragraph (d) regarding a Contingent Open. Proposed paragraphs
(e)(1)-(2) would be substantially similar to the functionality set
forth in BATS Rule 11.24(e)(1)-(2) and BYX Rule 11.23(e)(1)-(2).
Rule 11.8, Order Types
The Exchange proposes to amend the order types set forth under Rule
11.8 to align their operation with existing BATS Rule and
functionality.
Market Orders (Rule 11.8(a)). The Exchange proposes to amend
paragraph (a)(2) to state that Market Orders may also include a TIF
instruction of RHO and any portion of a Market Order with a TIF
instruction of RHO will be cancelled immediately following the Opening
or Re-Opening Process in which it is not executed, unless it is
eligible to be displayed on the EDGA Book pursuant to Rule 11.8(a)(4).
A Market Order being canceled immediately following the Opening or Re-
Opening Process if not executed is a natural extension of the Opening
Process. Exchange Rule 11.7(b) states that upon conclusion of the
Opening Process, any remaining orders will be placed on the EDGA Book,
cancelled, executed, or routed to an away in accordance with Rule
11.11. As a result, the Market Order will be cancelled unless it is
eligible to be displayed on the EDGA Book pursuant to Rule 11.8(a)(4).
Under current Rule 11.10(a)(3)(A), where a non-routable buy (sell)
Market Order is entered into the System and the NBO (NBB) is greater
(less) than the Upper (Lower) Price Band, such order will be posted by
the System to the EDGA Book and priced at the Upper (Lower) Price Band,
unless (i) the order includes a TIF instruction of IOC or FOK, in which
case it will be cancelled if not executed, or (ii) the User entered a
Cancel Back instruction. The Exchange proposes to specify, consistent
with BATS Rule 11.9(a)(2),\42\ that a Market Order to buy (sell) that
is posted by the System to the EDGA Book and displayed at the Upper
(Lower) Price Band will be re-priced and displayed at the Upper (Lower)
Price Band if Price Bands move such that the price of the resting
Market Order to buy (sell) would be above (below) the Upper (Lower)
Price Band or if the Price Bands move such that the order is no longer
posted and displayed at the most aggressive permissible price. The
System shall re-price such displayed interest to the most aggressive
permissible price until the order is executed in its entirety or
cancelled. In addition, the amended rule would state that a Market
Order that includes both a TIF instruction of RHO and a Short Sale
instruction that cannot be executed because of the existence of a Short
Sale Circuit Breaker will be posted and displayed by the System to the
EDGA Book and priced in accordance with the Short Sale Re-Price
instruction described in Rule 11.6(l)(2).
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\42\ See Securities Exchange Act Release Nos. 73875 (December
18, 2014) (SR-BATS-2014-068) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to Rules 11.0(a)(2) and
11.18(e) of the BATS Exchange, Inc.); and 73874 (December 18, 2014)
(SR-BYX-2014-039) (Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Rules 11.0(a)(2) and 11.18(e) of the BATS Y-
Exchange, Inc.).
---------------------------------------------------------------------------
Currently, with the exception of a Market Order with a Destination-
on-Open instruction, any portion of a Market Order that would execute
at a price more than the greater of $0.50 or 5 percent worse than the
consolidated last sale as published by the responsible single plan
processor at the time the order is entered into the System will be
cancelled. As amended, such order will be cancelled where they would
execute at a price more than $0.50 or 5 percent worse than the NBBO at
the time the order initially reaches the Exchange,
[[Page 2135]]
whichever is greater. This is identical to BATS Rule 11.9(a)(2).
Limit Orders (Rule 11.8(b)). The Exchange proposes to state that a
Limit Order may also include a TIF instruction of RHO or GTX, in
addition to IOC, FOK, Day or GTD. In addition, Limit Orders with a TIF
instruction of IOC that do not include a Book Only \43\ instruction and
will be eligible for routing away pursuant to Rule 11.11, while Limit
Orders with a TIF instruction of FOK will not. This is designed to
provide additional detail regarding the operation of Limit Order and is
consistent with BATS Rule 11.13(a)(2), which states, in sum, that
``[w]ith respect to an order that is eligible for routing, the System
will designate orders as IOCs and will cause such orders to be routed
to one or more Trading Centers.''
---------------------------------------------------------------------------
\43\ Book Only is an order instruction stating that an order
will be matched against an order on the EDGA Book or posted to the
EDGA Book, but will not route to an away Trading Center. See EDGA
Rule 11.6(n)(3).
---------------------------------------------------------------------------
Rule 11.8(b)(11) describes the application of the re-pricing
instruction to comply with Regulation SHO to Limit Orders. The Exchange
proposes to amend this paragraph to reflect the decommissioning of
Short Sale Price Adjust and Short Sale Price Sliding in order to align
and streamline its short sale pricing functionality with BATS Rule
11.9(g)(5) with no substantive differences from existing BATS Rules or
functionality. The Exchange proposes to replace the reference to the
Hide Not Slide instruction in Rule 11.8(b)(11) with Displayed Price
Sliding to reflect the name change discussed above. The Exchange also
proposes to delete Rule 11.8(b)(12) regarding the re-pricing of Routed
and Returned orders as this functionality will not be available upon
the Exchange being migrated to BATS technology as discussed above.
Lastly, the Exchange proposes to renumber Rule 11.8(b)(13) regarding
the re-pricing of non-displayed orders as 11.8(b)(12).
ISOs (Rule 11.8(c)). The Exchange proposes to state that an ISO may
also include a TIF instruction of RHO or GTX, in addition to IOC, Day
or GTD. The Exchange also proposes to amend Rule 11.8(c) to reflect the
ISO with a Post Only and TIF instruction of GTD, GTX, or Day will no
longer be eligible for the Re-Pricing Instructions to Comply with Rule
610 of Regulation NMS or Rule 201 of Regulation SHO. Also, as amended,
an ISO that includes a Post Only instruction and a TIF instruction of
GTD, GTX, or Day will be cancelled if the System is displaying orders
at the Locking Price at the time of entry unless such order removes
liquidity pursuant to current Rule 11.6(n)(4), which governs the
execution of orders with a Post Only instruction against resting
liquidity on the EDGA Book. Such orders that also include a Short Sale
instruction that cannot be executed or displayed at their limit price
at the time of entry because of the existence of a Short Sale Circuit
Breaker will also be cancelled. This proposed rule change is
representative of additional detail with regard to the re-pricing of
ISOs that, if displayed on the EDGA Book, would be a Locking or
Crossing Quotation in the Exchange's rules. Cancelling ISOs in the
above situations is reasonable because ISOs would no longer be eligible
for the Re-Pricing Instructions to comply with Rule 610 of Regulation
NMS or 201 of Regulation SHO, thereby ensuring the Exchange does not
post an order that would lock or cross the market or violate Rule 201
of Regulation SHO consistent with BATS functionality. The Exchange
notes, however, that absent a Short Sale Circuit Breaker being in
effect, an ISO that includes a Post Only instruction and TIF
instruction of GTD, GTX, or Day will remove liquidity when the System
is displaying an order at the Locking price if the value of such
execution equals or exceeds the value of such execution if the order
instead posted to the EDGA Book and provided liquidity, including
applicable fees and rebates, under current Rule 11.6(n)(4).
MidPoint Peg Orders (Rule 11.8(d)). The Exchange proposes amend
Rule 11.8(d) to reflect the operation of MidPoint Peg Orders once the
Exchange is migrated onto BATS technology. As amended, a MidPoint Peg
Order maybe pegged to the less aggressive of the midpoint of the NBBO
or one minimum price variation inside the same side of the NBBO as the
order, in addition to the mid-point of the NBBO. This is identical to
current BATS Rule 11.9(c)(9). In addition, the rule would specify that
a MidPoint Peg Order will not be eligible for execution when an NBBO is
not available. In such case, a MidPoint Peg Order would rest on the
EDGA Book and would not be eligible for execution in the System until
an NBBO is available. The Exchange believes MidPoint Peg Orders being
ineligible for execution when no NBBO exists is reasonable and
consistent with a User's intent and the purpose of the order type. A
User entering an MidPoint Peg Order is doing so to receive an execution
at the mid-point of the NBBO and a mid-point does not exist in the
absence of an NBBO. The MidPoint Peg Order will receive a new time
stamp when an NBBO becomes available and a new midpoint of the NBBO is
established. In such case, all MidPoint Peg Orders that are ranked at
the midpoint of the NBBO will retain their priority as compared to each
other based upon the time such orders were initially received by the
System.
The Exchange proposes to state that a MidPoint Peg Order may also
include a TIF instruction of RHO or GTX, in addition to IOC, FOK, Day
or GTD. In addition, Users will be able to enter MidPoint Peg Orders as
an Odd Lot, in addition to a Round Lot or Mixed Lot. Currently,
MidPoint Peg Orders may only be executed during Regular Trading Hours.
Upon migration of the Exchange onto BATS technology, MidPoint Peg
Orders will also be eligible for execution during the Pre-Opening
Session, Regular Session and Post Closing Session. While MidPoint Peg
Orders may be submitted to be executed during the Opening Process
described in Rule 11.7(c), any Minimum Execution Quantity instruction
on aMidPoint Peg Order will not be applied during the Opening Process.
Lastly, the Exchange proposes to specify that MidPoint Peg Orders may
include a Book Only or Post Only instruction.
MidPoint Discretionary Order (Rule 11.8(e)). In sum, a MidPoint
Discretionary Order (``MDO'') is a limit order to buy that is displayed
at and pegged to the NBB, with discretion to execute at prices up to
and including the midpoint of the NBBO, and a limit order to sell that
is displayed at and pegged to the NBO, with discretion to execute at
prices down to and including the midpoint of the NBBO. The Exchange
proposes to amend Rule 11.8(e)(1) to specify that an MDO may include a
TIF instruction of RHO or GTX, in addition to GTD or Day. The Exchange
also proposes to state that MDOs may be entered as Odd Lots, in
addition to Round Lots and Mixed Lots. Currently, MDOs may only be
executed during Regular Trading Hours. Upon migration of the Exchange
onto BATS technology, MDOs will also be eligible for execution during
the Pre-Opening Session and Post Closing Session. The Exchange does not
proposes any other changes to MDO.
In addition, similar to the changes to orders with a Primary Peg
instruction described above, the Exchange proposes to amend the
provisions governing when an MDO is locked or crossed by another market
and when an MDO would itself create a Locking or Crossing Quotation
(i.e., locking or crossing another market's quotation). As proposed, an
MDO will no longer be able to join the Exchange BBO when the EDGA Book
is locked by another
[[Page 2136]]
market. When the EDGA Book is crossed by another market, the Exchange
proposes to automatically adjust an MDO to the current NBO (for bids)
or the current NBB (for offers). Rule 11.8(e)(7) will continue to
require that an MDO that would otherwise be a Locking Quotation or
Crossing Quotation be automatically adjusted by the System to one
Minimum Price Variation below the current NBO (for bids) or to one
Minimum Price Variation above the current NBB (for offers) with no
discretion to execute to the midpoint of the NBBO. This proposed rule
change is representative of additional detail with regard to the
operation of MDOs during locked or crossed markets that is currently
included in Rule 11.8(e)(7) and is consistent with Exchange's current
re-pricing options under Rule 11.6(l), as well as Exchange Rule
11.10(f) and BATS Rule 11.20(a)(3) outlining the prohibition against
locked and crossed markets under Rule 610 of Regulation NMS.
NBBO Offset Peg Order (Rule 11.8(f)). The Exchange proposes to
change the name of the NBBO Offset Peg Order to the Market Maker Peg
Order, which is the equivalent order type on BATS.\44\ A Market Maker
Peg Order is a Limit Order that, upon entry or at the beginning of
Regular Trading Hours, as applicable, will be automatically priced by
the System at the Designated Percentage \45\ away from the last
reported sale, rather than then current NBO (in the case of an order to
buy) or NBB (in the case of an order to sell), as is currently the
case. A Market Maker Peg order may also include a TIF instruction of
RHO or GTD, in addition to Day. Market Maker Peg Orders may also be
entered as Odd Lots, in addition to Round Lots and Mixed Lots.
---------------------------------------------------------------------------
\44\ See BATS Rule 11.9(c)(16).
\45\ The term Designated Percentage is defined in Exchange Rule
11.20(d)(2)(D) and (E).
---------------------------------------------------------------------------
The Exchange also proposes to add definitions for Designated
Percentage and Defined Limit under Rule 11.8(f) to account for
securities priced below $1. For purposes of Market Maker Peg Order
pricing, the Designated Percentage shall be the same as set forth in
Rules 11.20(d)(2)(D) and 11.20(d)(2)(E), except that the Designated
Percentage for securities priced below $1 as set forth in Rule
11.20(d)(2)(E) shall be 28%. For purposes of Market Maker Peg Order
pricing, the Defined Limit shall be the same as set forth in Rules
11.20(d)(2)(F) and 11.20(d)(2)(G), except that the Defined Limit for
securities priced below $1 as set forth in Rule 11.20(d)(2)(G) shall be
29.5%. The proposed changes to Rule 11.8(f) are similar to the
functionality set forth in BATS Rule 11.9(c)(16).
Route Peg Order (Rule 11.8(g)). The Exchange proposes to change the
name of the Route Peg Order to the Supplemental Peg Order, which is the
equivalent order type on BATS.\46\ The Exchange also proposes to
specify that a Supplemental Peg Order to buy (sell) will not be
eligible for execution when an NBB (NBO) is not available. In such
case, a Supplemental Peg Order to buy (sell) would rest on the EDGA
Book and would not be eligible for execution in the System until an NBB
(NBO) exists. This functionality is similar to that proposed for the
MPM Order described above, and is based upon BATS Rule 11.9(c)(19). The
Exchange believes Supplemental Peg Orders being ineligible for
execution when an NBB or NBO is not available is reasonable and
consistent with a User's intent and the purpose of the order type. A
User entering a Supplemental Peg Order is doing so to receive an
execution at the NBBO against an order that is in the process of being
routed away. If no NBBO exists, there is no price at which to execute
the Supplemental Peg Order.
---------------------------------------------------------------------------
\46\ See BATS Rule 11.9(c)(19).
---------------------------------------------------------------------------
A Supplemental Peg Order may include a TIF instruction of GTX or
RHO, in addition to GTD or Day. Supplemental Peg Orders may also be
entered as Odd Lots, in addition to Round Lots and Mixed Lots. As
amended, a Supplemental Peg Order will be eligible for execution during
the Pre-Opening Session, Regular Session, and Post-Closing Session.
Therefore, the Exchange proposes to remove the restriction that
Supplemental Peg Orders: (i) May only be entered, cancelled, and
cancelled/replaced prior to and during the Regular Session; (ii) are
only eligible for execution during the Regular Session, but not until
such time that orders in that security during the Regular Session can
be posted by the System to the EDGA Book. Any remaining unexecuted
Supplemental Peg Orders are cancelled at the conclusion of the Regular
Session. Supplemental Peg Orders will continue to be ineligible for
execution in the Opening Process. The proposed changes to Rule 11.8(g)
regarding Route Peg Orders are similar to BATS Rule 11.9(c)(19).
Rule 11.9, Priority of Orders
The Exchange proposes to amend Rule 11.9 to align with BATS
functionality and BATS Rule 11.12 regarding how orders with certain
instructions are to be ranked by the System: (i) At a price other than
the midpoint of the NBBO; (ii) at the midpoint of the NBBO; and (iii)
where buy (sell) orders utilize instructions that cause them to be
ranked by the System upon clearance of a Locking Quotation.\47\ The
proposed amendment to Rules 11.9(a)(4) and (6) are described under the
amendments to Reserve Quantity discussed above.
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\47\ For purposes of priority under proposed Rule 11.9(a)(2)(A)
and (B), the Exchange notes that orders of Odd Lot, Round Lot, or
Mixed Lot size are treated equally.
---------------------------------------------------------------------------
Rule 11.9(a)(2)(A) currently states that the System will execute
equally priced trading interest within the System in time priority in
the following order: (i) The portion of a Limit order with a Displayed
instruction; (ii) Limit Orders with a Non-Displayed instruction and the
Reserve Quantity of Limit Orders; (iii) MidPoint Discretionary Orders
executed within their Discretionary Range and Limit Orders executed
within their Discretionary Range; and (iv) Route Peg Orders. As
amended, the System will rank equally priced trading interest in such
circumstances in the following order: (i) The portion of a Limit Order
with a Displayed instruction; (ii) Limit Orders with a Non-Displayed
instruction; (iii) Orders with a Pegged and Non-Displayed instruction;
(iv) MidPoint Peg Orders; (v) Reserve Quantity of Limit Orders; (vi)
MidPoint Discretionary Orders executed within their Discretionary Range
and Limit Orders executed within their Discretionary Range; and (vii)
Supplemental Peg Orders. Orders will be substantially ranked in same
order except that, as amended, orders with a Pegged and Non-Displayed
instruction will be distinguished from and placed behind Limit Orders
with a Non-Displayed Instruction. In turn, the Reserve Quantity of
Limit Orders will be separated from and placed behind Limit Orders with
a Non-Displayed instruction and orders with a Pegged and Non-Displayed
instruction. The Exchange believes it is reasonable to rank orders with
a Pegged and Non-Displayed instruction behind Limit Orders with a
Displayed instruction and Limit Orders with a Non-Displayed instruction
because this priority sequence incentivizes the use of displayed
liquidity on the EDGA Book as well as orders that provide liquidity at
a specific limit price. These proposed changes are substantially
similar to BATS functionality and Rules 11.12(a)(2). The Exchange notes
that BATS Rule 11.12(a)(2) does not currently specify that BATS Pegged
Orders referenced in the priority rule are limited to Pegged Orders
that are not
[[Page 2137]]
displayed on BATS, however, the Exchange represents that BATS
technology does treat Pegged Orders displayed on BATS as displayed
orders and that only Pegged Orders that are not displayed on BATS are
afforded later priority than displayed orders and other non-displayed
orders. Thus, the Exchange's proposal (which would limit the later
priority treatment to orders with a Pegged instruction and a Non-
Displayed instruction) is consistent with BATS technology.
Lastly, the Exchange does not propose to make any changes to the
ranking of orders that are re-ranked upon clearance of a Locking
Quotation under Rule 11.9(a)(2)(B) other than to; (i) Remove a
reference to the Routed and Returned Re-Pricing instruction because, as
described above, it will be decommissioned upon migration of the
Exchange onto BATS technology; and (ii) replace the term Hide Not Slide
with Displayed Price Sliding to reflect the name change discussed
above.
Rule 11.10, Order Execution
Rule 11.10(a)(2) summarizes the Exchange compliance with Regulation
NMS. The rule states that for any execution to occur during Regular
Trading Hours, the price must be equal to or better than the Protected
NBBO, unless the order is marked ISO or unless the execution falls
within another exception set forth in Rule 611(b) of Regulation NMS.
For any execution to occur during the Pre-Opening Session or the Post-
Closing Session, the price must be equal to or better than the highest
bid or lowest offer in the EDGA Book or disseminated by the responsible
single plan processor, unless the order is marked ISO. To align Rule
11.10(a)(2) with BATS Rule 11.13, the Exchange proposed to further
state that such executions may occur during the Pre-Opening Session or
the Post-Closing Session where a Protected Bid is crossing a Protected
Offer. A User may, in such circumstance, instruct the Exchange to
cancel any incoming order from such User in the event a Protected Bid
is crossing a Protected Offer.
To further align Exchange Rule 11.10(a)(2) with BATS Rule 11.13,
Rule 11.10(a)(2) will state that notwithstanding the above, in the
event that a Protected Bid is crossing a Protected Offer, whether
during or outside of Regular Trading Hours, unless an order is marked
ISO, the Exchange will not execute any portion of a bid at a price more
than the greater of 5 cents or 0.5 percent higher than the lowest
Protected Offer or any portion of an offer that would execute at a
price more than the greater of 5 cents or 0.5 percent lower than the
highest Protected Bid.
The Exchange also proposes to amend Rule 11.12(e)(3) to mirror BATS
Rule 11.9(e)(3). Rule 11.12 currently states that only the price and
quantity terms of the order may be changed by a Replace Message
(including changing a Limit Order to a Market Order). As amended, Rule
11.12 would also allow the Stop Price, the sell long indicator, Short
Sale instruction, and Max Floor to be changed by a Replace Message.
Rule 11.11, Routing to Away Trading Centers
The Exchange proposes to amend Rule 11.11, which describe the
Exchange's routing options align with BATS Rule 11.13.\48\ In doing so,
the Exchange proposes to eliminate obsolete routing options, modify
certain routing options, and add to Rule 11.11 to offer many of the
same routing options offered by BATS. The Exchange notes that the
proposed rule text is based on the Rule 11.13 of BATS and is different
only to the extent necessary to conform to the Exchange's current
rules. The Exchange believes that it is appropriate to amend its
routing options as described below to ensure consistency with BATS Rule
upon migration of the Exchange onto BATS technology.
---------------------------------------------------------------------------
\48\ The Exchange notes that BATS recently amended its Rule
11.13 to harmonize certain of its routing options with the Exchange.
See supra note 38.
---------------------------------------------------------------------------
Deletions. The Exchange also proposes to delete from Rule 11.11 the
following routing options that will be decommissioned upon migration of
the Exchange onto BATS technology: ROBA, ROBX, ROBY, ROPA, IOCX, IOCT,
and SWPC. Each of these routing options are described below.
ROBA. The Exchange proposes to delete the ROBA routing
option under which an order checks the System for available shares and
then is sent, with a Time-in-Force instruction of IOC, to BATS. If
shares remain unexecuted after routing, they are posted on the EDGA
Book, unless otherwise instructed by the User.
ROBX. The Exchange proposes to delete the ROBX routing
option under which an order checks the System for available shares and
then is sent, with a Time-in-Force instruction of IOC, to Nasdaq BX
Exchange. If shares remain unexecuted after routing, they are posted on
the EDGA Book, unless otherwise instructed by the User.
ROBY. The Exchange proposes to delete the ROBY routing
option under which an order checks the System for available shares and
then is sent, with a Time-in-Force instruction of IOC, to BYX. If
shares remain unexecuted after routing, they are posted on the EDGA
Book, unless otherwise instructed by the User.
ROPA. The Exchange proposes to delete the ROPA routing
option under which an order checks the System for available shares and
then is sent, with a Time-in-Force instruction of IOC, to NYSE Arca. If
shares remain unexecuted after routing, they are posted on the EDGA
Book, unless otherwise instructed by the User.
IOCX. The Exchange proposes to delete the IOCX routing
option under which an order checks the System for available shares and
then is sent, with a Time-in-Force instruction of IOC, to EDGA. If
shares remain unexecuted after routing, they are posted on the EDGA
Book, unless otherwise instructed by the User.
IOCT. The Exchange proposes to delete the IOCT routing
option under which an order checks the System for available shares and
then is sent to destinations on the System routing table. If shares
remain unexecuted after routing, they are sent, with a Time-in-Force
instruction of IOC, to EDGA. If shares remain unexecuted after routing,
they are posted on the EDGA Book, unless otherwise instructed by the
User.
SWPC. The Exchange proposes to delete the SWPC routing
option under which an order checks the System for available shares and
then is sent to only Protected Quotations and only for displayed size.
To the extent that any portion of the order is unexecuted, the
remainder is posted on the EDGA Book at the order's limit price. The
entire SWPC order will not be cancelled back to the User immediately if
at the time of entry there is an insufficient share quantity in the
SWPC order to fulfill the displayed size of all Protected Quotations.
The Exchange also proposes to delete a reference to SWPC in Rule
11.11(d).
The Exchange believes that it is appropriate to eliminate the above
routing options because they will be decommissioned upon migration of
the Exchange onto BATS technology and are unlikely to be offered by the
Exchange in the near future.
Additions. The Exchange proposes to add a Destination Specific
routing option, which is currently offered by BATS.\49\ Destination
Specific is a routing option under which an order checks the System for
available shares and then is sent to an away trading center or centers
specified by the User. The Destination Specific routing option
[[Page 2138]]
is also similar to the Exchange's current Destination Specified order
instruction in Rule 11.6(n)(5), in that both allow the User to select
the destination the order shall be routed to. The only differences are
that under the Destination Specific order instruction, the order is
first exposed to the EDGA Book before routing and if the order is not
executed in full after routing away will be processed by the Exchange
as described in Exchange Rule 11.10(a)(4), unless the User has provided
instructions that the order reside on the book of the relevant away
Trading Center.
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\49\ See BATS Rule 11.13(a)(3)(E).
---------------------------------------------------------------------------
The Exchange also proposes to add a Post to Away routing option,
which is currently offered by BATS.\50\ Post to Away is a routing
option under which the System will route the remainder of a routed
order to and posts such order on the order book of a destination on the
System routing table as specified by the User. The Post to Away routing
option is an alternative to either cancelling a routed order back to a
User or posting such order to the BATS Book to the extent an order is
not completely filled through the routing process. The Post to Away
routing option can be combined with the following routing options:
ROUT, ROUX, ROUE, ROUD, ROUZ, ROUQ, RDOT, RDOX, ROBB, ROCO, ROLF, INET,
IOCM and ICMT.\51\ As a result of adding the Post to Away routing
option, the Exchange proposes to amend Rule 11.11(g)(3) to remove now
redundant language that a User may instruct that any remainder of the
order may be posted to the EDGA Book or another destination on the
System routing table.
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\50\ See BATS Rule 11.13(a)(3)(H).
\51\ The Exchange notes that Post to Away under BATS Rule
11.13(a)(3)(H) may be combined with less routing options than are
proposed above. This is because, due to the Exchange's taker-maker
pricing model, Members may wish to send an order to the Exchange in
order to take liquidity and receive a rebate, before being routed to
and posted on another Trading Center that incorporates a maker-taker
pricing model that provides a rebate to orders that provide
liquidity.
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Lastly, the Exchange also proposes to specify for ROOC, ROUE, ROUT
and ROUX that the entering User may select either Route To Improve
(``RTI'') or Route To Fill (``RTF''). RTI may route to multiple
destinations at a single price level simultaneously while RTF may route
to multiple destinations and at multiple price levels simultaneously.
RTI is similar to the RTI routing option available under BYX Rule
11.13(a)(3)(G).
Modifications. First, the Exchange proposes to modify Rule 11.11(a)
regarding Regulation SHO to reflect the elimination of Short Sale Price
Adjust and Short Sale Price Sliding discussed above, as well as to
replace the phrase replace the phrase ``the short sale price
restriction'' with the defined term ``Short Sale Circuit Breaker.'' The
later change does not change the meaning of Rule 11.11(a) and simply
ensures a consistent use of defined terms throughout the Exchange's
Rules.
Second, the Exchange proposes to modify the following routing
options to ensure consistency with BATS Rule: ROUC, INET, ROLF, ROOC,
SWPA, and SWPB. Each of these modifications are described below.
ROUC. ROUC is a routing option under which an order checks
the System for available shares and then is sent to destinations on the
System routing table, Nasdaq OMX BX, and NYSE. If shares remain
unexecuted after routing, they are posted on the EDGA Book. The ROUC
routing option currently incorrectly states that any remaining shares
will be post to EDGA. Therefore, the Exchange proposes to correct the
ROUC routing option to state that any remaining shares will be posted
to the EDGX Book, rather than EDGA. The Exchange also proposes to amend
the ROUC routing option to state that any remaining shares will not be
posted to EDGX Book where the User instructs the Exchange otherwise.
INET. INET is a routing option under which an order will
check the System for available shares and then will be sent to Nasdaq.
If shares remain unexecuted after routing through the INET routing
option, they will be posted on the Nasdaq book. The Exchange proposes
to amend the INET routing option to state that any remaining shares
will not be posted to Nasdaq where the User instructs the Exchange
otherwise.
ROLF. ROLF is a routing option under which an order will
check the System for available shares and then will be sent to LavaFlow
ECN. The Exchange proposes to amend the ROLF routing option to states
that any remaining shares will be cancelled unless the User instructs
otherwise.
ROOC. ROOC is a routing option for orders that the
entering firm wishes to designate for participation in the opening, re-
opening (following a halt, suspension, or pause), or closing process of
a primary listing market (BATS, NYSE, Nasdaq, NYSE MKT, or NYSE Arca)
if received before the opening/re-opening/closing time of such market.
The Exchange proposes to amend the ROOC routing option to add BATS to
the list of primary listing markets and to specify that, due to current
system limitations, orders in BATS listed securities designated for
participation in the re-opening process on BATS following a halt,
suspension, or pause will remain on the EDGA Book and be eligible for
execution once the halt, suspension, or pause has been lifted. Lastly,
to ensure consistency with the ROOC routing option available on BATS,
the Exchange proposes to states that any remaining shares will either
be posted to the EDGA Book, executed, or routed to destinations on the
System routing table, rather than like a ROUT routing option under Rule
11.11(g)(3). The proposed modifications to the ROOC routing option is
similar to the ROOC routing option available under BYX Rule
11.13(a)(3)(N).
SWPA. SWPA is a routing option under which an order checks
the System for available shares and then is sent to only Protected
Quotations and only for displayed size. The entire SWPA order will not
be cancelled back to the User immediately if at the time of entry there
is an insufficient share quantity in the SWPA order to fulfill the
displayed size of all Protected Quotations. The Exchange proposes to
amend the SWPA routing option to state that, rather than cancelling any
remaining unexecuted shares, those shares will be posted to the EDGA
Book at the order's limit price, unless otherwise instructed by the
User. This is consistent with BATS Rule 11.13(a)(2)(A), which states
that any unfilled balance of a Limit Order will be posted to the BATS
book.
SWPB. SWPB is a routing option under which an order checks
the System for available shares and then is sent to only Protected
Quotations and only for displayed size. The entire SWPB order will be
cancelled back to the User immediately if at the time of entry there is
an insufficient share quantity in the SWPB order to fulfill the
displayed size of all Protected Quotations. Like as proposes for SWPA
above, the Exchange proposes to amend the SWPB routing option to state
that, rather than cancelling any remaining unexecuted shares, those
shares will be posted to the EDGA Book at the order's limit price,
unless otherwise instructed by the User. This is consistent with BATS
Rule 11.13(a)(2)(A), which states that any unfilled balance of a Limit
Order will be posted to the BATS book.
Implementation Date
The Exchange intends to implement the proposed rule change on or
about January 12, 2015, which is the anticipated date upon which the
migration of the Exchange to the BATS technology platform will be
complete.\52\
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\52\ Implementation of the proposed rule change on or about
January 12, 2015 is contingent upon the Commission granting a waiver
of the 30-day operative delay. 17 CFR 240.19b-4(f)(6)(iii).
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[[Page 2139]]
2. Statutory Basis
The Exchange believes that the proposed rule changes are consistent
with Section 6(b) of the Act \53\ and further the objectives of Section
6(b)(5) of the Act \54\ 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) \55\ of the Act
in that it seeks to assure fair competition among brokers and dealers
and among exchange markets.
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\53\ 15 U.S.C. 78f(b).
\54\ 15 U.S.C. 78f(b)(5).
\55\ 15 U.S.C. 78k-1(a)(1).
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The proposed rule changes are generally intended to add or align
certain system functionality currently offered by BATS in order to
provide a consistent technology offering for the BGM Affiliated
Exchanges. A consistent technology offering, in turn, will simplify the
technology implementation, changes and maintenance by Users of the
Exchange that are also participants on BATS. The proposed rule changes
would also provide Users with access to functionality that is generally
available on markets other than the BGM Affiliated Exchanges and may
result in the efficient execution of such orders and will provide
additional flexibility as well as increased functionality to the
Exchange's System and its Users. The proposed rule change does not
propose to implement new or unique functionality that has not been
previously filed with the Commission or is not available on BATS. The
Exchange notes that the proposed rule text is based on the BATS Rule
and is different only to the extent necessary to conform to the
Exchange's current rules. To the extent a proposed rule change is based
on an existing BATS Rule, the language of the BATS and Exchange Rules
may differ to extent necessary to conform with existing Exchange rule
text or to account for details or descriptions included in the
Exchange's Rules but not in the applicable BATS rule. Where possible,
the Exchange has mirrored BATS rules, because consistent rules will
simplify the regulatory requirements and increase the understanding of
the Exchange's operations for Members of the Exchange that are also
participants on BATS. The proposed rule change would provide greater
harmonization between the rules of the BGM Affiliated Exchanges,
resulting in greater uniformity and less burdensome and more efficient
regulatory compliance. As such, the proposed rule change would foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and would remove impediments to and perfect
the mechanism of a free and open market and a national market system.
The Exchange also believes that the proposed amendments will contribute
to the protection of investors and the public interest by making the
Exchange's rules easier to understand. Where necessary, the Exchange
has proposed language consistent with the Exchange's operations on BATS
technology, even if there are specific details not contained in the
current structure of BATS rules. The Exchange believes it is consistent
with the Act to maintain its current structure and such detail, rather
than removing such details simply to conform to the structure or format
of BATS rules, again because the Exchange believes this will increase
the understanding of the Exchange's operations for all Members of the
Exchange.
Re-Pricing (Rule 11.6(l)). The Exchange believes that the proposed
changes to Rule 11.6(l) are consistent with Section 6(b)(5) of the
Act,\56\ as well as Rule 610 of Regulation NMS \57\ and Rule 201 of
Regulation SHO.\58\ 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.'' \59\ Such rules must be ``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.'' \60\ Thus, the amendments to the Price Adjust
instruction proposed by the Exchange will assist Users by displaying
orders at permissible prices. Similarly, Rule 201 of Regulation SHO
\61\ 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.
---------------------------------------------------------------------------
\56\ 15 U.S.C. 78f(b)(5).
\57\ 17 CFR 242.610.
\58\ 17 CFR 242.201.
\59\ 17 CFR 242.610(d).
\60\ Id.
\61\ 17 CFR 242.201.
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The Exchange believes that the proposed optional multiple re-
pricing for Price Adjust and Displayed Price Sliding are consistent
with Section 6(b)(5) of the Act,\62\ as well as Rule 610 of Regulation
NMS.\63\ The Exchange is not modifying the overall functionality of
Price Adjust or Displayed Price Sliding, which, to avoid locking or
crossing quotations of other market centers, 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 multiple re-pricing under Price Adjust and Displayed
Price Sliding as well as to align with other similar re-pricing
instructions under BATS Rules 11.9(g)(1) and (2).\64\ The Exchange also
believes decommissioning the Routed and Returned Re-Pricing option is
consistent with the Act because those Users who would wish to engage in
multiple re-pricing upon return to the Exchange may select the option
multiple re-pricing for Price Adjust or Displayed Price Sliding as
discussed above. Lastly, the Exchange also believes renaming Hide Not
Slide as Displayed Price Sliding is consistent with the Act because it
would avoid investor confusion with a similarly named re-pricing
instruction on EDGX.\65\
---------------------------------------------------------------------------
\62\ 15 U.S.C. 78f(b)(5).
\63\ 17 CFR 242.610.
\64\ See supra note 29.
\65\ See EDGX Rule 11.6(l)(1)(B).
---------------------------------------------------------------------------
The Exchange also believes that cancelling ISOs with a TIF
instruction of GTD, GTX, or Day and not subjecting them to the re-
pricing instructions to comply with Rule 610 of Regulation NMS or Rule
201 of Regulation SHO is consistent with Section 6(b)(5) of the
Act,\66\ as well as Rule 610 of Regulation NMS \67\ and Rule 201 of
Regulation SHO.\68\ As amended, an ISO that includes a TIF instruction
of GTD, GTX, or Day will be cancelled if the System is displaying
orders at the Locking Price at the time of entry. Such orders that also
include a Short Sale instruction that cannot be executed or displayed
at their limit price at the time of entry because of the existence of a
Short Sale Circuit Breaker will also be cancelled. Such orders are
cancelled in order to avoid a potential violation of Rule 610(d) of
Regulation NMS or Rule 201
[[Page 2140]]
of Regulation SHO and is, therefore, consistent with the Act.
---------------------------------------------------------------------------
\66\ 15 U.S.C. 78f(b)(5).
\67\ 17 CFR 242.610.
\68\ 17 CFR 242.201.
---------------------------------------------------------------------------
The Exchange believes that the proposed changes to its Re-Pricing
Instructions to Comply with Rule 201 of Regulation SHO are consistent
with Section 6(b)(5) of the Act,\69\ as well as Rule 201 of Regulation
SHO.\70\ The Exchange proposes to streamline and simplify its available
re-pricing instructions by deleting Short Sale Price Adjust and Short
Sale Price Sliding and adopting a new, streamlined rule to align with
BATS Rule 11.9(g)(5), with the following differences. Rule 11.6(l)(2)
states that an order to sell with a Short Sale instruction and a Price
Adjust instruction that is re-priced will be ranked at the Permitted
Price and that an order to sell with a Short Sale instruction and a
Hide Not Slide instruction that is re-priced pursuant to this paragraph
will be ranked at the Permitted Price. The Exchange's short sale price
sliding will operate the same for Users of Price Adjust on BATS while
Users who select Displayed Price Sliding will be ranked at the
Permitted Price. The proposed rule change would provide greater
harmonization between the rules of the BGM Affiliated Exchanges,
resulting in greater uniformity and less burdensome and more efficient
regulatory compliance. As such, the proposed rule change would foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and would remove impediments to and perfect
the mechanism of a free and open market and a national market system.
---------------------------------------------------------------------------
\69\ 15 U.S.C. 78f(b)(5).
\70\ 17 CFR 242.201.
---------------------------------------------------------------------------
Opening Process (Rule 11.7). The amended description of the Opening
Process in Rule 11.7 is designed to promote just and equitable
principles of trade and remove impediments to, and perfect the
mechanism of, a free and open market system because it would align with
BZX Rule 11.24 and BYX Rule 11.23 as it relates to: \71\ (i) Which
orders may participate in the process; (ii) how the price of the
Opening Transaction is determined; and (iii) the process for late
openings and re-openings. The Opening Process and their related rules
would be identical across the BGM Affiliated Exchanges, and will
therefore, contribute to the protection of investors and the public
interest by avoiding investor confusion and providing consistent
functionality across the BGM Affiliated Exchanges. Lastly, and as
stated above, the amendment to Rule 11.7 is based on BATS Rule 11.24
and BYX Rule 11.23, both of which were recently approved by the
Commission.\72\
---------------------------------------------------------------------------
\71\ See supra note 40.
\72\ Id.
---------------------------------------------------------------------------
Order Types (Rule 11.8). The Exchange believes that the proposed
changes to its order types under Rule 11.8 in order to align their
functionality with BATS rules are consistent with Section 6(b)(5) of
the Act,\73\ because these changes are designed to provide Members with
additional specificity as to how their orders will be handled upon
migration of the Exchange onto BATS technologies, thereby fostering
cooperation and coordination with persons engaged in facilitating
transactions in securities and removing impediments to and perfecting
the mechanism of a free and open market and a national market system.
Each order type was amended to update the TIF instructions that would
be available upon migration of the Exchange onto BATS technology. In
addition, the proposed amendments are designed to align their operation
with like order types on BATS and do not propose any additional
functionality. For example, Market Orders under Rule 11.8(a) is to be
amended to reflect the execution parameters under BATS Rule 11.9(a)(2).
The amendments to Limit Orders under Rule 11.8(b) and ISOs under Rule
11.8(c) are designed to update TIF instruction available to each order
type. In addition, the changes are designed to update the Re-Pricing
options available to Limit Order and ISOs to reflect the
decommissioning of Routed and Returned as well as the streamlining of
the Re-Pricing Options to Comply with Regulations SHO to align with
BATS rules. In sum, the amendments to MidPoint Peg Orders under Rule
11.8(d), MidPoint Discretionary Orders under Rule 11.8(e), and
Supplemental Peg Orders under rule 11.8(g) simply clarify their
operation during a locked or crossed market as well as expand their
eligibility for execution from the Regular Session or Regular Trading
Hours to also include the Pre-Opening Session and Post-Closing Session.
The proposed changes to Rule 11.8(d) regarding MidPoint Peg Orders are
based on BATS Rule 11.9(c)(9). Lastly, the proposed changes to Rule
11.8(f) regarding Market Maker Peg Orders are based on BATS Rule
11.9(c)(17). The proposed changes to Rule 11.8(g) regarding Route Peg
Orders are based on BATS Rule 11.9(c)(19).
---------------------------------------------------------------------------
\73\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The proposed rule change does not propose to implement new or
unique functionality that has not been previously filed with the
Commission or is not available on BATS. Therefore, the proposed rule
change would provide greater harmonization between the rules of the BGM
Affiliated Exchanges, resulting in greater uniformity and less
burdensome and more efficient regulatory compliance. As such, the
proposed rule change would foster cooperation and coordination with
persons engaged in facilitating transactions in securities and would
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
Priority (Rule 11.9). The Exchange also believes its proposed
amendments to Rule 11.9 to regarding the priority of orders promotes
just and equitable principles of trade, remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system by providing Members, Users, and the investing public with
greater transparency regarding how the System operates. The Exchange
proposes to amend Rule 11.9 to align with BATS functionality and BATS
Rules 11.12 regarding how orders with certain instructions are to be
ranked by the System generally and where orders utilize instructions
that cause them to be ranked by the System upon clearance of a Locking
Quotation providing valuable, clear information to Members, Users, and
the investing public on how their orders would be executed. As amended,
orders will be substantially ranked in same order as under current
rules except that orders with a Pegged instruction and Non-Displayed
instruction will be distinguished from and placed behind Limit Orders
with a Non-Displayed Instruction. In turn, the Reserve Quantity of
Limit Orders will be separated from and placed behind Limit Orders with
a Non-Displayed instruction, orders with a Pegged and Non-Displayed
instruction, and MidPoint Peg Orders. These changes are made to align
Exchange Rule 11.9 with the functionality set forth in BATS Rule 11.12,
as described above. The Exchange believes that the proposed rule
changes regarding order priority will provide greater transparency and
further clarity on how the various order types will be assigned
priority under various scenarios, thereby assisting Members, Users and
the investing public in understanding the manner in which the System
may execute their orders.
Routing (Rule 11.11). The Exchange believes that the proposed
changes to Rule 11.11) [sic] are consistent with Section 6(b)(5) of the
Act.\74\ As noted above, the proposed rule changes to add
[[Page 2141]]
functionality are intended to add certain system functionality
currently offered by BATS in order to provide consistent routing
options across the BGM Affiliated Exchanges. A consistent offering, in
turn, will simplify the implementation, changes and maintenance by
Users of the Exchange that are also participants on BATS. The proposed
rule changes would also provide Users with access to functionality that
may result in the efficient execution of such orders and will provide
additional flexibility as well as increased functionality to the
Exchange's System and its Users. As explained elsewhere in this
proposal, all of the proposed routing options are similar to routing
strategies on other market centers, including BATS. The proposed rule
change would provide greater harmonization between the routing options
available amongst the BGM Affiliated Exchanges, resulting in greater
uniformity and less burdensome and more efficient regulatory
compliance.
---------------------------------------------------------------------------
\74\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
reiterates that the proposed rule change is being proposed in the
context of the technology integration of the BGM Affiliated Exchanges.
Thus, the Exchange believes this proposed rule change is necessary to
permit fair competition among national securities exchanges. In
addition, the Exchange believes the proposed rule change will benefit
Exchange participants in that it is one of several changes necessary to
achieve a consistent technology offering by the BGM Affiliated
Exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \75\ and Rule 19b-
4(f)(6) thereunder.\76\
---------------------------------------------------------------------------
\75\ 15 U.S.C. 78s(b)(3)(A).
\76\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6) requires a self-
regulatory organization to give the Commission written notice of its
intent to file the proposed rule change at least five business days
prior to the date of filing of the proposed rule change, or such
shorter time as designated by the Commission. The Exchange has
satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \77\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\78\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
---------------------------------------------------------------------------
\77\ 17 CFR 240.19b-4(f)(6).
\78\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Exchange represents that since completion of the Merger,
both Members and the BGM Affiliated Exchange have made numerous systems
changes in preparation for the technology migration occurring on
January 12, 2015. The Exchange has issued frequent updates to Members
informing them the BGM Affiliated Exchange technology migration changes
as well as its anticipated time line so that Members may make the
requisite system changes. In addition, the Exchange has conducted
multiple testing opportunities for Members to ensure both the Member's
and Exchange system will operate in accordance with the proposed rule
change on January 12, 2015. Based on these representations, the
Commission believes that waiver of the operative delay is consistent
with the protection of investors and the public interest. Therefore,
the Commission designates the proposal operative upon filing.\79\
---------------------------------------------------------------------------
\79\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule 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:
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 No. SR-EDGA-2015-03 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File No. SR-EDGA-2015-03. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-EDGA-2015-03 and should be
submitted on or before February 5, 2015.
[[Page 2142]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\80\
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\80\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00531 Filed 1-14-15; 8:45 am]
BILLING CODE 8011-01-P
