Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.22, Data Products, To Describe IPO Auction Viewer, 1252-1255 [2016-250]
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Federal Register / Vol. 81, No. 6 / Monday, January 11, 2016 / Notices
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 also will be available for
inspection and copying at EDGX’s
principal office. 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. 4–443 and
should be submitted on or before
February 1, 2016.
By the Commission.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–257 Filed 1–8–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76832; File No. SR–BATS–
2015–119]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Rule 11.22,
Data Products, To Describe IPO
Auction Viewer
mstockstill on DSK4VPTVN1PROD with NOTICES
January 5, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
23, 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 Exchange has
designated this proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A) of the
Act 3 and Rule 19b–4(f)(6)(iii)
thereunder,4 which renders it effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6)(iii).
2 17
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to
amend Rule 11.22 to describe a new
market data product known as IPO
Auction Viewer. The proposed rule
change is based on Nasdaq Stock Market
LLC’s (‘‘Nasdaq’’) Rule 7015(j).5
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
The Exchange proposes to amend
Rule 11.22 describing a new market data
product known as IPO Auction Viewer,
which would be provided free of charge.
IPO Auction Viewer would be a data
feed that is available to designated
associated persons of a Member 6 that is
acting as the Stabilizing Agent for an
IPO Security. ‘‘IPO Security’’ would be
defined under proposed paragraph
(l)(2)(A) to Exchange Rule 11.22 as ‘‘a
BATS listed security in an initial public
offering for which the initial pricing
procedures described in Rule 11.23(d)
are available.’’ 7 The proposed rule
change also adds to Rule 11.22(l)
definitions of ‘‘IPO Auction’’,
‘‘Stabilizing’’, and ‘‘Stabilizing Agent’’.
5 See also Securities Exchange Act Release No.
75863 (September 9, 2015), 80 FR 55406 (September
15, 2015) (SR–Nasdaq–2015–082) (Order Approving
Proposed Rule Change to Introduce an Additional
Data Element to the IPO Indicator Service).
6 The term ‘‘Member’’ is defined as ‘‘any
registered broker or dealer that has been admitted
to membership in the Exchange.’’ See Exchange
Rule 1.5(n).
7 Exchange Rule 11.23(d) sets forth the
Exchange’s procedures for conducting an auction
for a BATS listed security in an initial public
offering.
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‘‘IPO Auction’’ would be defined under
proposed paragraph (l)(2)(B) as ‘‘the
initial pricing procedures described in
Rule 11.23(d).’’ ‘‘Stabilizing’’ would be
defined under proposed paragraph
(l)(2)(C) as ‘‘Stabilizing as defined in
Rule 100 of Regulation M of the
Securities Exchange Act of 1934,
including engaging in syndicate
covering transactions.’’ Lastly,
‘‘Stabilizing Agent’’ would be defined
under proposed paragraph (l)(2)(D) as ‘‘a
Member that will engage in Stabilizing
with respect to an IPO Security on the
day of its initial public offering.’’
IPO Auction Viewer would assist
Members who are acting as a Stabilizing
Agent in monitoring the orders they
have entered for execution in the
auction process for an IPO Security. The
auction process under Exchange Rule
11.23(d) is designed to provide an
orderly, single priced opening of
securities subject to an intra-day halt,
including securities that are the subject
of an IPO. Prior to the execution of the
auction process for an IPO Security
(‘‘IPO Auction’’), Members enter orders
eligible for participation in the IPO
Auction, and the Exchange disseminates
certain information regarding buying
and selling interest and indicative
execution price information. The
quotation only period with respect to an
IPO Auction currently commences
fifteen (15) minutes plus a short random
period prior to the IPO Auction
(‘‘Quote-Only Period’’).8 Coinciding
with the beginning of the Quote-Only
Period for a security and updated every
five seconds thereafter, the Reference
Price,9 Indicative Price,10 Auction Only
Price,11 and the lesser of Reference Buy
Shares 12 and Reference Sell Shares 13
associated with the IPO Auction will be
disseminated.14 The IPO Auction
executes and regular market trading
commences in the IPO Security at the
conclusion of the IPO Auction.15 The
representative of the underwriting
syndicate that serves as lead
underwriter also serves as the
Stabilizing Agent for the IPO Security.
As discussed above, the Stabilizing
Agent has responsibility for monitoring
the submission of buying and selling
interest into the IPO Auction and
informing the Exchange when the IPO
Security is ready to initiate trading.
Thus, the Stabilizing Agent stands ready
8 See
Exchange Rule 11.23(a)(17).
Exchange Rule 11.23(a)(19).
10 See Exchange Rule 11.23(a)(10).
11 See Exchange Rule 11.23(a)(2).
12 See Exchange Rule 11.23(a)(18).
13 See Exchange Rule 11.23(a)(21).
14 See Exchange Rule 11.23(d)(1) and (2).
15 See Exchange Rule 11.23(d)(3).
9 See
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during the course of the day to commit
its capital in support of the IPO
Security, buying from investors that
wish to sell the IPO Security to realize
short-term gains (or to minimize shortterm losses). The Stabilizing Agent
thereby serves to dampen volatility in
the IPO Security and promote the
maintenance of a fair and orderly
market. Because the function performed
by the Stabilizing Agent is unique on
the day of the IPO, the Exchange has
concluded that providing additional
information about pre-opening interest
in the stock to the Stabilizing Agent will
help it to optimize the opening of the
stock and manage its own risk, thereby
assisting it in promoting a fair and
orderly market for the IPO Security.
Accordingly, the Exchange is proposing
to introduce the IPO Auction Viewer, a
specialized data product that will be
made available solely to the Stabilizing
Agent.
Access to the IPO Auction Viewer
will be limited through a secure
entitlement process to designated
individuals employed by the Stabilizing
Agent. On the day of an IPO, beginning
with the start of the Quote-Only Period
described in Exchange Rule
11.23(d)(1)(A) and ending upon the
completion of the IPO Auction for an
IPO Security, the IPO Auction Viewer
will display aggregated buying and
selling interest information for the IPO
Security, reflecting all orders on the
BATS Book, and consisting of the
aggregate size of all orders at each
permissible price level. The aggregated
information provided through this data
element would include all Eligible
Auction Orders 16 and size. Information
provided through the IPO Auction
Viewer will be updated every five
seconds, along with updates to the
Reference Price, Indicative Price,
Auction Only Price, and the lesser of
Reference Buy Shares and Reference
Sell Shares.17 Access to IPO Auction
Viewer shall terminate immediately
upon the completion of the IPO Auction
for the IPO Security.
The IPO Auction Viewer will provide
no information other than that described
above, unless the Exchange submits a
proposed rule change to add additional
data to it. In particular, the IPO Auction
Viewer will not provide any information
regarding Eligible Auction Orders other
than in the aggregated format described
above, and will not provide any
information regarding the identity of
Members posting orders. The Exchange
believes that providing this information
to the Stabilizing Agent will provide the
16 See
17 See
Exchange Rule 11.23(a)(8).
Exchange Rule 11.23(d)(1)(A).
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Stabilizing Agent with insights into the
scope of demand for, and supply of, the
IPO Security, in a manner that will
allow it to make more informed
decisions about the appropriate time to
initiate the opening of the IPO Security
through the IPO Auction. In addition,
the information will allow the
Stabilizing Agent to respond in a more
informed way to questions from its
customers and other participants
regarding expectations that an Order to
buy or sell with a stated price and size
may be executable in the IPO Auction.
Finally, the information will assist the
Stabilizing Agent in making decisions
about the appropriate level of capital to
commit to support the IPO Security
once trading commences.
Once the IPO Auction executes, the
IPO Auction Viewer will cease to be
available, both with respect to the state
of the BATS Book during the
continuous market and with respect to
retrospective information about the state
of the BATS Book leading up to the IPO
Auction. Thus, the Stabilizing Agent
will not be provided with any
information not available to other
market participants once continuous
market trading in the IPO Security
commences.
Since the aggregated information
provided through the IPO Auction
Viewer is unique and directly available
only to the Stabilizing Agent, the
Exchange believes that it is appropriate
to adopt safeguards in order to ensure
that the aggregated information is not
misused.18 Accordingly, the Exchange’s
proposed rule will require the
Stabilizing Agent receiving the IPO
Auction Viewer to maintain and enforce
written policies and procedures
reasonably designed to achieve the
following purposes:
• Restrict electronic access 19 to
aggregated information only to
associated persons of the Stabilizing
Agent who need to know the
information in connection with
establishing the opening price of an IPO
Security and Stabilizing the IPO
Security;
• Except as may be required for
purposes of maintaining books and
records for regulatory purposes, prevent
the retention of aggregated information
following the completion of the IPO
Auction for the IPO Security; and
18 The Exchange notes that the usage of the
information provided through the IPO Auction
Viewer must be consistent with Regulation M,
including Commission Guidance Regarding
Prohibited Conduct in Connection with IPO
Allocations (Securities Exchange Act Rel. No. 33–
8565) (April 7, 2005).
19 As discussed below, electronic access to the
IPO Auction Viewer will be available on a
displayed basis only.
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• Prevent persons with access to
aggregated information from engaging in
transactions in the IPO Security other
than transactions in the IPO Auction;
transactions on behalf of a customer; or
Stabilizing. Thus, for example, the
Stabilizing Agent or its affiliates would
not be permitted to use the information
to engage in proprietary trading other
than in support of bona fide Stabilizing
activity.
However, for the avoidance of doubt
regarding appropriate uses of the
aggregated information, the proposed
rule will also provide that nothing
contained in the rule shall be construed
to prohibit the Member acting as the
Stabilizing Agent from (i) engaging in
Stabilizing consistent with that role, or
(ii) using the information provided from
the IPO Auction Viewer to respond to
inquiries from any person, including,
without limitation, other Members,
customers, or associated persons of the
Stabilizing Agent, regarding the
expectations of the Member acting as
the Stabilizing Agent with regard to the
possibility of executing stated quantities
of an IPO Security at stated prices in the
IPO Auction.
The aggregated information provided
through the IPO Auction Viewer will be
available solely for display on the
screen of a computer for which an
entitlement has been provided by the
Exchange. Under no circumstances may
a Member redirect aggregated
information to another computer or
reconfigure it for use in a non-displayed
format, including, without limitation, in
any trading algorithm. If a Member
becomes aware of any violation of the
restrictions contained in the proposed
rule, it must report the violation
promptly to the Exchange.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,20 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,21 in particular, in that it is
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 to protect investors and the
public interest, and that it is not
designed to permit unfair
discrimination among customers,
brokers, or dealers.
The Exchange believes that the
proposed rule change will promote the
goals of the Act by assisting the
20 15
21 15
E:\FR\FM\11JAN1.SGM
U.S.C. 78f.
U.S.C. 78f(b)(5).
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Federal Register / Vol. 81, No. 6 / Monday, January 11, 2016 / Notices
Stabilizing Agent for an IPO Security in
promoting a fair and orderly market.
Specifically, by providing unique,
aggregated information concerning all
orders on the BATS Book prior to the
commencement of an IPO Auction, the
IPO Auction Viewer will give the
Stabilizing Agent information that will
assist it in achieving a range of goals.
Further, by being able to share
aggregated information with other
Members and customers, the Stabilizing
Agent will enable greater participation
in the IPO Auction because it will be
able to provide more certain information
about the ability of investors to execute
orders at particular sizes and prices.
Moreover, being able to compare
information about potential interest in
participating in the IPO Auction with
more detailed information about the
state of the BATS Book will enable the
Stabilizing Agent to determine with
more certainty the appropriate time to
allow the IPO Auction to execute.
Finally, having greater knowledge about
the range of trading interest in the BATS
Book prior to the execution of the IPO
Auction will enable the Stabilizing
Agent to make more informed decisions
about the extent of capital it may need
to commit after the commencement of
trading in order to stabilize the price of
the IPO Security and thereby dampen
volatility that might undermine investor
confidence.
The Exchange further believes that the
restrictions it proposes to impose on the
use of the IPO Auction Viewer will
protect against possible misuse of the
provided information. Notably, the
information will be provided only prior
to the completion of the IPO Auction
and may not be retained thereafter,
except to the extent necessary for
record-retention purposes. The
information will be disseminated in a
display format only and may not be
redirected or reconfigured for nondisplay usage (such as usage by a
trading algorithm). Moreover, electronic
access to the information will be
available only to certain designated
individuals with a role in conducting
Stabilizing activities, and persons with
access may not engage in transactions
other than Stabilizing or transactions in
the IPO Auction or on behalf of a
customer. The Exchange further believes
that the safeguards it proposes around
the use of such aggregated information
by its Members will provide added
assurance to Members and the investing
public that the IPO Auction Viewer will
not be misused.
In addition, the Exchange notes that
although the IPO Auction Viewer will
be available only to Stabilizing Agents,
this limitation is consistent with the
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protection of investors because the
Stabilizing Agent plays a unique role on
the day of an IPO because it must decide
when the IPO Security should
commence trading and must commit
capital in support of the IPO Security
once trading begins. Because the IPO
Auction Viewer will assist the
Stabilizing Agent in performing these
functions, which are performed by no
other broker, the Exchange believes that
it is reasonable to limit access to the IPO
Auction Viewer to the Stabilizing Agent.
Moreover, because the IPO Auction
Viewer will cease to be available once
regular trading in the IPO Security
commences and the information
provided therein will quickly become
stale, the Exchange does not believe that
access to the information will provide
the Stabilizing Agent with any unfair
advantage.
The Exchange believes that the
proposal to add certain defined terms to
Rule 11.22(l) is consistent with the Act
because the definitions are intended to
promote a clear understanding of the
rule text by delineating the products
addressed by the rule and the scope of
activities to which they pertain. The
Exchange further believes that the
proposal to make the IPO Auction
Viewer available to eligible recipients at
no charge is consistent with Section
6(b)(4) of the Act 22 because it will not
result in any increase in the costs
incurred by a Stabilizing Agent to
receive the additional information. The
Exchange further believes that the
proposal is consistent with an equitable
allocation of fees and not unfairly
discriminatory because additional
information is being provided to a
limited group of potential users in order
to assist in the promotion of fair and
orderly markets during an IPO.
Accordingly, the absence of an
additional fee is designed to encourage
eligible Members to accept the
information in order to ensure that the
goals of the proposal are advanced to
the greatest extent possible.
Lastly, the Exchange notes that the
proposed IPO Auction Viewer is based
on Nasdaq’s IPO Book Viewer, which
was recently approved by the
Commission.23 However, the Exchange
notes that while the proposed IPO
Auction Viewer would be identical to
Nasdaq’s IPO Book Viewer in many
respects, the products would differ in
the following two ways. First, Nasdaq’s
IPO Book Viewer provides the total
number of orders while the proposed
IPO Auction Viewer would not but
instead would only provide the number
22 15
U.S.C. 78f(b)(4).
23 See supra note 5.
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of shares. Second, the proposed IPO
Action Viewer would group the
aggregate size of all orders at each
permissible price increment, while
Nasdaq limits the grouping to price
increments of $0.05, $0.10, or $0.25,
depending on the election of the User.
All other aspects of IPO Auction Viewer
under Exchange Rule 11.22(l) would be
identical to Nasdaq Rule 7015(j).
The Exchange views these differences
as immaterial because the Exchange
does not believe that either distinction
would provide an inappropriate level of
detail but rather that these differences
are simply the result of different
designs. Notwithstanding these
differences, the Exchange believes the
proposed IPO Auction Viewer would
provide the Stabilizing Agent the
necessary information to: (i) Enable
greater participation in the IPO Auction
because it will be able to provide more
certain information about the ability of
investors to execute orders at particular
sizes and prices; (ii) compare potential
interest in participating in the IPO
Auction, enabling it to determine with
more certainty the appropriate time to
allow the IPO Auction to execute; and
(iii) make more informed decisions
about the extent of capital it may need
to commit after the commencement of
trading in order to stabilize the price of
the IPO Security and thereby dampen
volatility.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that by being able to
share aggregated information with other
Members and customers, the Stabilizing
Agent will enable greater participation
in the IPO Auction because it will be
able to provide more certain information
about the ability of investors to execute
orders at particular sizes and prices,
thus increasing competition. In
addition, given that the proposal will
result in a Stabilizing Agent’s usage of
the information being subject to greater
restrictions, the Exchange does not
believe that there can be any reasonable
objection to the proposal on competitive
grounds.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (A) Significantly affect
the protection of investors or the public
interest; (B) impose any significant
burden on competition; and (C) by its
terms, become operative for 30 days
from the date on which it was filed or
such shorter time as the Commission
may designate it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 24 and paragraph (f)(6) of Rule 19b–
4 thereunder,25 the Exchange has
designated this rule filing as noncontroversial. The Exchange has given
the Commission written notice of its
intent to file the proposed rule change,
along with a brief description and text
of 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.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (1) Necessary or appropriate in
the public interest; (2) for the protection
of investors; or (3) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposal is
consistent with the Act. Comments may
be submitted by any of the following
methods:
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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–2015–119 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–2015–119. 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–
2015–119 and should be submitted on
or before February 1, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–250 Filed 1–8–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76824; File No. SR–CBOE–
2015–118]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Credit
Option Margin Pilot Program Through
January 17, 2017
January 5, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
23, 2015, Chicago Board Options
Exchange, Incorporated (the ‘‘Exchange’’
or ‘‘CBOE’’) filed with the Securities
and Exchange Commission (the
26 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
24 15
U.S.C. 78s(b)(3)(A).
25 17 CFR 240.19b–4.
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‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
the Act 3 and Rule 19b–4(f)(6)
thereunder.4 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
CBOE proposes to amend Rule 12.3 by
extending the Credit Option Margin
Pilot Program through January 17, 2017.
The text of the proposed rule change
is available on the Exchange’s Web site
(https://www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On February 2, 2011, the Commission
approved the Exchange’s proposal to
establish a Credit Option Margin Pilot
Program (‘‘Program’’).5 The proposal
became effective on a pilot basis to run
on a parallel track with Financial
Industry Regulatory Authority
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 See Securities Exchange Act Release No. 63819
(February 2, 2011), 76 FR 6838 (February 8, 2011)
order approving (SR–CBOE–2010–106). To
implement the Program, the Exchange amended
Rule 12.3(l), Margin Requirements, to make CBOE’s
margin requirements for Credit Options consistent
with Financial Industry Regulatory Authority
(‘‘FINRA’’) Rule 4240, Margin Requirements for
Credit Default Swaps. CBOE’s Credit Options (i.e.,
Credit Default Options and Credit Default Basket
Options) are analogous to credit default swaps.
4 17
E:\FR\FM\11JAN1.SGM
11JAN1
]]>Agencies
[Federal Register Volume 81, Number 6 (Monday, January 11, 2016)]
[Notices]
[Pages 1252-1255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-250]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76832; File No. SR-BATS-2015-119]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 11.22, Data Products, To Describe IPO Auction Viewer
January 5, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 23, 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
Exchange has designated this proposal as a ``non-controversial''
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(6)(iii) thereunder,\4\ which renders it effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend Rule 11.22 to describe a new
market data product known as IPO Auction Viewer. The proposed rule
change is based on Nasdaq Stock Market LLC's (``Nasdaq'') Rule
7015(j).\5\
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\5\ See also Securities Exchange Act Release No. 75863
(September 9, 2015), 80 FR 55406 (September 15, 2015) (SR-Nasdaq-
2015-082) (Order Approving Proposed Rule Change to Introduce an
Additional Data Element to the IPO Indicator Service).
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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
The Exchange proposes to amend Rule 11.22 describing a new market
data product known as IPO Auction Viewer, which would be provided free
of charge. IPO Auction Viewer would be a data feed that is available to
designated associated persons of a Member \6\ that is acting as the
Stabilizing Agent for an IPO Security. ``IPO Security'' would be
defined under proposed paragraph (l)(2)(A) to Exchange Rule 11.22 as
``a BATS listed security in an initial public offering for which the
initial pricing procedures described in Rule 11.23(d) are available.''
\7\ The proposed rule change also adds to Rule 11.22(l) definitions of
``IPO Auction'', ``Stabilizing'', and ``Stabilizing Agent''. ``IPO
Auction'' would be defined under proposed paragraph (l)(2)(B) as ``the
initial pricing procedures described in Rule 11.23(d).''
``Stabilizing'' would be defined under proposed paragraph (l)(2)(C) as
``Stabilizing as defined in Rule 100 of Regulation M of the Securities
Exchange Act of 1934, including engaging in syndicate covering
transactions.'' Lastly, ``Stabilizing Agent'' would be defined under
proposed paragraph (l)(2)(D) as ``a Member that will engage in
Stabilizing with respect to an IPO Security on the day of its initial
public offering.''
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\6\ The term ``Member'' is defined as ``any registered broker or
dealer that has been admitted to membership in the Exchange.'' See
Exchange Rule 1.5(n).
\7\ Exchange Rule 11.23(d) sets forth the Exchange's procedures
for conducting an auction for a BATS listed security in an initial
public offering.
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IPO Auction Viewer would assist Members who are acting as a
Stabilizing Agent in monitoring the orders they have entered for
execution in the auction process for an IPO Security. The auction
process under Exchange Rule 11.23(d) is designed to provide an orderly,
single priced opening of securities subject to an intra-day halt,
including securities that are the subject of an IPO. Prior to the
execution of the auction process for an IPO Security (``IPO Auction''),
Members enter orders eligible for participation in the IPO Auction, and
the Exchange disseminates certain information regarding buying and
selling interest and indicative execution price information. The
quotation only period with respect to an IPO Auction currently
commences fifteen (15) minutes plus a short random period prior to the
IPO Auction (``Quote-Only Period'').\8\ Coinciding with the beginning
of the Quote-Only Period for a security and updated every five seconds
thereafter, the Reference Price,\9\ Indicative Price,\10\ Auction Only
Price,\11\ and the lesser of Reference Buy Shares \12\ and Reference
Sell Shares \13\ associated with the IPO Auction will be
disseminated.\14\ The IPO Auction executes and regular market trading
commences in the IPO Security at the conclusion of the IPO Auction.\15\
The representative of the underwriting syndicate that serves as lead
underwriter also serves as the Stabilizing Agent for the IPO Security.
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\8\ See Exchange Rule 11.23(a)(17).
\9\ See Exchange Rule 11.23(a)(19).
\10\ See Exchange Rule 11.23(a)(10).
\11\ See Exchange Rule 11.23(a)(2).
\12\ See Exchange Rule 11.23(a)(18).
\13\ See Exchange Rule 11.23(a)(21).
\14\ See Exchange Rule 11.23(d)(1) and (2).
\15\ See Exchange Rule 11.23(d)(3).
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As discussed above, the Stabilizing Agent has responsibility for
monitoring the submission of buying and selling interest into the IPO
Auction and informing the Exchange when the IPO Security is ready to
initiate trading. Thus, the Stabilizing Agent stands ready
[[Page 1253]]
during the course of the day to commit its capital in support of the
IPO Security, buying from investors that wish to sell the IPO Security
to realize short-term gains (or to minimize short-term losses). The
Stabilizing Agent thereby serves to dampen volatility in the IPO
Security and promote the maintenance of a fair and orderly market.
Because the function performed by the Stabilizing Agent is unique on
the day of the IPO, the Exchange has concluded that providing
additional information about pre-opening interest in the stock to the
Stabilizing Agent will help it to optimize the opening of the stock and
manage its own risk, thereby assisting it in promoting a fair and
orderly market for the IPO Security. Accordingly, the Exchange is
proposing to introduce the IPO Auction Viewer, a specialized data
product that will be made available solely to the Stabilizing Agent.
Access to the IPO Auction Viewer will be limited through a secure
entitlement process to designated individuals employed by the
Stabilizing Agent. On the day of an IPO, beginning with the start of
the Quote-Only Period described in Exchange Rule 11.23(d)(1)(A) and
ending upon the completion of the IPO Auction for an IPO Security, the
IPO Auction Viewer will display aggregated buying and selling interest
information for the IPO Security, reflecting all orders on the BATS
Book, and consisting of the aggregate size of all orders at each
permissible price level. The aggregated information provided through
this data element would include all Eligible Auction Orders \16\ and
size. Information provided through the IPO Auction Viewer will be
updated every five seconds, along with updates to the Reference Price,
Indicative Price, Auction Only Price, and the lesser of Reference Buy
Shares and Reference Sell Shares.\17\ Access to IPO Auction Viewer
shall terminate immediately upon the completion of the IPO Auction for
the IPO Security.
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\16\ See Exchange Rule 11.23(a)(8).
\17\ See Exchange Rule 11.23(d)(1)(A).
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The IPO Auction Viewer will provide no information other than that
described above, unless the Exchange submits a proposed rule change to
add additional data to it. In particular, the IPO Auction Viewer will
not provide any information regarding Eligible Auction Orders other
than in the aggregated format described above, and will not provide any
information regarding the identity of Members posting orders. The
Exchange believes that providing this information to the Stabilizing
Agent will provide the Stabilizing Agent with insights into the scope
of demand for, and supply of, the IPO Security, in a manner that will
allow it to make more informed decisions about the appropriate time to
initiate the opening of the IPO Security through the IPO Auction. In
addition, the information will allow the Stabilizing Agent to respond
in a more informed way to questions from its customers and other
participants regarding expectations that an Order to buy or sell with a
stated price and size may be executable in the IPO Auction. Finally,
the information will assist the Stabilizing Agent in making decisions
about the appropriate level of capital to commit to support the IPO
Security once trading commences.
Once the IPO Auction executes, the IPO Auction Viewer will cease to
be available, both with respect to the state of the BATS Book during
the continuous market and with respect to retrospective information
about the state of the BATS Book leading up to the IPO Auction. Thus,
the Stabilizing Agent will not be provided with any information not
available to other market participants once continuous market trading
in the IPO Security commences.
Since the aggregated information provided through the IPO Auction
Viewer is unique and directly available only to the Stabilizing Agent,
the Exchange believes that it is appropriate to adopt safeguards in
order to ensure that the aggregated information is not misused.\18\
Accordingly, the Exchange's proposed rule will require the Stabilizing
Agent receiving the IPO Auction Viewer to maintain and enforce written
policies and procedures reasonably designed to achieve the following
purposes:
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\18\ The Exchange notes that the usage of the information
provided through the IPO Auction Viewer must be consistent with
Regulation M, including Commission Guidance Regarding Prohibited
Conduct in Connection with IPO Allocations (Securities Exchange Act
Rel. No. 33-8565) (April 7, 2005).
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Restrict electronic access \19\ to aggregated information
only to associated persons of the Stabilizing Agent who need to know
the information in connection with establishing the opening price of an
IPO Security and Stabilizing the IPO Security;
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\19\ As discussed below, electronic access to the IPO Auction
Viewer will be available on a displayed basis only.
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Except as may be required for purposes of maintaining
books and records for regulatory purposes, prevent the retention of
aggregated information following the completion of the IPO Auction for
the IPO Security; and
Prevent persons with access to aggregated information from
engaging in transactions in the IPO Security other than transactions in
the IPO Auction; transactions on behalf of a customer; or Stabilizing.
Thus, for example, the Stabilizing Agent or its affiliates would not be
permitted to use the information to engage in proprietary trading other
than in support of bona fide Stabilizing activity.
However, for the avoidance of doubt regarding appropriate uses of
the aggregated information, the proposed rule will also provide that
nothing contained in the rule shall be construed to prohibit the Member
acting as the Stabilizing Agent from (i) engaging in Stabilizing
consistent with that role, or (ii) using the information provided from
the IPO Auction Viewer to respond to inquiries from any person,
including, without limitation, other Members, customers, or associated
persons of the Stabilizing Agent, regarding the expectations of the
Member acting as the Stabilizing Agent with regard to the possibility
of executing stated quantities of an IPO Security at stated prices in
the IPO Auction.
The aggregated information provided through the IPO Auction Viewer
will be available solely for display on the screen of a computer for
which an entitlement has been provided by the Exchange. Under no
circumstances may a Member redirect aggregated information to another
computer or reconfigure it for use in a non-displayed format,
including, without limitation, in any trading algorithm. If a Member
becomes aware of any violation of the restrictions contained in the
proposed rule, it must report the violation promptly to the Exchange.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\20\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\21\ in particular, in that it
is 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 to protect investors and the public
interest, and that it is not designed to permit unfair discrimination
among customers, brokers, or dealers.
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\20\ 15 U.S.C. 78f.
\21\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change will promote
the goals of the Act by assisting the
[[Page 1254]]
Stabilizing Agent for an IPO Security in promoting a fair and orderly
market. Specifically, by providing unique, aggregated information
concerning all orders on the BATS Book prior to the commencement of an
IPO Auction, the IPO Auction Viewer will give the Stabilizing Agent
information that will assist it in achieving a range of goals. Further,
by being able to share aggregated information with other Members and
customers, the Stabilizing Agent will enable greater participation in
the IPO Auction because it will be able to provide more certain
information about the ability of investors to execute orders at
particular sizes and prices. Moreover, being able to compare
information about potential interest in participating in the IPO
Auction with more detailed information about the state of the BATS Book
will enable the Stabilizing Agent to determine with more certainty the
appropriate time to allow the IPO Auction to execute. Finally, having
greater knowledge about the range of trading interest in the BATS Book
prior to the execution of the IPO Auction will enable the Stabilizing
Agent to make more informed decisions about the extent of capital it
may need to commit after the commencement of trading in order to
stabilize the price of the IPO Security and thereby dampen volatility
that might undermine investor confidence.
The Exchange further believes that the restrictions it proposes to
impose on the use of the IPO Auction Viewer will protect against
possible misuse of the provided information. Notably, the information
will be provided only prior to the completion of the IPO Auction and
may not be retained thereafter, except to the extent necessary for
record-retention purposes. The information will be disseminated in a
display format only and may not be redirected or reconfigured for non-
display usage (such as usage by a trading algorithm). Moreover,
electronic access to the information will be available only to certain
designated individuals with a role in conducting Stabilizing
activities, and persons with access may not engage in transactions
other than Stabilizing or transactions in the IPO Auction or on behalf
of a customer. The Exchange further believes that the safeguards it
proposes around the use of such aggregated information by its Members
will provide added assurance to Members and the investing public that
the IPO Auction Viewer will not be misused.
In addition, the Exchange notes that although the IPO Auction
Viewer will be available only to Stabilizing Agents, this limitation is
consistent with the protection of investors because the Stabilizing
Agent plays a unique role on the day of an IPO because it must decide
when the IPO Security should commence trading and must commit capital
in support of the IPO Security once trading begins. Because the IPO
Auction Viewer will assist the Stabilizing Agent in performing these
functions, which are performed by no other broker, the Exchange
believes that it is reasonable to limit access to the IPO Auction
Viewer to the Stabilizing Agent. Moreover, because the IPO Auction
Viewer will cease to be available once regular trading in the IPO
Security commences and the information provided therein will quickly
become stale, the Exchange does not believe that access to the
information will provide the Stabilizing Agent with any unfair
advantage.
The Exchange believes that the proposal to add certain defined
terms to Rule 11.22(l) is consistent with the Act because the
definitions are intended to promote a clear understanding of the rule
text by delineating the products addressed by the rule and the scope of
activities to which they pertain. The Exchange further believes that
the proposal to make the IPO Auction Viewer available to eligible
recipients at no charge is consistent with Section 6(b)(4) of the Act
\22\ because it will not result in any increase in the costs incurred
by a Stabilizing Agent to receive the additional information. The
Exchange further believes that the proposal is consistent with an
equitable allocation of fees and not unfairly discriminatory because
additional information is being provided to a limited group of
potential users in order to assist in the promotion of fair and orderly
markets during an IPO. Accordingly, the absence of an additional fee is
designed to encourage eligible Members to accept the information in
order to ensure that the goals of the proposal are advanced to the
greatest extent possible.
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\22\ 15 U.S.C. 78f(b)(4).
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Lastly, the Exchange notes that the proposed IPO Auction Viewer is
based on Nasdaq's IPO Book Viewer, which was recently approved by the
Commission.\23\ However, the Exchange notes that while the proposed IPO
Auction Viewer would be identical to Nasdaq's IPO Book Viewer in many
respects, the products would differ in the following two ways. First,
Nasdaq's IPO Book Viewer provides the total number of orders while the
proposed IPO Auction Viewer would not but instead would only provide
the number of shares. Second, the proposed IPO Action Viewer would
group the aggregate size of all orders at each permissible price
increment, while Nasdaq limits the grouping to price increments of
$0.05, $0.10, or $0.25, depending on the election of the User. All
other aspects of IPO Auction Viewer under Exchange Rule 11.22(l) would
be identical to Nasdaq Rule 7015(j).
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\23\ See supra note 5.
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The Exchange views these differences as immaterial because the
Exchange does not believe that either distinction would provide an
inappropriate level of detail but rather that these differences are
simply the result of different designs. Notwithstanding these
differences, the Exchange believes the proposed IPO Auction Viewer
would provide the Stabilizing Agent the necessary information to: (i)
Enable greater participation in the IPO Auction because it will be able
to provide more certain information about the ability of investors to
execute orders at particular sizes and prices; (ii) compare potential
interest in participating in the IPO Auction, enabling it to determine
with more certainty the appropriate time to allow the IPO Auction to
execute; and (iii) make more informed decisions about the extent of
capital it may need to commit after the commencement of trading in
order to stabilize the price of the IPO Security and thereby dampen
volatility.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
by being able to share aggregated information with other Members and
customers, the Stabilizing Agent will enable greater participation in
the IPO Auction because it will be able to provide more certain
information about the ability of investors to execute orders at
particular sizes and prices, thus increasing competition. In addition,
given that the proposal will result in a Stabilizing Agent's usage of
the information being subject to greater restrictions, the Exchange
does not believe that there can be any reasonable objection to the
proposal on competitive grounds.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
[[Page 1255]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (A)
Significantly affect the protection of investors or the public
interest; (B) impose any significant burden on competition; and (C) by
its terms, become operative for 30 days from the date on which it was
filed or such shorter time as the Commission may designate it has
become effective pursuant to Section 19(b)(3)(A) of the Act \24\ and
paragraph (f)(6) of Rule 19b-4 thereunder,\25\ the Exchange has
designated this rule filing as non-controversial. The Exchange has
given the Commission written notice of its intent to file the proposed
rule change, along with a brief description and text of 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.
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (1)
Necessary or appropriate in the public interest; (2) for the protection
of investors; or (3) otherwise in furtherance of the purposes of the
Act. If the Commission takes such action, the Commission shall
institute proceedings to determine whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the 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-2015-119 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-2015-119. 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-2015-119 and should be
submitted on or before February 1, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-250 Filed 1-8-16; 8:45 am]
BILLING CODE 8011-01-P
