Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a New Type of Logical Port Known as a Purge Port, 10102-10105 [2017-02638]

Download as PDF 10102 Federal Register / Vol. 82, No. 26 / Thursday, February 9, 2017 / Notices unsolicited written comments from Members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and paragraph (f) of Rule 19b–4 thereunder.13 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. 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: sradovich on DSK3GMQ082PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BatsBYX–2017–04 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–BatsBYX–2017–04. 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 (http://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 12 15 13 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). VerDate Sep<11>2014 18:11 Feb 08, 2017 Jkt 241001 business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the 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– BatsBYX–2017–04 and should be submitted on or before March 2, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–02647 Filed 2–8–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79956; File No. SR– BatsBZX–2017–05] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a New Type of Logical Port Known as a Purge Port February 3, 2017. 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 January 23, 2017, Bats BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) 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 amend Exchange Rule 22.11, Mass Cancellation of Trading Interest, to 14 17 CFR 200.30–3(a)(12). 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). PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 reflect the proposed Purge Port functionality. The text of the proposed changes to Exchange Rule 22.11 is attached as Exhibit 5A. The proposed changes to the fee schedule are attached as Exhibit 5B. The text of the proposed rule change is available at the Exchange’s Web site at www.bats.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 also offers a bulkquoting interface which allows Users of BZX Options to submit and update multiple bids and offers in one message through logical ports enabled for bulkquoting. Purge Ports The Exchange now proposes to modify the BZX Options fee schedule to identify fees for Purge Ports, a new type of logical port which would enable Options Members 5 to cancel/purge all open orders, or a subset thereof, across multiple logical ports through a single cancel/purge message. The Exchange also proposes to amend Exchange Rule 22.11, Mass Cancellation of Trading Interest, to reflect the proposed Purge Port functionality. The proposed ports are designed to assist Options Members, including Market Makers, in the management of, and risk control over, their quotes, particularly if the Options Member is dealing with a large number of options. For example, if an Options Member detects market indications that may influence the direction or bias of 5 ‘‘Options Member’’ is defined as ‘‘a firm, or organization that is registered with the Exchange pursuant to Chapter XVII of these Rules for purposes of participating in options trading on EDGX Options as an ‘Options Order Entry Firm’ or ‘Options Market Maker.’ ’’ See Exchange Rule 16.1(a)(38). E:\FR\FM\09FEN1.SGM 09FEN1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 82, No. 26 / Thursday, February 9, 2017 / Notices his or her quotes the Options Member may use the proposed Purge Port(s) to reduce uncertainty and to manage risk by purging all quotes in a number of options seamlessly to avoid unintended executions, while continuing to evaluate the direction of the market. While Purge Ports will be available to all Options Members, the Exchange anticipates they will be used primarily by Market Makers. Options Members may currently cancel orders through their existing logical ports and may send a mass cancel message pertaining to multiple contracts cancelling all orders sent though a particular logical port. The Exchange now proposes to expand the ability of Options Members to cancel orders through the proposed Purge Ports, which would enable them to cancel/purge all open orders, or a subset thereof, across multiple logical ports through a single cancel/purge message. The mass cancel request may be limited to a subset of orders by identifying the range of orders to be purged.6 An Options Member may also request via a Purge Port that the Exchange block all or a subset of its new inbound bids, offers, and orders in all series of options or in all options for a specified underlying security. The block will remain in effect until the Options Member requests the Exchange remove the block. The Exchange proposes to modify the Options Logical Port Fee section of the BZX Options fee schedule to adopt a fee for Purge Ports of $750 per port/per month. The Exchange also proposes to amend Exchange Rule 22.11, Mass Cancellation of Trading Interest, to reflect the proposed Purge Port functionality. Exchange Rule 22.11 currently states that an Options Member may simultaneously cancel all its bids, offers, and orders in all series of options or in all options for a specified underlying security by requesting the Exchange staff to effect such cancellation. First, the Exchange proposes to amend Rule 22.11 to state that an Options Member may also cancel all or a subset of its bids, offers, and orders in all series of options or in all options for a specified underlying security by requesting the Exchange to effect such cancellation.7 The Exchange further proposes to amend Rule 22.11 to state that an Options Member may also 6 The Options Member may identify a subset of orders based on their own risk profile by selecting orders across series, strike price, and/or expiration date. 7 The Exchange also proposes to the remove reference to the Exchange ‘‘staff’’ as such cancellation request may also be through the logical ports or the proposed Purge Ports. VerDate Sep<11>2014 18:11 Feb 08, 2017 Jkt 241001 request that the Exchange block all or a subset of its new inbound bids, offers, and orders in all series of options or in all options for a specified underlying security. Rule 22.11 will further state that the block will remain in effect until the Options Member requests the Exchange remove the block. Ministerial Change The Exchange proposes to remove language from the Option Logical Port Fees section of its fee schedule regarding the summing of logical ports for billing purposes. The fee schedule currently states that the, ‘‘[e]xcept for bulk quoting ports, which will be separately evaluated, BZX Options will sum logical ports across all classifications in order to determine applicable fees.’’ This language was adopted in October 2015 when the Exchange began charging different rates based on the number of logical ports a User utilized.8 Thereafter, in June 2016, the Exchange proposed to no longer charge different rates based on the number of logical ports and moved to a single rate for all logical ports, but for ports with bulk quoting capabilities.9 At that time, the above language should have also been removed from the fee schedule and the Exchange now proposes to remove it in this filing as such language is no longer necessary. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 10 in general, and furthers the objectives of Section 6(b)(5) of the Act 11 in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is consistent with Section 6(b)(4) of the Act,12 in that it provides for the equitable allocation of reasonable dues, fees and other charges among Members and other persons using any facility or system which the Exchange operates or controls. The Exchange believes that the proposed rule change would promote 8 See Securities Exchange Act Release No. 76120 (October 9, 2015), 80 FR 62588 (October 16, 2015) (SR–BATS–2015–83). 9 See Securities Exchange Act Release No. 77884 (May 23, 2016), 81 FR 33718 (May 27, 2016) (SR– BatsBZX–2016–17). 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). 12 15 U.S.C. 78f(b)(4). PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 10103 just and equitable principles of trade and remove impediments to and perfect the mechanism of a free and open market because offering Options Members, including Market Makers, designated Purge Ports would enhance their ability to manage quotes, quote traffic, and their quoting obligations,13 which would, in turn, improve their risk controls to the benefit of all market participants. The Exchange believes that the Purge Ports would foster cooperation and coordination with persons engaged in facilitating transactions in securities because designating Purge Ports for purges only may encourage better use of such dedicated ports. This may, concurrent with the logical ports that carry quote and other information necessary for market making activities, enable more efficient, as well as fair and reasonable, use of Market Makers’ resources. Because Purge Ports, as the name suggests, are only available for purging and not for activities such as order or quote entry, the Purge Ports are not designed to permit unfair discrimination but rather are designed to enable Market Makers to manage their quoting risk and meet their heightened quoting obligations that other market participants are not subject to, which, in turn, benefits all market participants. The Exchange also notes that similar connectivity and functionality is offered by other exchanges.14 The Exchange notes that the proposed rule change will not relieve Market Makers of their continuous quoting obligations under Exchange Rule 22.6 and under Regulation NMS Rule 602.15 Specifically, any interest that is executable against an Options Member’s or Market Maker’s quotes and orders that is received by the Exchange prior to the time the removal of quotes request will automatically execute at that price, up to the quote’s size. Market Makers that purge their quotes will not be relieved of the obligation to provide continuous two-sided quotes on a daily basis, nor will it prohibit the Exchange from taking disciplinary action against a Market Maker for failing to meet their 13 See Exchange Rules 22.5 and 22.6. Chapter VII of the NASDAQ PHLX LLC (‘‘Phlx’’) pricing schedule (setting forth fees for SQF Purge Ports, which only allow for the mass purging of quotations). See also Securities Exchange Act Release No. 77613 (April 13, 2016), 81 FR 23023 (April 19, 2016) (SR–Phlx–2016–45). See Miami International Securities Exchange LLC (‘‘MIAX’’) Rule 519C, Mass Cancellation of Trading Interest (allowing members to remove all or a subset of its quotations in and to block new inbound quotations). See also Securities Exchange Act Release No. 78974 (September 29, 2016), 81 FR 69090 (October 5, 2016) (SR–MIAX–2016–34). 15 17 CFR 242.602. 14 See E:\FR\FM\09FEN1.SGM 09FEN1 sradovich on DSK3GMQ082PROD with NOTICES 10104 Federal Register / Vol. 82, No. 26 / Thursday, February 9, 2017 / Notices continuous quoting obligation each trading day. The Exchange believes that its proposed fees should facilitate the ability of the Exchange to recoup some costs associated with Purge Ports as well as provide, maintain, and improve Purge Ports.16 The Exchange operates in a highly competitive market in which exchanges offer connectivity services as a means to facilitate the trading activities of Members and other participants. Accordingly, fees charged for connectivity are constrained by the active competition for the order flow of such participants as well as demand for market data from the Exchange. If a particular exchange charges excessive fees for connectivity, affected Members will opt to terminate their connectivity arrangements with that exchange, and adopt a possible range of alternative strategies, including routing to the applicable exchange through another participant or market center or taking that exchange’s data indirectly. Accordingly, the exchange charging excessive fees would stand to lose not only connectivity revenues but also revenues associated with the execution of orders routed to it by affected Members, and, to the extent applicable, market data revenues. The Exchange believes that this competitive dynamic imposes powerful restraints on the ability of any exchange to charge unreasonable fees for connectivity. The Exchange also believes the proposed fee for the Purge Ports is equitable and reasonable as compared to the Exchange’s other fees for logical port connectivity. The Exchange currently charges $650 per port/per month for logical ports, Multicast PITCH Spin Server, and GRP Ports. With regard to ports with bulk quoting capabilities, the Exchange charges $1,500 per month for the first five ports and $2,000 per month for each port in excess of five. The Exchange believes it is equitable and reasonable to charge $750 per month for the proposed Purge Ports as such ports are more similar to ports with bulk quoting capabilities than to standard logical ports because both Purge Ports and bulk quoting ports allow for the sending of a single message to impact multiple orders. Additionally, Purge Port requests may cancel orders submitted over numerous ports and contain added functionality to purge only a subset of these orders. The proposed rate is competitive with that charged by competitor exchanges for 16 Purge Ports will be fee liable on a monthly basis (and not only when such ports are active), which will help the Exchange to recoup the cost of these ports. VerDate Sep<11>2014 18:11 Feb 08, 2017 Jkt 241001 similar functionality. For example, Phlx charges a rate of $500 per month for the first five SQF Purge Ports, which only allow for the mass purging of quotations and not the purging of a subset of orders and the blocking of new orders as proposed herein.17 The Exchange also believes that the proposed amendments to its fee schedule are non-discriminatory because they will apply uniformly to all Members. The proposed Purge Ports are completely voluntary and no Member is required or under any regulatory obligation to utilize them. All Members that voluntarily select this service options will be charged the same amount for the same services. All Members have the option to select any connectivity option, and there is no differentiation among Members with regard to the fees charged for the services offered by the Exchange. Lastly, the Exchange believes the ministerial change to its fee schedule is also equitable, reasonable and not unfairly discriminatory in that it removes unnecessary language to avoid potential investor confusion. (B) Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes its proposed amendments to its fee schedule would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. On the contrary, the Exchange believes the proposed rule change will enhance competition because it will enable it to offer similar connectivity and functionality as its competitor exchanges.18 In addition, the proposed Purge Ports are completely voluntary and no Member is required or under any regulatory obligation to utilize them. The Exchange does not believe that the proposed change represents a significant departure from previous pricing offered by the Exchange or pricing offered by the Exchange’s competitors. Additionally, Members may opt to disfavor the Exchange’s pricing if they believe that alternatives offer them better value. Accordingly, the Exchange does not believe that the proposed change will impair the ability of Members or competing venues to maintain their competitive standing in the financial markets. The Exchange believes that fees for the proposed Purge Ports and connectivity, in general, are constrained 17 See Chapter VII of the Phlx pricing schedule (setting forth fees for SQF Purge Ports). See also Securities Exchange Act Release No. 77613 (April 13, 2016), 81 FR 23023 (April 19, 2016) (SR–Phlx– 2016–45). 18 See supra note 14. PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 by the robust competition for order flow among exchanges and non-exchange markets. Further, excessive fees for connectivity, including Purge Port fees, would serve to impair an exchange’s ability to compete for order flow rather than burdening competition. The Exchange also does not believe the proposed rule change would impact intramarket competition as it would apply to all Members and non-Members equally. Lastly, the ministerial change to its fee schedule will have no impact on competition as it does not change any fee or rate. It simply removes unnecessary language to avoid potential investor confusion. (C) Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No comments were solicited or received on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (A) Significantly affect the protection of investors or the public interest; (B) impose any significant burden on competition; and (C) by its terms, become operative for 30 days from the date on which it was filed or such shorter time as the Commission may designate it has become effective pursuant to Section 19(b)(3)(A) of the Act 19 and paragraph (f)(6) of Rule 19b– 4 thereunder,20 the Exchange has designated this rule filing as noncontroversial. The Exchange has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (1) Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 19 15 20 17 E:\FR\FM\09FEN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4. 09FEN1 Federal Register / Vol. 82, No. 26 / Thursday, February 9, 2017 / Notices IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Comments may be submitted by any of the following methods: • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File No. SR– BatsBZX–2017–05 on the subject line. Paper Comments sradovich on DSK3GMQ082PROD with NOTICES BILLING CODE 8011–01–P [Release No. 34–79967; File No. SR–ISE– 2017–08] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of Proposed Rule Change To Adopt Chapter 9 February 3, 2017. • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File No. SR–BatsBZX–2017–05. 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–BatsBZX– 2017–05 and should be submitted on or before March 2, 2017. 18:11 Feb 08, 2017 [FR Doc. 2017–02638 Filed 2–8–17; 8:45 am] SECURITIES AND EXCHANGE COMMISSION Electronic Comments VerDate Sep<11>2014 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Eduardo A. Aleman, Assistant Secretary. Jkt 241001 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 2, 2017, the International Securities Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange.3 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 proposes to Adopt Chapter 9. The text of the proposed rule change is available on the Exchange’s Web site at www.ise.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 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The Exchange originally filed this proposed rule change on January 17, 2017 under File No. SR–ISE– 2017–04. The Exchange withdrew that filing on January 31, 2017 and filed ISE–2017–05. The Exchange withdrew that filing on February 2, 2017and filed this proposed rule change. 1 15 PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 10105 forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors’ Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the ‘‘Participants’’) filed with the Commission, pursuant to Section 11A of the Exchange Act 4 and Rule 608 of Regulation NMS thereunder,5 the CAT NMS Plan.6 The Participants filed the Plan to comply with Rule 613 of Regulation NMS under the Exchange Act. The Plan was published for comment in the Federal Register on May 17, 2016,7 and approved by the Commission, as modified, on November 15, 2016.8 The Plan is designed to create, implement and maintain a consolidated audit trail (‘‘CAT’’) that would capture customer and order event information for orders in NMS Securities and OTC Equity Securities, across all markets, from the time of order inception through routing, cancellation, modification, or execution in a single consolidated data source. Each Participant is required to enforce compliance by its Industry Members, as applicable, with the provisions of the Plan, by adopting a Compliance Rule applicable to their 4 15 U.S.C. 78k–1. CFR 242.608. 6 See Letter from the Participants to Brent J. Fields, Secretary, Commission, dated September 30, 2014; and Letter from Participants to Brent J. Fields, Secretary, Commission, dated February 27, 2015. On December 24, 2015, the Participants submitted an amendment to the CAT NMS Plan. See Letter from Participants to Brent J. Fields, Secretary, Commission, dated December 23, 2015. 7 Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 81 FR 30614 (May 17, 2016). 8 Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘Approval Order’’). 5 17 E:\FR\FM\09FEN1.SGM 09FEN1

Agencies

[Federal Register Volume 82, Number 26 (Thursday, February 9, 2017)]
[Notices]
[Pages 10102-10105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02638]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79956; File No. SR-BatsBZX-2017-05]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a 
New Type of Logical Port Known as a Purge Port

February 3, 2017.
    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 January 23, 2017, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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 amend Exchange Rule 22.11, Mass 
Cancellation of Trading Interest, to reflect the proposed Purge Port 
functionality.
    The text of the proposed changes to Exchange Rule 22.11 is attached 
as Exhibit 5A. The proposed changes to the fee schedule are attached as 
Exhibit 5B. The text of the proposed rule change is available at the 
Exchange's Web site at www.bats.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 also offers a bulk-quoting interface which allows 
Users of BZX Options to submit and update multiple bids and offers in 
one message through logical ports enabled for bulk-quoting.
Purge Ports
    The Exchange now proposes to modify the BZX Options fee schedule to 
identify fees for Purge Ports, a new type of logical port which would 
enable Options Members \5\ to cancel/purge all open orders, or a subset 
thereof, across multiple logical ports through a single cancel/purge 
message. The Exchange also proposes to amend Exchange Rule 22.11, Mass 
Cancellation of Trading Interest, to reflect the proposed Purge Port 
functionality. The proposed ports are designed to assist Options 
Members, including Market Makers, in the management of, and risk 
control over, their quotes, particularly if the Options Member is 
dealing with a large number of options. For example, if an Options 
Member detects market indications that may influence the direction or 
bias of

[[Page 10103]]

his or her quotes the Options Member may use the proposed Purge Port(s) 
to reduce uncertainty and to manage risk by purging all quotes in a 
number of options seamlessly to avoid unintended executions, while 
continuing to evaluate the direction of the market. While Purge Ports 
will be available to all Options Members, the Exchange anticipates they 
will be used primarily by Market Makers.
---------------------------------------------------------------------------

    \5\ ``Options Member'' is defined as ``a firm, or organization 
that is registered with the Exchange pursuant to Chapter XVII of 
these Rules for purposes of participating in options trading on EDGX 
Options as an `Options Order Entry Firm' or `Options Market Maker.' 
'' See Exchange Rule 16.1(a)(38).
---------------------------------------------------------------------------

    Options Members may currently cancel orders through their existing 
logical ports and may send a mass cancel message pertaining to multiple 
contracts cancelling all orders sent though a particular logical port. 
The Exchange now proposes to expand the ability of Options Members to 
cancel orders through the proposed Purge Ports, which would enable them 
to cancel/purge all open orders, or a subset thereof, across multiple 
logical ports through a single cancel/purge message. The mass cancel 
request may be limited to a subset of orders by identifying the range 
of orders to be purged.\6\ An Options Member may also request via a 
Purge Port that the Exchange block all or a subset of its new inbound 
bids, offers, and orders in all series of options or in all options for 
a specified underlying security. The block will remain in effect until 
the Options Member requests the Exchange remove the block. The Exchange 
proposes to modify the Options Logical Port Fee section of the BZX 
Options fee schedule to adopt a fee for Purge Ports of $750 per port/
per month.
---------------------------------------------------------------------------

    \6\ The Options Member may identify a subset of orders based on 
their own risk profile by selecting orders across series, strike 
price, and/or expiration date.
---------------------------------------------------------------------------

    The Exchange also proposes to amend Exchange Rule 22.11, Mass 
Cancellation of Trading Interest, to reflect the proposed Purge Port 
functionality. Exchange Rule 22.11 currently states that an Options 
Member may simultaneously cancel all its bids, offers, and orders in 
all series of options or in all options for a specified underlying 
security by requesting the Exchange staff to effect such cancellation. 
First, the Exchange proposes to amend Rule 22.11 to state that an 
Options Member may also cancel all or a subset of its bids, offers, and 
orders in all series of options or in all options for a specified 
underlying security by requesting the Exchange to effect such 
cancellation.\7\ The Exchange further proposes to amend Rule 22.11 to 
state that an Options Member may also request that the Exchange block 
all or a subset of its new inbound bids, offers, and orders in all 
series of options or in all options for a specified underlying 
security. Rule 22.11 will further state that the block will remain in 
effect until the Options Member requests the Exchange remove the block.
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    \7\ The Exchange also proposes to the remove reference to the 
Exchange ``staff'' as such cancellation request may also be through 
the logical ports or the proposed Purge Ports.
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Ministerial Change
    The Exchange proposes to remove language from the Option Logical 
Port Fees section of its fee schedule regarding the summing of logical 
ports for billing purposes. The fee schedule currently states that the, 
``[e]xcept for bulk quoting ports, which will be separately evaluated, 
BZX Options will sum logical ports across all classifications in order 
to determine applicable fees.'' This language was adopted in October 
2015 when the Exchange began charging different rates based on the 
number of logical ports a User utilized.\8\ Thereafter, in June 2016, 
the Exchange proposed to no longer charge different rates based on the 
number of logical ports and moved to a single rate for all logical 
ports, but for ports with bulk quoting capabilities.\9\ At that time, 
the above language should have also been removed from the fee schedule 
and the Exchange now proposes to remove it in this filing as such 
language is no longer necessary.
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    \8\ See Securities Exchange Act Release No. 76120 (October 9, 
2015), 80 FR 62588 (October 16, 2015) (SR-BATS-2015-83).
    \9\ See Securities Exchange Act Release No. 77884 (May 23, 
2016), 81 FR 33718 (May 27, 2016) (SR-BatsBZX-2016-17).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\ in particular, in that it is designed to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest. The Exchange believes that 
the proposed rule change is consistent with Section 6(b)(4) of the 
Act,\12\ in that it provides for the equitable allocation of reasonable 
dues, fees and other charges among Members and other persons using any 
facility or system which the Exchange operates or controls. The 
Exchange believes that the proposed rule change would promote just and 
equitable principles of trade and remove impediments to and perfect the 
mechanism of a free and open market because offering Options Members, 
including Market Makers, designated Purge Ports would enhance their 
ability to manage quotes, quote traffic, and their quoting 
obligations,\13\ which would, in turn, improve their risk controls to 
the benefit of all market participants. The Exchange believes that the 
Purge Ports would foster cooperation and coordination with persons 
engaged in facilitating transactions in securities because designating 
Purge Ports for purges only may encourage better use of such dedicated 
ports. This may, concurrent with the logical ports that carry quote and 
other information necessary for market making activities, enable more 
efficient, as well as fair and reasonable, use of Market Makers' 
resources. Because Purge Ports, as the name suggests, are only 
available for purging and not for activities such as order or quote 
entry, the Purge Ports are not designed to permit unfair discrimination 
but rather are designed to enable Market Makers to manage their quoting 
risk and meet their heightened quoting obligations that other market 
participants are not subject to, which, in turn, benefits all market 
participants. The Exchange also notes that similar connectivity and 
functionality is offered by other exchanges.\14\
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78f(b)(4).
    \13\ See Exchange Rules 22.5 and 22.6.
    \14\ See Chapter VII of the NASDAQ PHLX LLC (``Phlx'') pricing 
schedule (setting forth fees for SQF Purge Ports, which only allow 
for the mass purging of quotations). See also Securities Exchange 
Act Release No. 77613 (April 13, 2016), 81 FR 23023 (April 19, 2016) 
(SR-Phlx-2016-45). See Miami International Securities Exchange LLC 
(``MIAX'') Rule 519C, Mass Cancellation of Trading Interest 
(allowing members to remove all or a subset of its quotations in and 
to block new inbound quotations). See also Securities Exchange Act 
Release No. 78974 (September 29, 2016), 81 FR 69090 (October 5, 
2016) (SR-MIAX-2016-34).
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    The Exchange notes that the proposed rule change will not relieve 
Market Makers of their continuous quoting obligations under Exchange 
Rule 22.6 and under Regulation NMS Rule 602.\15\ Specifically, any 
interest that is executable against an Options Member's or Market 
Maker's quotes and orders that is received by the Exchange prior to the 
time the removal of quotes request will automatically execute at that 
price, up to the quote's size. Market Makers that purge their quotes 
will not be relieved of the obligation to provide continuous two-sided 
quotes on a daily basis, nor will it prohibit the Exchange from taking 
disciplinary action against a Market Maker for failing to meet their

[[Page 10104]]

continuous quoting obligation each trading day.
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    \15\ 17 CFR 242.602.
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    The Exchange believes that its proposed fees should facilitate the 
ability of the Exchange to recoup some costs associated with Purge 
Ports as well as provide, maintain, and improve Purge Ports.\16\ The 
Exchange operates in a highly competitive market in which exchanges 
offer connectivity services as a means to facilitate the trading 
activities of Members and other participants. Accordingly, fees charged 
for connectivity are constrained by the active competition for the 
order flow of such participants as well as demand for market data from 
the Exchange. If a particular exchange charges excessive fees for 
connectivity, affected Members will opt to terminate their connectivity 
arrangements with that exchange, and adopt a possible range of 
alternative strategies, including routing to the applicable exchange 
through another participant or market center or taking that exchange's 
data indirectly. Accordingly, the exchange charging excessive fees 
would stand to lose not only connectivity revenues but also revenues 
associated with the execution of orders routed to it by affected 
Members, and, to the extent applicable, market data revenues. The 
Exchange believes that this competitive dynamic imposes powerful 
restraints on the ability of any exchange to charge unreasonable fees 
for connectivity.
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    \16\ Purge Ports will be fee liable on a monthly basis (and not 
only when such ports are active), which will help the Exchange to 
recoup the cost of these ports.
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    The Exchange also believes the proposed fee for the Purge Ports is 
equitable and reasonable as compared to the Exchange's other fees for 
logical port connectivity. The Exchange currently charges $650 per 
port/per month for logical ports, Multicast PITCH Spin Server, and GRP 
Ports. With regard to ports with bulk quoting capabilities, the 
Exchange charges $1,500 per month for the first five ports and $2,000 
per month for each port in excess of five. The Exchange believes it is 
equitable and reasonable to charge $750 per month for the proposed 
Purge Ports as such ports are more similar to ports with bulk quoting 
capabilities than to standard logical ports because both Purge Ports 
and bulk quoting ports allow for the sending of a single message to 
impact multiple orders. Additionally, Purge Port requests may cancel 
orders submitted over numerous ports and contain added functionality to 
purge only a subset of these orders. The proposed rate is competitive 
with that charged by competitor exchanges for similar functionality. 
For example, Phlx charges a rate of $500 per month for the first five 
SQF Purge Ports, which only allow for the mass purging of quotations 
and not the purging of a subset of orders and the blocking of new 
orders as proposed herein.\17\
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    \17\ See Chapter VII of the Phlx pricing schedule (setting forth 
fees for SQF Purge Ports). See also Securities Exchange Act Release 
No. 77613 (April 13, 2016), 81 FR 23023 (April 19, 2016) (SR-Phlx-
2016-45).
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    The Exchange also believes that the proposed amendments to its fee 
schedule are non-discriminatory because they will apply uniformly to 
all Members. The proposed Purge Ports are completely voluntary and no 
Member is required or under any regulatory obligation to utilize them. 
All Members that voluntarily select this service options will be 
charged the same amount for the same services. All Members have the 
option to select any connectivity option, and there is no 
differentiation among Members with regard to the fees charged for the 
services offered by the Exchange.
    Lastly, the Exchange believes the ministerial change to its fee 
schedule is also equitable, reasonable and not unfairly discriminatory 
in that it removes unnecessary language to avoid potential investor 
confusion.

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

    The Exchange believes its proposed amendments to its fee schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. On the contrary, 
the Exchange believes the proposed rule change will enhance competition 
because it will enable it to offer similar connectivity and 
functionality as its competitor exchanges.\18\ In addition, the 
proposed Purge Ports are completely voluntary and no Member is required 
or under any regulatory obligation to utilize them. The Exchange does 
not believe that the proposed change represents a significant departure 
from previous pricing offered by the Exchange or pricing offered by the 
Exchange's competitors. Additionally, Members may opt to disfavor the 
Exchange's pricing if they believe that alternatives offer them better 
value. Accordingly, the Exchange does not believe that the proposed 
change will impair the ability of Members or competing venues to 
maintain their competitive standing in the financial markets.
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    \18\ See supra note 14.
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    The Exchange believes that fees for the proposed Purge Ports and 
connectivity, in general, are constrained by the robust competition for 
order flow among exchanges and non-exchange markets. Further, excessive 
fees for connectivity, including Purge Port fees, would serve to impair 
an exchange's ability to compete for order flow rather than burdening 
competition. The Exchange also does not believe the proposed rule 
change would impact intramarket competition as it would apply to all 
Members and non-Members equally.
    Lastly, the ministerial change to its fee schedule will have no 
impact on competition as it does not change any fee or rate. It simply 
removes unnecessary language to avoid potential investor confusion.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    No comments were solicited or received on the proposed rule change.

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

    Because the foregoing proposed rule change does not: (A) 
Significantly affect the protection of investors or the public 
interest; (B) impose any significant burden on competition; and (C) by 
its terms, become operative for 30 days from the date on which it was 
filed or such shorter time as the Commission may designate it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \19\ and 
paragraph (f)(6) of Rule 19b-4 thereunder,\20\ the Exchange has 
designated this rule filing as non-controversial. The Exchange has 
given the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change at least five business days prior to the date of filing of 
the proposed rule change, or such shorter time as designated by the 
Commission.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (1) 
Necessary or appropriate in the public interest; (2) for the protection 
of investors; or (3) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.

[[Page 10105]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-BatsBZX-2017-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-BatsBZX-2017-05. 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-BatsBZX-2017-05 and should be 
submitted on or before March 2, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02638 Filed 2-8-17; 8:45 am]
 BILLING CODE 8011-01-P