Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Description of Price Improving Orders Under Subparagraph (6) to Rule 21.1(d) and Add Subparagraph (4) to Rule 21.1(h) Modifying the Operation of Orders Subject to the Display Price Sliding Process When a Contra-Side Post Only Order Is Received by the Bats EDGX Exchange Options Platform, 31272-31276 [2016-11642]

Download as PDF 31272 Federal Register / Vol. 81, No. 96 / Wednesday, May 18, 2016 / Notices Paper Comments • Send paper comments in triplicate to Elizabeth Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–ISE–2016–13. 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 ISE. 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–ISE– 2016–13 and should be submitted by June 8, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–11644 Filed 5–17–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77820; File No. SR– NYSEArca–2016–44] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change Amending NYSE Arca Equities Rule 7.31P(h) To Add a New Discretionary Pegged Order [FR Doc. 2016–11643 Filed 5–17–16; 8:45 am] On March 11, 2016, NYSE Arca, Inc. (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Exchange Rule 7.31P(h) to add a new Discretionary Pegged Order. The proposed rule change was published for comment in the Federal Register on March 30, 2016.3 The Commission received two comment letters on the proposed rule change,4 as well as a response from the Exchange.5 Section 19(b)(2) of the Act 6 provides that, within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day after publication of the notice for this proposed rule change is May 14, 2016. The Commission is extending this 45-day time period. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change. Accordingly, the Commission, pursuant to Section BILLING CODE 8011–01–P 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 77441 (March 24, 2016), 81 FR 17749. 4 See Letter from Sophia Lee, General Counsel, IEX Group, Inc., to Brent J. Fields, Secretary, Commission, dated April 15, 2016; Letter from John C. Nagel, Managing Director and Senior Deputy General Counsel, Citadel LLC, to Brent J. Fields, Secretary, Commission, dated April 20, 2016. 5 See Letter from Elizabeth K. King, General Counsel and Corporate Secretary, New York Stock Exchange, to Brent J. Fields, Secretary, Commission, dated April 27, 2016. 6 15 U.S.C. 78s(b)(2). sradovich on DSK3TPTVN1PROD with NOTICES CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:10 May 17, 2016 Jkt 238001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Robert W. Errett, Deputy Secretary. May 12, 2016. 2 17 16 17 19(b)(2) of the Act,7 designates June 28, 2016, as the date by which the Commission should either approve or disapprove or institute proceedings to determine whether to disapprove the proposed rule change (File Number SR– NYSEArca–2016–44). PO 00000 Frm 00049 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77819; File No. SR– BatsEDGX–2016–17] Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Description of Price Improving Orders Under Subparagraph (6) to Rule 21.1(d) and Add Subparagraph (4) to Rule 21.1(h) Modifying the Operation of Orders Subject to the Display Price Sliding Process When a Contra-Side Post Only Order Is Received by the Bats EDGX Exchange Options Platform May 12, 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 May 3, 2016, Bats EDGX Exchange, Inc. f/k/a EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6)(iii) thereunder,4 which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to: (i) Amend the description of Price 7 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(31). 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). 8 17 E:\FR\FM\18MYN1.SGM 18MYN1 Federal Register / Vol. 81, No. 96 / Wednesday, May 18, 2016 / Notices Improving Orders under subparagraph (6) to Rule 21.1(d); and (ii) add subparagraph (4) to Rule 21.1(h) modifying the operation of orders subject to the display price sliding process when a contra-side Post Only Order 5 is received by the Exchange’s options platform (‘‘EDGX Options’’). The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to: (i) Amend the description of Price Improving Orders under subparagraph (6) to Rule 21.1(d); and (ii) add subparagraph (4) to Rule 21.1(h) modifying the operation of orders subject to the display price sliding process when a contra-side Post Only Order is received by EDGX Options. sradovich on DSK3TPTVN1PROD with NOTICES Price Improving Orders Price Improving Orders are orders to buy or sell an option at a specified price at an increment smaller than the minimum price variation in the security.6 Price Improving Orders may be entered in increments as small as (1) one cent. Price Improving Orders are displayed at the minimum price variation in the security and shall be rounded up for sell orders and rounded down for buy orders. Unless a User 7 has entered instructions not to do so, Price Improving Orders are subject to the 5 See Exchange Rule 21.1(d)(8). Exchange Rule 21.1(d)(6). 7 The term ‘‘User’’ means any Options Member or Sponsored Participant who is authorized to obtain access to the System pursuant to Rule 11.3 (Access). See Exchange Rule 16.1(a)(63). 6 See VerDate Sep<11>2014 17:10 May 17, 2016 Jkt 238001 ‘‘display-price sliding process’’ described in current Rule 21.1(h). As described above, Price Improving Orders may be priced at an increment smaller than the minimum price variation in the security (i.e., for options priced in five (5) cent or ten (10) cent increments, an order priced at 1.03 is not a permissible increment for display). This may result in the order being ranked on the EDGX Options Book 8 non-displayed at a price increment smaller than the security’s minimum price variation. The Exchange proposes to amend the description of Price Improving Orders under subparagraph (6) to Rule 21.1(d) to prevent Price Improving Orders subject to the Price Adjust process 9 from being ranked at a non-displayed price on the EDGX Options Book. The Exchange also proposes to amend subparagraph (6) to Rule 21.1(d) to clarify how Price Improving Orders subject to the display price sliding process are currently handled on the EDGX Options Book. First, the Exchange proposes to amend the description of Price Improving Orders under subparagraph (6) to Rule 21.1(d) to prevent Price Improving Orders subject to the Price Adjust process from being ranked at a non-displayed price on the EDGX Options Book. Under the Price Adjust process, an order that, at the time of entry, would lock or cross a Protected Quotation of another options exchange or the Exchange will be ranked and displayed by the System at one minimum price variation below the current NBO (for bids) or to one minimum price variation above the current NBB (for offers). This could result in Price Improving Orders in securities with minimum quoting increments of five (5) or ten (10) cents 10 that the User elected to be subject to the Price Adjust process to be ranked on the EDGX Options Book at a non-displayed price. To prevent such orders from being ranked at a non-displayed price, the Exchange proposes to amend subparagraph (6) to Rule 21.1(d) to state that Price Improving Orders subject to the Price Adjust process will be ranked at the displayed price. Thus, other than a potential execution against contra-side liquidity when entered, a Price Improving Order subject to the Price Adjust process will no longer be priced at an increment smaller than the 8 ‘‘EDGX Options Book’’ is defined as ‘‘the electronic book of options orders maintained by the Trading System.’’ See Exchange Rule 16.1(a)(9). 9 See Exchange Rule 21.1(i). 10 See Exchange Rule 21.5 for a description of the Exchange’s Minimum Increments. PO 00000 Frm 00050 Fmt 4703 Sfmt 4703 31273 minimum price variation in the security. The following examples describe the proposed operation of Price Improving Orders subject to the Price Adjust process. Assume the NBBO is $1.00 x $1.05 and that the security’s minimum quoting increment is five (5) cents. Further assume that there is no liquidity to sell resting on the EDGX Options Book at a price below $1.05. A Price Improving Order to buy priced at $1.03 is entered and the User has elected the Price Adjust process. Under current functionality, the order will be ranked, non-displayed on the EDGX Options Book at $1.03, the price of the order, and displayed at $1.00. As proposed, the order would be ranked and displayed at $1.00, the displayed price. Assume the same example as above except that when the Price Improving Order is entered (i.e., an order to buy priced at $1.03 subject to the Price Adjust process) there is a resting Price Improving Order to sell ranked at a price of $1.03 (i.e., an order subject to the display price sliding process). In this case, the Price Improving Order subject to the Price Adjust process would execute upon entry against the resting order at $1.03. The Exchange also proposes to amend subparagraph (6) to Rule 21.1(d) to clarify how Price Improving Orders subject to the display price sliding process are currently handled on the EDGX Options Book. While the Exchange believes the current operation of Price Improving Orders is clear based on existing rules, the Exchange believes this clarification is necessary due to the proposed changes. Particularly, in light of the change proposed above regarding Price Improving Orders subject to the Price Adjust process, the Exchange proposes to add language to subparagraph (d)(6) clarifying the operation of Price Improving Orders subject to the display price sliding process. As proposed, Exchange Rule 21.1(d)(6) would state that Price Improving Orders subject to the displayprice sliding process will be ranked at the price entered by the User down to the current NBB (for offers) or up to the current NBO (for bids). The proposed language would make clear the current operation of such orders vis-a vis the proposed operation of Price Improving Orders subject to the Price Adjust process. Display Price Sliding Process and Post Only Orders Under current Exchange Rule 21.1(h), an order subject to the display price sliding process that, at the time of entry, E:\FR\FM\18MYN1.SGM 18MYN1 sradovich on DSK3TPTVN1PROD with NOTICES 31274 Federal Register / Vol. 81, No. 96 / Wednesday, May 18, 2016 / Notices would lock or cross a Protected Quotation of another options exchange will be ranked at the locking price in the EDGX Options Book and displayed by the System at one minimum price variation below the current National Best Offer (‘‘NBO’’) 11 (for bids) or to one minimum price variation above the current National Best Bid (‘‘NBB’’) 12 (for offers). Post Only Orders are orders that are to be ranked and executed on the Exchange pursuant to Rule 21.8 (Order Display and Book Processing) or cancelled, as appropriate, without routing away to another trading center.13 Currently, a Post Only Order will not remove liquidity from the EDGX Options Book unless the value of price improvement associated with such execution equals or exceeds the sum of fees charged for such execution and the value of any rebate that would be provided if the order posted to the EDGX Options Book and subsequently provided liquidity. In order to prevent circumstances on the EDGX Options Book where an order is ranked at the displayed price of a resting contra-side order, which could result in apparent violations of the Exchange’s priority rule, an incoming Post Only Order is currently rejected if it would be posted at the locking price of a contra-side order subject to the display price sliding process. In particular, accepting such order would result in a situation where an order is displayed on the Exchange and a contra-side order is ranked at the same price as such order. In turn, if an execution at that price is reported by the Exchange, the Exchange believes a User representing the order displayed on the Exchange might believe that an incoming order was received by the Exchange and then bypassed such order (i.e., removing some other liquidity on the same side of the market as the displayed order). As described in further detail below, the proposal will avoid the possibility of an execution of an order subject to display-price sliding at the same price as an order displayed on the Exchange. The Exchange notes that the circumstance described above, where an incoming Post Only Order is rejected by the Exchange, is limited to times when the Exchange is not already quoting at the NBBO and a Post Only Order is seeking to join either the NBB or NBO but there is a resting displayprice slid order on the contra-side of the Exchange’s order book. In order to facilitate the entry of orders priced at the National Best Bid or 11 See Exchange Rule 16.1(a)(29) (defining the terms ‘‘NBB’’, ‘‘NBO’’, and ‘‘NBBO’’). 12 Id. 13 See Exchange Rule 21.1(d)(8). VerDate Sep<11>2014 17:10 May 17, 2016 Jkt 238001 Offer (‘‘NBBO’’), the Exchange proposes to add subparagraph (4) to Rule 21.1(h) modifying the operation of orders subject to the display price sliding process when a contra-side Post Only Order is received by EDGX Options. Under proposed subparagraph (4), to the extent an incoming Post Only Order would be ranked and displayed at a price equal to the ranked price of a contra-side order subject to displayprice sliding (i.e., the locking price) the order subject to display-price sliding would be re-ranked at one (1) cent above the current NBB (for offers) or one (1) cent below the current NBO (for bids). An order subject to display price sliding that is re-ranked pursuant to proposed subparagraph (4) of Rule 21.1(h) would be re-ranked at the locking price in the event there is no longer displayed contra-side interest at the locking price. In both cases, the order would remain displayed by the System at one minimum price variation below the current NBO (for bids) or to one minimum price variation above the current NBB (for offers). The below examples describe the operation of orders subject to display price sliding under proposed subparagraph (4) to Rule 21.1(h). Example 1: Securities Quoted in Penny Increments—Proposed Operation. Assume the NBBO is $1.00 x $1.01 and that the Exchange’s displayed best bid and offer (‘‘BBO’’) is $1.00 x $1.02. Also assume that a non-routable order to buy at $1.01 subject to display price sliding is resting on the EDGX Options Book, ranked at $1.01 and displayed at $1.00. Assume a Post Only Order to sell at $1.01 is entered and, under current functionality, would be rejected because it is executable at the locking price of the order to buy subject to display price sliding resting on the EDGX Options Book. As proposed, the order to buy subject to display price sliding would be re-ranked and would remain displayed at $1.00, one (1) cent below the current NBO. The Post Only Order to sell would be posted to the EDGX Options Book, ranked and displayed at $1.01 (i.e., allowing the Exchange to join the NBBO of $1.00 x $1.01). If the Post Only Order to sell is executed or cancelled, the order to buy subject to display price sliding would be reranked at $1.01, its original ranked price, and would remain displayed at $1.00. Example 2: Securities Quoted in NonPenny Increments—Proposed Operation. Assume the NBBO is $1.00 x $1.05 and that the Exchange’s BBO is $1.00 x $1.10. Also assume that a non-routable order to buy at $1.05 subject to display price sliding is resting on the EDGX Options Book, ranked at $1.05 and displayed at $1.00. Assume a Post Only Order to sell at $1.05 is entered and, under current functionality, would be rejected because it is executable at the locking price of the order to buy subject to display price sliding resting on the EDGX Options Book. As proposed, the order to buy PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 subject to display price sliding would be reranked at $1.04, one (1) cent below the NBO, and would remain displayed at $1.00. The Post Only Order to sell would be posted to the EDGX Options Book, ranked and displayed at $1.05 (i.e., allowing the Exchange to join the NBBO of $1.00 x $1.01). If the Post Only Order to sell is executed or cancelled, the order to buy subject to display price sliding would be re-ranked at $1.05, its original ranked price, and would remain displayed at $1.00. The Exchange notes that similar behavior currently exists on the Bats BZX Exchange, Inc. (‘‘BZX’’) equities platform that permits an order to buy(sell) subject to display price sliding to be executed at one-half minimum price variation more(less) than the price of a contra-side displayed BZX Post Only Order.14 Specifically, under BZX Rule 11.9(g)(1)(E), BZX Post Only Orders are permitted to post and be displayed opposite the ranked price of orders subject to display-price sliding. In the event an order subject to displayprice sliding is ranked on the BZX Book 15 at a price equal to an opposite side order displayed by the Exchange, it cannot be executed at that price and instead will be subject to processing as set forth in BZX Rule 11.13(a)(4)(D). Under BZX Rule 11.13(a)(4)(D), in the event that an incoming order is a market order or is a limit order priced more aggressively than the displayed order, BZX will execute the incoming order at, in the case of an incoming sell order, one-half minimum price variation less than the price of the displayed order, and, in the case of an incoming buy order, at one-half minimum price variation more than the price of the displayed order. This behavior is designed to avoid an apparent priority issue. In particular, in such a situation the Exchange believes a User representing an order that is displayed on the Exchange might believe that an incoming order was received by the Exchange and then bypassed such displayed order, removing some other non-displayed liquidity on the same side of the market as such displayed order. Similar to what the Exchange proposes for EDGX Options, the above described functionality on its equites platform also effectively changes the ranked price of the order subject to display price sliding. Although the underlying solution is intended to solve the same circumstance, because halfpenny executions are not permitted with respect to options transactions, on EDGX Options the Exchange proposes to adjust the ranked price of the displayprice slid order when a contra-side Post 14 See 15 See E:\FR\FM\18MYN1.SGM BZX Rule 11.9(c)(6). BZX Rule 1.5(e). 18MYN1 Federal Register / Vol. 81, No. 96 / Wednesday, May 18, 2016 / Notices Only order is received by EDGX and posted at the locking price. 2. Statutory Basis The Exchange believes that its proposal 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.16 In particular, the proposal is consistent with Section 6(b)(5) of the Act 17 because it is designed to encourage displayed liquidity and offer market participants greater flexibility to post liquidity on the EDGX Options Book, thereby promoting just and equitable principles of trade, fostering cooperation and coordination with persons engaged in facilitating transactions in securities, removing impediments to, and perfecting the mechanism of, a free and open market and a national market system. sradovich on DSK3TPTVN1PROD with NOTICES Price Improving Orders The proposed changes to the description of Price Improving Orders under Rule 21.1(d)(6) promote just and equitable principles of trade and foster cooperation and coordination with persons engaged in facilitating transactions in securities. Specifically, the proposed change regarding Price Improving Orders subject to the Price Adjust process is designed to prevent the possibility of an internally crossed book where a Price Improving Order has already been submitted and is ranked non-displayed by the Exchange and a Post Only Order subject to the Price Adjust process is entered at a price increment smaller than the security’s minimum price increment and that crosses the resting order. In addition, the proposed amendment to Exchange Rule 21.1(d)(6) to clarify that Price Improving Orders subject to the display-price sliding process will be ranked at the price entered by the User down to the current NBB (for offers) or up to the current NBO (for bids) also promotes just and equitable principles of trade because it is consistent with and further clarifies the current operation of such orders. In addition, the addition of such language should avoid potential investor confusion regarding the operation of such orders with regard to the proposed language amending the operation of Price Improving Orders subject to the Price Adjust process. 16 15 17 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:10 May 17, 2016 Jkt 238001 Display Price Sliding Process and Post Only Orders Under current functionality, an incoming Post Only Order would be rejected if it is executable at the locking price of a contra-side order subject to display price sliding resting on the EDGX Options Book. This, at times, inhibits market participants, including Market Makers 18 from utilizing Post Only Orders to quote at the NBBO. Post Only Orders allow Users to post aggressively priced liquidity, as such Users have certainty as to the fee or rebate they will receive from the Exchange if their order is executed. Without such ability and by rejecting such Post Only Orders in scenarios described herein, the Exchange believes that certain Users would simply post less aggressively priced liquidity, and prices available for market participants, including retail investors, would deteriorate. Accordingly, the Exchange believes that the proposed rule change promotes just and equitable principles of trade by enhancing the liquidity available to all market participants by allowing Market Makers and other liquidity providers to add liquidity to the Exchange at the NBBO without fear that their order would be rejected. In addition, the proposed rule change would assist Market Makers in satisfying their two-sided quoting obligations under Exchange Rules 22.5(a)(1) and 22.6(d)(1). The proposed rule change should increase displayed liquidity at the NBBO on the Exchange, resulting in improved market quality and price discovery for all participants. The Exchange also notes that similar behavior currently exists on BZX’s equities platform that permits an order to buy(sell) subject to display price sliding to be executed at one-half minimum price variation more(less) than the price of a contra-side displayed BZX Post Only Order.19 (B) Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes the proposed rule change regarding display price sliding and Post Only Orders would enhance competition by enabling 18 See Exchange Rule 16.1(a)(37). BZX Rules 11.9(g)(1)(E) and 11.13(a)(4)(D). See also Securities Exchange Act Release No. 64754 (June 27, 2011), 76 FR 38712 (July 1, 2011) (SR– BATS–2011–015) (Order Approving a Proposed Rule Change to Amend BATS Rule 11.9, Entitled ‘‘Orders and Modifiers’’ and BATS Rule 11.13, Entitled ‘‘Order Execution’’). 19 See PO 00000 Frm 00052 Fmt 4703 Sfmt 4703 31275 market participants to post liquidity at the NBBO, thereby increasing the liquidity on the Exchange at the NBBO. In addition, the Exchange believes the proposed amendments to Price Improving Orders would does not impact competition, but rather seeks to avoid the potential of an internally crossed book on the Exchange as well as to further clarify the operation of such orders when subject to the display price sliding process. For all the reasons stated above, the Exchange does not believe that the proposed rule changes will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act, and believes the proposed change will enhance competition. (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. The Exchange has not received any written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 20 and Rule 19b–4(f)(6) thereunder.21 Because the proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 22 and Rule 19b–4(f)(6) thereunder.23 A proposed rule change filed under Rule 19b–4(f)(6) under the Act 24 normally does not become operative for 30 days after the date of filing. However, 20 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 22 15 U.S.C. 78s(b)(3)(A). 23 In addition, Rule 19b–4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s 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. The Exchange has satisfied this requirement. 24 17 CFR 240.19b–4(f)(6). 21 17 E:\FR\FM\18MYN1.SGM 18MYN1 31276 Federal Register / Vol. 81, No. 96 / Wednesday, May 18, 2016 / Notices Rule 19b–4(f)(6)(iii) 25 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange states that the proposed rule change will benefit market participants by enhancing their ability to post liquidity at the NBBO, and that waiver of the operative delay may increase displayed liquidity at the NBBO on the Exchange, resulting in improved market quality and price discovery for all participants in a timely manner. Further, the Exchange notes that the proposed rule change will not require any systems changes by Exchange Users that would necessitate a delay, as the Exchange will now accept and no longer reject Post Only Orders in the situations described herein. Based on the foregoing, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest.26 The Commission hereby grants the Exchange’s request and designates the proposal operative upon filing. 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 necessary or appropriate in the public interest, for the protection of investors, or 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. Paper Comments IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Robert W. Errett, Deputy Secretary. 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: sradovich on DSK3TPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BatsEDGX–2016–17 on the subject line. 25 17 CFR 240.19b–4(f)(6)(iii). purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 26 For VerDate Sep<11>2014 17:10 May 17, 2016 Jkt 238001 • 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-BatsEDGX–2016–17. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– BatsEDGX–2016–17 and should be submitted on or before June 8, 2016. [FR Doc. 2016–11642 Filed 5–17–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549–2736 Extension: Rule 13e–1 SEC File No. 270–255, OMB Control No. 3235–0305 Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget this request for extension of the previously approved collection of information discussed below. Rule 13e–1 (17 CFR 240.13e–1) under the Securities Exchange Act of 1934 (U.S.C. 78 et seq.) makes it unlawful for an issuer who has received notice that it is the subject of a tender offer made under Section 14(d)(1) of the Exchange Act to purchase any of its equity securities during the tender offer, unless it first files a statement with the Commission containing information required by the rule. This rule is in keeping with the Commission’s statutory responsibility to prescribe rules and regulations that are necessary for the protection of investors. Public companies are the respondents. We estimate that it takes approximately 10 burden hours per response to provide the information required under Rule 13e–1 and that the information is filed by approximately 10 respondents. We estimate that 25% of the 10 hours per response (2.5 hours) is prepared by the company for a total annual reporting burden of 25 hours (2.5 hours per response × 10 responses). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. The public may view the background documentation for this information collection at the following Web site, www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Shagufta_ Ahmed@omb.eop.gov; and (ii) Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email to: PRA_Mailbox@ sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: May 12, 2016. Robert W. Errett, Deputy Secretary. [FR Doc. 2016–11639 Filed 5–17–16; 8:45 am] 27 17 PO 00000 CFR 200.30–3(a)(12). Frm 00053 Fmt 4703 Sfmt 9990 BILLING CODE 8011–01–P E:\FR\FM\18MYN1.SGM 18MYN1

Agencies

[Federal Register Volume 81, Number 96 (Wednesday, May 18, 2016)]
[Notices]
[Pages 31272-31276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-11642]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77819; File No. SR-BatsEDGX-2016-17]


Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the Description of Price Improving Orders Under Subparagraph (6) 
to Rule 21.1(d) and Add Subparagraph (4) to Rule 21.1(h) Modifying the 
Operation of Orders Subject to the Display Price Sliding Process When a 
Contra-Side Post Only Order Is Received by the Bats EDGX Exchange 
Options Platform

May 12, 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 May 3, 2016, Bats EDGX Exchange, Inc. f/k/a EDGX Exchange, Inc. 
(the ``Exchange'' or ``EDGX'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to: (i) Amend the description of 
Price

[[Page 31273]]

Improving Orders under subparagraph (6) to Rule 21.1(d); and (ii) add 
subparagraph (4) to Rule 21.1(h) modifying the operation of orders 
subject to the display price sliding process when a contra-side Post 
Only Order \5\ is received by the Exchange's options platform (``EDGX 
Options'').
---------------------------------------------------------------------------

    \5\ See Exchange Rule 21.1(d)(8).
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the Exchange's 
Web site at www.batstrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to: (i) Amend the description of Price 
Improving Orders under subparagraph (6) to Rule 21.1(d); and (ii) add 
subparagraph (4) to Rule 21.1(h) modifying the operation of orders 
subject to the display price sliding process when a contra-side Post 
Only Order is received by EDGX Options.
Price Improving Orders
    Price Improving Orders are orders to buy or sell an option at a 
specified price at an increment smaller than the minimum price 
variation in the security.\6\ Price Improving Orders may be entered in 
increments as small as (1) one cent. Price Improving Orders are 
displayed at the minimum price variation in the security and shall be 
rounded up for sell orders and rounded down for buy orders. Unless a 
User \7\ has entered instructions not to do so, Price Improving Orders 
are subject to the ``display-price sliding process'' described in 
current Rule 21.1(h).
---------------------------------------------------------------------------

    \6\ See Exchange Rule 21.1(d)(6).
    \7\ The term ``User'' means any Options Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3 (Access). See Exchange Rule 16.1(a)(63).
---------------------------------------------------------------------------

    As described above, Price Improving Orders may be priced at an 
increment smaller than the minimum price variation in the security 
(i.e., for options priced in five (5) cent or ten (10) cent increments, 
an order priced at 1.03 is not a permissible increment for display). 
This may result in the order being ranked on the EDGX Options Book \8\ 
non-displayed at a price increment smaller than the security's minimum 
price variation. The Exchange proposes to amend the description of 
Price Improving Orders under subparagraph (6) to Rule 21.1(d) to 
prevent Price Improving Orders subject to the Price Adjust process \9\ 
from being ranked at a non-displayed price on the EDGX Options Book. 
The Exchange also proposes to amend subparagraph (6) to Rule 21.1(d) to 
clarify how Price Improving Orders subject to the display price sliding 
process are currently handled on the EDGX Options Book.
---------------------------------------------------------------------------

    \8\ ``EDGX Options Book'' is defined as ``the electronic book of 
options orders maintained by the Trading System.'' See Exchange Rule 
16.1(a)(9).
    \9\ See Exchange Rule 21.1(i).
---------------------------------------------------------------------------

    First, the Exchange proposes to amend the description of Price 
Improving Orders under subparagraph (6) to Rule 21.1(d) to prevent 
Price Improving Orders subject to the Price Adjust process from being 
ranked at a non-displayed price on the EDGX Options Book. Under the 
Price Adjust process, an order that, at the time of entry, would lock 
or cross a Protected Quotation of another options exchange or the 
Exchange will be ranked and displayed by the System at one minimum 
price variation below the current NBO (for bids) or to one minimum 
price variation above the current NBB (for offers). This could result 
in Price Improving Orders in securities with minimum quoting increments 
of five (5) or ten (10) cents \10\ that the User elected to be subject 
to the Price Adjust process to be ranked on the EDGX Options Book at a 
non-displayed price. To prevent such orders from being ranked at a non-
displayed price, the Exchange proposes to amend subparagraph (6) to 
Rule 21.1(d) to state that Price Improving Orders subject to the Price 
Adjust process will be ranked at the displayed price. Thus, other than 
a potential execution against contra-side liquidity when entered, a 
Price Improving Order subject to the Price Adjust process will no 
longer be priced at an increment smaller than the minimum price 
variation in the security.
---------------------------------------------------------------------------

    \10\ See Exchange Rule 21.5 for a description of the Exchange's 
Minimum Increments.
---------------------------------------------------------------------------

    The following examples describe the proposed operation of Price 
Improving Orders subject to the Price Adjust process.
    Assume the NBBO is $1.00 x $1.05 and that the security's minimum 
quoting increment is five (5) cents. Further assume that there is no 
liquidity to sell resting on the EDGX Options Book at a price below 
$1.05. A Price Improving Order to buy priced at $1.03 is entered and 
the User has elected the Price Adjust process. Under current 
functionality, the order will be ranked, non-displayed on the EDGX 
Options Book at $1.03, the price of the order, and displayed at $1.00. 
As proposed, the order would be ranked and displayed at $1.00, the 
displayed price.
    Assume the same example as above except that when the Price 
Improving Order is entered (i.e., an order to buy priced at $1.03 
subject to the Price Adjust process) there is a resting Price Improving 
Order to sell ranked at a price of $1.03 (i.e., an order subject to the 
display price sliding process). In this case, the Price Improving Order 
subject to the Price Adjust process would execute upon entry against 
the resting order at $1.03.
    The Exchange also proposes to amend subparagraph (6) to Rule 
21.1(d) to clarify how Price Improving Orders subject to the display 
price sliding process are currently handled on the EDGX Options Book. 
While the Exchange believes the current operation of Price Improving 
Orders is clear based on existing rules, the Exchange believes this 
clarification is necessary due to the proposed changes. Particularly, 
in light of the change proposed above regarding Price Improving Orders 
subject to the Price Adjust process, the Exchange proposes to add 
language to subparagraph (d)(6) clarifying the operation of Price 
Improving Orders subject to the display price sliding process. As 
proposed, Exchange Rule 21.1(d)(6) would state that Price Improving 
Orders subject to the display-price sliding process will be ranked at 
the price entered by the User down to the current NBB (for offers) or 
up to the current NBO (for bids). The proposed language would make 
clear the current operation of such orders vis-a vis the proposed 
operation of Price Improving Orders subject to the Price Adjust 
process.
Display Price Sliding Process and Post Only Orders
    Under current Exchange Rule 21.1(h), an order subject to the 
display price sliding process that, at the time of entry,

[[Page 31274]]

would lock or cross a Protected Quotation of another options exchange 
will be ranked at the locking price in the EDGX Options Book and 
displayed by the System at one minimum price variation below the 
current National Best Offer (``NBO'') \11\ (for bids) or to one minimum 
price variation above the current National Best Bid (``NBB'') \12\ (for 
offers). Post Only Orders are orders that are to be ranked and executed 
on the Exchange pursuant to Rule 21.8 (Order Display and Book 
Processing) or cancelled, as appropriate, without routing away to 
another trading center.\13\ Currently, a Post Only Order will not 
remove liquidity from the EDGX Options Book unless the value of price 
improvement associated with such execution equals or exceeds the sum of 
fees charged for such execution and the value of any rebate that would 
be provided if the order posted to the EDGX Options Book and 
subsequently provided liquidity. In order to prevent circumstances on 
the EDGX Options Book where an order is ranked at the displayed price 
of a resting contra-side order, which could result in apparent 
violations of the Exchange's priority rule, an incoming Post Only Order 
is currently rejected if it would be posted at the locking price of a 
contra-side order subject to the display price sliding process. In 
particular, accepting such order would result in a situation where an 
order is displayed on the Exchange and a contra-side order is ranked at 
the same price as such order. In turn, if an execution at that price is 
reported by the Exchange, the Exchange believes a User representing the 
order displayed on the Exchange might believe that an incoming order 
was received by the Exchange and then bypassed such order (i.e., 
removing some other liquidity on the same side of the market as the 
displayed order). As described in further detail below, the proposal 
will avoid the possibility of an execution of an order subject to 
display-price sliding at the same price as an order displayed on the 
Exchange. The Exchange notes that the circumstance described above, 
where an incoming Post Only Order is rejected by the Exchange, is 
limited to times when the Exchange is not already quoting at the NBBO 
and a Post Only Order is seeking to join either the NBB or NBO but 
there is a resting display-price slid order on the contra-side of the 
Exchange's order book.
---------------------------------------------------------------------------

    \11\ See Exchange Rule 16.1(a)(29) (defining the terms ``NBB'', 
``NBO'', and ``NBBO'').
    \12\ Id.
    \13\ See Exchange Rule 21.1(d)(8).
---------------------------------------------------------------------------

    In order to facilitate the entry of orders priced at the National 
Best Bid or Offer (``NBBO''), the Exchange proposes to add subparagraph 
(4) to Rule 21.1(h) modifying the operation of orders subject to the 
display price sliding process when a contra-side Post Only Order is 
received by EDGX Options. Under proposed subparagraph (4), to the 
extent an incoming Post Only Order would be ranked and displayed at a 
price equal to the ranked price of a contra-side order subject to 
display-price sliding (i.e., the locking price) the order subject to 
display-price sliding would be re-ranked at one (1) cent above the 
current NBB (for offers) or one (1) cent below the current NBO (for 
bids). An order subject to display price sliding that is re-ranked 
pursuant to proposed subparagraph (4) of Rule 21.1(h) would be re-
ranked at the locking price in the event there is no longer displayed 
contra-side interest at the locking price. In both cases, the order 
would remain displayed by the System at one minimum price variation 
below the current NBO (for bids) or to one minimum price variation 
above the current NBB (for offers).
    The below examples describe the operation of orders subject to 
display price sliding under proposed subparagraph (4) to Rule 21.1(h).

    Example 1: Securities Quoted in Penny Increments--Proposed 
Operation. Assume the NBBO is $1.00 x $1.01 and that the Exchange's 
displayed best bid and offer (``BBO'') is $1.00 x $1.02. Also assume 
that a non-routable order to buy at $1.01 subject to display price 
sliding is resting on the EDGX Options Book, ranked at $1.01 and 
displayed at $1.00. Assume a Post Only Order to sell at $1.01 is 
entered and, under current functionality, would be rejected because 
it is executable at the locking price of the order to buy subject to 
display price sliding resting on the EDGX Options Book. As proposed, 
the order to buy subject to display price sliding would be re-ranked 
and would remain displayed at $1.00, one (1) cent below the current 
NBO. The Post Only Order to sell would be posted to the EDGX Options 
Book, ranked and displayed at $1.01 (i.e., allowing the Exchange to 
join the NBBO of $1.00 x $1.01). If the Post Only Order to sell is 
executed or cancelled, the order to buy subject to display price 
sliding would be re-ranked at $1.01, its original ranked price, and 
would remain displayed at $1.00.
    Example 2: Securities Quoted in Non-Penny Increments--Proposed 
Operation. Assume the NBBO is $1.00 x $1.05 and that the Exchange's 
BBO is $1.00 x $1.10. Also assume that a non-routable order to buy 
at $1.05 subject to display price sliding is resting on the EDGX 
Options Book, ranked at $1.05 and displayed at $1.00. Assume a Post 
Only Order to sell at $1.05 is entered and, under current 
functionality, would be rejected because it is executable at the 
locking price of the order to buy subject to display price sliding 
resting on the EDGX Options Book. As proposed, the order to buy 
subject to display price sliding would be re-ranked at $1.04, one 
(1) cent below the NBO, and would remain displayed at $1.00. The 
Post Only Order to sell would be posted to the EDGX Options Book, 
ranked and displayed at $1.05 (i.e., allowing the Exchange to join 
the NBBO of $1.00 x $1.01). If the Post Only Order to sell is 
executed or cancelled, the order to buy subject to display price 
sliding would be re-ranked at $1.05, its original ranked price, and 
would remain displayed at $1.00.

    The Exchange notes that similar behavior currently exists on the 
Bats BZX Exchange, Inc. (``BZX'') equities platform that permits an 
order to buy(sell) subject to display price sliding to be executed at 
one-half minimum price variation more(less) than the price of a contra-
side displayed BZX Post Only Order.\14\ Specifically, under BZX Rule 
11.9(g)(1)(E), BZX Post Only Orders are permitted to post and be 
displayed opposite the ranked price of orders subject to display-price 
sliding. In the event an order subject to display-price sliding is 
ranked on the BZX Book \15\ at a price equal to an opposite side order 
displayed by the Exchange, it cannot be executed at that price and 
instead will be subject to processing as set forth in BZX Rule 
11.13(a)(4)(D). Under BZX Rule 11.13(a)(4)(D), in the event that an 
incoming order is a market order or is a limit order priced more 
aggressively than the displayed order, BZX will execute the incoming 
order at, in the case of an incoming sell order, one-half minimum price 
variation less than the price of the displayed order, and, in the case 
of an incoming buy order, at one-half minimum price variation more than 
the price of the displayed order. This behavior is designed to avoid an 
apparent priority issue. In particular, in such a situation the 
Exchange believes a User representing an order that is displayed on the 
Exchange might believe that an incoming order was received by the 
Exchange and then bypassed such displayed order, removing some other 
non-displayed liquidity on the same side of the market as such 
displayed order. Similar to what the Exchange proposes for EDGX 
Options, the above described functionality on its equites platform also 
effectively changes the ranked price of the order subject to display 
price sliding. Although the underlying solution is intended to solve 
the same circumstance, because half-penny executions are not permitted 
with respect to options transactions, on EDGX Options the Exchange 
proposes to adjust the ranked price of the display-price slid order 
when a contra-side Post

[[Page 31275]]

Only order is received by EDGX and posted at the locking price.
---------------------------------------------------------------------------

    \14\ See BZX Rule 11.9(c)(6).
    \15\ See BZX Rule 1.5(e).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal 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.\16\ In particular, 
the proposal is consistent with Section 6(b)(5) of the Act \17\ because 
it is designed to encourage displayed liquidity and offer market 
participants greater flexibility to post liquidity on the EDGX Options 
Book, thereby promoting just and equitable principles of trade, 
fostering cooperation and coordination with persons engaged in 
facilitating transactions in securities, removing impediments to, and 
perfecting the mechanism of, a free and open market and a national 
market system.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Price Improving Orders
    The proposed changes to the description of Price Improving Orders 
under Rule 21.1(d)(6) promote just and equitable principles of trade 
and foster cooperation and coordination with persons engaged in 
facilitating transactions in securities. Specifically, the proposed 
change regarding Price Improving Orders subject to the Price Adjust 
process is designed to prevent the possibility of an internally crossed 
book where a Price Improving Order has already been submitted and is 
ranked non-displayed by the Exchange and a Post Only Order subject to 
the Price Adjust process is entered at a price increment smaller than 
the security's minimum price increment and that crosses the resting 
order.
    In addition, the proposed amendment to Exchange Rule 21.1(d)(6) to 
clarify that Price Improving Orders subject to the display-price 
sliding process will be ranked at the price entered by the User down to 
the current NBB (for offers) or up to the current NBO (for bids) also 
promotes just and equitable principles of trade because it is 
consistent with and further clarifies the current operation of such 
orders. In addition, the addition of such language should avoid 
potential investor confusion regarding the operation of such orders 
with regard to the proposed language amending the operation of Price 
Improving Orders subject to the Price Adjust process.
Display Price Sliding Process and Post Only Orders
    Under current functionality, an incoming Post Only Order would be 
rejected if it is executable at the locking price of a contra-side 
order subject to display price sliding resting on the EDGX Options 
Book. This, at times, inhibits market participants, including Market 
Makers \18\ from utilizing Post Only Orders to quote at the NBBO. Post 
Only Orders allow Users to post aggressively priced liquidity, as such 
Users have certainty as to the fee or rebate they will receive from the 
Exchange if their order is executed. Without such ability and by 
rejecting such Post Only Orders in scenarios described herein, the 
Exchange believes that certain Users would simply post less 
aggressively priced liquidity, and prices available for market 
participants, including retail investors, would deteriorate. 
Accordingly, the Exchange believes that the proposed rule change 
promotes just and equitable principles of trade by enhancing the 
liquidity available to all market participants by allowing Market 
Makers and other liquidity providers to add liquidity to the Exchange 
at the NBBO without fear that their order would be rejected. In 
addition, the proposed rule change would assist Market Makers in 
satisfying their two-sided quoting obligations under Exchange Rules 
22.5(a)(1) and 22.6(d)(1). The proposed rule change should increase 
displayed liquidity at the NBBO on the Exchange, resulting in improved 
market quality and price discovery for all participants. The Exchange 
also notes that similar behavior currently exists on BZX's equities 
platform that permits an order to buy(sell) subject to display price 
sliding to be executed at one-half minimum price variation more(less) 
than the price of a contra-side displayed BZX Post Only Order.\19\
---------------------------------------------------------------------------

    \18\ See Exchange Rule 16.1(a)(37).
    \19\ See BZX Rules 11.9(g)(1)(E) and 11.13(a)(4)(D). See also 
Securities Exchange Act Release No. 64754 (June 27, 2011), 76 FR 
38712 (July 1, 2011) (SR-BATS-2011-015) (Order Approving a Proposed 
Rule Change to Amend BATS Rule 11.9, Entitled ``Orders and 
Modifiers'' and BATS Rule 11.13, Entitled ``Order Execution'').
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the contrary, the 
Exchange believes the proposed rule change regarding display price 
sliding and Post Only Orders would enhance competition by enabling 
market participants to post liquidity at the NBBO, thereby increasing 
the liquidity on the Exchange at the NBBO. In addition, the Exchange 
believes the proposed amendments to Price Improving Orders would does 
not impact competition, but rather seeks to avoid the potential of an 
internally crossed book on the Exchange as well as to further clarify 
the operation of such orders when subject to the display price sliding 
process. For all the reasons stated above, the Exchange does not 
believe that the proposed rule changes will impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act, and believes the proposed change will enhance competition.

(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. The Exchange has not received any written 
comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \20\ and Rule 19b-4(f)(6) thereunder.\21\ 
Because the proposed rule change does not: (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \22\ and Rule 19b-
4(f)(6) thereunder.\23\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's 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. The Exchange has satisfied this 
requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) under the Act 
\24\ normally does not become operative for 30 days after the date of 
filing. However,

[[Page 31276]]

Rule 19b-4(f)(6)(iii) \25\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay so that the proposal may 
become operative immediately upon filing. The Exchange states that the 
proposed rule change will benefit market participants by enhancing 
their ability to post liquidity at the NBBO, and that waiver of the 
operative delay may increase displayed liquidity at the NBBO on the 
Exchange, resulting in improved market quality and price discovery for 
all participants in a timely manner. Further, the Exchange notes that 
the proposed rule change will not require any systems changes by 
Exchange Users that would necessitate a delay, as the Exchange will now 
accept and no longer reject Post Only Orders in the situations 
described herein. Based on the foregoing, the Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest.\26\ The Commission hereby grants the 
Exchange's request and designates the proposal operative upon filing.
---------------------------------------------------------------------------

    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ 17 CFR 240.19b-4(f)(6)(iii).
    \26\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 necessary or 
appropriate in the public interest, for the protection of investors, or 
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 Number SR-BatsEDGX-2016-17 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 Number SR-BatsEDGX-2016-17. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BatsEDGX-2016-17 and should 
be submitted on or before June 8, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-11642 Filed 5-17-16; 8:45 am]
 BILLING CODE 8011-01-P
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