Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Rule 11.27 Regarding the Data Collection Requirements of the Tick Size Pilot Program, 75141-75146 [2015-30479]
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Federal Register / Vol. 80, No. 230 / Tuesday, December 1, 2015 / Notices
ESTIMATE OF ANNUAL RESPONDENT BURDEN
Annual
responses
Form number
AA–17 Application Process
AA–17cert .............................................................................................................................
AA–17sum ............................................................................................................................
AA–17b
(With assistance) ..................................................................................................................
(Without assistance) .............................................................................................................
AA–19a
(With assistance) ..................................................................................................................
(Without assistance) .............................................................................................................
Certification, and AA–3sum,
Application Summary.
The AA–3 application process gathers
information from an applicant about
their marital history, work history,
benefits from other government
agencies, and Medicare entitlement for
a spouse annuity. An RRB
representative interviews the applicant
either at a field office (preferred), an
itinerant point, or by telephone. During
the interview, the RRB representative
enters the information obtained into an
on-line information system. Upon
completion of the interview, the system
generates, for the applicant’s review,
either Form AA–3cert or AA–3sum,
which is a summary of the information
that the applicant provided or verified.
Form AA–3cert, Application Summary
and Certification, requires a traditional
pen and ink ‘‘wet’’ signature. Form AA–
Burden
(hours)
900
2,100
20
19
300
665
250
20
40
50
167
17
200
15
45
65
150
16
3,485
Total ...............................................................................................................................
2. Title and purpose of information
collection: Application for Spouse
Annuity under the Railroad Retirement
Act; OMB 3220–0042.
Section 2(c) of the Railroad
Retirement Act (RRA), provides for the
payment of annuities to spouses of
railroad retirement annuitants who meet
the requirements under the RRA. The
age requirements for a spouse annuity
depend on the employee’s age, date of
retirement, and years of railroad service.
The requirements relating to the
annuities are prescribed in 20 CFR 216,
218, 219, 232, 234, and 295.
To collect the information needed to
help determine an applicant’s
entitlement to, and the amount of, a
spouse annuity the RRB uses Form AA–
3, Application for Spouse/Divorced
Spouse Annuity, and electronic Forms
AA–3cert, Application Summary and
Time
(minutes)
........................
1,315
3sum, Application Summary,
documents an alternate signing method
called ‘‘Attestation,’’ which is an action
taken by the RRB representative to
confirm and annotate in the RRB
records (1) the applicant’s intent to file
an application; (2) the applicant’s
affirmation under penalty of perjury that
the information provided is correct; and
(3) the applicant’s agreement to sign the
application by proxy. When the RRB
representative is unable to contact the
applicant in person or by telephone, for
example, the applicant lives in another
country, a manual version of Form AA–
3 is used. One response is requested of
each respondent. Completion of the
form is required to obtain a benefit.
The RRB proposes to remove the
paper version of the AA–3 from the
information collection due to receiving
less than 10 responses a year.
ESTIMATE OF ANNUAL RESPONDENT BURDEN
Annual
responses
Form number
Time
(minutes)
Burden
(hours)
4,700
7,000
30
29
2,350
3,383
Total ...............................................................................................................................
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Form AA–3 Online Process
Form AA–3cert (Ink Signature) ............................................................................................
Form AA–3sum (Attestation) ................................................................................................
11,700
........................
5,733
Additional Information or Comments:
To request more information or to
obtain a copy of the information
collection justification, forms, and/or
supporting material, contact Dana
Hickman at (312) 751–4981 or
Dana.Hickman@RRB.GOV. Comments
regarding the information collection
should be addressed to Charles
Mierzwa, Railroad Retirement Board,
844 North Rush Street, Chicago, Illinois
60611–2092 or emailed to
Charles.Mierzwa@RRB.GOV. Written
comments should be received within 60
days of this notice.
Charles Mierzwa,
Chief of Information Resources Management.
[FR Doc. 2015–30443 Filed 11–30–15; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76524; File No. SR–BATS–
2015–102]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing of a
Proposed Rule Change To Adopt Rule
11.27 Regarding the Data Collection
Requirements of the Tick Size Pilot
Program
BILLING CODE 7905–01–P
November 25, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
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Federal Register / Vol. 80, No. 230 / Tuesday, December 1, 2015 / Notices
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
13, 2015, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to adopt
Exchange Rule 11.27 to implement the
Regulation NMS Plan to Implement a
Tick Size Pilot Program (‘‘Plan’’).
The text of the proposed rule change
is available at the Exchange’s Web site
at www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
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(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On August 25, 2014, NYSE Group,
Inc., on behalf of BATS Exchange, Inc.,
BATS Y-Exchange, Inc., Chicago Stock
Exchange, Inc., EDGA Exchange, Inc.,
EDGX Exchange, Inc., Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’), NASDAQ OMX BX, Inc.,
NASDAQ OMX PHLX LLC, the Nasdaq
Stock Market LLC, New York Stock
Exchange LLC (‘‘NYSE’’), NYSE MKT
LLC, and NYSE Arca, Inc. (collectively
‘‘Participants’’), filed with the
Commission, pursuant to Section 11A of
the Act 3 and Rule 608 of Regulation
NMS thereunder,4 the Plan to
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78k–1.
4 17 CFR 242.608.
2 17
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Implement a Tick Size Pilot Program
(‘‘Pilot’’).5 The Participants filed the
Plan to comply with an order issued by
the Commission on June 24, 2014.6 The
Plan 7 was published for comment in the
Federal Register on November 7, 2014,
and approved by the Commission, as
modified, on May 6, 2015.8
The Plan is designed to allow the
Commission, market participants, and
the public to study and assess the
impact of increment conventions on the
liquidity and trading of the common
stocks of small-capitalization
companies. Each Participant is required
to comply, and to enforce compliance
by its member organizations, as
applicable, with the provisions of the
Plan. As is described more fully below,
the proposed rules would require
Members 9 to comply with the
applicable data collection requirements
of the Plan.10
The Pilot will include stocks of
companies with $3 billion or less in
market capitalization, an average daily
trading volume of one million shares or
less, and a volume weighted average
price of at least $2.00 for every trading
day. The Pilot will consist of a control
group of approximately 1400 Pilot
Securities and three test groups with
400 Pilot Securities in each (selected by
a stratified random sampling process).11
During the pilot, Pilot Securities in the
control group will be quoted at the
current tick size increment of $0.01 per
share and will trade at the currently
permitted increments. Pilot Securities in
the first test group (‘‘Test Group One’’)
will be quoted in $0.05 minimum
increments but will continue to trade at
any price increment that is currently
permitted.12 Pilot Securities in the
second test group (‘‘Test Group Two’’)
5 See Letter from Brendon J. Weiss, Vice
President, Intercontinental Exchange, Inc., to
Secretary, Commission, dated August 25, 2014.
6 See Securities Exchange Act Release No. 72460
(June 24, 2014), 79 FR 36840 (June 30, 2014).
7 Unless otherwise specified, capitalized terms
used in this rule filing are based on the defined
terms of the Plan.
8 See Securities Exchange Act Release No. 74892
(May 6, 2015), 80 FR 27513 (May 13, 2015)
(‘‘Approval Order’’).
9 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
Member will have the status of a ‘‘member’’ of the
Exchange as that term is defined in Section 3(a)(3)
of the Act.’’ See Exchange Rule 1.5(n).
10 The Exchange proposes to add Information and
Policy .11 to Rule 11.27 to provide that the Rule
shall be in effect during a pilot period to coincide
with the pilot period for the Plan (including any
extensions to the pilot period for the Plan).
11 See Section V of the Plan for identification of
Pilot Securities, including criteria for selection and
grouping.
12 See Section VI(B) of the Plan.
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will be quoted in $0.05 minimum
increments and will trade at $0.05
minimum increments subject to a
midpoint exception, a retail investor
order exception, and a negotiated trade
exception.13 Pilot Securities in the third
test group (‘‘Test Group Three’’) will be
subject to the same quoting and trading
increments as Test Group Two and also
will be subject to the ‘‘Trade-at’’
requirement to prevent price matching
by a market participant that is not
displaying at a Trading Center’s ‘‘Best
Protected Bid’’ or ‘‘Best Protected
Offer,’’ unless an enumerated exception
applies.14 In addition to the exceptions
provided under Test Group Two, an
exception for Block Size orders and
exceptions that mirror those under Rule
611 of Regulation NMS 15 will apply to
the Trade-at requirement.
In approving the Plan, the
Commission noted that the Trading
Center data reporting requirements
would facilitate an analysis of the
effects of the Pilot on liquidity (e.g.,
transaction costs by order size),
execution quality (e.g., speed of order
executions), market maker activity,
competition between trading venues
(e.g., routing frequency of market
orders), transparency (e.g., choice
between displayed and hidden orders),
and market dynamics (e.g., rates and
speed of order cancellations).16 The
Commission noted that Market Maker
profitability data would assist the
Commission in evaluating the effect, if
any, of a widened tick increment on
market marker profits and any
corresponding changes in the liquidity
of small-capitalization securities.17
Compliance With the Data Collection
Requirements of the Plan
The Plan contains requirements for
collecting and transmitting data to the
Commission and to the public.18
Specifically, Appendix B.I of the Plan
(Market Quality Statistics) requires
Trading Centers19 to submit variety of
13 See
Section VI(C) of the Plan.
Section VI(D) of the Plan.
15 17 CFR 242.611.
16 See Approval Order, 80 FR at 27543.
17 Id.
18 The Exchange is also required by the Plan to
establish, maintain, and enforce written policies
and procedures that are reasonably designed to
comply with applicable quoting and trading
requirements specified in the Plan. The Exchange
intends to separately propose rules that would
require compliance by its Members with the
applicable quoting and trading requirements
specified in the Plan, and has reserved Paragraph
(a) for such rules.
19 The Plan incorporates the definition of a
‘‘Trading Center’’ from Rule 600(b)(78) of
Regulation NMS. Regulation NMS defines a
‘‘Trading Center’’ as ‘‘a national securities exchange
or national securities association that operates an
14 See
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market quality statistics, including
information about an order’s original
size, whether the order was displayable
or not, the cumulative number of orders,
the cumulative number of shares of
orders, and the cumulative number of
shares executed within specific time
increments, e.g., from 30 seconds to less
than 60 seconds after the time of order
receipt. This information shall be
categorized by security, order type,
original order size, hidden status, and
coverage under Rule 605.20 Appendix
B.I of the Plan also contains additional
requirements for market orders and
marketable limit orders, including the
share-weighted average effective spread
for executions of orders; the cumulative
number of shares of orders executed
with price improvement; and, for shares
executed with price improvement, the
share-weighted average amount per
share that prices were improved.
Appendix B.II of the Plan (Market and
Marketable Limit Order Data) requires
Trading Centers to submit information
relating to market orders and marketable
limit orders, including the time of order
receipt, order type, the order size, the
National Best Bid and National Best
Offer (‘‘NBBO’’) quoted price, the NBBO
quoted depth, the average execution
price-share-weighted average, and the
average execution time-share-weighted
average.
The Plan requires Appendix B.I and
B.II data to be submitted by Participants
that operate a Trading Center, and by
members of the Participants that operate
Trading Centers. The Plan provides that
each Participant that is the Designated
Examining Authority (‘‘DEA’’) for a
member of the Participant that operates
a Trading Center shall collect such data
in a pipe delimited format, beginning
six months prior to the Pilot Period and
ending six months after the end of the
Pilot Period. The Plan also requires the
Participant, operating as DEA, to
transmit this information to the SEC
within 30 calendar days following
month end.
The Exchange is therefore proposing
Rule 11.27(b) to set forth the
requirements for the collection and
transmission of data pursuant to
Appendix B.I and B.II of the Plan.
Proposed Rule 11.27(b)(1) requires that
a Member that operates a Trading Center
shall establish, maintain and enforce
written policies and procedures that are
reasonably designed to comply with the
data collection and transmission
SRO trading facility, an alternative trading system,
an exchange market maker, an OTC market maker,
or any other broker or dealer that executes orders
internally by trading as principal or crossing orders
as agent.’’ See 17 CFR 242.600(b).
20 17 CFR 242.605.
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requirements of Items I and II to
Appendix B of the Plan, and a Member
that is a Market Maker shall establish,
maintain and enforce written policies
and procedures that are reasonably
designed to comply with the data
collection and transmission
requirements of Item IV of Appendix B
of the Plan and Item I of Appendix C of
the Plan.
Rule 11.27(b)(2) provides that the
Exchange shall collect and transmit to
the SEC the data described in Items I
and II of Appendix B of the Plan relating
to trading activity in Pre-Pilot Securities
and Pilot Securities on a Trading Center
operated by the Exchange. The
Exchange shall transmit such data to the
SEC in a pipe delimited format, on a
disaggregated basis by Trading Center,
within 30 calendar days following
month end for: (i) Each Pre-Pilot Data
Collection Security for the period
beginning six months prior to the Pilot
Period through the trading day
immediately preceding the Pilot Period;
and (ii) each Pilot Security for the
period beginning on the first day of the
Pilot Period through six months after
the end of the Pilot Period. The
Exchange also shall make such data
publicly available on the Exchange Web
site on a monthly basis at no charge and
will not identify the Member that
generated the data.
Appendix B.IV (Daily Market Maker
Participation Statistics) requires a
Participant to collect data related to
Market Maker participation from each
Market Maker 21 engaging in trading
activity on a Trading Center operated by
the Participant. The Exchange is
therefore proposing Rule 11.27(b)(3) to
gather data about a Market Maker’s
participation in Pilot Securities and PrePilot Data Collection Securities.
Proposed Rule 11.27(b)(3)(A) provides
that a Member that is a Market Maker
shall collect and transmit to their DEA
data relating to Item IV of Appendix B
of the Plan with respect to activity
conducted on any Trading Center in
Pilot Securities and Pre-Pilot Data
Collection Securities in furtherance of
its status as a registered Market Maker,
including a Trading Center that executes
trades otherwise than on a national
securities exchange, for transactions that
have settled or reached settlement date.
The proposed rule requires Market
Makers to transmit such data in a format
required by their DEA, by 12:00 p.m.
EST on T+4 for: (i) Transactions in each
Pre-Pilot Data Collection Security for
21 The Plan defines a Market Maker as ‘‘a dealer
registered with any self-regulatory organization, in
accordance with the rules thereof, as (i) a market
maker or (ii) a liquidity provider with an obligation
to maintain continuous, two-sided trading interest.’’
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75143
the period beginning six months prior to
the Pilot Period through the trading day
immediately preceding the Pilot Period;
and (ii) for transactions in each Pilot
Security for the period beginning on the
first day of the Pilot Period through six
months after the end of the Pilot Period.
Proposed Rule 11.27(b)(3)(B) provides
that the Exchange shall transmit the
data collected by the DEA pursuant to
Rule 11.27(b)(3)(A) above relating to
Market Maker activity on a Trading
Center operated by the Exchange to the
SEC in a pipe delimited format within
30 calendar days following month end.
The Exchange shall also make such data
publicly available on the Exchange Web
site on a monthly basis at no charge and
shall not identify the Trading Center
that generated the data.
Appendix C.I (Market Maker
Profitability) requires a Participant to
collect data related to Market Maker
profitability from each Market Maker for
which it is the DEA. Specifically, the
Participant is required to collect the
total number of shares of orders
executed by the Market Maker; the raw
Market Maker realized trading profits,
and the raw Market Maker unrealized
trading profits. Data shall be collected
for dates starting six months prior to the
Pilot Period through six months after
the end of the Pilot Period. This data
shall be collected on a monthly basis, to
be provided in a pipe delimited format
to the Participant, as DEA, within 30
calendar days following month end.
Appendix C.II (Aggregated Market
Maker Profitability) requires the
Participant, as DEA, to aggregate the
Appendix C.I data, and to categorize
this data by security as well as by the
control group and each Test Group. That
aggregated data shall contain
information relating to total raw Market
Maker realized trading profits, volumeweighted average of raw Market Maker
realized trading profits, the total raw
Market Maker unrealized trading profits,
and the volume-weighted average of
Market Maker unrealized trading profits.
The Exchange is therefore proposing
Rule 11.27(b)(4) to set forth the
requirements for the collection and
transmission of data pursuant to
Appendix C.I of the Plan. Proposed Rule
11.27(b)(4)(A) requires that a Member
that is a Market Maker shall collect and
transmit to their DEA the data described
in Item I of Appendix C of the Plan, as
modified by Paragraph (b)(5) with
respect to executions in Pilot Securities
that have settled or reached settlement
date that were executed on any Trading
Center. The proposed rule also requires
Members to provide such data in a
format required by their DEA by 12 p.m.
EST on T+4 for executions during and
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outside of Regular Trading Hours in
each: (i) Pre-Pilot Data Collection
Security for the period beginning six
months prior to the Pilot Period through
the trading day immediately preceding
the Pilot Period; and (ii) Pilot Security
for the period beginning on the first day
of the Pilot Period through six months
after the end of the Pilot Period.
The Exchange is also adopting a rule
setting forth the manner in which
Market Maker participation will be
calculated. Item III of Appendix B of the
Plan requires each Participant that is a
national securities exchange to collect
daily Market Maker registration
statistics categorized by security,
including the following information: (i)
Ticker symbol; (ii) the Participant
exchange; (iii) number of registered
market makers; and (iv) the number of
other registered liquidity providers.
Therefore, the Exchange proposes to
adopt Rule 11.27(b)(5) providing that
the Exchange shall collect and transmit
to the SEC the data described in Item III
of Appendix B of the Plan relating to
daily Market Maker registration
statistics in a pipe delimited format
within 30 calendar days following
month end for: (i) For transactions in
each Pre-Pilot Data Collection Security
for the period beginning six months
prior to the Pilot Period through the
trading day immediately preceding the
Pilot Period; and (ii) For transactions in
each Pilot Security for the period
beginning on the first day of the Pilot
Period through six months after the end
of the Pilot Period.
The Exchange is also proposing,
through Interpretations and Policies, to
clarify other aspects of the data
collection requirements.22 Proposed
Interpretations and Policy .02 relates to
the use of the retail investor order flag
for purposes of Appendix B.II(n)
reporting. The Plan currently states that
market and marketable limit orders shall
include a ‘‘yes/no’’ field relating to the
Retail Investor Order flag. The Exchange
is proposing Interpretations and Policy
.02 to clarify that, for purposes of the
reporting requirement in Appendix
B.II(n), a Trading Center shall report ‘‘y’’
to their DEA where it is relying upon
the Retail Investor Order exception to
Test Groups Two and Three, and ‘‘n’’ for
all other instances. The Exchange
believes that requiring the identification
of a Retail Investor Orders only where
the exception may apply (i.e., Pilot
Securities in Test Groups Two and
22 The
Exchange is also proposing Interpretations
and Policy .01 to Rule 11.27 to clarify that certain
enumerated terms used throughout Rule 11.27 shall
have the same meaning as set forth in the Plan.
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Three) is consistent with Appendix
B.II(n).
Interpretations and Policy .03 requires
that Members populate a field to
identify to their DEA whether an order
is affected by the bands in place
pursuant to the National Market System
Plan to Address Extraordinary Market
Volatility.23 Pursuant to the Limit-Up
Limit-Down Plan, between 9:30 a.m.
and 4:00 p.m., the Securities
Information Processor (‘‘SIP’’) calculates
a lower price band and an upper price
band for each NMS stock. These price
bands represent a specified percentage
above or below the stock’s reference
price, which generally is calculated
based on reported transactions in that
stock over the preceding five minutes.
When one side of the market for an
individual security is outside the
applicable price band, the SIP identifies
that quotation as non-executable. When
the other side of the market reaches the
applicable price band (e.g., the offer
reaches the lower price band), the
security enters a Limit State. The stock
would exit a Limit State if, within 15
seconds of entering the Limit State, all
Limit State Quotations were executed or
canceled in their entirety. If the security
does not exit a Limit State within 15
seconds, then the primary listing
exchange declares a five-minute trading
pause, which would be applicable to all
markets trading the security.
The Exchange and the other
Participants have determined that it is
appropriate to create a new flag for
reporting orders that are affected by the
Limit-Up Limit-Down bands.
Accordingly, a Trading Center shall
report a value of ‘‘Y’’ to their DEA when
the ability of an order to execute has
been affected by the Limit-Up LimitDown bands in effect at the time of
order receipt. A Trading Center shall
report a value of ‘‘N’’ to their DEA when
the ability of an order to execute has not
been affected by the Limit-Up LimitDown bands in effect at the time of
order receipt.
Interpretation and Policy .03 also
requires, for dually-listed securities, that
the Participant indicate whether the
order was handled domestically, or
routed to a foreign venue. Accordingly,
the Participant will indicate, for
purposes of Appendix B.I, whether the
order was: (1) Fully executed
domestically, or (2) fully or partially
executed on a foreign market. For
purposes of Appendix B.II, the
Participant will classify all orders in
23 See National Market System Plan to Address
Extraordinary Market Volatility, Securities
Exchange Act Release No. 67091 (May 31, 2012), 77
FR 33498 (June 6, 2012) (File No. 4–631) (‘‘LimitUp Limit-Down Plan’’).
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dually-listed Pilot and Pre-Pilot
Securities as: (1) Directed to a domestic
venue for execution; (2) may only be
directed to a foreign venue for
execution; or (3) was fully or partially
directed to a foreign venue at the
discretion of the Member. The Exchange
believes that this proposed flag will
better identify orders in dually-listed
securities, as such orders that were
executed in foreign venues would not be
subject to the Plan’s quoting and trading
requirements, and could otherwise
compromise the integrity of the data.
Interpretations and Policy .04 relates
to the time ranges specified in
Appendix B.I.a(14), B.I.a(15), B.I.a(21)
and B.I.a(22).24 The Exchange and the
other Participants have determined that
it is appropriate to change the reporting
times in these provisions to require
more granular reporting for these
categories. Accordingly, the Exchange
proposes to add Appendix B.I.a(14A),
which will require Trading Centers to
report the cumulative number of shares
of orders executed from 100
microseconds to less than 1 millisecond
after the time of order receipt. Appendix
B.I.a(15) will be changed to require the
cumulative number of shares of orders
executed from 1 millisecond to less than
100 milliseconds after the time of order
receipt. The Exchange also proposes to
add Appendix B.I.a(21A), which will
require Trading Centers to report the
cumulative number of shares of orders
canceled from 100 microseconds to less
than 1 millisecond after the time of
order receipt. Appendix B.I.a(22) will be
changed to require the cumulative
number of shares of orders canceled
from 1 millisecond to less than 100
milliseconds after the time of order
receipt. The Exchange believes that
these new reporting requirements will
contribute to a meaningful analysis of
the Pilot by producing more granular
data on these points.25
24 Specifically, Appendix B.I.a(14) requires
reporting of the cumulative number of shares of
orders executed from 0 to less than 100
microseconds after the time of order receipt;
Appendix B.I.a(15) requires reporting of the
cumulative number of shares of orders executed
from 100 microseconds to less than 100
milliseconds after the time of order receipt;
Appendix B.I.a(21) requires reporting of the
cumulative number of shares of orders cancelled
from 0 to less than 100 microseconds after the time
of order receipt; and Appendix B.I.a(22) requires
reporting of the cumulative number of shares of
orders cancelled from 100 microseconds to less
than 100 milliseconds after the time of order
receipt.
25 The Exchange notes that FINRA intends to file
an exemptive request seeking relief from certain of
the Plan’s data collection requirements, including
the requirements that Trading Centers report
information in either microseconds or milliseconds,
as not all Trading Centers currently capture and
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Interpretations and Policy .05 relates
to the relevant measurement for
purposes of Appendix B.I.a(31)–(33)
reporting. Currently, the Plan states that
this data shall be reported as of the time
of order execution. The Exchange and
the other Participants believe that this
information should more properly be
captured at the time of order receipt as
evaluating share-weighted average
prices at the time of order receipt is
more consistent with the goal of
observing the effect of the Pilot on the
liquidity of Pilot Securities. The
Exchange is therefore proposing to make
this change through Interpretations and
Policy .05.26 This change will make
these provisions consistent with the
remainder of the statistics in Appendix
B.I.a, which are all based on order
receipt.
Interpretations and Policy .06
addresses the status of not-held and
auction orders for purposes of Appendix
B.I reporting. Currently, Appendix B.I
sets forth eight categories of orders,
including market orders, marketable
limit orders, and inside-the-quote
resting limit orders, for which daily
market quality statistics must be
reported. Currently, Appendix B.I does
not provide a category for not held
orders, clean cross orders, auction
orders, or orders received when the
NBBO is crossed. The Exchange and the
other Participants have determined that
it is appropriate to include separate
categories for both not held orders and
auction orders for purposes of Appendix
B reporting. The Exchange is therefore
proposing Interpretations and Policy .06
to provide that not held orders shall be
included as an order type for purposes
of Appendix B reporting, and shall be
assigned the number (18). Clean cross
orders shall be included as an order
type for purposes of Appendix B
reporting, and shall be assigned the
number (19); auction orders shall be
included an as order type for purposes
of Appendix B reporting, and shall be
assigned the number (20); and orders
that cannot otherwise be classified,
including, for example, orders received
when the NBBO is crossed shall be
included as an order type for purposes
of Appendix B reporting, and shall be
assigned the number (21). All of these
orders already are included in the scope
of Appendix B; however, without this
proposed change, these order types
would be categorized with other orders,
such as regular held orders, that should
report orders in either microseconds or
milliseconds.
26 This proposed change is also part of an
exemptive request that the Exchange and the other
Participants will be submitting to the SEC pursuant
to Rule 608(e) of Regulation NMS.
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be able to be fully executed upon
receipt, which would compromise the
value of this data.
The Exchange is proposing
Interpretations and Policy .07 to clarify
the scope of the Plan as it relates to
Members that only execute orders
limited purposes. Specifically, The
Exchange and the other Participants
believe that a Member that only
executes orders otherwise than on a
national securities exchange for the
purpose of: (1) Correcting a bona fide
error related to the execution of a
customer order; (2) purchasing a
security from a customer at a nominal
price solely for purposes of liquidating
the customer’s position; or (3)
completing the fractional share portion
of an order 27 shall not be deemed a
Trading Center for purposes of
Appendix B to the Plan. The Exchange
is therefore proposing Supplementary
Material .09 to make this clarification.
The Exchange is proposing
Interpretations and Policy .08 to clarify
that, for purposes of the Plan, Trading
Centers must begin the data collection
required pursuant to Appendix B.I.a(1)
through B.II.(y) of the Plan and Item I of
Appendix C of the Plan on April 4,
2016. While the Exchange or the
Member’s DEA will provide the
information required by Appendix B
and C of the Plan during the Pilot
Period, the requirement that the
Exchange or their DEA provide
information to the SEC within 30 days
following month end and make such
data publicly available on its Web site
pursuant to Appendix B and C shall
commence six months prior to the
beginning of the Pilot Period.28
The Exchange is proposing
Interpretations and Policy .09 to address
the requirement in Appendix C.I(b) of
the Plan that the calculation of raw
Market Maker realized trading profits
utilize a last in, first out (‘‘LIFO’’)-like
method to determine which share prices
shall be used in that calculation. The
Exchange and the other Participants
believe that it is more appropriate to
utilize a methodology that yields LIFOlike results, rather than utilizing a LIFOlike method, and the Exchange is
27 The
Exchange notes that where a Member
purchases a fractional share from a customer, the
Trading Center that executes the remaining whole
shares of that customer order would subject to
subject to Appendix B of the Plan.
28 In its order approving the Plan, the SEC noted
that the Pilot shall be implemented within one year
of the date of publication of its order, e.g., by May
6, 2016. See Approval Order, 80 FR at 27545.
However, on November 6, 2015, the SEC extended
the implementation date approximately five months
to October 3, 2016. See Securities Exchange Act
Release No. 76382 (November 6, 2015) (File No. 4–
657).
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therefore proposing Interpretations and
Policy .09 to make this change.29 The
Exchange is proposing that, for purposes
of Item I of Appendix C, the Participants
shall calculate daily Market Maker
realized profitability statistics for each
trading day on a daily LIFO basis using
reported trade price and shall include
only trades executed on the subject
trading day. The daily LIFO calculation
shall not include any positions carried
over from previous trading days. For
purposes of Item I.c of Appendix C, the
Participants shall calculate daily Market
Maker unrealized profitability statistics
for each trading day on an average price
basis. Specifically, the Participants must
calculate the volume weighted average
price of the excess (deficit) of buy
volume over sell volume for the current
trading day using reported trade price.
The gain (loss) of the excess (deficit) of
buy volume over sell volume shall be
determined by using the volume
weighted average price compared to the
closing price of the security as reported
by the primary listing exchange. In
reporting unrealized trading profits, the
Participant shall also report the number
of excess (deficit) shares held by the
Market Maker, the volume weighted
average price of that excess (deficit) and
the closing price of the security as
reported by the primary listing exchange
used in reporting unrealized profit.
Finally, the Exchange is proposing
Interpretations and Policy .10 to address
the securities that will be used for data
collection purposes prior to the
commencement of the Pilot. The
Exchange and the other Participants
have determined that it is appropriate to
collect data for a group of securities that
is larger, and using different
quantitative thresholds, than the group
of securities that will be Pilot Securities.
The Exchange is therefore proposing
Interpretations and Policy .09 to define
‘‘Pre-Pilot Data Collection Securities’’ as
the securities designated by the
Participants for purposes of the data
collection requirements described in
Items I, II and IV of Appendix B and
Item I of Appendix C of the Plan for the
period beginning six months prior to the
Pilot Period and ending on the trading
29 Appendix C.I currently requires Market Maker
profitability statistics to include (1) the total
number of shares of orders executed by the Market
Maker; (2) raw Market Maker realized trading
profits, which is the difference between the market
value of Market Maker shares and the market value
of Market Maker purchases, using a LIFO-like
method; and (3) raw Market Maker unrealized
trading profits, which is the difference between the
purchase or sale price of the end-of-day inventory
position of the Market Maker and the Closing Price.
In the case of a short position, the Closing Price
from the sale will be subtracted; in the case of a
long position, the purchase price will be subtracted
from the Closing Price.
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day immediately preceding the Pilot
Period. The Participants shall compile
the list of Pre-Pilot Data Collection
Securities by selecting all NMS stocks
with a market capitalization of $5
billion or less, a Consolidated Average
Daily Volume (CADV) of 2 million
shares or less and a closing price of $1
per share or more. The market
capitalization and the closing price
thresholds shall be applied to the last
day of the Pre-Pilot measurement
period, and the CADV threshold shall be
applied to the duration of the Pre-Pilot
measurement period. The Pre-Pilot
measurement period shall be the three
calendar months ending on the day
when the Pre-Pilot Data Collection
Securities are selected. The Pre-Pilot
Data Collection Securities shall be
selected thirty days prior to the
commencement of the six-month PrePilot Period. On the trading day that is
the first trading day of the Pilot Period
through six months after the end of the
Pilot Period, the data collection
requirements will become applicable to
the Pilot Securities only. A Pilot
Security will only be eligible to be
included in a Test Group if it was a PrePilot Security.
The proposed rule change will be
effective upon Commission approval.
The implementation date will be April
4, 2016.
this proposal is in furtherance of the
objectives of the Plan, as identified by
the SEC, and is therefore consistent with
the Act because the proposal
implements and clarifies the
requirements of the Plan and applies
specific obligations to Members in
furtherance of compliance with the
Plan.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 30 in general, and furthers the
objectives of Section 6(b)(5) of the Act 31
in particular, in that it is designed to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, 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.
The Exchange believes that this
proposal is consistent with the Act
because it implements and clarifies the
provisions of the Plan, and is designed
to assist the Exchange in meeting its
regulatory obligations pursuant of the
Plan. In approving the Plan, the SEC
noted that the Pilot was an appropriate,
data-driven test that was designed to
evaluate the impact of a wider tick size
on trading, liquidity, and the market
quality of securities of smaller
capitalization companies, and was
therefore in furtherance of the purposes
of the Act. The Exchange believes that
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission will: (a) By order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be disapproved.
30 15
31 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange notes that the proposed rule
change implements the provisions of the
Plan, and is designed to assist the
Exchange in meeting its regulatory
obligations pursuant of the Plan. The
Exchange also notes that the data
collection requirements for Members
that operate Trading Centers will apply
equally to all such Members, as will the
data collection requirements for Market
Makers.
(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.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposal 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–
BATS–2015–102 on the subject line.
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Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File No.
SR–BATS–2015–102. This file number
should be included on the subject line
if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–BATS–
2015–102 and should be submitted on
or beforeDecember 22, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Brent J. Fields,
Secretary.
[FR Doc. 2015–30479 Filed 11–30–15; 8:45 am]
BILLING CODE 8011–01–P
32 17
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[Federal Register Volume 80, Number 230 (Tuesday, December 1, 2015)]
[Notices]
[Pages 75141-75146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30479]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76524; File No. SR-BATS-2015-102]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Adopt Rule 11.27 Regarding the Data
Collection Requirements of the Tick Size Pilot Program
November 25, 2015.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the
[[Page 75142]]
``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 13, 2015, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to adopt Exchange Rule 11.27 to implement
the Regulation NMS Plan to Implement a Tick Size Pilot Program
(``Plan'').
The text of the proposed rule change is available at the Exchange's
Web site at www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On August 25, 2014, NYSE Group, Inc., on behalf of BATS Exchange,
Inc., BATS Y-Exchange, Inc., Chicago Stock Exchange, Inc., EDGA
Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory
Authority, Inc. (``FINRA''), NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC,
the Nasdaq Stock Market LLC, New York Stock Exchange LLC (``NYSE''),
NYSE MKT LLC, and NYSE Arca, Inc. (collectively ``Participants''),
filed with the Commission, pursuant to Section 11A of the Act \3\ and
Rule 608 of Regulation NMS thereunder,\4\ the Plan to Implement a Tick
Size Pilot Program (``Pilot'').\5\ The Participants filed the Plan to
comply with an order issued by the Commission on June 24, 2014.\6\ The
Plan \7\ was published for comment in the Federal Register on November
7, 2014, and approved by the Commission, as modified, on May 6,
2015.\8\
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\3\ 15 U.S.C. 78k-1.
\4\ 17 CFR 242.608.
\5\ See Letter from Brendon J. Weiss, Vice President,
Intercontinental Exchange, Inc., to Secretary, Commission, dated
August 25, 2014.
\6\ See Securities Exchange Act Release No. 72460 (June 24,
2014), 79 FR 36840 (June 30, 2014).
\7\ Unless otherwise specified, capitalized terms used in this
rule filing are based on the defined terms of the Plan.
\8\ See Securities Exchange Act Release No. 74892 (May 6, 2015),
80 FR 27513 (May 13, 2015) (``Approval Order'').
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The Plan is designed to allow the Commission, market participants,
and the public to study and assess the impact of increment conventions
on the liquidity and trading of the common stocks of small-
capitalization companies. Each Participant is required to comply, and
to enforce compliance by its member organizations, as applicable, with
the provisions of the Plan. As is described more fully below, the
proposed rules would require Members \9\ to comply with the applicable
data collection requirements of the Plan.\10\
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\9\ 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 Member will
have the status of a ``member'' of the Exchange as that term is
defined in Section 3(a)(3) of the Act.'' See Exchange Rule 1.5(n).
\10\ The Exchange proposes to add Information and Policy .11 to
Rule 11.27 to provide that the Rule shall be in effect during a
pilot period to coincide with the pilot period for the Plan
(including any extensions to the pilot period for the Plan).
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The Pilot will include stocks of companies with $3 billion or less
in market capitalization, an average daily trading volume of one
million shares or less, and a volume weighted average price of at least
$2.00 for every trading day. The Pilot will consist of a control group
of approximately 1400 Pilot Securities and three test groups with 400
Pilot Securities in each (selected by a stratified random sampling
process).\11\ During the pilot, Pilot Securities in the control group
will be quoted at the current tick size increment of $0.01 per share
and will trade at the currently permitted increments. Pilot Securities
in the first test group (``Test Group One'') will be quoted in $0.05
minimum increments but will continue to trade at any price increment
that is currently permitted.\12\ Pilot Securities in the second test
group (``Test Group Two'') will be quoted in $0.05 minimum increments
and will trade at $0.05 minimum increments subject to a midpoint
exception, a retail investor order exception, and a negotiated trade
exception.\13\ Pilot Securities in the third test group (``Test Group
Three'') will be subject to the same quoting and trading increments as
Test Group Two and also will be subject to the ``Trade-at'' requirement
to prevent price matching by a market participant that is not
displaying at a Trading Center's ``Best Protected Bid'' or ``Best
Protected Offer,'' unless an enumerated exception applies.\14\ In
addition to the exceptions provided under Test Group Two, an exception
for Block Size orders and exceptions that mirror those under Rule 611
of Regulation NMS \15\ will apply to the Trade-at requirement.
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\11\ See Section V of the Plan for identification of Pilot
Securities, including criteria for selection and grouping.
\12\ See Section VI(B) of the Plan.
\13\ See Section VI(C) of the Plan.
\14\ See Section VI(D) of the Plan.
\15\ 17 CFR 242.611.
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In approving the Plan, the Commission noted that the Trading Center
data reporting requirements would facilitate an analysis of the effects
of the Pilot on liquidity (e.g., transaction costs by order size),
execution quality (e.g., speed of order executions), market maker
activity, competition between trading venues (e.g., routing frequency
of market orders), transparency (e.g., choice between displayed and
hidden orders), and market dynamics (e.g., rates and speed of order
cancellations).\16\ The Commission noted that Market Maker
profitability data would assist the Commission in evaluating the
effect, if any, of a widened tick increment on market marker profits
and any corresponding changes in the liquidity of small-capitalization
securities.\17\
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\16\ See Approval Order, 80 FR at 27543.
\17\ Id.
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Compliance With the Data Collection Requirements of the Plan
The Plan contains requirements for collecting and transmitting data
to the Commission and to the public.\18\ Specifically, Appendix B.I of
the Plan (Market Quality Statistics) requires Trading Centers\19\ to
submit variety of
[[Page 75143]]
market quality statistics, including information about an order's
original size, whether the order was displayable or not, the cumulative
number of orders, the cumulative number of shares of orders, and the
cumulative number of shares executed within specific time increments,
e.g., from 30 seconds to less than 60 seconds after the time of order
receipt. This information shall be categorized by security, order type,
original order size, hidden status, and coverage under Rule 605.\20\
Appendix B.I of the Plan also contains additional requirements for
market orders and marketable limit orders, including the share-weighted
average effective spread for executions of orders; the cumulative
number of shares of orders executed with price improvement; and, for
shares executed with price improvement, the share-weighted average
amount per share that prices were improved.
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\18\ The Exchange is also required by the Plan to establish,
maintain, and enforce written policies and procedures that are
reasonably designed to comply with applicable quoting and trading
requirements specified in the Plan. The Exchange intends to
separately propose rules that would require compliance by its
Members with the applicable quoting and trading requirements
specified in the Plan, and has reserved Paragraph (a) for such
rules.
\19\ The Plan incorporates the definition of a ``Trading
Center'' from Rule 600(b)(78) of Regulation NMS. Regulation NMS
defines a ``Trading Center'' as ``a national securities exchange or
national securities association that operates an SRO trading
facility, an alternative trading system, an exchange market maker,
an OTC market maker, or any other broker or dealer that executes
orders internally by trading as principal or crossing orders as
agent.'' See 17 CFR 242.600(b).
\20\ 17 CFR 242.605.
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Appendix B.II of the Plan (Market and Marketable Limit Order Data)
requires Trading Centers to submit information relating to market
orders and marketable limit orders, including the time of order
receipt, order type, the order size, the National Best Bid and National
Best Offer (``NBBO'') quoted price, the NBBO quoted depth, the average
execution price-share-weighted average, and the average execution time-
share-weighted average.
The Plan requires Appendix B.I and B.II data to be submitted by
Participants that operate a Trading Center, and by members of the
Participants that operate Trading Centers. The Plan provides that each
Participant that is the Designated Examining Authority (``DEA'') for a
member of the Participant that operates a Trading Center shall collect
such data in a pipe delimited format, beginning six months prior to the
Pilot Period and ending six months after the end of the Pilot Period.
The Plan also requires the Participant, operating as DEA, to transmit
this information to the SEC within 30 calendar days following month
end.
The Exchange is therefore proposing Rule 11.27(b) to set forth the
requirements for the collection and transmission of data pursuant to
Appendix B.I and B.II of the Plan. Proposed Rule 11.27(b)(1) requires
that a Member that operates a Trading Center shall establish, maintain
and enforce written policies and procedures that are reasonably
designed to comply with the data collection and transmission
requirements of Items I and II to Appendix B of the Plan, and a Member
that is a Market Maker shall establish, maintain and enforce written
policies and procedures that are reasonably designed to comply with the
data collection and transmission requirements of Item IV of Appendix B
of the Plan and Item I of Appendix C of the Plan.
Rule 11.27(b)(2) provides that the Exchange shall collect and
transmit to the SEC the data described in Items I and II of Appendix B
of the Plan relating to trading activity in Pre-Pilot Securities and
Pilot Securities on a Trading Center operated by the Exchange. The
Exchange shall transmit such data to the SEC in a pipe delimited
format, on a disaggregated basis by Trading Center, within 30 calendar
days following month end for: (i) Each Pre-Pilot Data Collection
Security for the period beginning six months prior to the Pilot Period
through the trading day immediately preceding the Pilot Period; and
(ii) each Pilot Security for the period beginning on the first day of
the Pilot Period through six months after the end of the Pilot Period.
The Exchange also shall make such data publicly available on the
Exchange Web site on a monthly basis at no charge and will not identify
the Member that generated the data.
Appendix B.IV (Daily Market Maker Participation Statistics)
requires a Participant to collect data related to Market Maker
participation from each Market Maker \21\ engaging in trading activity
on a Trading Center operated by the Participant. The Exchange is
therefore proposing Rule 11.27(b)(3) to gather data about a Market
Maker's participation in Pilot Securities and Pre-Pilot Data Collection
Securities. Proposed Rule 11.27(b)(3)(A) provides that a Member that is
a Market Maker shall collect and transmit to their DEA data relating to
Item IV of Appendix B of the Plan with respect to activity conducted on
any Trading Center in Pilot Securities and Pre-Pilot Data Collection
Securities in furtherance of its status as a registered Market Maker,
including a Trading Center that executes trades otherwise than on a
national securities exchange, for transactions that have settled or
reached settlement date. The proposed rule requires Market Makers to
transmit such data in a format required by their DEA, by 12:00 p.m. EST
on T+4 for: (i) Transactions in each Pre-Pilot Data Collection Security
for the period beginning six months prior to the Pilot Period through
the trading day immediately preceding the Pilot Period; and (ii) for
transactions in each Pilot Security for the period beginning on the
first day of the Pilot Period through six months after the end of the
Pilot Period.
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\21\ The Plan defines a Market Maker as ``a dealer registered
with any self-regulatory organization, in accordance with the rules
thereof, as (i) a market maker or (ii) a liquidity provider with an
obligation to maintain continuous, two-sided trading interest.''
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Proposed Rule 11.27(b)(3)(B) provides that the Exchange shall
transmit the data collected by the DEA pursuant to Rule 11.27(b)(3)(A)
above relating to Market Maker activity on a Trading Center operated by
the Exchange to the SEC in a pipe delimited format within 30 calendar
days following month end. The Exchange shall also make such data
publicly available on the Exchange Web site on a monthly basis at no
charge and shall not identify the Trading Center that generated the
data.
Appendix C.I (Market Maker Profitability) requires a Participant to
collect data related to Market Maker profitability from each Market
Maker for which it is the DEA. Specifically, the Participant is
required to collect the total number of shares of orders executed by
the Market Maker; the raw Market Maker realized trading profits, and
the raw Market Maker unrealized trading profits. Data shall be
collected for dates starting six months prior to the Pilot Period
through six months after the end of the Pilot Period. This data shall
be collected on a monthly basis, to be provided in a pipe delimited
format to the Participant, as DEA, within 30 calendar days following
month end. Appendix C.II (Aggregated Market Maker Profitability)
requires the Participant, as DEA, to aggregate the Appendix C.I data,
and to categorize this data by security as well as by the control group
and each Test Group. That aggregated data shall contain information
relating to total raw Market Maker realized trading profits, volume-
weighted average of raw Market Maker realized trading profits, the
total raw Market Maker unrealized trading profits, and the volume-
weighted average of Market Maker unrealized trading profits.
The Exchange is therefore proposing Rule 11.27(b)(4) to set forth
the requirements for the collection and transmission of data pursuant
to Appendix C.I of the Plan. Proposed Rule 11.27(b)(4)(A) requires that
a Member that is a Market Maker shall collect and transmit to their DEA
the data described in Item I of Appendix C of the Plan, as modified by
Paragraph (b)(5) with respect to executions in Pilot Securities that
have settled or reached settlement date that were executed on any
Trading Center. The proposed rule also requires Members to provide such
data in a format required by their DEA by 12 p.m. EST on T+4 for
executions during and
[[Page 75144]]
outside of Regular Trading Hours in each: (i) Pre-Pilot Data Collection
Security for the period beginning six months prior to the Pilot Period
through the trading day immediately preceding the Pilot Period; and
(ii) Pilot Security for the period beginning on the first day of the
Pilot Period through six months after the end of the Pilot Period.
The Exchange is also adopting a rule setting forth the manner in
which Market Maker participation will be calculated. Item III of
Appendix B of the Plan requires each Participant that is a national
securities exchange to collect daily Market Maker registration
statistics categorized by security, including the following
information: (i) Ticker symbol; (ii) the Participant exchange; (iii)
number of registered market makers; and (iv) the number of other
registered liquidity providers. Therefore, the Exchange proposes to
adopt Rule 11.27(b)(5) providing that the Exchange shall collect and
transmit to the SEC the data described in Item III of Appendix B of the
Plan relating to daily Market Maker registration statistics in a pipe
delimited format within 30 calendar days following month end for: (i)
For transactions in each Pre-Pilot Data Collection Security for the
period beginning six months prior to the Pilot Period through the
trading day immediately preceding the Pilot Period; and (ii) For
transactions in each Pilot Security for the period beginning on the
first day of the Pilot Period through six months after the end of the
Pilot Period.
The Exchange is also proposing, through Interpretations and
Policies, to clarify other aspects of the data collection
requirements.\22\ Proposed Interpretations and Policy .02 relates to
the use of the retail investor order flag for purposes of Appendix
B.II(n) reporting. The Plan currently states that market and marketable
limit orders shall include a ``yes/no'' field relating to the Retail
Investor Order flag. The Exchange is proposing Interpretations and
Policy .02 to clarify that, for purposes of the reporting requirement
in Appendix B.II(n), a Trading Center shall report ``y'' to their DEA
where it is relying upon the Retail Investor Order exception to Test
Groups Two and Three, and ``n'' for all other instances. The Exchange
believes that requiring the identification of a Retail Investor Orders
only where the exception may apply (i.e., Pilot Securities in Test
Groups Two and Three) is consistent with Appendix B.II(n).
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\22\ The Exchange is also proposing Interpretations and Policy
.01 to Rule 11.27 to clarify that certain enumerated terms used
throughout Rule 11.27 shall have the same meaning as set forth in
the Plan.
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Interpretations and Policy .03 requires that Members populate a
field to identify to their DEA whether an order is affected by the
bands in place pursuant to the National Market System Plan to Address
Extraordinary Market Volatility.\23\ Pursuant to the Limit-Up Limit-
Down Plan, between 9:30 a.m. and 4:00 p.m., the Securities Information
Processor (``SIP'') calculates a lower price band and an upper price
band for each NMS stock. These price bands represent a specified
percentage above or below the stock's reference price, which generally
is calculated based on reported transactions in that stock over the
preceding five minutes. When one side of the market for an individual
security is outside the applicable price band, the SIP identifies that
quotation as non-executable. When the other side of the market reaches
the applicable price band (e.g., the offer reaches the lower price
band), the security enters a Limit State. The stock would exit a Limit
State if, within 15 seconds of entering the Limit State, all Limit
State Quotations were executed or canceled in their entirety. If the
security does not exit a Limit State within 15 seconds, then the
primary listing exchange declares a five-minute trading pause, which
would be applicable to all markets trading the security.
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\23\ See National Market System Plan to Address Extraordinary
Market Volatility, Securities Exchange Act Release No. 67091 (May
31, 2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (``Limit-Up
Limit-Down Plan'').
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The Exchange and the other Participants have determined that it is
appropriate to create a new flag for reporting orders that are affected
by the Limit-Up Limit-Down bands. Accordingly, a Trading Center shall
report a value of ``Y'' to their DEA when the ability of an order to
execute has been affected by the Limit-Up Limit-Down bands in effect at
the time of order receipt. A Trading Center shall report a value of
``N'' to their DEA when the ability of an order to execute has not been
affected by the Limit-Up Limit-Down bands in effect at the time of
order receipt.
Interpretation and Policy .03 also requires, for dually-listed
securities, that the Participant indicate whether the order was handled
domestically, or routed to a foreign venue. Accordingly, the
Participant will indicate, for purposes of Appendix B.I, whether the
order was: (1) Fully executed domestically, or (2) fully or partially
executed on a foreign market. For purposes of Appendix B.II, the
Participant will classify all orders in dually-listed Pilot and Pre-
Pilot Securities as: (1) Directed to a domestic venue for execution;
(2) may only be directed to a foreign venue for execution; or (3) was
fully or partially directed to a foreign venue at the discretion of the
Member. The Exchange believes that this proposed flag will better
identify orders in dually-listed securities, as such orders that were
executed in foreign venues would not be subject to the Plan's quoting
and trading requirements, and could otherwise compromise the integrity
of the data.
Interpretations and Policy .04 relates to the time ranges specified
in Appendix B.I.a(14), B.I.a(15), B.I.a(21) and B.I.a(22).\24\ The
Exchange and the other Participants have determined that it is
appropriate to change the reporting times in these provisions to
require more granular reporting for these categories. Accordingly, the
Exchange proposes to add Appendix B.I.a(14A), which will require
Trading Centers to report the cumulative number of shares of orders
executed from 100 microseconds to less than 1 millisecond after the
time of order receipt. Appendix B.I.a(15) will be changed to require
the cumulative number of shares of orders executed from 1 millisecond
to less than 100 milliseconds after the time of order receipt. The
Exchange also proposes to add Appendix B.I.a(21A), which will require
Trading Centers to report the cumulative number of shares of orders
canceled from 100 microseconds to less than 1 millisecond after the
time of order receipt. Appendix B.I.a(22) will be changed to require
the cumulative number of shares of orders canceled from 1 millisecond
to less than 100 milliseconds after the time of order receipt. The
Exchange believes that these new reporting requirements will contribute
to a meaningful analysis of the Pilot by producing more granular data
on these points.\25\
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\24\ Specifically, Appendix B.I.a(14) requires reporting of the
cumulative number of shares of orders executed from 0 to less than
100 microseconds after the time of order receipt; Appendix B.I.a(15)
requires reporting of the cumulative number of shares of orders
executed from 100 microseconds to less than 100 milliseconds after
the time of order receipt; Appendix B.I.a(21) requires reporting of
the cumulative number of shares of orders cancelled from 0 to less
than 100 microseconds after the time of order receipt; and Appendix
B.I.a(22) requires reporting of the cumulative number of shares of
orders cancelled from 100 microseconds to less than 100 milliseconds
after the time of order receipt.
\25\ The Exchange notes that FINRA intends to file an exemptive
request seeking relief from certain of the Plan's data collection
requirements, including the requirements that Trading Centers report
information in either microseconds or milliseconds, as not all
Trading Centers currently capture and report orders in either
microseconds or milliseconds.
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[[Page 75145]]
Interpretations and Policy .05 relates to the relevant measurement
for purposes of Appendix B.I.a(31)-(33) reporting. Currently, the Plan
states that this data shall be reported as of the time of order
execution. The Exchange and the other Participants believe that this
information should more properly be captured at the time of order
receipt as evaluating share-weighted average prices at the time of
order receipt is more consistent with the goal of observing the effect
of the Pilot on the liquidity of Pilot Securities. The Exchange is
therefore proposing to make this change through Interpretations and
Policy .05.\26\ This change will make these provisions consistent with
the remainder of the statistics in Appendix B.I.a, which are all based
on order receipt.
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\26\ This proposed change is also part of an exemptive request
that the Exchange and the other Participants will be submitting to
the SEC pursuant to Rule 608(e) of Regulation NMS.
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Interpretations and Policy .06 addresses the status of not-held and
auction orders for purposes of Appendix B.I reporting. Currently,
Appendix B.I sets forth eight categories of orders, including market
orders, marketable limit orders, and inside-the-quote resting limit
orders, for which daily market quality statistics must be reported.
Currently, Appendix B.I does not provide a category for not held
orders, clean cross orders, auction orders, or orders received when the
NBBO is crossed. The Exchange and the other Participants have
determined that it is appropriate to include separate categories for
both not held orders and auction orders for purposes of Appendix B
reporting. The Exchange is therefore proposing Interpretations and
Policy .06 to provide that not held orders shall be included as an
order type for purposes of Appendix B reporting, and shall be assigned
the number (18). Clean cross orders shall be included as an order type
for purposes of Appendix B reporting, and shall be assigned the number
(19); auction orders shall be included an as order type for purposes of
Appendix B reporting, and shall be assigned the number (20); and orders
that cannot otherwise be classified, including, for example, orders
received when the NBBO is crossed shall be included as an order type
for purposes of Appendix B reporting, and shall be assigned the number
(21). All of these orders already are included in the scope of Appendix
B; however, without this proposed change, these order types would be
categorized with other orders, such as regular held orders, that should
be able to be fully executed upon receipt, which would compromise the
value of this data.
The Exchange is proposing Interpretations and Policy .07 to clarify
the scope of the Plan as it relates to Members that only execute orders
limited purposes. Specifically, The Exchange and the other Participants
believe that a Member that only executes orders otherwise than on a
national securities exchange for the purpose of: (1) Correcting a bona
fide error related to the execution of a customer order; (2) purchasing
a security from a customer at a nominal price solely for purposes of
liquidating the customer's position; or (3) completing the fractional
share portion of an order \27\ shall not be deemed a Trading Center for
purposes of Appendix B to the Plan. The Exchange is therefore proposing
Supplementary Material .09 to make this clarification.
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\27\ The Exchange notes that where a Member purchases a
fractional share from a customer, the Trading Center that executes
the remaining whole shares of that customer order would subject to
subject to Appendix B of the Plan.
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The Exchange is proposing Interpretations and Policy .08 to clarify
that, for purposes of the Plan, Trading Centers must begin the data
collection required pursuant to Appendix B.I.a(1) through B.II.(y) of
the Plan and Item I of Appendix C of the Plan on April 4, 2016. While
the Exchange or the Member's DEA will provide the information required
by Appendix B and C of the Plan during the Pilot Period, the
requirement that the Exchange or their DEA provide information to the
SEC within 30 days following month end and make such data publicly
available on its Web site pursuant to Appendix B and C shall commence
six months prior to the beginning of the Pilot Period.\28\
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\28\ In its order approving the Plan, the SEC noted that the
Pilot shall be implemented within one year of the date of
publication of its order, e.g., by May 6, 2016. See Approval Order,
80 FR at 27545. However, on November 6, 2015, the SEC extended the
implementation date approximately five months to October 3, 2016.
See Securities Exchange Act Release No. 76382 (November 6, 2015)
(File No. 4-657).
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The Exchange is proposing Interpretations and Policy .09 to address
the requirement in Appendix C.I(b) of the Plan that the calculation of
raw Market Maker realized trading profits utilize a last in, first out
(``LIFO'')-like method to determine which share prices shall be used in
that calculation. The Exchange and the other Participants believe that
it is more appropriate to utilize a methodology that yields LIFO-like
results, rather than utilizing a LIFO-like method, and the Exchange is
therefore proposing Interpretations and Policy .09 to make this
change.\29\ The Exchange is proposing that, for purposes of Item I of
Appendix C, the Participants shall calculate daily Market Maker
realized profitability statistics for each trading day on a daily LIFO
basis using reported trade price and shall include only trades executed
on the subject trading day. The daily LIFO calculation shall not
include any positions carried over from previous trading days. For
purposes of Item I.c of Appendix C, the Participants shall calculate
daily Market Maker unrealized profitability statistics for each trading
day on an average price basis. Specifically, the Participants must
calculate the volume weighted average price of the excess (deficit) of
buy volume over sell volume for the current trading day using reported
trade price. The gain (loss) of the excess (deficit) of buy volume over
sell volume shall be determined by using the volume weighted average
price compared to the closing price of the security as reported by the
primary listing exchange. In reporting unrealized trading profits, the
Participant shall also report the number of excess (deficit) shares
held by the Market Maker, the volume weighted average price of that
excess (deficit) and the closing price of the security as reported by
the primary listing exchange used in reporting unrealized profit.
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\29\ Appendix C.I currently requires Market Maker profitability
statistics to include (1) the total number of shares of orders
executed by the Market Maker; (2) raw Market Maker realized trading
profits, which is the difference between the market value of Market
Maker shares and the market value of Market Maker purchases, using a
LIFO-like method; and (3) raw Market Maker unrealized trading
profits, which is the difference between the purchase or sale price
of the end-of-day inventory position of the Market Maker and the
Closing Price. In the case of a short position, the Closing Price
from the sale will be subtracted; in the case of a long position,
the purchase price will be subtracted from the Closing Price.
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Finally, the Exchange is proposing Interpretations and Policy .10
to address the securities that will be used for data collection
purposes prior to the commencement of the Pilot. The Exchange and the
other Participants have determined that it is appropriate to collect
data for a group of securities that is larger, and using different
quantitative thresholds, than the group of securities that will be
Pilot Securities. The Exchange is therefore proposing Interpretations
and Policy .09 to define ``Pre-Pilot Data Collection Securities'' as
the securities designated by the Participants for purposes of the data
collection requirements described in Items I, II and IV of Appendix B
and Item I of Appendix C of the Plan for the period beginning six
months prior to the Pilot Period and ending on the trading
[[Page 75146]]
day immediately preceding the Pilot Period. The Participants shall
compile the list of Pre-Pilot Data Collection Securities by selecting
all NMS stocks with a market capitalization of $5 billion or less, a
Consolidated Average Daily Volume (CADV) of 2 million shares or less
and a closing price of $1 per share or more. The market capitalization
and the closing price thresholds shall be applied to the last day of
the Pre-Pilot measurement period, and the CADV threshold shall be
applied to the duration of the Pre-Pilot measurement period. The Pre-
Pilot measurement period shall be the three calendar months ending on
the day when the Pre-Pilot Data Collection Securities are selected. The
Pre-Pilot Data Collection Securities shall be selected thirty days
prior to the commencement of the six-month Pre-Pilot Period. On the
trading day that is the first trading day of the Pilot Period through
six months after the end of the Pilot Period, the data collection
requirements will become applicable to the Pilot Securities only. A
Pilot Security will only be eligible to be included in a Test Group if
it was a Pre-Pilot Security.
The proposed rule change will be effective upon Commission
approval. The implementation date will be April 4, 2016.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \30\ in general, and furthers the objectives of Section
6(b)(5) of the Act \31\ in particular, in that it is designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, 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.
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\30\ 15 U.S.C. 78f(b).
\31\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that this proposal is consistent with the Act
because it implements and clarifies the provisions of the Plan, and is
designed to assist the Exchange in meeting its regulatory obligations
pursuant of the Plan. In approving the Plan, the SEC noted that the
Pilot was an appropriate, data-driven test that was designed to
evaluate the impact of a wider tick size on trading, liquidity, and the
market quality of securities of smaller capitalization companies, and
was therefore in furtherance of the purposes of the Act. The Exchange
believes that this proposal is in furtherance of the objectives of the
Plan, as identified by the SEC, and is therefore consistent with the
Act because the proposal implements and clarifies the requirements of
the Plan and applies specific obligations to Members in furtherance of
compliance with the Plan.
(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
notes that the proposed rule change implements the provisions of the
Plan, and is designed to assist the Exchange in meeting its regulatory
obligations pursuant of the Plan. The Exchange also notes that the data
collection requirements for Members that operate Trading Centers will
apply equally to all such Members, as will the data collection
requirements for Market Makers.
(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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal 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-BATS-2015-102 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-BATS-2015-102. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-BATS-2015-102 and should be
submitted on or before December 22, 2015.
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\32\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
Brent J. Fields,
Secretary.
[FR Doc. 2015-30479 Filed 11-30-15; 8:45 am]
BILLING CODE 8011-01-P
