Self-Regulatory Organizations; BATS Exchange, Inc.; Order Granting Approval of a Proposed Rule Change To Amend Rules 11.9, 11.12, and 11.13 of BATS Exchange, Inc., 22600-22602 [2015-09267]

Download as PDF 22600 Federal Register / Vol. 80, No. 77 / Wednesday, April 22, 2015 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule 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 if consistent with the protection of investors and the public interest, provided that the selfregulatory organization has given 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,18 the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 19 and Rule 19b–4(f)(6) thereunder.20 A proposed rule change filed under Rule 19b–4(f)(6) 21 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),22 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay to allow the Exchange to respond to current demand for the expeditious sharing of risk settings between Clearing Members and Members on whose behalf they clear Exchange Transactions. The proposal does not raise any novel or unique issues, and is substantially similar to rules that are currently operative on other options exchanges. Therefore, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest and designates the proposed rule change as operative upon filing.23 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if 18 The Exchange has satisfied this requirement. U.S.C. 78s(b)(3)(A). 20 17 CFR 240.19b–4(f)(6). 21 Id. 22 17 CFR 240.19b–4(f)(6)(iii). 23 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 19 15 VerDate Sep<11>2014 18:00 Apr 21, 2015 Jkt 235001 it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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 Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MIAX–2015–29 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 Number SR–MIAX–2015–29. 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. Frm 00128 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Brent J. Fields, Secretary. [FR Doc. 2015–09263 Filed 4–21–15; 8:45 am] BILLING CODE 8011–01–P 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: PO 00000 All submissions should refer to File Number SR–MIAX–2015–29 and should be submitted on or before May 13, 2015. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74738; File No. SR–BATS– 2015–09] Self-Regulatory Organizations; BATS Exchange, Inc.; Order Granting Approval of a Proposed Rule Change To Amend Rules 11.9, 11.12, and 11.13 of BATS Exchange, Inc. April 16, 2015. I. Introduction On January 30, 2015, BATS Exchange, Inc. (‘‘BATS’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Exchange Rules 11.9, 11.12, and 11.13. The proposed rule change was published for comment in the Federal Register on February 18, 2015.3 The Commission received no comments on the proposal. This order grants approval of the proposed rule change. II. Description of the Proposed Rule Change The Exchange conducted a comprehensive review of its system functionality.4 The proposal adds additional clarity and specificity regarding the current functionality of the Exchange’s System,5 including the 24 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. 74247 (February 11, 2015), 80 FR 8720 (‘‘Notice’’). See also Securities Exchange Act Release No. 74247A (February 26, 2015), 80 FR 11695 (March 4, 2015) (correcting file number in Notice heading to be ‘‘SR–BATS–2015–09’’). 4 On June 5, 2014, Chair Mary Jo White asked all national securities exchanges to conduct a comprehensive review of each order type offered to members and how it operates in practice. See Mary Jo White, Chair, Commission, Speech at the Sandler O’Neill & Partners, L.P. Global Exchange and Brokerage Conference, (June 5, 2014) (available at https://www.sec.gov/News/Speech/Detail/Speech/ 1370542004312#.VD2HW610w6Y). 5 Exchange Rule 1.5(aa) defines ‘‘System’’ as ‘‘the electronic communications and trading facility designated by the Board through which securities 1 15 E:\FR\FM\22APN1.SGM 22APN1 Federal Register / Vol. 80, No. 77 / Wednesday, April 22, 2015 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES operation of its order types and order instructions. The Exchange proposes no substantive modifications to the System. The changes include: (i) Making clear that orders with a Time-in-Force (‘‘TIF’’) of Immediate-or-Cancel (‘‘IOC’’) can be routed away from the Exchange; (ii) specifying the methodology used by the Exchange to determine whether BATS Post Only Orders 6 will remove liquidity from the BATS Book; 7 (iii) adding additional detail to and re-structuring the description of Pegged Orders; (iv) adding additional detail to the description of Mid-Point Peg Orders; (v) adding additional detail to the description of Discretionary Orders; (vi) amending Rule 11.12, Priority of Orders, and Rule 11.13, Order Execution, to provide additional specificity and enhance the structure of Exchange rules describing the process for ranking, executing and routing orders; (vii) adding additional detail to the description of orders subject to Re-Route functionality; and (viii) making a series of conforming changes to Rules 11.9, 11.12 and 11.13 to update crossreferences. Rule 11.9. The Exchange proposes revisions to Rule 11.9 to provide greater detail as to the existing functionality of certain order types and modifiers.8 Among other things, the Exchange proposes to make clear that orders with an IOC TIF are routable but do not post to the Exchange’s book,9 whereas orders with a Fill-or-Kill (‘‘FOK’’) TIF are not routable.10 The Exchange also proposes to clarify the Exchange’s methodology for determining whether BATS Post Only orders will remove liquidity from the Exchange’s order book upon entry.11 In addition, the Exchange proposes to reformat the rule describing the Primary Pegged and Market Pegged orders,12 and to make clear that Mid-Point Peg Orders are not eligible to execute when the NBBO is crossed but Users may elect whether such orders will be eligible to execute when the NBBO is locked.13 orders of Users are consolidated for ranking, execution and, when applicable, routing away.’’ 6 See Rule 11.9(c)(6). 7 As defined in Rule 1.5(e). 8 For additional detail regarding the specific proposed revisions for each order type and modifier, see Notice, supra note 3 at 8721–23, and proposed Rule 11.9. 9 See proposed Rule 11.9(b)(1). In connection with this proposed change the Exchange also proposes to specify that the cancellation of an unfilled balance of an order is one possible outcome after an order has been routed away. See proposed Rule 11.13(b)(2). This is what would occur with the unfilled balance of a routed IOC order. See Notice, supra note 3 at 8721. 10 See proposed Rule 11.9(b)(6). 11 See proposed Rule 11.9(c)(6). 12 See proposed Rule 11.9(c)(8). 13 See proposed Rule 11.9(c)(9). VerDate Sep<11>2014 18:00 Apr 21, 2015 Jkt 235001 Further, the Exchange proposes to add additional detail to the rule describing Discretionary Orders so that it specifies: (i) That Discretionary Orders may be fully non-displayed, with a nondisplayed ranked price (and discretionary price); (ii) how resting Discretionary Orders interact with incoming contra-side orders, including how the order type, TIF and price of the incoming order affects whether the resting Discretionary Order removes liquidity against the incoming order or the incoming order removes liquidity against the resting Discretionary Order; and (iii) that Discretionary Orders are routed away from the Exchange at their full discretionary price.14 Rule 11.12. The Exchange proposes several modifications to Rule 11.12 that are intended to clarify existing functionality relating to order priority. Some of these modifications would revise the structure of Rule 11.12 or add cross references to other rules.15 In addition, the Exchange proposes to revise Rule 11.12(a)(2) to refer to ranking, rather than executing, equallypriced trading interest because, according to the Exchange, the rule is intended to describe the manner in which resting orders are ranked and maintained.16 The Exchange also proposes to revise the reference to Pegged Orders in the priority hierarchy set forth in Rule 11.12(a)(2) to make clear that the reference is specifically to non-displayed Pegged Orders.17 The Exchange notes that the purpose of this revision is to distinguish non-displayed Pegged Orders from Primary Pegged Orders that, if displayed, are ranked with other displayed orders.18 Further, the Exchange proposes to adopt new Rule 11.12(a)(3), which would codify existing match trade prevention rules that optionally prevent the execution of orders from the same User.19 Lastly, the Exchange proposes to renumber current Rules 11.12(a)(3) and (a)(4) as Rules 11.12(a)(4) and (a)(5), respectively, and to revise them to clarify that time priority in particular can be retained or lost in certain circumstances, as 14 See proposed Rule 11.9(c)(10). In addition, the Exchange proposes to update cross references to rules that would be re-numbered as a result of the proposal. See proposed Rules 11.9(c), 11.9(d) and 11.9(g). 15 See Notice, supra note 3 at 8723. See also proposed Rule 11.12(a). 16 See Notice, supra note 3 at 8723. See also proposed Rule 11.12(a)(2). 17 See Notice, supra note 3 at 8723. See also proposed Rule 11.12(a)(2)(C). 18 See Notice, supra note 3 at 8723. 19 See Notice, supra note 3 at 8723. See also proposed Rule 11.12(a)(3). The Exchange notes that proposed Rule 11.12(a)(3) is based on EDGX Rule 11.9(a)(3). See Notice, supra note 3 at 8723. PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 22601 opposed to both price and time priority.20 Rule 11.13. The Exchange proposes several revisions to Rule 11.13, which currently governs the execution and routing logic on the Exchange. The Exchange proposes to restructure and reformat the rule in certain ways, including by more clearly delineating between execution (to be contained in new paragraph (a)) 21 and routing (to be contained in new paragraph (b)), adding sub-headings and descriptive titles, adding a cross reference to the Exchange’s rules related to the Limit Up-Limit Down Plan, and revising existing cross references in the rule.22 In addition, the Exchange proposes to add Rules 11.13(a)(4)(C) and (D), which would replace and amend existing text set forth in Rule 11.13(a)(1) and are intended to provide further clarity regarding how incoming orders are handled in certain situations when there is undisplayed locking interest on the Exchange.23 The Exchange also proposes revisions to Rule 11.13 as it relates to the Exchange’s routing process, including its re-route functionality. In particular, the Exchange proposes to add language to the rule’s description of the Aggressive Re-Route instruction (to be renumbered as Rule 11.13(b)(4)(A)) that states that any routable non-displayed limit order posted to the BATS Book that is crossed by another accessible Trading Center will be automatically routed to that Trading Center.24 The Exchange also proposes to adopt new Rule 11.13(b)(4)(C), which would specify when an order with a Super Aggressive Re-Route instruction will remove liquidity against an incoming 20 See Notice, supra note 3 at 8723. See also proposed Rules 11.12(a)(4) and (a)(5). In addition, the Exchange proposes to renumber current Rules 11.12(a)(5) and (a)(6) as Rules 11.12(a)(6) and (a)(7), respectively. 21 The Exchange proposes to move language contained within Rule 11.13 to the beginning of new paragraph (a) such that the language is more generally applicable to the rules governing execution. Specifically, the Exchange proposes to relocate language stating that any order falling within the parameters of the paragraph shall be referred to as ‘‘executable’’ and that 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(b) (as proposed to be re-numbered), or cannot be posted to the BATS Book. See Notice, supra note 3 at 8723–24. See also proposed Rule 11.13(a). 22 See Notice, supra note 3 at 8724. See also proposed Rule 11.13. 23 See Notice, supra note 3 at 8724. See also proposed Rules 11.13(a)(4)(C) and (D). 24 See Notice, supra note 3 at 8725. See also proposed Rule 11.13(b)(4)(A). E:\FR\FM\22APN1.SGM 22APN1 22602 Federal Register / Vol. 80, No. 77 / Wednesday, April 22, 2015 / Notices order.25 Further, the Exchange proposes to revise Rule 11.13(b) (to be renumbered as Rule 11.13(b)(5)) to make clear that orders that have been routed pursuant to Rule 11.12(a) are not ranked and maintained by the BATS Book, and therefore are not available to execute against incoming orders pursuant to new Rule 11.13(a).26 asabaliauskas on DSK5VPTVN1PROD with NOTICES III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.27 In particular, the Commission finds that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act,28 which requires, among other things, that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, 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, and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers, brokers or dealers. The Exchange believes that the proposed rule change will provide additional clarity and specificity regarding the functionality of the System, thus promoting just and equitable principals of trade and promoting a fair and open market. In addition, the Exchange believes the proposed rule change will contribute to the protection of investors and the public interest by making the Exchange’s rules easier to understand. The Exchange states that the proposed rule changes add clarity and transparency to the Exchange’s rulebook regarding existing Exchange functionality.29 For example, among other things, the Exchange’s proposal would amend Rule 11.9 to clarify that IOC orders are routable and FOK orders are not routable, specify the methodology used by the Exchange to 25 See Notice, supra note 3 at 8725–26. See also proposed Rule 11.13(b)(4)(C). 26 See Notice, supra note 3 at 8725. See also proposed Rule 11.13(b)(5). For additional detail regarding the Exchange’s proposed rule changes, including examples of the operation of functionality addressed by this rule filing, see Notice, supra note 3 at 8721–26. 27 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 28 15 U.S.C. 78f(b)(5) 29 See Notice, supra note 3 at 8726. VerDate Sep<11>2014 18:00 Apr 21, 2015 Jkt 235001 determine whether BATS Post Only Orders will remove liquidity from the BATS Book, and add additional detail describing the operation of Mid-Point Peg Orders and Discretionary Orders. The Exchange also has proposed to amend Rules 11.12 and 11.13 to provide additional transparency as to, but not substantively modify, the Exchange’s process for ranking, executing and routing orders, including orders subject to the Exchange’s re-route functionality. The Commission believes that these proposed changes should provide greater specificity, clarity and transparency with respect to certain order type and modifier functionality available on the Exchange, as well as the Exchange’s methodologies for ranking, executing and routing orders. Therefore, the proposal should help to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,30 that the proposed rule change (SR–BATS–2015– 09) be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.31 Brent J. Fields, Secretary. [FR Doc. 2015–09267 Filed 4–21–15; 8:45 am] BILLING CODE 8011–01–P The hearing will be at The Historic Davenport Hotel, 10 South Post Street, Elizabethan Room, Spokane, WA 99201. SUPPLEMENTARY INFORMATION: Pursuant to the Small Business Regulatory Enforcement Fairness Act (Pub. L. 104– 121), Sec. 222, SBA announces the hearing for Small Business Owners, Business Organizations, Trade Associations, Chambers of Commerce and related organizations serving small business concerns to report experiences regarding unfair or excessive Federal regulatory enforcement issues affecting their members. FOR FURTHER INFORMATION CONTACT: The hearing is open to the public; however, advance notice of attendance is requested. Anyone wishing to attend and/or make a presentation at the ´ Spokane, WA hearing must contact Jose ´ Mendez by May 1, 2015 in writing, or by fax or email in order to be placed on the agenda. For further information, ´ ´ please contact Jose Mendez, Case Management Specialist, Office of the National Ombudsman, 409 3rd Street SW., Suite 7125, Washington, DC 20416, by phone (202) 205–6178 and fax (202) 481–5719. Additionally, if you need accommodations because of a disability, translation services, or require additional information, please contact ´ ´ Jose Mendez as well. For more information on the Office of the National Ombudsman, see our Web site at www.sba.gov/ombudsman. ADDRESSES: Dated: April 14, 2015. Miguel J. L’Heureux, SBA Committee Management Officer. [FR Doc. 2015–09295 Filed 4–21–15; 8:45 am] BILLING CODE P SMALL BUSINESS ADMINISTRATION Regulatory Fairness Hearing; U.S. Small Business Administration; Region X—Spokane, Washington SOCIAL SECURITY ADMINISTRATION U.S. Small Business Administration (SBA). ACTION: Notice of open hearing of Region X Small Business Owners in Spokane, WA. Agency Information Collection Activities: Comment Request AGENCY: The SBA, Office of the National Ombudsman is issuing this notice to announce the location, date and time of the Spokane, WA Regulatory Fairness Hearing. This hearing is open to the public. DATES: The hearing will be held on Thursday, May 7, 2015, from 1:00 p.m. to 4:30 p.m. (PDT). SUMMARY: 30 15 31 17 PO 00000 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). Frm 00130 Fmt 4703 Sfmt 4703 [Docket No: SSA–2015–0020] The Social Security Administration (SSA) publishes a list of information collection packages requiring clearance by the Office of Management and Budget (OMB) in compliance with Public Law 104–13, the Paperwork Reduction Act of 1995, effective October 1, 1995. This notice includes a revision and an extension of OMB-approved information collections. SSA is soliciting comments on the accuracy of the agency’s burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and ways to minimize burden on respondents, E:\FR\FM\22APN1.SGM 22APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 77 (Wednesday, April 22, 2015)]
[Notices]
[Pages 22600-22602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09267]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74738; File No. SR-BATS-2015-09]


Self-Regulatory Organizations; BATS Exchange, Inc.; Order 
Granting Approval of a Proposed Rule Change To Amend Rules 11.9, 11.12, 
and 11.13 of BATS Exchange, Inc.

April 16, 2015.

I. Introduction

    On January 30, 2015, BATS Exchange, Inc. (``BATS'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Exchange Rules 11.9, 
11.12, and 11.13. The proposed rule change was published for comment in 
the Federal Register on February 18, 2015.\3\ The Commission received 
no comments on the proposal. This order grants approval of the proposed 
rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 74247 (February 11, 
2015), 80 FR 8720 (``Notice''). See also Securities Exchange Act 
Release No. 74247A (February 26, 2015), 80 FR 11695 (March 4, 2015) 
(correcting file number in Notice heading to be ``SR-BATS-2015-
09'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange conducted a comprehensive review of its system 
functionality.\4\ The proposal adds additional clarity and specificity 
regarding the current functionality of the Exchange's System,\5\ 
including the

[[Page 22601]]

operation of its order types and order instructions. The Exchange 
proposes no substantive modifications to the System.
---------------------------------------------------------------------------

    \4\ On June 5, 2014, Chair Mary Jo White asked all national 
securities exchanges to conduct a comprehensive review of each order 
type offered to members and how it operates in practice. See Mary Jo 
White, Chair, Commission, Speech at the Sandler O'Neill & Partners, 
L.P. Global Exchange and Brokerage Conference, (June 5, 2014) 
(available at https://www.sec.gov/News/Speech/Detail/Speech/1370542004312#.VD2HW610w6Y).
    \5\ Exchange Rule 1.5(aa) 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.''
---------------------------------------------------------------------------

    The changes include: (i) Making clear that orders with a Time-in-
Force (``TIF'') of Immediate-or-Cancel (``IOC'') can be routed away 
from the Exchange; (ii) specifying the methodology used by the Exchange 
to determine whether BATS Post Only Orders \6\ will remove liquidity 
from the BATS Book; \7\ (iii) adding additional detail to and re-
structuring the description of Pegged Orders; (iv) adding additional 
detail to the description of Mid-Point Peg Orders; (v) adding 
additional detail to the description of Discretionary Orders; (vi) 
amending Rule 11.12, Priority of Orders, and Rule 11.13, Order 
Execution, to provide additional specificity and enhance the structure 
of Exchange rules describing the process for ranking, executing and 
routing orders; (vii) adding additional detail to the description of 
orders subject to Re-Route functionality; and (viii) making a series of 
conforming changes to Rules 11.9, 11.12 and 11.13 to update cross-
references.
---------------------------------------------------------------------------

    \6\ See Rule 11.9(c)(6).
    \7\ As defined in Rule 1.5(e).
---------------------------------------------------------------------------

    Rule 11.9. The Exchange proposes revisions to Rule 11.9 to provide 
greater detail as to the existing functionality of certain order types 
and modifiers.\8\ Among other things, the Exchange proposes to make 
clear that orders with an IOC TIF are routable but do not post to the 
Exchange's book,\9\ whereas orders with a Fill-or-Kill (``FOK'') TIF 
are not routable.\10\ The Exchange also proposes to clarify the 
Exchange's methodology for determining whether BATS Post Only orders 
will remove liquidity from the Exchange's order book upon entry.\11\ In 
addition, the Exchange proposes to reformat the rule describing the 
Primary Pegged and Market Pegged orders,\12\ and to make clear that 
Mid-Point Peg Orders are not eligible to execute when the NBBO is 
crossed but Users may elect whether such orders will be eligible to 
execute when the NBBO is locked.\13\ Further, the Exchange proposes to 
add additional detail to the rule describing Discretionary Orders so 
that it specifies: (i) That Discretionary Orders may be fully non-
displayed, with a non-displayed ranked price (and discretionary price); 
(ii) how resting Discretionary Orders interact with incoming contra-
side orders, including how the order type, TIF and price of the 
incoming order affects whether the resting Discretionary Order removes 
liquidity against the incoming order or the incoming order removes 
liquidity against the resting Discretionary Order; and (iii) that 
Discretionary Orders are routed away from the Exchange at their full 
discretionary price.\14\
---------------------------------------------------------------------------

    \8\ For additional detail regarding the specific proposed 
revisions for each order type and modifier, see Notice, supra note 3 
at 8721-23, and proposed Rule 11.9.
    \9\ See proposed Rule 11.9(b)(1). In connection with this 
proposed change the Exchange also proposes to specify that the 
cancellation of an unfilled balance of an order is one possible 
outcome after an order has been routed away. See proposed Rule 
11.13(b)(2). This is what would occur with the unfilled balance of a 
routed IOC order. See Notice, supra note 3 at 8721.
    \10\ See proposed Rule 11.9(b)(6).
    \11\ See proposed Rule 11.9(c)(6).
    \12\ See proposed Rule 11.9(c)(8).
    \13\ See proposed Rule 11.9(c)(9).
    \14\ See proposed Rule 11.9(c)(10). In addition, the Exchange 
proposes to update cross references to rules that would be re-
numbered as a result of the proposal. See proposed Rules 11.9(c), 
11.9(d) and 11.9(g).
---------------------------------------------------------------------------

    Rule 11.12. The Exchange proposes several modifications to Rule 
11.12 that are intended to clarify existing functionality relating to 
order priority. Some of these modifications would revise the structure 
of Rule 11.12 or add cross references to other rules.\15\ In addition, 
the Exchange proposes to revise Rule 11.12(a)(2) to refer to ranking, 
rather than executing, equally-priced trading interest because, 
according to the Exchange, the rule is intended to describe the manner 
in which resting orders are ranked and maintained.\16\ The Exchange 
also proposes to revise the reference to Pegged Orders in the priority 
hierarchy set forth in Rule 11.12(a)(2) to make clear that the 
reference is specifically to non-displayed Pegged Orders.\17\ The 
Exchange notes that the purpose of this revision is to distinguish non-
displayed Pegged Orders from Primary Pegged Orders that, if displayed, 
are ranked with other displayed orders.\18\ Further, the Exchange 
proposes to adopt new Rule 11.12(a)(3), which would codify existing 
match trade prevention rules that optionally prevent the execution of 
orders from the same User.\19\ Lastly, the Exchange proposes to 
renumber current Rules 11.12(a)(3) and (a)(4) as Rules 11.12(a)(4) and 
(a)(5), respectively, and to revise them to clarify that time priority 
in particular can be retained or lost in certain circumstances, as 
opposed to both price and time priority.\20\
---------------------------------------------------------------------------

    \15\ See Notice, supra note 3 at 8723. See also proposed Rule 
11.12(a).
    \16\ See Notice, supra note 3 at 8723. See also proposed Rule 
11.12(a)(2).
    \17\ See Notice, supra note 3 at 8723. See also proposed Rule 
11.12(a)(2)(C).
    \18\ See Notice, supra note 3 at 8723.
    \19\ See Notice, supra note 3 at 8723. See also proposed Rule 
11.12(a)(3). The Exchange notes that proposed Rule 11.12(a)(3) is 
based on EDGX Rule 11.9(a)(3). See Notice, supra note 3 at 8723.
    \20\ See Notice, supra note 3 at 8723. See also proposed Rules 
11.12(a)(4) and (a)(5). In addition, the Exchange proposes to 
renumber current Rules 11.12(a)(5) and (a)(6) as Rules 11.12(a)(6) 
and (a)(7), respectively.
---------------------------------------------------------------------------

    Rule 11.13. The Exchange proposes several revisions to Rule 11.13, 
which currently governs the execution and routing logic on the 
Exchange. The Exchange proposes to restructure and reformat the rule in 
certain ways, including by more clearly delineating between execution 
(to be contained in new paragraph (a)) \21\ and routing (to be 
contained in new paragraph (b)), adding sub-headings and descriptive 
titles, adding a cross reference to the Exchange's rules related to the 
Limit Up-Limit Down Plan, and revising existing cross references in the 
rule.\22\ In addition, the Exchange proposes to add Rules 
11.13(a)(4)(C) and (D), which would replace and amend existing text set 
forth in Rule 11.13(a)(1) and are intended to provide further clarity 
regarding how incoming orders are handled in certain situations when 
there is undisplayed locking interest on the Exchange.\23\
---------------------------------------------------------------------------

    \21\ The Exchange proposes to move language contained within 
Rule 11.13 to the beginning of new paragraph (a) such that the 
language is more generally applicable to the rules governing 
execution. Specifically, the Exchange proposes to relocate language 
stating that any order falling within the parameters of the 
paragraph shall be referred to as ``executable'' and that 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(b) 
(as proposed to be re-numbered), or cannot be posted to the BATS 
Book. See Notice, supra note 3 at 8723-24. See also proposed Rule 
11.13(a).
    \22\ See Notice, supra note 3 at 8724. See also proposed Rule 
11.13.
    \23\ See Notice, supra note 3 at 8724. See also proposed Rules 
11.13(a)(4)(C) and (D).
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    The Exchange also proposes revisions to Rule 11.13 as it relates to 
the Exchange's routing process, including its re-route functionality. 
In particular, the Exchange proposes to add language to the rule's 
description of the Aggressive Re-Route instruction (to be renumbered as 
Rule 11.13(b)(4)(A)) that states that any routable non-displayed limit 
order posted to the BATS Book that is crossed by another accessible 
Trading Center will be automatically routed to that Trading Center.\24\ 
The Exchange also proposes to adopt new Rule 11.13(b)(4)(C), which 
would specify when an order with a Super Aggressive Re-Route 
instruction will remove liquidity against an incoming

[[Page 22602]]

order.\25\ Further, the Exchange proposes to revise Rule 11.13(b) (to 
be renumbered as Rule 11.13(b)(5)) to make clear that orders that have 
been routed pursuant to Rule 11.12(a) are not ranked and maintained by 
the BATS Book, and therefore are not available to execute against 
incoming orders pursuant to new Rule 11.13(a).\26\
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    \24\ See Notice, supra note 3 at 8725. See also proposed Rule 
11.13(b)(4)(A).
    \25\ See Notice, supra note 3 at 8725-26. See also proposed Rule 
11.13(b)(4)(C).
    \26\ See Notice, supra note 3 at 8725. See also proposed Rule 
11.13(b)(5). For additional detail regarding the Exchange's proposed 
rule changes, including examples of the operation of functionality 
addressed by this rule filing, see Notice, supra note 3 at 8721-26.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\27\ In particular, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6(b)(5) of 
the Act,\28\ which requires, among other things, that the Exchange's 
rules be designed to prevent fraudulent and manipulative acts and 
practices, 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, and, in general, to protect investors and the 
public interest; and are not designed to permit unfair discrimination 
between customers, issuers, brokers or dealers.
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    \27\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \28\ 15 U.S.C. 78f(b)(5)
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    The Exchange believes that the proposed rule change will provide 
additional clarity and specificity regarding the functionality of the 
System, thus promoting just and equitable principals of trade and 
promoting a fair and open market. In addition, the Exchange believes 
the proposed rule change will contribute to the protection of investors 
and the public interest by making the Exchange's rules easier to 
understand.
    The Exchange states that the proposed rule changes add clarity and 
transparency to the Exchange's rulebook regarding existing Exchange 
functionality.\29\ For example, among other things, the Exchange's 
proposal would amend Rule 11.9 to clarify that IOC orders are routable 
and FOK orders are not routable, specify the methodology used by the 
Exchange to determine whether BATS Post Only Orders will remove 
liquidity from the BATS Book, and add additional detail describing the 
operation of Mid-Point Peg Orders and Discretionary Orders. The 
Exchange also has proposed to amend Rules 11.12 and 11.13 to provide 
additional transparency as to, but not substantively modify, the 
Exchange's process for ranking, executing and routing orders, including 
orders subject to the Exchange's re-route functionality.
---------------------------------------------------------------------------

    \29\ See Notice, supra note 3 at 8726.
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    The Commission believes that these proposed changes should provide 
greater specificity, clarity and transparency with respect to certain 
order type and modifier functionality available on the Exchange, as 
well as the Exchange's methodologies for ranking, executing and routing 
orders. Therefore, the proposal should help to prevent fraudulent and 
manipulative acts and practices, promote just and equitable principles 
of trade, remove impediments to and perfect the mechanism of a free and 
open market and a national market system, and, in general, protect 
investors and the public interest.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\30\ that the proposed rule change (SR-BATS-2015-09) be, and it 
hereby is, approved.
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    \30\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-09267 Filed 4-21-15; 8:45 am]
BILLING CODE 8011-01-P

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