Self-Regulatory Organizations; BATS-Y Exchange, Inc.; Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Adopt an Early Trading Session and Three New Time-In-Force Instructions, 23032-23035 [2016-08955]
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23032
Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices
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
Number SR–BatsEDGA–2016–03. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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 Number SR–
BatsEDGA–2016–03, and should be
submitted on or before May 10, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08943 Filed 4–18–16; 8:45 am]
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BILLING CODE 8011–01–P
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77607; File No. SR–BYX–
2016–03]
Self-Regulatory Organizations; BATS–
Y Exchange, Inc.; Order Approving
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, To Adopt
an Early Trading Session and Three
New Time-In-Force Instructions
April 13, 2016.
I. Introduction
On February 16, 2016, BATS–Y
Exchange, Inc. (n/k/a Bats BYX
Exchange, Inc.) (the ‘‘Exchange’’ or
‘‘BYX’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’), pursuant to Section
19(b)(1) 1 of the Securities Exchange Act
of 1934 (‘‘Act’’) 2 and Rule 19b–4
thereunder,3 a proposed rule change to
amend its rules to: (i) Create a new
trading session to be known as the Early
Trading Session, which will run from
7:00 a.m. to 8:00 a.m. Eastern Time; and
(ii) adopt three new Time-in-Force
(‘‘TIF’’) instructions. The proposed rule
change was published for comment in
the Federal Register on February 29,
2016.4 On April 11, 2016, the Exchange
filed Amendment No. 1 to the proposed
rule change.5 The Commission received
no comments on the proposed rule
change. This order approves the
proposed rule change, as modified by
Amendment No. 1.
II. Description of the Proposal
The Exchange proposes to amend its
rules to: (i) Create a new trading session,
the Early Trading Session, which will
run from 7:00 a.m. to 8:00 a.m. Eastern
Time; and (ii) adopt three new TIF
instructions.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 See Securities Exchange Act Release No. 77213
(February 23, 2016), 81 FR 10310 (‘‘Notice’’).
5 Amendment No. 1 amended and replaced the
proposed rule change in its entirety. In Amendment
No. 1, the Exchange made technical, nonsubstantive changes to the proposed rule text to
replace references to ‘‘BATS’’ with ‘‘BYX,’’ and
otherwise revised Exhibit 5, so that the proposed
rule text therein is consistent with the Exchange’s
current rule text. See Securities Exchange Act
Release No. 77308 (March 7, 2016) 81 FR 12975
(March 11, 2016) (SR–BYX–2016–07). In
Amendment No. 1, the Exchange also proposes a
non-substantive change to Exchange Rule 14.1 to
correct an inaccurate description of the start time
for the Pre-Opening Session. Because Amendment
No. 1 adds clarification and does not materially
alter the substance of the proposed rule change or
raise unique or novel regulatory issues, Amendment
No. 1 is not subject to notice and comment.
2 15
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A. Early Trading Session
The Exchange trading day is currently
divided into three sessions: (i) The PreOpening Session, which starts at 8:00
a.m. and ends at 9:30 a.m. Eastern Time;
(ii) Regular Trading Hours, which run
from 9:30 a.m. to 4:00 p.m. Eastern
Time; and (iii) the After Hours Session,
which runs from 4:00 p.m. to 5:00 p.m.
Eastern Time.6 The Exchange proposes
to amend its rules to create the Early
Trading Session. Exchange Rule 1.5
would be amended to add a new term,
‘‘Early Trading Session,’’ under
proposed paragraph (ee). ‘‘Early Trading
Session’’ would be defined as ‘‘the time
between 7:00 a.m. and 8:00 a.m. Eastern
Time.’’
The Exchange also proposes to amend
Exchange Rule 11.1(a) to state that
orders may be entered or executed on,
or routed away from, the Exchange
during the Early Trading Session and to
reflect the start time of the Early Trading
Session as 7:00 a.m. Eastern Time. Other
than the proposal to adopt an Early
Trading Session, the Exchange does not
propose to amend the substance or
operation of Exchange Rule 11.1(a).7
Users 8 currently designate when their
orders are eligible for execution by
selecting a desired TIF instruction.
Orders entered between 6:00 a.m. and
8:00 a.m. Eastern Time are not eligible
for execution until the start of the PreOpening Session or Regular Trading
Hours, depending on the TIF selected by
the User. A User may enter orders in
advance of the trading session for which
its orders are eligible. For example,
Users may enter orders starting at 6:00
a.m. Eastern Time with a TIF of Regular
Hours Only (‘‘RHO’’), which designates
that the order only be eligible for
execution during Regular Trading
Hours.9 Users may enter orders as early
as 6:00 a.m. Eastern Time, but those
orders would not be eligible for
execution until the start of the PreOpening Session at 8:00 a.m. According
to the Exchange, some Users have
requested the ability for their orders to
be eligible for execution starting at 7:00
a.m. Eastern Time. Therefore, the
Exchange is proposing to adopt the
Early Trading Session.10
As amended, Exchange Rule 11.1(a)
would state that orders entered between
6:00 a.m. and 7:00 a.m. Eastern Time,
rather than 6:00 a.m. and 8:00 a.m.
6 See
Notice, supra note 4, at 10310.
id.
8 ‘‘User’’ is defined as ‘‘any Member or Sponsored
Participant who is authorized to obtain access to the
System pursuant to Rule 11.3.’’ See Exchange Rule
1.5(cc).
9 See Exchange Rule 11.9(b)(7).
10 See Notice, supra note 4, at 10310.
7 See
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Eastern Time, would not be eligible for
execution until the start of the Early
Trading Session, Pre-Opening Session,
or Regular Trading Hours, depending on
the TIF selected by the User. Exchange
Rule 11.1(a) would also be amended to
state that the Exchange would not
accept the following orders prior to 7:00
a.m. Eastern Time, rather than 8:00 a.m.:
(i) BYX Post Only Orders; 11 (ii) Partial
Post Only at Limit Orders; 12 (iii)
Intermarket Sweep Orders (‘‘ISOs’’); 13
(iv) BYX Market Orders 14 with a TIF
other than RHO; (v) Minimum Quantity
Orders 15 that also include a TIF of RHO;
(vi) Retail Price Improvement Orders; 16
and (vii) all orders with a TIF
instruction of Immediate-or-Cancel
(‘‘IOC’’) 17 or Fill-or-Kill (‘‘FOK’’).18 At
the commencement of the Early Trading
Session, orders entered between 6:00
a.m. and 7:00 a.m. Eastern Time, rather
than 6:00 a.m. and 8:00 a.m. Eastern
Time, would be handled in time
sequence, beginning with the order with
the oldest time stamp, and would be
placed on the BYX Book,19 routed,
cancelled, or executed in accordance
with the terms of the order. As
amended, Exchange Rule 11.1(a) would
state that orders may be executed on the
Exchange or routed away from the
Exchange during Regular Trading Hours
and during the Early Trading, PreOpening, and After Hours Trading
Sessions.20
The Exchange also proposes to make
the changes described below to
Exchange Rules 3.21, 11.9, 11.13, 11.17,
and 14.1 to reflect the adoption of the
Early Trading Session:
• Exchange Rule 3.21, Customer
Disclosures. Exchange Rule 3.21
prohibits Members from accepting an
order from a customer for execution in
the Pre-Opening or After Hours Trading
Session without disclosing to their
11 See
Exchange Rule 11.9(c)(6).
Exchange Rule 11.9(c)(7).
13 See Exchange Rule 11.9(d).
14 See Exchange Rule 11.9(a)(2).
15 See Exchange Rule 11.9(c)(5).
16 See Exchange Rule 11.24(a)(3).
17 See Exchange Rule 11.9(b)(1).
18 See Exchange Rule 11.9(b)(6).
19 See Exchange Rule 1.5(e).
20 See Notice, supra note 4, at 10310–11.
Amendment No. 1 updated Exhibit 5 so that the
names of orders, order modifiers, and the
Exchange’s book stated therein conform with those
used in the current Exchange Rules. See supra, note
5. The Exchange also describes how the Early
Trading Session will affect its Members’ operations
and the Exchange’s opening process, order types,
routing services, order processing, data feeds, trade
reporting, market surveillance, and clearly
erroneous trade processing. The Exchange clarifies
that these processes would operate in the same
manner with the exception of changes in time to
reflect the adoption of the Early Trading Session.
See Notice, supra note 4, at 10311.
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customer that extended hours trading
involves material trading risks,
including the possibility of lower
liquidity, high volatility, changing
prices, unlinked markets, an
exaggerated effect from news
announcements, wider spreads and any
other relevant risk. The Exchange
proposes to amend Exchange Rule 3.21
to also require such disclosures for
customer orders that are to be executed
during the Early Trading Session.21
• Exchange Rule 11.9, Orders and
Modifiers. The Exchange proposes to
amend the description of BYX Market
Orders under Exchange Rule 11.9(a)(2),
Market Maker Peg Orders under Rule
11.9(c)(16), and Supplementary Peg
Orders under Rule 11.9(c)(19) to
account for the Early Trading Session.
Every order type that is currently
available beginning at 8:00 a.m. would
be available beginning at 7:00 a.m. for
inclusion in the Early Trading Session.
All other order types, and all order type
behaviors, would otherwise remain
unchanged. Therefore, each of the above
rules for BYX Market Orders, Market
Maker Peg Orders, and Supplemental
Peg Orders would be amended to
account for the Early Trading Session.22
• Exchange Rule 11.13, Order
Execution and Routing. Exchange Rule
11.13(a)(2)(B) discusses compliance
with Regulation NMS and Trade
Through Protections and states that the
price of any execution occurring during
the Pre-Opening Session or the After
Hours Trading Session must be equal to
or better than the highest Protected Bid
or lowest Protected Offer, unless the
order is marked ISO or a Protected Bid
is crossing a Protected Offer. The
Exchange proposes to amend Exchange
Rule 11.13(a)(2)(B) to expand the
Exchange Rule’s requirements to the
Early Trading Session.23
• Exchange Rule 11.17, Clearly
Erroneous Executions. Exchange Rule
11.17 outlines under which conditions
the Exchange may determine that an
execution is clearly erroneous. The
Exchange proposes to amend Exchange
Rule 11.17 to include executions that
occur during the Early Trading Session.
Exchange Rule 11.17(c)(1) sets forth the
numerical guidelines the Exchange is to
follow when determining whether an
execution was clearly erroneous during
Regular Trading Hours or the PreOpening or After Hours Trading
Session. Exchange Rule 11.17(c)(3) sets
forth additional factors the Exchange
21 See
id.
id. at 10311–12. Amendment No. 1 updated
Exhibit 5 so that the names of orders and order
modifiers stated therein conform with those used in
the current Exchange Rules. See supra, note 5.
23 See Notice, supra note 4, at 10312.
22 See
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23033
may consider in determining whether a
transaction is clearly erroneous. These
factors include whether the transaction
was executed during the Pre-Opening or
After Hours Trading Sessions. The
Exchange proposes to amend Exchange
Rule 11.17(c)(1) and (3) to include
executions occurring during the Early
Trading Session.24
• Rule 14.1, Unlisted Trading
Privileges. The Exchange proposes to
amend Rules 14.1(c)(2), and
Interpretation and Policies .01(a) and (b)
to account for the proposed Early
Trading Session. Specifically, the
Exchange proposes to amend paragraph
(c)(2) to state that an information
circular distributed by the Exchange
prior to the commencement of trading of
a UTP Derivative Security will include
the risk of trading during the Early
Trading Session, in addition to the PreOpening Session and After Hours
Trading Session.25 In addition, the
Exchange proposes to amend
Interpretation and Policies .01(a) to add
Early Trading Session to the paragraph’s
title and to state that if a UTP Derivative
Security begins trading on the Exchange
in the Early Trading Session or PreOpening Session and subsequently a
temporary interruption occurs in the
calculation or wide dissemination of the
Intraday Indicative Value (‘‘IIV’’) or the
value of the underlying index, as
applicable, to such UTP Derivative
Security, by a major market data vendor,
the Exchange may continue to trade the
UTP Derivative Security for the
remainder of the Early Trading Session
and Pre-Opening Session. Lastly, the
Exchange proposes to amend
Interpretation and Policies .01(b) to add
Early Trading Session to the paragraph’s
title and to amend subparagraph (ii) of
that section to state that if the IIV or the
value of the underlying index continues
not to be calculated or widely available
as of the commencement of the Early
Trading Session or Pre-Opening Session
on the next business day, the Exchange
shall not commence trading of the UTP
Derivative Security in the Early Trading
Session or Pre-Opening Session that
day.26
24 See id. The Exchange also proposes technical
amendments to Exchange Rules 11.17(c)(1) and (3)
to delete the letter ‘‘s’’ from the word ‘‘Trading
Sessions’’ and the letter ‘‘s’’ from the word ‘‘tapes,’’
respectively.
25 In Amendment No. 1, the Exchange also
proposes to amend Rule 14.1(c)(2) to correct an
inaccurate description of the Pre-Opening Session,
which currently reads as 9:00 a.m. to 9:30 a.m.
rather than 8:00 a.m. to 9:30 a.m. as is set forth
throughout Exchange Rules.
26 See Notice, supra note 4, at 10312.
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Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices
B. TIF Instructions
The Exchange proposes to adopt three
new TIF instructions under Exchange
Rule 11.9(b). As discussed above, a User
may designate when its order is eligible
for execution by selecting the desired
TIF instruction under Exchange Rule
11.9(b).27
Although the Exchange states that the
proposal to adopt an Early Trading
Session is in response to User requests
for their orders to be eligible for
execution starting at 7:00 a.m. Eastern
Time, the Exchange states that some
Users have requested that their orders
continue to not be eligible for execution
until the start of the Pre-Opening
Session at 8:00 a.m. Therefore, the
Exchange proposes to adopt the
following three new TIF instructions
under Exchange Rule 11.9(b): 28
• Pre-Opening Session Plus (‘‘PRE’’).
A limit order that is designated for
execution during the Pre-Opening
Session and Regular Trading Hours.
Like the current Good ‘til Cancel TIF
instruction,29 any portion not executed
would expire at the end of Regular
Trading Hours.
• Pre-Opening Session ‘til Extended
Day (‘‘PTX’’). A limit order that is
designated for execution during the PreOpening Session, Regular Trading
Hours, and the After Hours Session.
Like the current Good ‘til Extended Day
TIF instruction,30 any portion not
executed would expire at the end of the
After Hours Session.
• Pre-Opening Session ‘til Day
(‘‘PTD’’). A limit order that is designated
for execution during the Pre-Opening
Session, Regular Trading Hours, and the
After Hours Session. Like the current
Good ‘til Day TIF instruction,31 any
portion not executed would be
cancelled at the expiration time
assigned to the order, which can be no
later than the close of the After Hours
Trading Session.
Under each proposed TIF instruction,
Users may designate that their orders
only be eligible for execution starting
with the Pre-Opening Session. Users
may continue to enter orders as early as
6:00 a.m., but orders with the proposed
TIF instructions would not be eligible
for execution until 8:00 a.m. Eastern
Time, which is the start of the PreOpening Session. At the commencement
of the Pre-Opening Session, orders
entered between 6:00 a.m. and 8:00 a.m.
Eastern Time with one of the proposed
TIF instructions would be handled in
27 See
Exchange Rule 11.1(a).
Notice, supra note 4, at 10312.
29 See Exchange Rule 11.9(b)(3).
30 See Exchange Rule 11.9(b)(5).
31 See Exchange Rule 11.9(b)(4).
28 See
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time sequence, beginning with the order
with the oldest time stamp, and would
be placed on the BYX Book, routed,
cancelled, or executed in accordance
with the terms of the order.32
III. Discussion and Commission
Findings
After careful consideration, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.33 The
Commission believes that the proposed
rule change is consistent with Section
6(b)(5) 34 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The Exchange proposes to adopt an
Early Trading Session and three new
TIF instructions and to make related
changes to its rules as discussed
above.35 The Commission believes that
the proposed rules would provide Users
with additional options for trading on
the Exchange. The Commission notes
that the proposed Early Trading Session
hours are similar to those of other
exchanges,36 and that the proposed TIF
instructions would offer functionality
similar to existing functionality
available on the Exchange and other
exchanges that allows Members to select
when their orders become eligible for
execution.37
32 See Notice, supra note 4, at 10312. Amendment
No. 1 updated Exhibit 5 so that the name of the
Exchange’s book stated therein conforms with the
name used in the current Exchange Rules. See
supra, note 5. Orders utilizing one of the proposed
TIF instructions would not be eligible for execution
during the Early Trading Session. See Notice, supra
note 4, at 10312, n.32.
33 In approving this rule change, the Commission
notes that it has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
34 15 U.S.C. 78f(b)(5).
35 See supra section II.
36 For example, NYSE Arca, Inc. operates an
Opening Session that starts at 4:00 a.m. Eastern
Time and ends at 9:30 a.m. Eastern Time, and
Nasdaq Stock Market LLC operates a pre-market
session that also opens at 4:00 a.m. and ends at 9:30
a.m. Eastern Time. See NYSE Arca Rule 7.34(a)(1);
Nasdaq Rule 4701(g). See also Securities Exchange
Act Release No. 60605 (September 1, 2009), 74 FR
46277 (September 8, 2009) (SR–CHX–2009–13)
(adopting bifurcated post-trading session on the
Chicago Stock Exchange, Inc.).
37 Specifically, on the Exchange, Users may enter
an order starting at 6:00 a.m. Eastern Time with a
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The Commission notes that the
Exchange has represented that it would
subject orders that are eligible for
execution as of the start of the PreOpening Session to all of the Exchange’s
standard regulatory checks, as it
currently does with all orders upon
entry.38 Specifically, the Exchange
would subject such orders to checks for
compliance with, including but not
limited to, Regulation NMS,39
Regulation SHO,40 and relevant
Exchange rules.41 Moreover, the
Exchange reminds its Members of their
regulatory obligations when submitting
an order with one of the proposed TIF
instructions.42 In particular, the
Exchange states that Members must
comply with the Market Access Rule,43
which requires, among other things, pretrade controls and procedures that are
reasonably designed to assure
compliance with Exchange trading rules
and Commission rules pursuant to
Regulation SHO and Regulation NMS.
The Exchange also notes that a
Member’s procedures must be
reasonably designed to ensure
compliance with the applicable
regulatory requirements, not just at the
time the order is routed to the Exchange,
but also at the time the order becomes
eligible for execution.44
The Commission further notes the
Exchange’s discussion of the best
execution obligations of Members
utilizing the proposed TIF
instructions.45 Specifically, the
Exchange states that a Member’s best
execution obligations may include
cancelling an order when market
conditions deteriorate and could result
in an inferior execution or informing
customers when the execution of their
order may be delayed intentionally
while the Member utilizes reasonable
diligence to ascertain the best market for
the security.46 The Exchange further
notes that Members will maintain the
ability to cancel or modify the terms of
an order utilizing any of the proposed
TIF instructions at any time, including
during the time from when the order is
routed to the Exchange until the start of
the Pre-Opening Session.47 As a result,
TIF of Regular Hours Only, which designates that
the order only be eligible for execution during
Regular Trading Hours, which begin at 9:30 a.m.
Eastern Time. See Exchange Rule 11.9(b)(7); see
also NASDAQ Rule 4703(a)(7).
38 See Notice, supra note 4, at 10314.
39 See 17 CFR 242.600–613.
40 See 17 CFR 242.200–204.
41 See Notice, supra note 4, at 10314.
42 See id.
43 See 17 CFR 240.15c3–5.
44 See Notice, supra note 4, at 10314.
45 See id. at 10314.
46 See id. at n.41.
47 See id. at 10313.
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the Exchange states that a Member who
utilizes the proposed TIF instructions,
but later determines that market
conditions favor execution during Early
Trading Session, can cancel the order
residing at the Exchange and enter a
separate order to execute during the
Early Trading Session.48
Furthermore, the Exchange proposes
technical amendments to its Rules to
correct erroneous plural words and an
inaccurate description of the PreOpening Session times in Exchange
Rules 11.17 and 14.1, respectively. The
Commission believes these proposed
amendments would help alleviate
potential confusion among Users and
Members regarding the operation of the
Exchange’s rules and are, therefore,
consistent with the Act.
IV. Conclusion
IT IS THEREFORE ORDERED,
pursuant to Section 19(b)(2) of the Act 49
that the proposed rule change (SR–
BYX–2016–03), as modified by
Amendment No.1, be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.50
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08955 Filed 4–18–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77611; File No. SR–BATS–
2016–14]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Order Approving
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, To Adopt
an Early Trading Session and Three
New Time-in-Force Instructions
April 13, 2016.
mstockstill on DSK4VPTVN1PROD with NOTICES
I. Introduction
On February 12, 2016, BATS
Exchange, Inc. (the ‘‘Exchange’’ or
‘‘BATS’’) (n/k/a Bats BZX Exchange,
Inc.) filed with the Securities and
Exchange Commission (the
‘‘Commission’’), pursuant to section
19(b)(1) 1 of the Securities Exchange Act
of 1934 (‘‘Act’’) 2 and Rule 19b–4
thereunder,3 a proposed rule change to
amend its rules to: (i) Create a new
48 See
id. at 10313–14.
U.S.C. 78s(b)(2).
50 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
49 15
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trading session to be known as the Early
Trading Session, which will run from
7:00 a.m. to 8:00 a.m. Eastern Time; and
(ii) adopt three new Time-in-Force
(‘‘TIF’’) instructions. The proposed rule
change was published for comment in
the Federal Register on February 29,
2016.4 On April 11, 2016, the Exchange
filed Amendment No. 1 to the proposed
rule change.5 The Commission received
no comments on the proposed rule
change. This order approves the
proposed rule change, as modified by
Amendment No. 1.
II. Description of the Proposal
The Exchange proposes to amend its
rules to: (i) Create a new trading session,
the Early Trading Session, which will
run from 7:00 a.m. to 8:00 a.m. Eastern
Time; and (ii) adopt three new TIF
instructions.
A. Early Trading Session
The Exchange trading day is currently
divided into three sessions: (i) The PreOpening Session, which starts at 8:00
a.m. and ends at 9:30 a.m. Eastern Time;
(ii) Regular Trading Hours, which run
from 9:30 a.m. to 4:00 p.m. Eastern
Time; and (iii) the After Hours Session,
which runs from 4:00 p.m. to 5:00 p.m.
Eastern Time.6 The Exchange proposes
to amend its rules to create the Early
Trading Session. Exchange Rule 1.5
would be amended to add a new term,
‘‘Early Trading Session,’’ under
proposed paragraph (ee). ‘‘Early Trading
Session’’ would be defined as ‘‘the time
between 7:00 a.m. and 8:00 a.m. Eastern
Time.’’
The Exchange also proposes to amend
Exchange Rule 11.1(a) to state that
orders may be entered or executed on,
or routed away from, the Exchange
during the Early Trading Session and to
reflect the start time of the Early Trading
Session as 7:00 a.m. Eastern Time. Other
than the proposal to adopt an Early
Trading Session, the Exchange does not
propose to amend the substance or
operation of Exchange Rule 11.1(a).7
4 See Securities Exchange Act Release No. 77214
(February 23, 2016), 81 FR 10350 (‘‘Notice’’).
5 Amendment No. 1 amended and replaced the
proposed rule change in its entirety. In Amendment
No. 1, the Exchange made technical nonsubstantive
changes to the proposed rule text to replace all
references to ‘‘BATS’’ with ‘‘BZX’’ and to otherwise
revise Exhibit 5 so that the proposed rule text is
consistent with the Exchange’s current rule text.
See Securities Exchange Act Release Nos. 77307
(March 7, 2016), 81 FR 12996 (March 11, 2016) (SR–
BATS–2016–25) and 77476 (March 30, 2016) 81 FR
19661 (April 5, 2016) (SR–BATS–2016–17). Because
Amendment No. 1 adds clarification and does not
materially alter the substance of the proposed rule
change or raise unique or novel regulatory issues,
Amendment No. 1 is not subject to notice and
comment.
6 See Notice, supra note 4, at 10350.
7 See id.
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
23035
Users 8 currently designate when their
orders are eligible for execution by
selecting a desired TIF instruction.
Orders entered between 6:00 a.m. and
8:00 a.m. Eastern Time are not eligible
for execution until the start of the PreOpening Session or Regular Trading
Hours, depending on the TIF selected by
the User. A User may enter orders in
advance of the trading session for which
its orders are eligible. For example,
Users may enter orders starting at 6:00
a.m. Eastern Time with a TIF of Regular
Hours Only (‘‘RHO’’), which designates
that the order only be eligible for
execution during Regular Trading
Hours.9 Users may enter orders as early
as 6:00 a.m. Eastern Time, but those
orders would not be eligible for
execution until the start of the PreOpening Session at 8:00 a.m. According
to the Exchange, some Users have
requested the ability for their orders to
be eligible for execution starting at 7:00
a.m. Eastern Time. Therefore, the
Exchange is proposing to adopt the
Early Trading Session.10
As amended, Exchange Rule 11.1(a)
would state that orders entered between
6:00 a.m. and 7:00 a.m. Eastern Time,
rather than 6:00 a.m. and 8:00 a.m.
Eastern Time, would not be eligible for
execution until the start of the Early
Trading Session, Pre-Opening Session,
or Regular Trading Hours, depending on
the TIF selected by the User. Exchange
Rule 11.1(a) would also be amended to
state that the Exchange would not
accept the following orders prior to 7:00
a.m. Eastern Time, rather than 8:00 a.m.:
(i) BZX Post Only Orders; 11 (ii) Partial
Post Only at Limit Orders; 12 (iii)
Intermarket Sweep Orders (‘‘ISOs’’); 13
(iv) BZX Market Orders 14 that are not
Eligible Auction Orders as defined in
Rule 11.23(a)(8); (v) Minimum Quantity
Orders 15 that also include a TIF of RHO;
and (vi) all orders with a TIF instruction
of Immediate-or-Cancel (‘‘IOC’’) 16 or
Fill-or-Kill (‘‘FOK’’).17 At the
commencement of the Early Trading
Session, orders entered between 6:00
a.m. and 7:00 a.m. Eastern Time, rather
than 6:00 a.m. and 8:00 a.m. Eastern
Time, would be handled in time
sequence, beginning with the order with
8 ‘‘User’’ is defined as ‘‘any Member or Sponsored
Participant who is authorized to obtain access to the
System pursuant to Rule 11.3.’’ See Exchange Rule
1.5(cc).
9 See Exchange Rule 11.9(b)(7).
10 See Notice, supra note 4, at 10351.
11 See Exchange Rule 11.9(c)(6).
12 See Exchange Rule 11.9(c)(7).
13 See Exchange Rule 11.9(d).
14 See Exchange Rule 11.9(a)(2).
15 See Exchange Rule 11.9(c)(5).
16 See Exchange Rule 11.9(b)(1).
17 See Exchange Rule 11.9(b)(6).
E:\FR\FM\19APN1.SGM
19APN1
]]>Agencies
[Federal Register Volume 81, Number 75 (Tuesday, April 19, 2016)]
[Notices]
[Pages 23032-23035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08955]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77607; File No. SR-BYX-2016-03]
Self-Regulatory Organizations; BATS-Y Exchange, Inc.; Order
Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto,
To Adopt an Early Trading Session and Three New Time-In-Force
Instructions
April 13, 2016.
I. Introduction
On February 16, 2016, BATS-Y Exchange, Inc. (n/k/a Bats BYX
Exchange, Inc.) (the ``Exchange'' or ``BYX'') filed with the Securities
and Exchange Commission (the ``Commission''), pursuant to Section
19(b)(1) \1\ of the Securities Exchange Act of 1934 (``Act'') \2\ and
Rule 19b-4 thereunder,\3\ a proposed rule change to amend its rules to:
(i) Create a new trading session to be known as the Early Trading
Session, which will run from 7:00 a.m. to 8:00 a.m. Eastern Time; and
(ii) adopt three new Time-in-Force (``TIF'') instructions. The proposed
rule change was published for comment in the Federal Register on
February 29, 2016.\4\ On April 11, 2016, the Exchange filed Amendment
No. 1 to the proposed rule change.\5\ The Commission received no
comments on the proposed rule change. This order approves the proposed
rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 77213 (February 23,
2016), 81 FR 10310 (``Notice'').
\5\ Amendment No. 1 amended and replaced the proposed rule
change in its entirety. In Amendment No. 1, the Exchange made
technical, non-substantive changes to the proposed rule text to
replace references to ``BATS'' with ``BYX,'' and otherwise revised
Exhibit 5, so that the proposed rule text therein is consistent with
the Exchange's current rule text. See Securities Exchange Act
Release No. 77308 (March 7, 2016) 81 FR 12975 (March 11, 2016) (SR-
BYX-2016-07). In Amendment No. 1, the Exchange also proposes a non-
substantive change to Exchange Rule 14.1 to correct an inaccurate
description of the start time for the Pre-Opening Session. Because
Amendment No. 1 adds clarification and does not materially alter the
substance of the proposed rule change or raise unique or novel
regulatory issues, Amendment No. 1 is not subject to notice and
comment.
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to amend its rules to: (i) Create a new
trading session, the Early Trading Session, which will run from 7:00
a.m. to 8:00 a.m. Eastern Time; and (ii) adopt three new TIF
instructions.
A. Early Trading Session
The Exchange trading day is currently divided into three sessions:
(i) The Pre-Opening Session, which starts at 8:00 a.m. and ends at 9:30
a.m. Eastern Time; (ii) Regular Trading Hours, which run from 9:30 a.m.
to 4:00 p.m. Eastern Time; and (iii) the After Hours Session, which
runs from 4:00 p.m. to 5:00 p.m. Eastern Time.\6\ The Exchange proposes
to amend its rules to create the Early Trading Session. Exchange Rule
1.5 would be amended to add a new term, ``Early Trading Session,''
under proposed paragraph (ee). ``Early Trading Session'' would be
defined as ``the time between 7:00 a.m. and 8:00 a.m. Eastern Time.''
---------------------------------------------------------------------------
\6\ See Notice, supra note 4, at 10310.
---------------------------------------------------------------------------
The Exchange also proposes to amend Exchange Rule 11.1(a) to state
that orders may be entered or executed on, or routed away from, the
Exchange during the Early Trading Session and to reflect the start time
of the Early Trading Session as 7:00 a.m. Eastern Time. Other than the
proposal to adopt an Early Trading Session, the Exchange does not
propose to amend the substance or operation of Exchange Rule
11.1(a).\7\
---------------------------------------------------------------------------
\7\ See id.
---------------------------------------------------------------------------
Users \8\ currently designate when their orders are eligible for
execution by selecting a desired TIF instruction. Orders entered
between 6:00 a.m. and 8:00 a.m. Eastern Time are not eligible for
execution until the start of the Pre-Opening Session or Regular Trading
Hours, depending on the TIF selected by the User. A User may enter
orders in advance of the trading session for which its orders are
eligible. For example, Users may enter orders starting at 6:00 a.m.
Eastern Time with a TIF of Regular Hours Only (``RHO''), which
designates that the order only be eligible for execution during Regular
Trading Hours.\9\ Users may enter orders as early as 6:00 a.m. Eastern
Time, but those orders would not be eligible for execution until the
start of the Pre-Opening Session at 8:00 a.m. According to the
Exchange, some Users have requested the ability for their orders to be
eligible for execution starting at 7:00 a.m. Eastern Time. Therefore,
the Exchange is proposing to adopt the Early Trading Session.\10\
---------------------------------------------------------------------------
\8\ ``User'' is defined as ``any Member or Sponsored Participant
who is authorized to obtain access to the System pursuant to Rule
11.3.'' See Exchange Rule 1.5(cc).
\9\ See Exchange Rule 11.9(b)(7).
\10\ See Notice, supra note 4, at 10310.
---------------------------------------------------------------------------
As amended, Exchange Rule 11.1(a) would state that orders entered
between 6:00 a.m. and 7:00 a.m. Eastern Time, rather than 6:00 a.m. and
8:00 a.m.
[[Page 23033]]
Eastern Time, would not be eligible for execution until the start of
the Early Trading Session, Pre-Opening Session, or Regular Trading
Hours, depending on the TIF selected by the User. Exchange Rule 11.1(a)
would also be amended to state that the Exchange would not accept the
following orders prior to 7:00 a.m. Eastern Time, rather than 8:00
a.m.: (i) BYX Post Only Orders; \11\ (ii) Partial Post Only at Limit
Orders; \12\ (iii) Intermarket Sweep Orders (``ISOs''); \13\ (iv) BYX
Market Orders \14\ with a TIF other than RHO; (v) Minimum Quantity
Orders \15\ that also include a TIF of RHO; (vi) Retail Price
Improvement Orders; \16\ and (vii) all orders with a TIF instruction of
Immediate-or-Cancel (``IOC'') \17\ or Fill-or-Kill (``FOK'').\18\ At
the commencement of the Early Trading Session, orders entered between
6:00 a.m. and 7:00 a.m. Eastern Time, rather than 6:00 a.m. and 8:00
a.m. Eastern Time, would be handled in time sequence, beginning with
the order with the oldest time stamp, and would be placed on the BYX
Book,\19\ routed, cancelled, or executed in accordance with the terms
of the order. As amended, Exchange Rule 11.1(a) would state that orders
may be executed on the Exchange or routed away from the Exchange during
Regular Trading Hours and during the Early Trading, Pre-Opening, and
After Hours Trading Sessions.\20\
---------------------------------------------------------------------------
\11\ See Exchange Rule 11.9(c)(6).
\12\ See Exchange Rule 11.9(c)(7).
\13\ See Exchange Rule 11.9(d).
\14\ See Exchange Rule 11.9(a)(2).
\15\ See Exchange Rule 11.9(c)(5).
\16\ See Exchange Rule 11.24(a)(3).
\17\ See Exchange Rule 11.9(b)(1).
\18\ See Exchange Rule 11.9(b)(6).
\19\ See Exchange Rule 1.5(e).
\20\ See Notice, supra note 4, at 10310-11. Amendment No. 1
updated Exhibit 5 so that the names of orders, order modifiers, and
the Exchange's book stated therein conform with those used in the
current Exchange Rules. See supra, note 5. The Exchange also
describes how the Early Trading Session will affect its Members'
operations and the Exchange's opening process, order types, routing
services, order processing, data feeds, trade reporting, market
surveillance, and clearly erroneous trade processing. The Exchange
clarifies that these processes would operate in the same manner with
the exception of changes in time to reflect the adoption of the
Early Trading Session. See Notice, supra note 4, at 10311.
---------------------------------------------------------------------------
The Exchange also proposes to make the changes described below to
Exchange Rules 3.21, 11.9, 11.13, 11.17, and 14.1 to reflect the
adoption of the Early Trading Session:
Exchange Rule 3.21, Customer Disclosures. Exchange Rule
3.21 prohibits Members from accepting an order from a customer for
execution in the Pre-Opening or After Hours Trading Session without
disclosing to their customer that extended hours trading involves
material trading risks, including the possibility of lower liquidity,
high volatility, changing prices, unlinked markets, an exaggerated
effect from news announcements, wider spreads and any other relevant
risk. The Exchange proposes to amend Exchange Rule 3.21 to also require
such disclosures for customer orders that are to be executed during the
Early Trading Session.\21\
---------------------------------------------------------------------------
\21\ See id.
---------------------------------------------------------------------------
Exchange Rule 11.9, Orders and Modifiers. The Exchange
proposes to amend the description of BYX Market Orders under Exchange
Rule 11.9(a)(2), Market Maker Peg Orders under Rule 11.9(c)(16), and
Supplementary Peg Orders under Rule 11.9(c)(19) to account for the
Early Trading Session. Every order type that is currently available
beginning at 8:00 a.m. would be available beginning at 7:00 a.m. for
inclusion in the Early Trading Session. All other order types, and all
order type behaviors, would otherwise remain unchanged. Therefore, each
of the above rules for BYX Market Orders, Market Maker Peg Orders, and
Supplemental Peg Orders would be amended to account for the Early
Trading Session.\22\
---------------------------------------------------------------------------
\22\ See id. at 10311-12. Amendment No. 1 updated Exhibit 5 so
that the names of orders and order modifiers stated therein conform
with those used in the current Exchange Rules. See supra, note 5.
---------------------------------------------------------------------------
Exchange Rule 11.13, Order Execution and Routing. Exchange
Rule 11.13(a)(2)(B) discusses compliance with Regulation NMS and Trade
Through Protections and states that the price of any execution
occurring during the Pre-Opening Session or the After Hours Trading
Session must be equal to or better than the highest Protected Bid or
lowest Protected Offer, unless the order is marked ISO or a Protected
Bid is crossing a Protected Offer. The Exchange proposes to amend
Exchange Rule 11.13(a)(2)(B) to expand the Exchange Rule's requirements
to the Early Trading Session.\23\
---------------------------------------------------------------------------
\23\ See Notice, supra note 4, at 10312.
---------------------------------------------------------------------------
Exchange Rule 11.17, Clearly Erroneous Executions.
Exchange Rule 11.17 outlines under which conditions the Exchange may
determine that an execution is clearly erroneous. The Exchange proposes
to amend Exchange Rule 11.17 to include executions that occur during
the Early Trading Session. Exchange Rule 11.17(c)(1) sets forth the
numerical guidelines the Exchange is to follow when determining whether
an execution was clearly erroneous during Regular Trading Hours or the
Pre-Opening or After Hours Trading Session. Exchange Rule 11.17(c)(3)
sets forth additional factors the Exchange may consider in determining
whether a transaction is clearly erroneous. These factors include
whether the transaction was executed during the Pre-Opening or After
Hours Trading Sessions. The Exchange proposes to amend Exchange Rule
11.17(c)(1) and (3) to include executions occurring during the Early
Trading Session.\24\
---------------------------------------------------------------------------
\24\ See id. The Exchange also proposes technical amendments to
Exchange Rules 11.17(c)(1) and (3) to delete the letter ``s'' from
the word ``Trading Sessions'' and the letter ``s'' from the word
``tapes,'' respectively.
---------------------------------------------------------------------------
Rule 14.1, Unlisted Trading Privileges. The Exchange
proposes to amend Rules 14.1(c)(2), and Interpretation and Policies
.01(a) and (b) to account for the proposed Early Trading Session.
Specifically, the Exchange proposes to amend paragraph (c)(2) to state
that an information circular distributed by the Exchange prior to the
commencement of trading of a UTP Derivative Security will include the
risk of trading during the Early Trading Session, in addition to the
Pre-Opening Session and After Hours Trading Session.\25\ In addition,
the Exchange proposes to amend Interpretation and Policies .01(a) to
add Early Trading Session to the paragraph's title and to state that if
a UTP Derivative Security begins trading on the Exchange in the Early
Trading Session or Pre-Opening Session and subsequently a temporary
interruption occurs in the calculation or wide dissemination of the
Intraday Indicative Value (``IIV'') or the value of the underlying
index, as applicable, to such UTP Derivative Security, by a major
market data vendor, the Exchange may continue to trade the UTP
Derivative Security for the remainder of the Early Trading Session and
Pre-Opening Session. Lastly, the Exchange proposes to amend
Interpretation and Policies .01(b) to add Early Trading Session to the
paragraph's title and to amend subparagraph (ii) of that section to
state that if the IIV or the value of the underlying index continues
not to be calculated or widely available as of the commencement of the
Early Trading Session or Pre-Opening Session on the next business day,
the Exchange shall not commence trading of the UTP Derivative Security
in the Early Trading Session or Pre-Opening Session that day.\26\
---------------------------------------------------------------------------
\25\ In Amendment No. 1, the Exchange also proposes to amend
Rule 14.1(c)(2) to correct an inaccurate description of the Pre-
Opening Session, which currently reads as 9:00 a.m. to 9:30 a.m.
rather than 8:00 a.m. to 9:30 a.m. as is set forth throughout
Exchange Rules.
\26\ See Notice, supra note 4, at 10312.
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[[Page 23034]]
B. TIF Instructions
The Exchange proposes to adopt three new TIF instructions under
Exchange Rule 11.9(b). As discussed above, a User may designate when
its order is eligible for execution by selecting the desired TIF
instruction under Exchange Rule 11.9(b).\27\
---------------------------------------------------------------------------
\27\ See Exchange Rule 11.1(a).
---------------------------------------------------------------------------
Although the Exchange states that the proposal to adopt an Early
Trading Session is in response to User requests for their orders to be
eligible for execution starting at 7:00 a.m. Eastern Time, the Exchange
states that some Users have requested that their orders continue to not
be eligible for execution until the start of the Pre-Opening Session at
8:00 a.m. Therefore, the Exchange proposes to adopt the following three
new TIF instructions under Exchange Rule 11.9(b): \28\
---------------------------------------------------------------------------
\28\ See Notice, supra note 4, at 10312.
---------------------------------------------------------------------------
Pre-Opening Session Plus (``PRE''). A limit order that is
designated for execution during the Pre-Opening Session and Regular
Trading Hours. Like the current Good `til Cancel TIF instruction,\29\
any portion not executed would expire at the end of Regular Trading
Hours.
---------------------------------------------------------------------------
\29\ See Exchange Rule 11.9(b)(3).
---------------------------------------------------------------------------
Pre-Opening Session `til Extended Day (``PTX''). A limit
order that is designated for execution during the Pre-Opening Session,
Regular Trading Hours, and the After Hours Session. Like the current
Good `til Extended Day TIF instruction,\30\ any portion not executed
would expire at the end of the After Hours Session.
---------------------------------------------------------------------------
\30\ See Exchange Rule 11.9(b)(5).
---------------------------------------------------------------------------
Pre-Opening Session `til Day (``PTD''). A limit order that
is designated for execution during the Pre-Opening Session, Regular
Trading Hours, and the After Hours Session. Like the current Good `til
Day TIF instruction,\31\ any portion not executed would be cancelled at
the expiration time assigned to the order, which can be no later than
the close of the After Hours Trading Session.
---------------------------------------------------------------------------
\31\ See Exchange Rule 11.9(b)(4).
---------------------------------------------------------------------------
Under each proposed TIF instruction, Users may designate that their
orders only be eligible for execution starting with the Pre-Opening
Session. Users may continue to enter orders as early as 6:00 a.m., but
orders with the proposed TIF instructions would not be eligible for
execution until 8:00 a.m. Eastern Time, which is the start of the Pre-
Opening Session. At the commencement of the Pre-Opening Session, orders
entered between 6:00 a.m. and 8:00 a.m. Eastern Time with one of the
proposed TIF instructions would be handled in time sequence, beginning
with the order with the oldest time stamp, and would be placed on the
BYX Book, routed, cancelled, or executed in accordance with the terms
of the order.\32\
---------------------------------------------------------------------------
\32\ See Notice, supra note 4, at 10312. Amendment No. 1 updated
Exhibit 5 so that the name of the Exchange's book stated therein
conforms with the name used in the current Exchange Rules. See
supra, note 5. Orders utilizing one of the proposed TIF instructions
would not be eligible for execution during the Early Trading
Session. See Notice, supra note 4, at 10312, n.32.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\33\ The Commission
believes that the proposed rule change is consistent with Section
6(b)(5) \34\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------
\33\ In approving this rule change, the Commission notes that it
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\34\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange proposes to adopt an Early Trading Session and three
new TIF instructions and to make related changes to its rules as
discussed above.\35\ The Commission believes that the proposed rules
would provide Users with additional options for trading on the
Exchange. The Commission notes that the proposed Early Trading Session
hours are similar to those of other exchanges,\36\ and that the
proposed TIF instructions would offer functionality similar to existing
functionality available on the Exchange and other exchanges that allows
Members to select when their orders become eligible for execution.\37\
---------------------------------------------------------------------------
\35\ See supra section II.
\36\ For example, NYSE Arca, Inc. operates an Opening Session
that starts at 4:00 a.m. Eastern Time and ends at 9:30 a.m. Eastern
Time, and Nasdaq Stock Market LLC operates a pre-market session that
also opens at 4:00 a.m. and ends at 9:30 a.m. Eastern Time. See NYSE
Arca Rule 7.34(a)(1); Nasdaq Rule 4701(g). See also Securities
Exchange Act Release No. 60605 (September 1, 2009), 74 FR 46277
(September 8, 2009) (SR-CHX-2009-13) (adopting bifurcated post-
trading session on the Chicago Stock Exchange, Inc.).
\37\ Specifically, on the Exchange, Users may enter an order
starting at 6:00 a.m. Eastern Time with a TIF of Regular Hours Only,
which designates that the order only be eligible for execution
during Regular Trading Hours, which begin at 9:30 a.m. Eastern Time.
See Exchange Rule 11.9(b)(7); see also NASDAQ Rule 4703(a)(7).
---------------------------------------------------------------------------
The Commission notes that the Exchange has represented that it
would subject orders that are eligible for execution as of the start of
the Pre-Opening Session to all of the Exchange's standard regulatory
checks, as it currently does with all orders upon entry.\38\
Specifically, the Exchange would subject such orders to checks for
compliance with, including but not limited to, Regulation NMS,\39\
Regulation SHO,\40\ and relevant Exchange rules.\41\ Moreover, the
Exchange reminds its Members of their regulatory obligations when
submitting an order with one of the proposed TIF instructions.\42\ In
particular, the Exchange states that Members must comply with the
Market Access Rule,\43\ which requires, among other things, pre-trade
controls and procedures that are reasonably designed to assure
compliance with Exchange trading rules and Commission rules pursuant to
Regulation SHO and Regulation NMS. The Exchange also notes that a
Member's procedures must be reasonably designed to ensure compliance
with the applicable regulatory requirements, not just at the time the
order is routed to the Exchange, but also at the time the order becomes
eligible for execution.\44\
---------------------------------------------------------------------------
\38\ See Notice, supra note 4, at 10314.
\39\ See 17 CFR 242.600-613.
\40\ See 17 CFR 242.200-204.
\41\ See Notice, supra note 4, at 10314.
\42\ See id.
\43\ See 17 CFR 240.15c3-5.
\44\ See Notice, supra note 4, at 10314.
---------------------------------------------------------------------------
The Commission further notes the Exchange's discussion of the best
execution obligations of Members utilizing the proposed TIF
instructions.\45\ Specifically, the Exchange states that a Member's
best execution obligations may include cancelling an order when market
conditions deteriorate and could result in an inferior execution or
informing customers when the execution of their order may be delayed
intentionally while the Member utilizes reasonable diligence to
ascertain the best market for the security.\46\ The Exchange further
notes that Members will maintain the ability to cancel or modify the
terms of an order utilizing any of the proposed TIF instructions at any
time, including during the time from when the order is routed to the
Exchange until the start of the Pre-Opening Session.\47\ As a result,
[[Page 23035]]
the Exchange states that a Member who utilizes the proposed TIF
instructions, but later determines that market conditions favor
execution during Early Trading Session, can cancel the order residing
at the Exchange and enter a separate order to execute during the Early
Trading Session.\48\
---------------------------------------------------------------------------
\45\ See id. at 10314.
\46\ See id. at n.41.
\47\ See id. at 10313.
\48\ See id. at 10313-14.
---------------------------------------------------------------------------
Furthermore, the Exchange proposes technical amendments to its
Rules to correct erroneous plural words and an inaccurate description
of the Pre-Opening Session times in Exchange Rules 11.17 and 14.1,
respectively. The Commission believes these proposed amendments would
help alleviate potential confusion among Users and Members regarding
the operation of the Exchange's rules and are, therefore, consistent
with the Act.
IV. Conclusion
IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the Act
\49\ that the proposed rule change (SR-BYX-2016-03), as modified by
Amendment No.1, be, and it hereby is, approved.
---------------------------------------------------------------------------
\49\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\50\
---------------------------------------------------------------------------
\50\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08955 Filed 4-18-16; 8:45 am]
BILLING CODE 8011-01-P
