Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Changes to Rules 11.5, Registration of Market Makers, 11.6, Obligations of Market Maker Authorized Traders, 11.7, Registration of Market Makers in a Security, and 11.8, Obligations of Market Makers, 1657-1661 [2016-00464]
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Federal Register / Vol. 81, No. 8 / Wednesday, January 13, 2016 / Notices
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Summary of the Application
1. Applicants request an order to
permit (a) a Fund 1 (each a ‘‘Fund of
Funds’’) to acquire shares of Underlying
Funds 2 in excess of the limits in
sections 12(d)(1)(A) and (B) of the Act
and (b) each Underlying Fund that is a
registered open-end investment
company or series thereof, the
Distributor or any principal underwriter
and any broker or dealer registered
under the Exchange Act to sell shares of
the Underlying Fund to the Fund of
Funds in excess of the limits in section
12(d)(1)(B) of the Act. Applicants also
request an order of exemption under
sections 6(c) and 17(b) of the Act from
the prohibition on certain affiliated
transactions in section 17(a) of the Act
to the extent necessary to permit the
Underlying Funds to sell their shares to,
and redeem their shares from, the Funds
of Funds.3 Applicants state that such
transactions will be consistent with the
policies of each Fund of Funds and each
Underlying Fund and with the general
purposes of the Act and will be based
on the net asset values of the
Underlying Funds.
2. Applicants agree that any order
granting the requested relief will be
subject to the terms and conditions
stated in the application. Such terms
and conditions are designed to, among
other things, help prevent any potential
1 Applicants request that the order apply to each
existing and future series of Columbia Funds Series
Trust I and Columbia Funds Variable Insurance
Trust, and to each existing and future registered
open-end management investment company or
series thereof which is advised by the Adviser or
any entity controlling, controlled by or under
common control with the Adviser and which is part
of the same ‘‘group of investment companies’’ as
Columbia Funds Series Trust I and Columbia Funds
Variable Insurance Trust (each, a ‘‘Fund’’). For
purposes of the request for relief, the term ‘‘group
of investment companies’’ means any two or more
investment companies that hold themselves out to
investors as related companies for purposes of
investment and investor services.
2 Certain of the Underlying Funds have obtained
exemptions from the Commission necessary to
permit their shares to be listed and traded on a
national securities exchange at negotiated prices
and, accordingly, to operate as exchange-traded
funds (‘‘ETFs’’).
3 A Fund of Funds generally would purchase and
sell shares of an Unaffiliated Fund that operates as
an ETF through secondary market transactions
rather than through principal transactions with the
Unaffiliated Fund. To the extent that a Fund of
Funds purchases or redeems shares from an ETF
that is an affiliated person of the Fund of Funds in
exchange for a basket of specified securities as
described in the Application for the exemptive
order upon which the ETF relies, Applicants also
request relief from Section 17(a) for those in-kind
transactions. Applicants are not seeking relief from
Section 17(a) for, and the requested relief will not
apply to, transactions where an ETF could be
deemed an affiliated person, or an affiliated person
of an affiliated person, of a Fund of Funds because
an investment adviser to the ETF is also an
investment adviser to the Fund of Funds.
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(i) undue influence over an Underlying
Fund that is not in the same ‘‘group of
investment companies’’ as the Fund of
Funds through control or voting power,
or in connection with certain services,
transactions, and underwritings, (ii)
excessive layering of fees, and (iii)
overly complex fund structures, which
are the concerns underlying the limits
in sections 12(d)(1)(A) and (B) of the
Act.
3. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are reasonable and fair and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
Section 6(c) of the Act permits the
Commission to exempt any persons or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–00470 Filed 1–12–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76849; File No. SR–BATS–
2015–121]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Changes to Rules 11.5,
Registration of Market Makers, 11.6,
Obligations of Market Maker
Authorized Traders, 11.7, Registration
of Market Makers in a Security, and
11.8, Obligations of Market Makers
January 7, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
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1657
‘‘Act’’),1 and Rule 19b-4 thereunder,2
notice is hereby given that on December
29, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange filed a proposal to
amend Rules 11.5, Registration of
Market Makers, 11.6, Obligations of
Market Maker Authorized Traders, 11.7,
Registration of Market Makers in a
Security, and 11.8, Obligations of
Market Makers, in order to update
certain provisions and conform to the
rules of EDGA Exchange, Inc. (‘‘EDGA’’),
EDGX Exchange, Inc. (‘‘EDGX’’),
Exchange’s equity options trading
platform (‘‘BZX Options’’), EDGX’s
equity options trading platform (‘‘EDGX
Options’’), and the Nasdaq Stock Market
LLC (‘‘Nasdaq’’).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.
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).
5 See EDGA and EDGX Rules 11.17, 11.18, 11.19,
and 11.20; BZX Options Rule 22.6(d)(4), (5), and (7);
EDGX Options Rule 22.6(d)(4), (5), and (7); and
Nasdaq Rules Rule 4613(a)(2)(ii) [sic], 4613(a)(2)(D)
and (E).
2 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
In early 2014, the Exchange and its
affiliate, BATS Y-Exchange, Inc.
(‘‘BYX’’), received approval to effect a
merger (the ‘‘Merger’’) of the Exchange’s
parent company, BATS Global Markets,
Inc., with Direct Edge Holdings LLC, the
indirect parent of EDGX and EDGA
(together with BZX, BYX and EDGX, the
‘‘BGM Affiliated Exchanges’’).6 In the
context of the Merger, the BGM
Affiliated Exchanges are working to
align their rules, retaining only intended
differences between the BGM Affiliated
Exchanges. Thus, the Exchange
proposes to amend Rules 11.5,
Registration of Market Makers, 11.6,
Obligations of Market Maker Authorized
Traders, 11.7, Registration of Market
Makers in a Security, and 11.8,
Obligations of Market Makers, in order
to update certain provisions and
conform to the rules of EDGA and EDGX
and provide a consistent rule set across
each of the BGM Affiliated Exchanges.7
As amended, Exchange Rules 11.5, 11.6,
11.7, and 11.8 would be identical to
EDGA and EDGX Rules 11.17, 11.18,
11.19, and 11.20 but for different cross
references to Exchange Rules that are
due to the different rule numbering
amongst the Exchange, EDGA and
EDGX.8
Rule 11.5, Registration of Market Makers
Like EDGA and EDGX Rule 11.17,
Exchange Rule 11.5 governs the
registration of Market Makers on the
Exchange. In particular, paragraphs (a)
and (b) of Rule 11.5 sets forth the
application process for Members
seeking to register as Market Makers on
the Exchange. The Exchange proposes to
amend paragraphs (c) and (d) of Rule
11.5 to harmonize Rule 11.5 with EDGA
and EDGX Rule 11.17.
Paragraph (c) sets for [sic] the
scenarios under which the Exchange
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6 See
Securities Exchange Act Release No. 71375
(January 23, 2014), 79 FR 4771 (January 29, 2014)
(SR–BATS–2013–059; SR–BYX–2013–039).
7 The Exchange notes that BYX intends to file an
identical proposal with the Commission to amend
its Rules 11.5, 11.6, 11.7, and 11.8 to updated
certain provisions and conform to EDGA and EDGX
Rules 11.17, 11.18, 11.19, and 11.20. The Exchange
also notes that EDGA and EDGX intend to file
proposals with the Commission to amend Rules
11.17, 11.18, 11.19, and 11.20 to update certain
provisions to harmonize with the changes to
Exchange Rules 11.5, 11.6, 11.7, and 11.8 proposed
herein.
8 The Exchange notes that the substance of the
rules that are cross-referenced in Rule 11.5, 11.6,
11.7 and 11.8 are identical or substantially similar
to the corresponding EDGA and EDGX Rules.
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may suspend or terminate a Market
Maker’s registration which include
where the Market Maker has: (i)
substantially of [sic] continuously failed
to engage in dealings in accordance with
Rule 11.8 (discussed below); (ii) failed
to meet the minimum net capital
requirements set forth under paragraph
(a) of the Rule; and [sic] (iii) maintain
a fair and orderly market. Rule 11.5(c)
is substantially similar to EDGA and
EDGX Rules 11.17(c)(1) thru (3). EDGA
and EDGX contain an additional
provision under Rule 11.17(c)(4)
allowing them to suspend or terminate
a Market Maker’s registration where it
does not have at least one registered
Market Maker Authorized Trader
(‘‘MMAT’’) qualified to perform market
making activities as set forth in EDGA
and EDGX Rule 11.18(b)(5).9 Under
proposed Rule 11.5(c)(4), a MMAT
whose registration is suspended
pursuant to Exchange Rule 11.6(c) shall
not be deemed qualified within the
meaning of Exchange Rule 11.6(c). In
order to harmonize the scenarios under
which the Exchange may suspend or
terminate a Market Maker’s registration
under Rule 11.5(c) with EDGA and
EDGX, the Exchange proposes to adopt
the provisions under EDGA and EDGX
Rule 11.17(c)(4) as new subparagraph
(c)(4) under Rule 11.5. The Exchange
believes it is reasonable to suspend or
terminate a Market Maker’s registration
where it does not have at least one
registered MMAT qualified to perform
market making activities as the absence
of a qualified MMAT would impede its
ability to satisfy its market making
obligations. To accommodate the
addition of subparagraph (c)(4) under
Rule 11.5, the Exchange also proposes to
relocate the ‘‘or’’ from the end of
subparagraph (c)(2) to the end of
subparagraph (c)(3).
Lastly, to conform to EDGA and EDGX
Rules 11.17(d), the Exchange proposes
to amend paragraph (d) or [sic] Rule
11.5 to remove the letter ‘‘s’’ from after
the word ‘‘interests’’.
Rule 11.6, Obligations of Market Maker
Authorized Traders
Like EDGA and EDGX Rules 11.18,
Exchange Rule 11.6 governs the
9 Under Exchange Rule 11.6(b)(5), a Market Maker
must ensure that a MMAT is properly qualified to
perform market making activities, including but not
limited to ensuring the MMAT has met the
requirements set forth in Exchange Rule 11.6(b)(2).
In addition, the Exchange notes that EDGA and
EDGX Rules [sic] Rule 11.17(c)(4) currently
reference EDGA and EDGX Rules 11.19(b)(5). The
Exchange notes that this reference should be to
EDGA and EDGX Rules 11.18(b)(5) and that EDGA
and EDGX intend to include this correction in an
upcoming rule filing to be submitted to the
Commission.
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registration of MMATs. The Exchange
proposes to amend paragraph (b)(4) to
remove the letter ‘‘s’’ from after the
word ‘‘interests’’ to harmonize Rule 11.6
with EDGA and EDGX Rule 11.18.
Rule 11.7, Registration of Market Makers
in a Security
Like EDGA and EDGX Rules 11.19,
Exchange Rule 11.7 sets forth the
process for a Market Maker to become
registered in a newly authorized
security or in a security already
admitted to dealings on the Exchange.
The Exchange proposes to make the
following changes to harmonize Rule
11.7 with EDGA and EDGX Rule 11.19:
• Amend paragraph (a) to state that
registration in a security shall become
effective on the same day as the
Exchange’s approval of the registration,
unless otherwise provided by the
Exchange; rather than the day following
the following the Exchange’s approval
of the registration. This proposed
amendment would harmonize Exchange
Rule 11.7(a) with EDGA and EDGX
Rules 11.19(a) in order to provide for
consistent timeframes within which a
registration may become effective across
each of the BGM Affiliated Exchanges.
Also, allowing for a registration to
become effective on the same day as
Exchange approval would enable a
Market Maker to immediately provide
liquidity in a security, rather than
waiting until the following trading day.
The Exchange would continue to
maintain the authority to delay the
effectiveness of the registration due to
the Market Maker satisfying additional
procedural requirements, such as the
daily notification to the Exchange of the
symbols to which it will make a market
in on a particular trading day;
• Amend paragraph (a)(4) to replace
the term ‘‘they are’’ with ‘‘Market Maker
is’’;
• amend paragraph (a)(5) to add an
‘‘and’’ to the end of the paragraph; and
• amend paragraph (b) to remove the
letter ‘‘s’’ from after the word
‘‘interests’’.
The changes proposed above would
harmonize Exchange Rule 11.7 with
EDGA and EDGX Rules 11.19.
Rule 11.8, Obligations of Market Makers
Like EDGA and EDGX Rules 11.20,
Exchange Rule 11.8 sets forth the
obligations of Market Makers. In short,
Members who are registered as Market
Makers in one or more securities traded
on the Exchange must engage in a
course of dealings for their own account
to assist in the maintenance, insofar as
reasonably practicable, of fair and
orderly markets on the Exchange in
accordance with these Rules. The
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Exchange proposes to make the
following changes to harmonize Rule
11.8(a), (c), and (d) with EDGA and
EDGX Rule 11.19:
• Amend subparagraph (a)(1) to
clarify that the Market Maker must
maintain continuous, two-sided
quotations; 10
• amend paragraph (c) to: (i) Replace
in the first sentence ‘‘or’’ with
‘‘including, but without limitation’’ and
‘‘the’’ with ‘‘its’’; (ii) delete the ‘‘other’’
from the second sentence; and (iii) add
an ‘‘s’’ to the word ‘‘power’’ in the
second sentence;
• amend paragraph (d)(1) to: (i) Add
‘‘Continuous’’ to the title ‘‘Two-Sided
Quote Obligations’’; 11
• amend paragraphs (d)(2) and
(d)(2)(C) to replace the word ‘‘under’’
with ‘‘of’’ before Regulation NMS;
• amend paragraph (d)(2)(A) to
replace ‘‘from’’ with ‘‘as reported by’’
before reference to the responsible
single plan processor; and
• amend paragraph (d)(2)(B) to
replace ‘‘received from’’ with ‘‘reported
by’’ before reference to the responsible
single plan processor.
The Exchange also proposes to amend
Rule 11.8(d)(1) to clarify the scenarios
in which a Market Maker’s two-sided
quoting obligation may be temporarily
suspended or alleviated. The provisions
proposed to be added are each
substantially similar to the rules of BZX
Options and EDGX Options.12 Proposed
Rule 11.8(d)(1)(A) addresses a Market
Maker’s ability to satisfy the quoting
standard in the event of a technical
failure or system limitation. In
particular, if a technical failure or
limitation of a system of the Exchange
prevents the Market Maker from
maintaining or communicating to the
Exchange timely and accurate quotes in
each security in which a Member is
registered as a Market Maker, the
duration of such failure shall not be
considered in determining whether the
Market Maker has satisfied the quoting
standard with respect to that security.13
In addition, proposed Rule
11.8(d)(1)(B) addresses a Market Maker’s
ability to satisfy the quoting standard
during a halt, suspension or pause. A
10 The Exchange does not propose to amend a
Market Maker’s quoting obligations. The proposed
change is simply intended to make clear that the
obligation is to maintain a continuous, two-sided
quotation.
11 Id.
12 See BZX Options Rule 22.6(d)(4), (5), and (7).
See also EDGX Options Rule 22.6(d)(4), (5), and (7).
13 See Securities Exchange Act Release No. 71229
[sic] (December 18, 2013), 78 FR 77736 (December
24, 2013) (SR–BATS–2013–062) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule
Change to Modify BATS Options Market Maker
Continuous Quoting Obligation Rules).
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Market Maker’s quoting obligation
under Rule 11.8 would be suspended
during a trading halt, suspension, or
pause in the security.14 A Market
Maker’s quoting obligation would
recommence after the first regular way
transaction on the primary listing
market following such halt, suspension,
or pause in the security, as reported by
the responsible single plan processor.15
A Market Maker’s quoting obligation
would also be suspended under Rule
11.8(d)(1)(B) for the duration that an
NMS stock is in a Limit State or a
Straddle State declared pursuant to the
Plan to Address Extraordinary Market
Volatility Pursuant to Rule 608 of
Regulation NMS under the Act (the
‘‘Limit Up-Limit Down Plan’’ or
‘‘Plan’’).16
Under proposed Rule 11.8(d)(1)(C),
the Exchange would have the ability to
consider other exceptions to the TwoSided Obligation based on demonstrated
legal or regulatory requirements or other
mitigating circumstances. For example,
a Market Maker must implement the
pre-trade and other risk controls
required by Rule 15c3–5 of the Act (the
‘‘Market Access Rule’’) with respect to
all of their quoting activity. These pretrade risk controls must be reasonably
designed to systemically limit financial
exposure and ensure compliance with
all regulatory requirements. The risk
controls a Market Maker may have in
place to comply with the Market Access
Rule may prevent that Market Maker
from satisfying its quoting obligation. In
such case, the Exchange would consider
whether the Market Maker’s failure to
satisfy its quoting obligation due to its
compliance with the Market Access
Rule was proper.
Lastly, the Exchange proposes to
amend its definitions of ‘‘Designated
Percentage’’ and ‘‘Defined Limit’’ under
Rules 11.8(d)(2)(D) and (E) respectively
to be substantially similar to Nasdaq
Rules 4613(a)(2)(D) and (E). The pricing
obligations applicable to quotations of
Market Makers are based on the
Designated Percentage and the Defined
Limit, which are determined based on
the applicable trigger percentage. The
amended definitions would include
revised percentages and updated
14 The Exchange notes that proposed Rule
11.8(d)(B) would differ from BZX Options and
EDGX Options Rules 22.6(d)(5) in so far as
proposed Rule 11.8(d)(B) references ‘‘security’’
rather than ‘‘underlying security’’ in order to
conform to the equities markets.
15 See also Nasdaq Stock Market LLC (‘‘Nasdaq’’)
Rule 4613(a)(2)(ii).
16 See BZX and BYX Rules 11.18(e). See also
EDGA and EDGX Rules 11.16(e). See also Securities
Exchange Act Release No. 67091 (May 31, 2012), 77
FR 33498 (June 6, 2012) (the ‘‘Limit Up-Limit Down
Release’’).
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1659
descriptions of the categories of
securities that are subject to those
percentages. The Exchange notes that
the percentages discussed below in the
proposed definitions of Designated
Percentage and Defined Limit are
currently included in Interpretation and
Policy .01 to Rule 11.8. Therefore, the
Exchange is not proposing new
percentages governing a Market Maker’s
quoting obligations; it is seeking to
adopt revised definitions that are
substantially similar to that of Nasdaq in
order to provide consistent rules with
regard to Market Maker’s quoting
obligations.17 The Exchange believes
consistent definitions would avoid
confusion amongst market participants
that make markets on multiple venues.
The Exchange currently defines
Designated Percentage under Rule
11.8(d)(2)(D) as the individual stock
pause trigger percentage under the
applicable rules of a primary listing
market less: Two (2) percentage points
for securities that are included in the
S&P 500® Index, Russell 1000® Index,
and a pilot list of Exchange Traded
Products and for all other NMS stocks
with a price equal to or greater than
$1.00 per share; and twenty (20)
percentage points for all NMS stocks
with a price less than $1.00 per share
that are not included in the S&P 500®
Index, Russell 1000® Index, and a pilot
list of Exchange Traded Products.
Exchange Rule 11.8(d)(2)(D) also states
that for times during Regular Trading
Hours 18 when stock pause triggers are
not in effect under the rules of the
primary listing market, the Designated
Percentage will be 20% for securities
included in the S&P 500® Index, Russell
1000® Index, and a pilot list of
Exchange Traded Products. The
Designated Percentage will remain the
same throughout Regular Trading Hours
for all other NMS stocks.
As amended, Designated Percentage
would be defined as 8% for Tier 1 NMS
Stocks under the Limit Up-Limit Down
17 The Exchange proposed to categorize securities
included in the S&P 500® Index, Russell 1000®
Index, and a pilot list of Exchange Traded Products
as Tier 1 NMS Stocks under the under the Limit
Up-Limit Down Plan. Securities not included in the
S&P 500® Index, Russell 1000® Index, or in the
pilot list of Exchange Traded Products would be
categorized as Tier 2 NMS Stocks under the under
the Limit Up-Limit Down Plan. Nasdaq Rule
4613(a)(2)(D) and (E) references securities as
included in the S&P 500® Index, Russell 1000®
Index, and a pilot list of Exchange Traded Products
as such and those that are not as Tier 2 NMS Stocks.
The Exchange notes that EDGA and EDGX also
intent [sic] to amend their definitions of Designated
Percentage and Defined Limit to mirror that
proposed herein.
18 See Exchange Rule 1.5(w).
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Plan,19 28% for Tier 2 NMS Stocks
under the Limit Up-Limit Down Plan 20
with a price equal to or greater than
$1.00, and 30% for Tier 2 NMS Stocks
under the Limit Up-Limit Down Plan
with a price less than $1.00, except that
between 9:30 a.m. and 9:45 a.m. and
between 3:35 p.m. and the close of
trading, when Exchange Rule 11.18(b) is
not in effect, the Designated Percentage
shall be 20% for Tier 1 NMS Stocks
under the Limit Up-Limit Down Plan,
28% for Tier 2 NMS Stocks under the
Limit Up-Limit Down Plan with a price
equal to or greater than $1.00, and 30%
for Tier 2 NMS Stocks under the Limit
Up-Limit Down Plan with a price less
than $1.00.
The Exchange currently defines
Defined Limit under Rule 11.8(d)(2)(E)
as the individual stock pause trigger
percentage under the applicable rules of
a primary listing market less one-half
(1⁄2) percentage point for securities that
are included in the S&P 500® Index,
Russell 1000® Index, and a pilot list of
Exchange Traded Products and for all
other NMS stocks with a price equal to
or greater than $1.00 per share; and
eighteen and one-half (18.5) percentage
points for all NMS stocks with a price
less than $1.00 per share that are not
included in the S&P 500® Index, Russell
1000® Index, and a pilot list of
Exchange Traded Products. As
amended, Defined Limit would be
defined as 9.5% for Tier 1 NMS Stocks
under the Limit Up-Limit Down Plan,
29.5% for Tier 2 NMS Stocks under the
Limit Up-Limit Down Plan with a price
equal to or greater than $1.00, and
31.5% for Tier 2 NMS Stocks under the
Limit Up-Limit Down Plan with a price
less than $1.00, except that between
9:30 a.m. and 9:45 a.m. and between
3:35 p.m. and the close of trading, when
Exchange Rule 11.18(b) is not in effect,
the Defined Limit shall be 21.5% for
Tier 1 NMS Stocks under the Limit UpLimit Down Plan, 29.5% for Tier 2 NMS
Stocks under the Limit Up-Limit Down
Plan with a price equal to or greater
than $1.00, and 31.5% for Tier 2 NMS
Stocks under the Limit Up-Limit Down
Plan with a price less than $1.00.
Exchange Rule 11.8(d)(2)(E) also states
that for times during Regular Trading
Hours when stock pause triggers are not
in effect under the rules of the primary
listing market, the Defined Limit will be
19 Tier 1 NMS Stocks under the Limit Up-Limit
Down Plan are securities that are included in the
S&P 500® Index, Russell 1000® Index, and a pilot
list of Exchange Traded Products. See the Limit UpLimit Down Release supra note 16.
20 Tier 2 NMS Stocks under the Limit Up-Limit
Down Plan are securities that are not included in
the S&P 500® Index, Russell 1000® Index, and a
pilot list of Exchange Traded Products. Id.
VerDate Sep<11>2014
16:59 Jan 12, 2016
Jkt 238001
21.5% for securities included in the S&P
500® Index, Russell 1000® Index, and a
pilot list of Exchange Traded Products.
The Defined Limit will remain the same
throughout Regular Trading Hours for
all other NMS stocks.
The Exchange proposes to delete
Interpretation and Policy .01 to Rule
11.8 as its content would now be
duplicative with the definitions of
Designated Percentage and Defined
Limit under proposed Rules
11.8(d)(2)(D) and (E).
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder that
are applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6(b) of the
Act.21 Specifically, the proposed change
is consistent with Section 6(b)(5) of the
Act,22 because it is designed to promote
just and equitable principles of trade, to
remove impediments to, and perfect the
mechanism of, a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. As mentioned above, the
proposed rule changes, combined with
the planned filing for the BYX, EDGA,
and EDGX, would allow the BGM
Affiliated Exchanges to provide a
consistent set of rules as it relates to the
registration and obligations of Market
Makers. Consistent rules, in turn, will
simplify the regulatory requirements for
Market Makers on the Exchange that are
also Market Makers on EDGA, EDGX
and/or BYX. The proposed rule change
would provide greater harmonization
between rules of similar purpose on the
BGM Affiliated Exchanges, resulting in
greater uniformity and less burdensome
and more efficient regulatory
compliance and understanding of
Exchange Rules. As such, the proposed
rule change would foster cooperation
and coordination with persons engaged
in facilitating transactions in securities
and would remove impediments to and
perfect the mechanism of a free and
open market and a national market
system. Similarly, the Exchange also
believes that, by harmonizing the rules
across each BGM Affiliated Exchange,
the proposal will enhance the
Exchange’s ability to fairly and
efficiently regulate its Market Makers by
utilizing a consistent rule set and
obligations across each of the BGM
Affiliated Exchanges. Consistent rules
would enable the Exchange to apply
identical standards to that of its
affiliates, alleviating confusion by
Market Makers on who may also be
registered as such on BYX, EDGA, or
EDGX, thereby promoting just and
equitable principles of trade in
accordance with Section 6(b)(5) of the
Act.23
The Exchange also believes the
proposed amendments to Rule 11.8(d)
are consistent with Section 6(b)(5) of the
Act,24 because they are designed to
promote just and equitable principles of
trade, to remove impediments to, and
perfect the mechanism of, a free and
open market and a national market
system, and, in general, to protect
investors and the public interest. The
proposed amendments to Rule
11.8(d)(1) are meant to clarify the
scenarios in which a Market Maker’s
two-sided quoting obligation may be
temporarily suspended or alleviated.
The provisions proposed to be added
are each substantially similar to the
rules of the BZX Options, EDGX
Options and Nasdaq.25 The Exchange
believes it is appropriate to have
consistent rules across its equities and
options platforms. Consistent rules
would aid in alleviating confusion
amongst those that are Members on both
platforms. The Exchange believes it is
reasonable to suspend or alleviate a
Market Maker’s quoting obligations in
the event of a technical or system
limitation, during a trading halt,
suspension or pause, as well as where
demonstrated legal or regulatory
requirements prevent the Market Maker
from quoting. In each scenario, the
Exchange will review the reasons
behind the Market Maker inability to
quote for compliance with the Rule. In
addition, the percentages included in
the proposed definitions of Designated
Percentage and Defined Limit are
currently included in Interpretation and
Policy .01 to Rule 11.8. Therefore, the
Exchange is not proposing to new
percentages governing a Market Maker’s
quoting obligations; it is seeking to
adopt revised definitions that are
substantially similar to that of Nasdaq in
order to provide a consistent rules with
regard to Market Makers quoting
obligations.
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 not
necessary or appropriate in furtherance
of the purposes of the act. To the
contrary, allowing the Exchange to
23 Id.
21 15
U.S.C. 78f(b).
22 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00063
Fmt 4703
24 15
U.S.C. 78f(b)(5).
supra notes 12 and 15.
25 See
Sfmt 4703
E:\FR\FM\13JAN1.SGM
13JAN1
Federal Register / Vol. 81, No. 8 / Wednesday, January 13, 2016 / Notices
implement substantively identical rules
across each of the BGM Affiliated
Exchanges regarding Market Maker
registration and their obligations does
not present any competitive issues, but
rather is designed to provide greater
harmonization among Exchange, BYX,
EDGX, and EDGA rules of similar
purpose. The proposed rule change
should, therefore, result in less
burdensome and more efficient
regulatory compliance and
understanding of Exchange Rules for
common members of the BGM Affiliated
Exchanges and an enhanced ability of
the BGM Affiliated Exchanges to fairly
and efficiently regulate Market Makers.
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.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
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 26 and paragraph (f)(6) of Rule 19b–
4 thereunder,27 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.
26 15
27 17
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
16:59 Jan 12, 2016
Jkt 238001
• 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–2015–121 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–2015–121. 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 also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–BATS–
2015–121, and should be submitted on
or before February 3, 2016.
PO 00000
Frm 00064
Fmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–00464 Filed 1–12–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4.
VerDate Sep<11>2014
1661
Sfmt 4703
[Release No. 34–76852; File No. SR–BYX–
2015–53]
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Changes to Rules 11.5,
Registration of Market Makers, 11.6,
Obligations of Market Maker
Authorized Traders, 11.7, Registration
of Market Makers in a Security, and
11.8, Obligations of Market Makers
January 7, 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
29, 2015, BATS Y-Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) 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.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange filed a proposal to
amend Rules 11.5, Registration of
Market Makers, 11.6, Obligations of
Market Maker Authorized Traders, 11.7,
Registration of Market Makers in a
Security, and 11.8, Obligations of
Market Makers, in order to update
certain provisions and conform to the
rules of EDGA Exchange, Inc. (‘‘EDGA’’),
EDGX Exchange, Inc. (‘‘EDGX’’), BATS
Exchange, Inc.’s (‘‘BZX’’) equity options
trading platform (‘‘BZX Options’’),
EDGX’s equity options trading platform
28 17
CFR 200.30–3(a)(12).
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).
1 15
E:\FR\FM\13JAN1.SGM
13JAN1
]]>Agencies
[Federal Register Volume 81, Number 8 (Wednesday, January 13, 2016)]
[Notices]
[Pages 1657-1661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00464]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76849; File No. SR-BATS-2015-121]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Changes to Rules
11.5, Registration of Market Makers, 11.6, Obligations of Market Maker
Authorized Traders, 11.7, Registration of Market Makers in a Security,
and 11.8, Obligations of Market Makers
January 7, 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 29, 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange filed a proposal to amend Rules 11.5, Registration of
Market Makers, 11.6, Obligations of Market Maker Authorized Traders,
11.7, Registration of Market Makers in a Security, and 11.8,
Obligations of Market Makers, in order to update certain provisions and
conform to the rules of EDGA Exchange, Inc. (``EDGA''), EDGX Exchange,
Inc. (``EDGX''), Exchange's equity options trading platform (``BZX
Options''), EDGX's equity options trading platform (``EDGX Options''),
and the Nasdaq Stock Market LLC (``Nasdaq'').\5\
---------------------------------------------------------------------------
\5\ See EDGA and EDGX Rules 11.17, 11.18, 11.19, and 11.20; BZX
Options Rule 22.6(d)(4), (5), and (7); EDGX Options Rule 22.6(d)(4),
(5), and (7); and Nasdaq Rules Rule 4613(a)(2)(ii) [sic],
4613(a)(2)(D) and (E).
---------------------------------------------------------------------------
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.
[[Page 1658]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In early 2014, the Exchange and its affiliate, BATS Y-Exchange,
Inc. (``BYX''), received approval to effect a merger (the ``Merger'')
of the Exchange's parent company, BATS Global Markets, Inc., with
Direct Edge Holdings LLC, the indirect parent of EDGX and EDGA
(together with BZX, BYX and EDGX, the ``BGM Affiliated Exchanges'').\6\
In the context of the Merger, the BGM Affiliated Exchanges are working
to align their rules, retaining only intended differences between the
BGM Affiliated Exchanges. Thus, the Exchange proposes to amend Rules
11.5, Registration of Market Makers, 11.6, Obligations of Market Maker
Authorized Traders, 11.7, Registration of Market Makers in a Security,
and 11.8, Obligations of Market Makers, in order to update certain
provisions and conform to the rules of EDGA and EDGX and provide a
consistent rule set across each of the BGM Affiliated Exchanges.\7\ As
amended, Exchange Rules 11.5, 11.6, 11.7, and 11.8 would be identical
to EDGA and EDGX Rules 11.17, 11.18, 11.19, and 11.20 but for different
cross references to Exchange Rules that are due to the different rule
numbering amongst the Exchange, EDGA and EDGX.\8\
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 71375 (January 23,
2014), 79 FR 4771 (January 29, 2014) (SR-BATS-2013-059; SR-BYX-2013-
039).
\7\ The Exchange notes that BYX intends to file an identical
proposal with the Commission to amend its Rules 11.5, 11.6, 11.7,
and 11.8 to updated certain provisions and conform to EDGA and EDGX
Rules 11.17, 11.18, 11.19, and 11.20. The Exchange also notes that
EDGA and EDGX intend to file proposals with the Commission to amend
Rules 11.17, 11.18, 11.19, and 11.20 to update certain provisions to
harmonize with the changes to Exchange Rules 11.5, 11.6, 11.7, and
11.8 proposed herein.
\8\ The Exchange notes that the substance of the rules that are
cross-referenced in Rule 11.5, 11.6, 11.7 and 11.8 are identical or
substantially similar to the corresponding EDGA and EDGX Rules.
---------------------------------------------------------------------------
Rule 11.5, Registration of Market Makers
Like EDGA and EDGX Rule 11.17, Exchange Rule 11.5 governs the
registration of Market Makers on the Exchange. In particular,
paragraphs (a) and (b) of Rule 11.5 sets forth the application process
for Members seeking to register as Market Makers on the Exchange. The
Exchange proposes to amend paragraphs (c) and (d) of Rule 11.5 to
harmonize Rule 11.5 with EDGA and EDGX Rule 11.17.
Paragraph (c) sets for [sic] the scenarios under which the Exchange
may suspend or terminate a Market Maker's registration which include
where the Market Maker has: (i) substantially of [sic] continuously
failed to engage in dealings in accordance with Rule 11.8 (discussed
below); (ii) failed to meet the minimum net capital requirements set
forth under paragraph (a) of the Rule; and [sic] (iii) maintain a fair
and orderly market. Rule 11.5(c) is substantially similar to EDGA and
EDGX Rules 11.17(c)(1) thru (3). EDGA and EDGX contain an additional
provision under Rule 11.17(c)(4) allowing them to suspend or terminate
a Market Maker's registration where it does not have at least one
registered Market Maker Authorized Trader (``MMAT'') qualified to
perform market making activities as set forth in EDGA and EDGX Rule
11.18(b)(5).\9\ Under proposed Rule 11.5(c)(4), a MMAT whose
registration is suspended pursuant to Exchange Rule 11.6(c) shall not
be deemed qualified within the meaning of Exchange Rule 11.6(c). In
order to harmonize the scenarios under which the Exchange may suspend
or terminate a Market Maker's registration under Rule 11.5(c) with EDGA
and EDGX, the Exchange proposes to adopt the provisions under EDGA and
EDGX Rule 11.17(c)(4) as new subparagraph (c)(4) under Rule 11.5. The
Exchange believes it is reasonable to suspend or terminate a Market
Maker's registration where it does not have at least one registered
MMAT qualified to perform market making activities as the absence of a
qualified MMAT would impede its ability to satisfy its market making
obligations. To accommodate the addition of subparagraph (c)(4) under
Rule 11.5, the Exchange also proposes to relocate the ``or'' from the
end of subparagraph (c)(2) to the end of subparagraph (c)(3).
---------------------------------------------------------------------------
\9\ Under Exchange Rule 11.6(b)(5), a Market Maker must ensure
that a MMAT is properly qualified to perform market making
activities, including but not limited to ensuring the MMAT has met
the requirements set forth in Exchange Rule 11.6(b)(2). In addition,
the Exchange notes that EDGA and EDGX Rules [sic] Rule 11.17(c)(4)
currently reference EDGA and EDGX Rules 11.19(b)(5). The Exchange
notes that this reference should be to EDGA and EDGX Rules
11.18(b)(5) and that EDGA and EDGX intend to include this correction
in an upcoming rule filing to be submitted to the Commission.
---------------------------------------------------------------------------
Lastly, to conform to EDGA and EDGX Rules 11.17(d), the Exchange
proposes to amend paragraph (d) or [sic] Rule 11.5 to remove the letter
``s'' from after the word ``interests''.
Rule 11.6, Obligations of Market Maker Authorized Traders
Like EDGA and EDGX Rules 11.18, Exchange Rule 11.6 governs the
registration of MMATs. The Exchange proposes to amend paragraph (b)(4)
to remove the letter ``s'' from after the word ``interests'' to
harmonize Rule 11.6 with EDGA and EDGX Rule 11.18.
Rule 11.7, Registration of Market Makers in a Security
Like EDGA and EDGX Rules 11.19, Exchange Rule 11.7 sets forth the
process for a Market Maker to become registered in a newly authorized
security or in a security already admitted to dealings on the Exchange.
The Exchange proposes to make the following changes to harmonize Rule
11.7 with EDGA and EDGX Rule 11.19:
Amend paragraph (a) to state that registration in a
security shall become effective on the same day as the Exchange's
approval of the registration, unless otherwise provided by the
Exchange; rather than the day following the following the Exchange's
approval of the registration. This proposed amendment would harmonize
Exchange Rule 11.7(a) with EDGA and EDGX Rules 11.19(a) in order to
provide for consistent timeframes within which a registration may
become effective across each of the BGM Affiliated Exchanges. Also,
allowing for a registration to become effective on the same day as
Exchange approval would enable a Market Maker to immediately provide
liquidity in a security, rather than waiting until the following
trading day. The Exchange would continue to maintain the authority to
delay the effectiveness of the registration due to the Market Maker
satisfying additional procedural requirements, such as the daily
notification to the Exchange of the symbols to which it will make a
market in on a particular trading day;
Amend paragraph (a)(4) to replace the term ``they are''
with ``Market Maker is'';
amend paragraph (a)(5) to add an ``and'' to the end of the
paragraph; and
amend paragraph (b) to remove the letter ``s'' from after
the word ``interests''.
The changes proposed above would harmonize Exchange Rule 11.7 with
EDGA and EDGX Rules 11.19.
Rule 11.8, Obligations of Market Makers
Like EDGA and EDGX Rules 11.20, Exchange Rule 11.8 sets forth the
obligations of Market Makers. In short, Members who are registered as
Market Makers in one or more securities traded on the Exchange must
engage in a course of dealings for their own account to assist in the
maintenance, insofar as reasonably practicable, of fair and orderly
markets on the Exchange in accordance with these Rules. The
[[Page 1659]]
Exchange proposes to make the following changes to harmonize Rule
11.8(a), (c), and (d) with EDGA and EDGX Rule 11.19:
Amend subparagraph (a)(1) to clarify that the Market Maker
must maintain continuous, two-sided quotations; \10\
---------------------------------------------------------------------------
\10\ The Exchange does not propose to amend a Market Maker's
quoting obligations. The proposed change is simply intended to make
clear that the obligation is to maintain a continuous, two-sided
quotation.
---------------------------------------------------------------------------
amend paragraph (c) to: (i) Replace in the first sentence
``or'' with ``including, but without limitation'' and ``the'' with
``its''; (ii) delete the ``other'' from the second sentence; and (iii)
add an ``s'' to the word ``power'' in the second sentence;
amend paragraph (d)(1) to: (i) Add ``Continuous'' to the
title ``Two-Sided Quote Obligations''; \11\
---------------------------------------------------------------------------
\11\ Id.
---------------------------------------------------------------------------
amend paragraphs (d)(2) and (d)(2)(C) to replace the word
``under'' with ``of'' before Regulation NMS;
amend paragraph (d)(2)(A) to replace ``from'' with ``as
reported by'' before reference to the responsible single plan
processor; and
amend paragraph (d)(2)(B) to replace ``received from''
with ``reported by'' before reference to the responsible single plan
processor.
The Exchange also proposes to amend Rule 11.8(d)(1) to clarify the
scenarios in which a Market Maker's two-sided quoting obligation may be
temporarily suspended or alleviated. The provisions proposed to be
added are each substantially similar to the rules of BZX Options and
EDGX Options.\12\ Proposed Rule 11.8(d)(1)(A) addresses a Market
Maker's ability to satisfy the quoting standard in the event of a
technical failure or system limitation. In particular, if a technical
failure or limitation of a system of the Exchange prevents the Market
Maker from maintaining or communicating to the Exchange timely and
accurate quotes in each security in which a Member is registered as a
Market Maker, the duration of such failure shall not be considered in
determining whether the Market Maker has satisfied the quoting standard
with respect to that security.\13\
---------------------------------------------------------------------------
\12\ See BZX Options Rule 22.6(d)(4), (5), and (7). See also
EDGX Options Rule 22.6(d)(4), (5), and (7).
\13\ See Securities Exchange Act Release No. 71229 [sic]
(December 18, 2013), 78 FR 77736 (December 24, 2013) (SR-BATS-2013-
062) (Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change to Modify BATS Options Market Maker Continuous Quoting
Obligation Rules).
---------------------------------------------------------------------------
In addition, proposed Rule 11.8(d)(1)(B) addresses a Market Maker's
ability to satisfy the quoting standard during a halt, suspension or
pause. A Market Maker's quoting obligation under Rule 11.8 would be
suspended during a trading halt, suspension, or pause in the
security.\14\ A Market Maker's quoting obligation would recommence
after the first regular way transaction on the primary listing market
following such halt, suspension, or pause in the security, as reported
by the responsible single plan processor.\15\ A Market Maker's quoting
obligation would also be suspended under Rule 11.8(d)(1)(B) for the
duration that an NMS stock is in a Limit State or a Straddle State
declared pursuant to the Plan to Address Extraordinary Market
Volatility Pursuant to Rule 608 of Regulation NMS under the Act (the
``Limit Up-Limit Down Plan'' or ``Plan'').\16\
---------------------------------------------------------------------------
\14\ The Exchange notes that proposed Rule 11.8(d)(B) would
differ from BZX Options and EDGX Options Rules 22.6(d)(5) in so far
as proposed Rule 11.8(d)(B) references ``security'' rather than
``underlying security'' in order to conform to the equities markets.
\15\ See also Nasdaq Stock Market LLC (``Nasdaq'') Rule
4613(a)(2)(ii).
\16\ See BZX and BYX Rules 11.18(e). See also EDGA and EDGX
Rules 11.16(e). See also Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit
Down Release'').
---------------------------------------------------------------------------
Under proposed Rule 11.8(d)(1)(C), the Exchange would have the
ability to consider other exceptions to the Two-Sided Obligation based
on demonstrated legal or regulatory requirements or other mitigating
circumstances. For example, a Market Maker must implement the pre-trade
and other risk controls required by Rule 15c3-5 of the Act (the
``Market Access Rule'') with respect to all of their quoting activity.
These pre-trade risk controls must be reasonably designed to
systemically limit financial exposure and ensure compliance with all
regulatory requirements. The risk controls a Market Maker may have in
place to comply with the Market Access Rule may prevent that Market
Maker from satisfying its quoting obligation. In such case, the
Exchange would consider whether the Market Maker's failure to satisfy
its quoting obligation due to its compliance with the Market Access
Rule was proper.
Lastly, the Exchange proposes to amend its definitions of
``Designated Percentage'' and ``Defined Limit'' under Rules
11.8(d)(2)(D) and (E) respectively to be substantially similar to
Nasdaq Rules 4613(a)(2)(D) and (E). The pricing obligations applicable
to quotations of Market Makers are based on the Designated Percentage
and the Defined Limit, which are determined based on the applicable
trigger percentage. The amended definitions would include revised
percentages and updated descriptions of the categories of securities
that are subject to those percentages. The Exchange notes that the
percentages discussed below in the proposed definitions of Designated
Percentage and Defined Limit are currently included in Interpretation
and Policy .01 to Rule 11.8. Therefore, the Exchange is not proposing
new percentages governing a Market Maker's quoting obligations; it is
seeking to adopt revised definitions that are substantially similar to
that of Nasdaq in order to provide consistent rules with regard to
Market Maker's quoting obligations.\17\ The Exchange believes
consistent definitions would avoid confusion amongst market
participants that make markets on multiple venues.
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\17\ The Exchange proposed to categorize securities included in
the S&P 500[supreg] Index, Russell 1000[supreg] Index, and a pilot
list of Exchange Traded Products as Tier 1 NMS Stocks under the
under the Limit Up-Limit Down Plan. Securities not included in the
S&P 500[supreg] Index, Russell 1000[supreg] Index, or in the pilot
list of Exchange Traded Products would be categorized as Tier 2 NMS
Stocks under the under the Limit Up-Limit Down Plan. Nasdaq Rule
4613(a)(2)(D) and (E) references securities as included in the S&P
500[supreg] Index, Russell 1000[supreg] Index, and a pilot list of
Exchange Traded Products as such and those that are not as Tier 2
NMS Stocks. The Exchange notes that EDGA and EDGX also intent [sic]
to amend their definitions of Designated Percentage and Defined
Limit to mirror that proposed herein.
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The Exchange currently defines Designated Percentage under Rule
11.8(d)(2)(D) as the individual stock pause trigger percentage under
the applicable rules of a primary listing market less: Two (2)
percentage points for securities that are included in the S&P
500[supreg] Index, Russell 1000[supreg] Index, and a pilot list of
Exchange Traded Products and for all other NMS stocks with a price
equal to or greater than $1.00 per share; and twenty (20) percentage
points for all NMS stocks with a price less than $1.00 per share that
are not included in the S&P 500[supreg] Index, Russell 1000[supreg]
Index, and a pilot list of Exchange Traded Products. Exchange Rule
11.8(d)(2)(D) also states that for times during Regular Trading Hours
\18\ when stock pause triggers are not in effect under the rules of the
primary listing market, the Designated Percentage will be 20% for
securities included in the S&P 500[supreg] Index, Russell 1000[supreg]
Index, and a pilot list of Exchange Traded Products. The Designated
Percentage will remain the same throughout Regular Trading Hours for
all other NMS stocks.
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\18\ See Exchange Rule 1.5(w).
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As amended, Designated Percentage would be defined as 8% for Tier 1
NMS Stocks under the Limit Up-Limit Down
[[Page 1660]]
Plan,\19\ 28% for Tier 2 NMS Stocks under the Limit Up-Limit Down Plan
\20\ with a price equal to or greater than $1.00, and 30% for Tier 2
NMS Stocks under the Limit Up-Limit Down Plan with a price less than
$1.00, except that between 9:30 a.m. and 9:45 a.m. and between 3:35
p.m. and the close of trading, when Exchange Rule 11.18(b) is not in
effect, the Designated Percentage shall be 20% for Tier 1 NMS Stocks
under the Limit Up-Limit Down Plan, 28% for Tier 2 NMS Stocks under the
Limit Up-Limit Down Plan with a price equal to or greater than $1.00,
and 30% for Tier 2 NMS Stocks under the Limit Up-Limit Down Plan with a
price less than $1.00.
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\19\ Tier 1 NMS Stocks under the Limit Up-Limit Down Plan are
securities that are included in the S&P 500[supreg] Index, Russell
1000[supreg] Index, and a pilot list of Exchange Traded Products.
See the Limit Up-Limit Down Release supra note 16.
\20\ Tier 2 NMS Stocks under the Limit Up-Limit Down Plan are
securities that are not included in the S&P 500[supreg] Index,
Russell 1000[supreg] Index, and a pilot list of Exchange Traded
Products. Id.
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The Exchange currently defines Defined Limit under Rule
11.8(d)(2)(E) as the individual stock pause trigger percentage under
the applicable rules of a primary listing market less one-half (\1/2\)
percentage point for securities that are included in the S&P
500[supreg] Index, Russell 1000[supreg] Index, and a pilot list of
Exchange Traded Products and for all other NMS stocks with a price
equal to or greater than $1.00 per share; and eighteen and one-half
(18.5) percentage points for all NMS stocks with a price less than
$1.00 per share that are not included in the S&P 500[supreg] Index,
Russell 1000[supreg] Index, and a pilot list of Exchange Traded
Products. As amended, Defined Limit would be defined as 9.5% for Tier 1
NMS Stocks under the Limit Up-Limit Down Plan, 29.5% for Tier 2 NMS
Stocks under the Limit Up-Limit Down Plan with a price equal to or
greater than $1.00, and 31.5% for Tier 2 NMS Stocks under the Limit Up-
Limit Down Plan with a price less than $1.00, except that between 9:30
a.m. and 9:45 a.m. and between 3:35 p.m. and the close of trading, when
Exchange Rule 11.18(b) is not in effect, the Defined Limit shall be
21.5% for Tier 1 NMS Stocks under the Limit Up-Limit Down Plan, 29.5%
for Tier 2 NMS Stocks under the Limit Up-Limit Down Plan with a price
equal to or greater than $1.00, and 31.5% for Tier 2 NMS Stocks under
the Limit Up-Limit Down Plan with a price less than $1.00. Exchange
Rule 11.8(d)(2)(E) also states that for times during Regular Trading
Hours when stock pause triggers are not in effect under the rules of
the primary listing market, the Defined Limit will be 21.5% for
securities included in the S&P 500[supreg] Index, Russell 1000[supreg]
Index, and a pilot list of Exchange Traded Products. The Defined Limit
will remain the same throughout Regular Trading Hours for all other NMS
stocks.
The Exchange proposes to delete Interpretation and Policy .01 to
Rule 11.8 as its content would now be duplicative with the definitions
of Designated Percentage and Defined Limit under proposed Rules
11.8(d)(2)(D) and (E).
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities exchange, and,
in particular, with the requirements of Section 6(b) of the Act.\21\
Specifically, the proposed change is consistent with Section 6(b)(5) of
the Act,\22\ because it is designed to promote just and equitable
principles of trade, to remove impediments to, and perfect the
mechanism of, a free and open market and a national market system, and,
in general, to protect investors and the public interest. As mentioned
above, the proposed rule changes, combined with the planned filing for
the BYX, EDGA, and EDGX, would allow the BGM Affiliated Exchanges to
provide a consistent set of rules as it relates to the registration and
obligations of Market Makers. Consistent rules, in turn, will simplify
the regulatory requirements for Market Makers on the Exchange that are
also Market Makers on EDGA, EDGX and/or BYX. The proposed rule change
would provide greater harmonization between rules of similar purpose on
the BGM Affiliated Exchanges, resulting in greater uniformity and less
burdensome and more efficient regulatory compliance and understanding
of Exchange Rules. As such, the proposed rule change would foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and would remove impediments to and perfect
the mechanism of a free and open market and a national market system.
Similarly, the Exchange also believes that, by harmonizing the rules
across each BGM Affiliated Exchange, the proposal will enhance the
Exchange's ability to fairly and efficiently regulate its Market Makers
by utilizing a consistent rule set and obligations across each of the
BGM Affiliated Exchanges. Consistent rules would enable the Exchange to
apply identical standards to that of its affiliates, alleviating
confusion by Market Makers on who may also be registered as such on
BYX, EDGA, or EDGX, thereby promoting just and equitable principles of
trade in accordance with Section 6(b)(5) of the Act.\23\
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(5).
\23\ Id.
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The Exchange also believes the proposed amendments to Rule 11.8(d)
are consistent with Section 6(b)(5) of the Act,\24\ because they are
designed to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system, and, in general, to protect investors and
the public interest. The proposed amendments to Rule 11.8(d)(1) are
meant to clarify the scenarios in which a Market Maker's two-sided
quoting obligation may be temporarily suspended or alleviated. The
provisions proposed to be added are each substantially similar to the
rules of the BZX Options, EDGX Options and Nasdaq.\25\ The Exchange
believes it is appropriate to have consistent rules across its equities
and options platforms. Consistent rules would aid in alleviating
confusion amongst those that are Members on both platforms. The
Exchange believes it is reasonable to suspend or alleviate a Market
Maker's quoting obligations in the event of a technical or system
limitation, during a trading halt, suspension or pause, as well as
where demonstrated legal or regulatory requirements prevent the Market
Maker from quoting. In each scenario, the Exchange will review the
reasons behind the Market Maker inability to quote for compliance with
the Rule. In addition, the percentages included in the proposed
definitions of Designated Percentage and Defined Limit are currently
included in Interpretation and Policy .01 to Rule 11.8. Therefore, the
Exchange is not proposing to new percentages governing a Market Maker's
quoting obligations; it is seeking to adopt revised definitions that
are substantially similar to that of Nasdaq in order to provide a
consistent rules with regard to Market Makers quoting obligations.
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\24\ 15 U.S.C. 78f(b)(5).
\25\ See supra notes 12 and 15.
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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
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the act. To the contrary, allowing the
Exchange to
[[Page 1661]]
implement substantively identical rules across each of the BGM
Affiliated Exchanges regarding Market Maker registration and their
obligations does not present any competitive issues, but rather is
designed to provide greater harmonization among Exchange, BYX, EDGX,
and EDGA rules of similar purpose. The proposed rule change should,
therefore, result in less burdensome and more efficient regulatory
compliance and understanding of Exchange Rules for common members of
the BGM Affiliated Exchanges and an enhanced ability of the BGM
Affiliated Exchanges to fairly and efficiently regulate Market Makers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (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 \26\ and
paragraph (f)(6) of Rule 19b-4 thereunder,\27\ 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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\26\ 15 U.S.C. 78s(b)(3)(A).
\27\ 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 proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File No. SR-BATS-2015-121 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-2015-121. 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 also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-BATS-2015-121, and should be
submitted on or before February 3, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00464 Filed 1-12-16; 8:45 am]
BILLING CODE 8011-01-P
