Self-Regulatory Organizations; Bats BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 11.9, Orders and Modifiers, To Add New Optional Functionality to Minimum Quantity Orders, 47047-47051 [2017-21673]

Download as PDF Federal Register / Vol. 82, No. 194 / Tuesday, October 10, 2017 / Notices Clendenin; Comments Due: October 11, 2017. This notice will be published in the Federal Register. Stacy L. Ruble, Secretary. [FR Doc. 2017–21754 Filed 10–6–17; 8:45 am] BILLING CODE 7710–FW–P gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 3, 2017, it filed with the Postal Regulatory Commission a Request of the United States Postal Service to Add First-Class Package Service Contract 84 to Competitive Product List. Documents are available at www.prc.gov, Docket Nos. MC2018–2, CP2018–2. Elizabeth A. Reed, Attorney, Corporate and Postal Business Law. POSTAL SERVICE [FR Doc. 2017–21663 Filed 10–6–17; 8:45 am] Product Change—Priority Mail Negotiated Service Agreement The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule’s Competitive Products List. DATES: Date of notice required under 39 U.S.C. 3642(d)(1): October 10, 2017. FOR FURTHER INFORMATION CONTACT: Elizabeth A. Reed, 202–268–3179. SUPPLEMENTARY INFORMATION: The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 3, 2017, it filed with the Postal Regulatory Commission a Request of the United States Postal Service to Add Priority Mail Contract 366 to Competitive Product List. Documents are available at www.prc.gov, Docket Nos. MC2018–3, CP2018–3. SUMMARY: Elizabeth A. Reed, Attorney, Corporate and Postal Business Law. [FR Doc. 2017–21664 Filed 10–6–17; 8:45 am] BILLING CODE 7710–12–P Product Change—First-Class Package Service Negotiated Service Agreement BILLING CODE 7905–01–P SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; Bats BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 11.9, Orders and Modifiers, To Add New Optional Functionality to Minimum Quantity Orders Product Change—First-Class Package Service Negotiated Service Agreement Postal ServiceTM. ACTION: Notice. AGENCY: The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule’s Competitive Products List. DATES: Date of notice required under 39 U.S.C. 3642(d)(1): October 10, 2017. FOR FURTHER INFORMATION CONTACT: Elizabeth A. Reed, 202–268–3179. SUPPLEMENTARY INFORMATION: The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 3, 2017, it filed with the Postal Regulatory Commission a Request of the United States Postal Service to Add First-Class Package Service Contract 83 to Competitive Product List. Documents are available at www.prc.gov, Docket Nos. MC2018–1, CP2018–1. SUMMARY: Postal ServiceTM. ACTION: Notice. [FR Doc. 2017–21662 Filed 10–6–17; 8:45 am] BILLING CODE 7710–12–P AGENCY: Railroad Retirement Board The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule’s Competitive Products List. DATES: Date of notice required under 39 U.S.C. 3642(d)(1): October 10, 2017. FOR FURTHER INFORMATION CONTACT: Elizabeth A. Reed, 202–268–3179. SUPPLEMENTARY INFORMATION: The United States Postal Service® hereby SUMMARY: sradovich on DSK3GMQ082PROD with NOTICES [FR Doc. 2017–21853 Filed 10–5–17; 11:15 am] [Release No. 34–81806; File No. SR– BatsBYX–2017–24] Elizabeth A. Reed, Attorney, Corporate and Postal Business Law. POSTAL SERVICE 17:26 Oct 06, 2017 Dated: October 5, 2017. Martha P. Rico, For the Board, Secretary to the Board. POSTAL SERVICE Postal ServiceTM. Notice. VerDate Sep<11>2014 The person to contact for more information is Martha P. Rico, Secretary to the Board, Phone No. 312–751–4920. BILLING CODE 7710–12–P AGENCY: ACTION: 47047 Jkt 244001 Sunshine Act Meeting; Notice of Public Meeting Notice is hereby given that the Railroad Retirement Board will hold a meeting on October 25, 2017, 10:00 a.m. at the Board’s meeting room on the 8th floor of its headquarters building, 844 North Rush Street, Chicago, Illinois, 60611. The agenda for this meeting follows: Portion open to the public: (1) Executive Committee Reports PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 October 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 September 26, 2017, Bats BYX Exchange, Inc. (‘‘Exchange’’ or ‘‘BYX’’) 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) 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 add new optional functionality to Minimum Quantity Orders by amending paragraph (c)(5) of Exchange Rule 11.9, Orders and Modifiers. The Exchange also proposes to amend paragraph (e)(3) of Exchange Rule 11.9 to make certain clarifying, non-substantive changes. The proposed amendments are identical changes its affiliate, Bats EDGX Exchange, Inc. (‘‘EDGX’’), recently filed with and were published by the Commission for immediate effectiveness.5 The Exchange 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 5 See EDGX Rules 11.6(h), 11.8(b)(3), and 11.10(e)(3). See also Securities Exchange Act 2 17 E:\FR\FM\10OCN1.SGM Continued 10OCN1 47048 Federal Register / Vol. 82, No. 194 / Tuesday, October 10, 2017 / Notices also proposes to add language to the description of Minimum Quantity Orders to further describe their current operation on BYX and to harmonize the rule with that of EDGX.6 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. Exchange’s current rules. Each of these changes are described in detail below. 1. Purpose The Exchange proposes to add new optional functionality to Minimum Quantity Orders by amending paragraph (c)(5) of Exchange Rule 11.9, Orders and Modifiers. The Exchange also proposes to amend paragraph (e)(3) of Exchange Rule 11.9 to make certain clarifying, non-substantive changes. The proposed amendments are identical to changes recently filed by Exchange’s affiliate EDGX and were published by the Commission for immediate effectiveness.7 The Exchange also proposes to add language to the description of Minimum Quantity Orders to further describe their current operation on BYX and to harmonize the rule with that of EDGX.8 The Exchange does not propose to implement new or unique functionality that has not been previously filed with the Commission or is not available on EDGX. The Exchange notes that the proposed rule text is based on BYX rules and is different only to the extent necessary to conform to the Exchange Rule 11.9(c)(5), Proposed Individual Minimum Size and Harmonization With EDGX Rule 11.6(h) A Minimum Quantity Order enables a User 9 to specify a minimum share amount at which the order will execute. A Minimum Quantity Order will not execute unless the volume of contraside liquidity available to execute against the order meets or exceeds the designated minimum. Specifically, a Minimum Quantity Order is a limit order to buy or sell that will only execute if a specified minimum quantity of shares can be obtained. Orders with a specified minimum quantity will only execute against multiple, aggregated orders if such executions would occur simultaneously.10 The Exchange will only honor a specified minimum quantity on BYX Only Orders 11 that are non-displayed or Immediate-or-Cancel (‘‘IOC’’) Orders 12 and will disregard a minimum quantity on any other order. First, the Exchange proposes to add new optional functionality that would enhance the utility of Minimum Quantity Orders by amending paragraph (c)(5) of Exchange Rule 11.9. In sum, the proposal would permit an incoming Minimum Quantity Order to forego executions where multiple resting orders could otherwise be aggregated to satisfy the order’s minimum quantity. The Exchange has observed that some market participants avoid sending large Minimum Quantity Orders to the Exchange out of concern that such orders may interact with small orders entered by professional traders, possibly adversely impacting the execution of their larger order. Institutional orders are often much larger in size than the average order in the marketplace. To facilitate the liquidation or acquisition of a large position, market participants tend to submit multiple orders into the market that may only represent a fraction of the overall institutional position to be executed. Various strategies used by institutional market participants to execute large orders are intended to limit price movement of the security at issue. Executing in small sizes, even if in the aggregate it meets the order’s minimum quantity, may Release No. 81457 (August 22, 2017), 82 FR 40812 (August 28, 2017) (SR–BatsEDGX–2017–34). 6 See EDGX Rule 11.9(h) (describing the operation of the Minimum Execution Quantity order instructions, which is functionally identical to the BYX Minimum Quantity Order). 7 See supra note 5. 8 See EDGX Rule 11.9(h) (describing the operation of the Minimum Execution Quantity order instructions, which is functionally identical to the BYX Minimum Quantity Order). 9 The term ‘‘User’’ is defined as ‘‘any Member or Sponsored Participant who is authorized to obtain access to the System pursuant to Rule 11.3.’’ See Exchange Rule 1.5(cc). 10 Today, the System will aggregate multiple resting orders to satisfy the incoming order’s minimum quantity and a User cannot elect for the incoming order to execute against a single resting contra-side order. 11 See Exchange Rule 11.9(c)(4). 12 See Exchange Rule 11.9(b)(1). 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. sradovich on DSK3GMQ082PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change VerDate Sep<11>2014 17:26 Oct 06, 2017 Jkt 244001 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 impact the market for that security such that the additional orders the market participant has yet to enter into the market may be more costly to execute. If an institution is able to execute in larger sizes, the contra-party to the execution is less likely to be a participant that reacts to short term changes in the stock price, and as such, the price impact to the stock may be less acute when larger individual executions are obtained.13 As a result, these orders are often executed away from the Exchange in dark pools or other exchanges that offer the same functionality as proposed herein,14 or via broker-dealer internalization. To attract larger Minimum Quantity Orders, the Exchange proposes to add new optional functionality that would enhance the utility of Minimum Quantity Orders. In sum, the proposal would permit a User to elect that its incoming Minimum Quantity Order execute solely against one or more resting individual orders, each of which must satisfy the order’s minimum quantity condition. In such case, the order would forego executions where multiple resting orders could otherwise be aggregated to satisfy the order’s minimum quantity, but do not individually satisfy the minimum quantity condition.15 As discussed above, under the current rule a Minimum Quantity Order will execute upon entry against any number of smaller contra-side orders that, in aggregate, meet the minimum quantity set by the User. This default behavior will remain. For example, assume there are two orders to sell resting on the BYX Book 16—the first for 300 shares and a second for 400 shares, with the 300 share order having time priority ahead of the 400 share order. If a User entered a Minimum Quantity Order to buy 1,000 shares at $10.00 with a minimum quantity of 500 shares, and the order was marketable against the two resting sell orders for 300 and 400 shares, the 13 The Commission has long recognized this concern: ‘‘[a]nother type of implicit transaction cost reflected in the price of a security is short-term price volatility caused by temporary imbalances in trading interest. For example, a significant implicit cost for large investors (who often represent the consolidated investments of many individuals) is the price impact that their large trades can have on the market. Indeed, disclosure of these large orders can reduce the likelihood of their being filled.’’ See Securities Exchange Act Release No. 42450 (February 23, 2000), 65 FR 10577, 10581 (February 28, 2000) (SR–NYSE–99–48). 14 See supra note 5. 15 If no election is made, the System will aggregate multiple resting orders to satisfy the incoming order’s minimum quantity. 16 The term ‘‘BYX Book’’ is defined as ‘‘the System’s electronic file of orders.’’ See Exchange Rule 1.5(e). E:\FR\FM\10OCN1.SGM 10OCN1 Federal Register / Vol. 82, No. 194 / Tuesday, October 10, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES System 17 would aggregate both sell orders for purposes of meeting the minimum quantity, thus resulting in executions of 300 shares and then 400 shares respectively with the remaining 300 shares of the Minimum Quantity Order being posted to the BYX Book with a minimum quantity restriction of 300 shares. The proposed new optional functionality will not allow aggregation of smaller executions to satisfy the minimum quantity of an incoming Minimum Quantity Order. Using the same scenario as above, but with the proposed new functionality and a minimum quantity requirement of 400 shares selected by the User, the Minimum Quantity Order would not execute against the two sell orders because the 300 share order with time priority at the top of the BYX Book is less than the incoming order’s 400 share Minimum Execution Quantity [sic]. The new functionality will cause the Minimum Quantity Order to be cancelled or posted to the BYX Book, non-displayed, in accordance with the characteristics of the underlying order type 18 when encountering an order with time priority that is of insufficient size to satisfy the minimum execution requirement. If posted, the Minimum Quantity Order will operate as it does currently and will only execute against individual orders that satisfy its minimum quantity as proposed herein. The Exchange notes that the User entering the Minimum Quantity Order has expressed its intention not to execute against liquidity below a certain minimum size, and therefore, cedes execution priority when it would lock an order against which it would otherwise execute if it were not for the minimum execution size restriction. The Exchange proposes to add language to paragraph (c)(5) of Rule 11.9 to make clear that the order would cede execution priority in such in [sic] scenario. As amended, the description of a Minimum Quantity Order under paragraph (c)(5) of Exchange Rule 11.9 would set forth the default behavior of Minimum Quantity Orders that execute upon entry against a single order or multiple aggregated orders simultaneously. Amended Rule 11.9(c)(5) would set forth the proposed 17 The term ‘‘System’’ is defined as ‘‘the electronic communications and trading facility designated by the Board through which securities orders of Users are consolidated for ranking, execution and, when applicable, routing away. See Exchange Rule 1.5(aa). 18 See supra notes 11 and 12 for a description of the functionality associated with orders that may also be Minimum Quantity Orders. VerDate Sep<11>2014 17:26 Oct 06, 2017 Jkt 244001 optional functionality where a User may alternatively specify that the incoming order’s minimum quantity condition be satisfied by each order resting on the BYX Book that would execute against the order with the minimum quantity condition. If there are such orders, but there are also orders that do not satisfy the minimum quantity condition, the incoming Minimum Quantity Order will execute against orders resting on the BYX Book in accordance with Rule 11.12, Priority of Orders, until it reaches an order that does not satisfy the minimum quantity condition at which point it would be posted to the BYX Book or cancelled in accordance with the terms of the order. If, upon entry, there are no orders that satisfy the minimum quantity condition resting on the BYX Book, the order will either be posted to the BYX Book or cancelled in accordance with the terms of the order. The Exchange also proposes to reprice incoming Minimum Quantity Orders where that order may cross an order posted on the BYX Book. Specifically, where there is insufficient size to satisfy an incoming order’s minimum quantity condition and that incoming order, if posted at its limit price, would cross an order(s) resting on the BYX Book, the order with the minimum quantity condition will be repriced to and ranked at the locking price. For example, an order to buy at $11.00 with a minimum quantity condition of 500 shares is entered and there is an order resting on the BYX Book to sell 200 shares at $10.99. The resting order to sell does not contain sufficient size to satisfy the incoming order’s minimum quantity condition of 500 shares. The price of the incoming buy order, if posted to the BYX Book, would cross the price of the resting sell order. In such case, to avoid an internally crossed book, the System will re-price the incoming buy order to $10.99, the locking price. This behavior is similar to how the Exchange currently reprices non-displayed orders that cross the Protected Quotation of an external market.19 In addition, both the Investors Exchange, Inc. (‘‘IEX’’) and the Nasdaq Stock Market LLC (‘‘Nasdaq’’) also reprice similar orders to avoid an internally crossed book.20 Second, the Exchange proposes to add language to the description of Minimum Quantity Orders to further describe their current operation on BZX and to harmonize the rule with that of its affiliate, EDGX, as described in EDGX 19 See Exchange Rule 11.9(g)(4). Nasdaq Rule 4703(e). See IEX Rule 11.190(h)(2). 20 See PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 47049 Rule 11.6(h).21 The Exchange does not propose to implement new or unique functionality that has not been previously filed with the Commission or is not available on EDGX. The Exchange notes that the proposed rule text is based on BYX rules and is different only to the extent necessary to conform to the Exchange’s current rules. The Exchange notes that, but for the proposed changes discussed above, the current operation of Minimum Quantity Orders on the Exchange and the Minimum Execution Quantity instruction on EDGX is identical. The Exchange, therefore, proposes to amend the description of the Minimum Execution Quantity [sic] instruction to clarify its operation upon order entry and when the order is posted to the BYX Book. The Exchange proposes to clarify that upon entry, and by default, an order with a Minimum Execution Quantity [sic] will execute against a single order or multiple aggregated orders simultaneously. A User may also specify that the order only against [sic] orders that individually satisfy the order’s minimum quantity condition, as proposed herein. Once posted to the BYX Book,22 the order may only execute against individual incoming orders with a size that satisfies the minimum quantity condition. Any shares remaining after a partial execution will continue to be executed at a size that is equal to or exceeds the quantity provided in the instruction. Where the number of shares remaining after a partial execution are [sic] less than the quantity provided in the order, the Minimum Quantity Order shall be equal to the number of shares remaining. The Exchange also proposed to clarify that a Minimum Quantity Order is not eligible to be routed to another Trading Center in accordance with Exchange Rule 11.13, Order Execution and Routing. These proposed changes would provide additional specificity to the operation of Minimum Quantity Orders and would harmonize the rule with the description of the Minimum Execution Quantity instruction under EDX [sic] Rule 11.6(h). Exchange Rule 11.9(e)(3), Replace Messages The Exchange also proposes to amend paragraph (e)(3) of Rule 11.9 to make certain clarifying, non-substantive 21 See EDGX Rule 11.9(h) describing the operation of the Minimum Execution Quantity order instructions, which is functionally identical to the BYX Minimum Quantity Order. 22 Orders will only post to the BYX Book if they are designated with a TIF instruction that allows for posting. For example, an order with a TIF of IOC or FOK will never post to the BYX Book. E:\FR\FM\10OCN1.SGM 10OCN1 47050 Federal Register / Vol. 82, No. 194 / Tuesday, October 10, 2017 / Notices changes. The proposed change would harmonize the description of Replace messages under Exchange Rule 11.9(e)(3) with EDGX Rule 11.10(e)(3). Exchange Rule 11.9(e)(3) currently states that other than changing a limit order to a market order, only the price, stop price, the sell long or sell short indicator, Max Floor 23 of a Reserve Order [sic], and quantity terms of the order may be changed with a Replace message. If a User desires to change any other terms of an existing order, the existing order must be cancelled and a new order must be entered. As amended, paragraph (e)(3) of Rule 11.9 would specify that the Max Floor is associated with a Reserve Order and to replace the phrase ‘‘and quantity terms’’ with the word ‘‘size’’. The Exchange believes these changes will provide additional specificity to the rule and ensure the rule uses terminology consistent with the description of Replace messages and their impact on an order’s priority under Exchange Rule 11.12(a)(4). sradovich on DSK3GMQ082PROD with NOTICES 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 24 in general, and furthers the objectives of Section 6(b)(5) of the Act 25 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. Exchange Rule 11.6(h), Proposed Individual Minimum Size The proposed rule change would remove impediments to and promote just and equitable principles of trade because it would provide Users with optional functionality that enhances the use of the Minimum Execution Quantity [sic] instruction. These proposed amendments are identical to changes recently proposed by EDGX that were published by the Commission for immediate effectiveness.26 The proposed change to the functioning of Minimum Quantity Orders will provide market participants, including institutional firms who ultimately represent individual retail investors in many cases, with better control over their orders, thereby providing them 23 See Exchange Rule 11.9(c)(1). U.S.C. 78f(b). 25 15 U.S.C. 78f(b)(5). 26 See supra note 5. 24 15 VerDate Sep<11>2014 17:26 Oct 06, 2017 Jkt 244001 with greater potential to improve the quality of their order executions. Currently, the rule allows Users to designate a minimum acceptable quantity on an order that may aggregate multiple executions to meet the minimum quantity requirement. Once posted to the book, however, the minimum quantity requirement is equivalent to a minimum execution size requirement. The Exchange is now proposing to provide Users with control over the execution of their Minimum Quantity Orders by allowing them an option to designate the minimum individual execution size upon entry. The control offered by the proposed change is consistent with the various types of control currently provided by exchange order types. For example, the Exchange and other exchanges offer limit orders, which allow a market participant control over the price it will pay or receive for a stock.27 Similarly, exchanges offer order types that allow market participants to structure their trading activity in a manner that is more likely to avoid certain transaction cost related economic outcomes.28 As discussed above, the functionality proposed herein would enable Users to avoid transacting with smaller orders that they believe ultimately increases the cost of the transaction. Because the Exchange does not have this functionality, market participants, such as large institutions that transact a large number of orders on behalf of retail investors, have avoided sending large orders to the Exchange to avoid potentially more expensive transactions.29 In this regard, the Exchange notes that the proposed new optional functionality may improve the Exchange’s market by attracting more order flow. Such new order flow will further enhance the depth and liquidity on the Exchange, which supports just and equitable principals of trade. Furthermore, the proposed modification to Minimum Quantity Orders is consistent with providing market participants with greater control over the nature of their executions so that they may achieve their trading goals and improve the quality of their executions. Moreover, the proposed optional functionality for Minimum Quantity Orders is also substantially similar to that offered by Nasdaq and IEX, both of 27 See Exchange Rule 11.9(a)(1). example, the BYX Post Only Order. See Exchange Rule 11.9(c)(6). 29 As noted, the proposal is designed to attract liquidity to the Exchange by allowing market participants to designate a minimum size of a contra-side order to interact with, thus providing them with functionality available to them on dark markets. 28 For PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 which have been recently approved by the Commission.30 The Exchange also believes that repricing incoming Minimum Quantity Orders where they may cross an order posted on the BYX Book promotes just and equitable principles of trade because it enables the Exchange to avoid an internally crossed book. The proposed re-pricing is identical to how EDGX reprices orders with a Minimum Quantity instruction 31 and is similar to how BYX reprices non-displayed orders that cross an external market.32 In addition, both IEX and Nasdaq also reprice minimum quantity orders to avoid an internally crossed book. In certain circumstances, Nasdaq re-prices buy (sell) orders to one minimum price increment below (above) the lowest (highest) price of such orders.33 IEX reprices non-displayed orders, such as minimum quantity orders, that include a limit price more aggressive than the midpoint of the NBBO to the midpoint of the NBBO.34 In addition, the additional proposed changes to the description of Minimum Quantity Orders would better align Exchange rules and system functionality with identical functionality and rules on its affiliate, EDGX. Consistent descriptions of identical functionality between the Exchange and EDGX will reduce complexity and avoid potential investor confusion. The proposed rule changes do not propose to implement new or unique functionality that has not been previously filed with the Commission or is not available on EDGX. The Exchange notes that the proposed rule text is based on applicable BYX rules; the proposed language of the Exchange’s Rules differs only to extent necessary to conform to existing Exchange rule text or to account for details or descriptions included in the Exchange’s Rules. Clarification to Exchange Rule 11.9(e)(3) The Exchange believes the proposed amendments to paragraph (e)(3) of Rule 30 See Nasdaq Rule 4703(e) (defining Minimum Quantity). See also Securities Exchange Act Release No. 73959 (December 30, 2014), 80 FR 582 (January 6, 2015) (order approving new optional functionality for Minimum Quantity Orders). See IEX Rule 11.190(b)(11) and Supplementary Material .03 (defining Minimum Quantity Orders and MinExec with Cancel Remaining and MinExec with AON Remaining). See also Securities Exchange Act Release No. 78101 (June 17, 2016), 81 FR 41141 (June 23, 2016) (order approving the IEX exchange application, which included IEX’s Minimum Quantity Orders). See also IEX Rule 11.190(d)(3) (allowing the minimum quantity size of an order to be changed via a replace message). 31 See supra note 5. 32 See BYX Rule 11.9(g)(4). 33 See Nasdaq Rule 4703(e). 34 See IEX Rule 11.190(h)(2). E:\FR\FM\10OCN1.SGM 10OCN1 47051 Federal Register / Vol. 82, No. 194 / Tuesday, October 10, 2017 / Notices 11.9 are also consistent with the Act in that they will provide additional specificity to the rules. In particular, the amendments to paragraph (e)(3) of Rule 11.10 [sic] will ensure the rule uses terminology consistent with the description of Replace messages and their impact on an order’s priority under Exchange Rule 11.12(a)(4). Also, the Exchange notes that the proposed change would harmonize the description of Replace messages under Exchange Rule 11.9(e)(3) with EDGX Rule 11.10(e)(3). B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. On the contrary, the Exchange believes the proposed rule change promotes competition because it will enable the Exchange to offer functionality substantially similar to that offered by Nasdaq and IEX.35 In addition, the proposed amendments to paragraph (e)(3) of Rule 11.10 [sic] would not have any impact on competition as they simply provide additional details to the rule and do not alter current System functionality. Therefore, the Exchange does not believe the proposed rule change will result in any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. sradovich on DSK3GMQ082PROD with NOTICES 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 36 and paragraph (f)(6) of Rule 19b– 4 thereunder.37 As required by Rule 19b–4(f)(6)(iii), the Exchange has given the Commission written notice of its intent to file the proposed rule change, 35 See supra note 30. U.S.C. 78s(b)(3)(A). 37 17 CFR 240.19b–4. 36 15 VerDate Sep<11>2014 17:26 Oct 06, 2017 Jkt 244001 along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (1) Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BatsBYX–2017–24 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–2017–24. 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 the PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 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–2017–24, and should be submitted on or before October 31, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.38 Robert W. Errett, Deputy Secretary. [FR Doc. 2017–21673 Filed 10–6–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81803; File No. SR–ISE– 2017–85] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Remove Obsolete Text From Options Regulatory Fee Rule October 3, 2017. 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 September 25, 2017, Nasdaq ISE, 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. 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 remove obsolete rule text from the Schedule of Fees at Chapter VII, Section C, entitled ‘‘Options Regulatory Fee.’’ The text of the proposed rule change is set forth below. Proposed deletions are enclosed in [brackets]. * * * * * Nasdaq ISE Schedule of Fees * * * 38 17 * CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\10OCN1.SGM 10OCN1 *

Agencies

[Federal Register Volume 82, Number 194 (Tuesday, October 10, 2017)]
[Notices]
[Pages 47047-47051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21673]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81806; File No. SR-BatsBYX-2017-24]


Self-Regulatory Organizations; Bats BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
11.9, Orders and Modifiers, To Add New Optional Functionality to 
Minimum Quantity Orders

October 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 September 26, 2017, Bats BYX Exchange, Inc. (``Exchange'' or 
``BYX'') 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) 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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to add new optional functionality to 
Minimum Quantity Orders by amending paragraph (c)(5) of Exchange Rule 
11.9, Orders and Modifiers. The Exchange also proposes to amend 
paragraph (e)(3) of Exchange Rule 11.9 to make certain clarifying, non-
substantive changes. The proposed amendments are identical changes its 
affiliate, Bats EDGX Exchange, Inc. (``EDGX''), recently filed with and 
were published by the Commission for immediate effectiveness.\5\ The 
Exchange

[[Page 47048]]

also proposes to add language to the description of Minimum Quantity 
Orders to further describe their current operation on BYX and to 
harmonize the rule with that of EDGX.\6\
---------------------------------------------------------------------------

    \5\ See EDGX Rules 11.6(h), 11.8(b)(3), and 11.10(e)(3). See 
also Securities Exchange Act Release No. 81457 (August 22, 2017), 82 
FR 40812 (August 28, 2017) (SR-BatsEDGX-2017-34).
    \6\ See EDGX Rule 11.9(h) (describing the operation of the 
Minimum Execution Quantity order instructions, which is functionally 
identical to the BYX Minimum Quantity Order).
---------------------------------------------------------------------------

    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 proposes to add new optional functionality to Minimum 
Quantity Orders by amending paragraph (c)(5) of Exchange Rule 11.9, 
Orders and Modifiers. The Exchange also proposes to amend paragraph 
(e)(3) of Exchange Rule 11.9 to make certain clarifying, non-
substantive changes. The proposed amendments are identical to changes 
recently filed by Exchange's affiliate EDGX and were published by the 
Commission for immediate effectiveness.\7\ The Exchange also proposes 
to add language to the description of Minimum Quantity Orders to 
further describe their current operation on BYX and to harmonize the 
rule with that of EDGX.\8\ The Exchange does not propose to implement 
new or unique functionality that has not been previously filed with the 
Commission or is not available on EDGX. The Exchange notes that the 
proposed rule text is based on BYX rules and is different only to the 
extent necessary to conform to the Exchange's current rules. Each of 
these changes are described in detail below.
---------------------------------------------------------------------------

    \7\ See supra note 5.
    \8\ See EDGX Rule 11.9(h) (describing the operation of the 
Minimum Execution Quantity order instructions, which is functionally 
identical to the BYX Minimum Quantity Order).
---------------------------------------------------------------------------

Exchange Rule 11.9(c)(5), Proposed Individual Minimum Size and 
Harmonization With EDGX Rule 11.6(h)
    A Minimum Quantity Order enables a User \9\ to specify a minimum 
share amount at which the order will execute. A Minimum Quantity Order 
will not execute unless the volume of contra-side liquidity available 
to execute against the order meets or exceeds the designated minimum. 
Specifically, a Minimum Quantity Order is a limit order to buy or sell 
that will only execute if a specified minimum quantity of shares can be 
obtained. Orders with a specified minimum quantity will only execute 
against multiple, aggregated orders if such executions would occur 
simultaneously.\10\ The Exchange will only honor a specified minimum 
quantity on BYX Only Orders \11\ that are non-displayed or Immediate-
or-Cancel (``IOC'') Orders \12\ and will disregard a minimum quantity 
on any other order.
---------------------------------------------------------------------------

    \9\ The term ``User'' is defined as ``any Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3.'' See Exchange Rule 1.5(cc).
    \10\ Today, the System will aggregate multiple resting orders to 
satisfy the incoming order's minimum quantity and a User cannot 
elect for the incoming order to execute against a single resting 
contra-side order.
    \11\ See Exchange Rule 11.9(c)(4).
    \12\ See Exchange Rule 11.9(b)(1).
---------------------------------------------------------------------------

    First, the Exchange proposes to add new optional functionality that 
would enhance the utility of Minimum Quantity Orders by amending 
paragraph (c)(5) of Exchange Rule 11.9. In sum, the proposal would 
permit an incoming Minimum Quantity Order to forego executions where 
multiple resting orders could otherwise be aggregated to satisfy the 
order's minimum quantity.
    The Exchange has observed that some market participants avoid 
sending large Minimum Quantity Orders to the Exchange out of concern 
that such orders may interact with small orders entered by professional 
traders, possibly adversely impacting the execution of their larger 
order. Institutional orders are often much larger in size than the 
average order in the marketplace. To facilitate the liquidation or 
acquisition of a large position, market participants tend to submit 
multiple orders into the market that may only represent a fraction of 
the overall institutional position to be executed. Various strategies 
used by institutional market participants to execute large orders are 
intended to limit price movement of the security at issue. Executing in 
small sizes, even if in the aggregate it meets the order's minimum 
quantity, may impact the market for that security such that the 
additional orders the market participant has yet to enter into the 
market may be more costly to execute. If an institution is able to 
execute in larger sizes, the contra-party to the execution is less 
likely to be a participant that reacts to short term changes in the 
stock price, and as such, the price impact to the stock may be less 
acute when larger individual executions are obtained.\13\ As a result, 
these orders are often executed away from the Exchange in dark pools or 
other exchanges that offer the same functionality as proposed 
herein,\14\ or via broker-dealer internalization.
---------------------------------------------------------------------------

    \13\ The Commission has long recognized this concern: 
``[a]nother type of implicit transaction cost reflected in the price 
of a security is short-term price volatility caused by temporary 
imbalances in trading interest. For example, a significant implicit 
cost for large investors (who often represent the consolidated 
investments of many individuals) is the price impact that their 
large trades can have on the market. Indeed, disclosure of these 
large orders can reduce the likelihood of their being filled.'' See 
Securities Exchange Act Release No. 42450 (February 23, 2000), 65 FR 
10577, 10581 (February 28, 2000) (SR-NYSE-99-48).
    \14\ See supra note 5.
---------------------------------------------------------------------------

    To attract larger Minimum Quantity Orders, the Exchange proposes to 
add new optional functionality that would enhance the utility of 
Minimum Quantity Orders. In sum, the proposal would permit a User to 
elect that its incoming Minimum Quantity Order execute solely against 
one or more resting individual orders, each of which must satisfy the 
order's minimum quantity condition. In such case, the order would 
forego executions where multiple resting orders could otherwise be 
aggregated to satisfy the order's minimum quantity, but do not 
individually satisfy the minimum quantity condition.\15\ As discussed 
above, under the current rule a Minimum Quantity Order will execute 
upon entry against any number of smaller contra-side orders that, in 
aggregate, meet the minimum quantity set by the User. This default 
behavior will remain. For example, assume there are two orders to sell 
resting on the BYX Book \16\--the first for 300 shares and a second for 
400 shares, with the 300 share order having time priority ahead of the 
400 share order. If a User entered a Minimum Quantity Order to buy 
1,000 shares at $10.00 with a minimum quantity of 500 shares, and the 
order was marketable against the two resting sell orders for 300 and 
400 shares, the

[[Page 47049]]

System \17\ would aggregate both sell orders for purposes of meeting 
the minimum quantity, thus resulting in executions of 300 shares and 
then 400 shares respectively with the remaining 300 shares of the 
Minimum Quantity Order being posted to the BYX Book with a minimum 
quantity restriction of 300 shares.
---------------------------------------------------------------------------

    \15\ If no election is made, the System will aggregate multiple 
resting orders to satisfy the incoming order's minimum quantity.
    \16\ The term ``BYX Book'' is defined as ``the System's 
electronic file of orders.'' See Exchange Rule 1.5(e).
    \17\ The term ``System'' is defined as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away. See Exchange Rule 
1.5(aa).
---------------------------------------------------------------------------

    The proposed new optional functionality will not allow aggregation 
of smaller executions to satisfy the minimum quantity of an incoming 
Minimum Quantity Order. Using the same scenario as above, but with the 
proposed new functionality and a minimum quantity requirement of 400 
shares selected by the User, the Minimum Quantity Order would not 
execute against the two sell orders because the 300 share order with 
time priority at the top of the BYX Book is less than the incoming 
order's 400 share Minimum Execution Quantity [sic]. The new 
functionality will cause the Minimum Quantity Order to be cancelled or 
posted to the BYX Book, non-displayed, in accordance with the 
characteristics of the underlying order type \18\ when encountering an 
order with time priority that is of insufficient size to satisfy the 
minimum execution requirement. If posted, the Minimum Quantity Order 
will operate as it does currently and will only execute against 
individual orders that satisfy its minimum quantity as proposed herein. 
The Exchange notes that the User entering the Minimum Quantity Order 
has expressed its intention not to execute against liquidity below a 
certain minimum size, and therefore, cedes execution priority when it 
would lock an order against which it would otherwise execute if it were 
not for the minimum execution size restriction. The Exchange proposes 
to add language to paragraph (c)(5) of Rule 11.9 to make clear that the 
order would cede execution priority in such in [sic] scenario.
---------------------------------------------------------------------------

    \18\ See supra notes 11 and 12 for a description of the 
functionality associated with orders that may also be Minimum 
Quantity Orders.
---------------------------------------------------------------------------

    As amended, the description of a Minimum Quantity Order under 
paragraph (c)(5) of Exchange Rule 11.9 would set forth the default 
behavior of Minimum Quantity Orders that execute upon entry against a 
single order or multiple aggregated orders simultaneously. Amended Rule 
11.9(c)(5) would set forth the proposed optional functionality where a 
User may alternatively specify that the incoming order's minimum 
quantity condition be satisfied by each order resting on the BYX Book 
that would execute against the order with the minimum quantity 
condition. If there are such orders, but there are also orders that do 
not satisfy the minimum quantity condition, the incoming Minimum 
Quantity Order will execute against orders resting on the BYX Book in 
accordance with Rule 11.12, Priority of Orders, until it reaches an 
order that does not satisfy the minimum quantity condition at which 
point it would be posted to the BYX Book or cancelled in accordance 
with the terms of the order. If, upon entry, there are no orders that 
satisfy the minimum quantity condition resting on the BYX Book, the 
order will either be posted to the BYX Book or cancelled in accordance 
with the terms of the order.
    The Exchange also proposes to re-price incoming Minimum Quantity 
Orders where that order may cross an order posted on the BYX Book. 
Specifically, where there is insufficient size to satisfy an incoming 
order's minimum quantity condition and that incoming order, if posted 
at its limit price, would cross an order(s) resting on the BYX Book, 
the order with the minimum quantity condition will be re-priced to and 
ranked at the locking price. For example, an order to buy at $11.00 
with a minimum quantity condition of 500 shares is entered and there is 
an order resting on the BYX Book to sell 200 shares at $10.99. The 
resting order to sell does not contain sufficient size to satisfy the 
incoming order's minimum quantity condition of 500 shares. The price of 
the incoming buy order, if posted to the BYX Book, would cross the 
price of the resting sell order. In such case, to avoid an internally 
crossed book, the System will re-price the incoming buy order to 
$10.99, the locking price. This behavior is similar to how the Exchange 
currently reprices non-displayed orders that cross the Protected 
Quotation of an external market.\19\ In addition, both the Investors 
Exchange, Inc. (``IEX'') and the Nasdaq Stock Market LLC (``Nasdaq'') 
also re-price similar orders to avoid an internally crossed book.\20\
---------------------------------------------------------------------------

    \19\ See Exchange Rule 11.9(g)(4).
    \20\ See Nasdaq Rule 4703(e). See IEX Rule 11.190(h)(2).
---------------------------------------------------------------------------

    Second, the Exchange proposes to add language to the description of 
Minimum Quantity Orders to further describe their current operation on 
BZX and to harmonize the rule with that of its affiliate, EDGX, as 
described in EDGX Rule 11.6(h).\21\ The Exchange does not propose to 
implement new or unique functionality that has not been previously 
filed with the Commission or is not available on EDGX. The Exchange 
notes that the proposed rule text is based on BYX rules and is 
different only to the extent necessary to conform to the Exchange's 
current rules. The Exchange notes that, but for the proposed changes 
discussed above, the current operation of Minimum Quantity Orders on 
the Exchange and the Minimum Execution Quantity instruction on EDGX is 
identical.
---------------------------------------------------------------------------

    \21\ See EDGX Rule 11.9(h) describing the operation of the 
Minimum Execution Quantity order instructions, which is functionally 
identical to the BYX Minimum Quantity Order.
---------------------------------------------------------------------------

    The Exchange, therefore, proposes to amend the description of the 
Minimum Execution Quantity [sic] instruction to clarify its operation 
upon order entry and when the order is posted to the BYX Book. The 
Exchange proposes to clarify that upon entry, and by default, an order 
with a Minimum Execution Quantity [sic] will execute against a single 
order or multiple aggregated orders simultaneously. A User may also 
specify that the order only against [sic] orders that individually 
satisfy the order's minimum quantity condition, as proposed herein. 
Once posted to the BYX Book,\22\ the order may only execute against 
individual incoming orders with a size that satisfies the minimum 
quantity condition. Any shares remaining after a partial execution will 
continue to be executed at a size that is equal to or exceeds the 
quantity provided in the instruction. Where the number of shares 
remaining after a partial execution are [sic] less than the quantity 
provided in the order, the Minimum Quantity Order shall be equal to the 
number of shares remaining. The Exchange also proposed to clarify that 
a Minimum Quantity Order is not eligible to be routed to another 
Trading Center in accordance with Exchange Rule 11.13, Order Execution 
and Routing. These proposed changes would provide additional 
specificity to the operation of Minimum Quantity Orders and would 
harmonize the rule with the description of the Minimum Execution 
Quantity instruction under EDX [sic] Rule 11.6(h).
---------------------------------------------------------------------------

    \22\ Orders will only post to the BYX Book if they are 
designated with a TIF instruction that allows for posting. For 
example, an order with a TIF of IOC or FOK will never post to the 
BYX Book.
---------------------------------------------------------------------------

Exchange Rule 11.9(e)(3), Replace Messages
    The Exchange also proposes to amend paragraph (e)(3) of Rule 11.9 
to make certain clarifying, non-substantive

[[Page 47050]]

changes. The proposed change would harmonize the description of Replace 
messages under Exchange Rule 11.9(e)(3) with EDGX Rule 11.10(e)(3). 
Exchange Rule 11.9(e)(3) currently states that other than changing a 
limit order to a market order, only the price, stop price, the sell 
long or sell short indicator, Max Floor \23\ of a Reserve Order [sic], 
and quantity terms of the order may be changed with a Replace message. 
If a User desires to change any other terms of an existing order, the 
existing order must be cancelled and a new order must be entered. As 
amended, paragraph (e)(3) of Rule 11.9 would specify that the Max Floor 
is associated with a Reserve Order and to replace the phrase ``and 
quantity terms'' with the word ``size''. The Exchange believes these 
changes will provide additional specificity to the rule and ensure the 
rule uses terminology consistent with the description of Replace 
messages and their impact on an order's priority under Exchange Rule 
11.12(a)(4).
---------------------------------------------------------------------------

    \23\ See Exchange Rule 11.9(c)(1).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \24\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \25\ 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.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Exchange Rule 11.6(h), Proposed Individual Minimum Size
    The proposed rule change would remove impediments to and promote 
just and equitable principles of trade because it would provide Users 
with optional functionality that enhances the use of the Minimum 
Execution Quantity [sic] instruction. These proposed amendments are 
identical to changes recently proposed by EDGX that were published by 
the Commission for immediate effectiveness.\26\ The proposed change to 
the functioning of Minimum Quantity Orders will provide market 
participants, including institutional firms who ultimately represent 
individual retail investors in many cases, with better control over 
their orders, thereby providing them with greater potential to improve 
the quality of their order executions. Currently, the rule allows Users 
to designate a minimum acceptable quantity on an order that may 
aggregate multiple executions to meet the minimum quantity requirement. 
Once posted to the book, however, the minimum quantity requirement is 
equivalent to a minimum execution size requirement. The Exchange is now 
proposing to provide Users with control over the execution of their 
Minimum Quantity Orders by allowing them an option to designate the 
minimum individual execution size upon entry. The control offered by 
the proposed change is consistent with the various types of control 
currently provided by exchange order types. For example, the Exchange 
and other exchanges offer limit orders, which allow a market 
participant control over the price it will pay or receive for a 
stock.\27\ Similarly, exchanges offer order types that allow market 
participants to structure their trading activity in a manner that is 
more likely to avoid certain transaction cost related economic 
outcomes.\28\
---------------------------------------------------------------------------

    \26\ See supra note 5.
    \27\ See Exchange Rule 11.9(a)(1).
    \28\ For example, the BYX Post Only Order. See Exchange Rule 
11.9(c)(6).
---------------------------------------------------------------------------

    As discussed above, the functionality proposed herein would enable 
Users to avoid transacting with smaller orders that they believe 
ultimately increases the cost of the transaction. Because the Exchange 
does not have this functionality, market participants, such as large 
institutions that transact a large number of orders on behalf of retail 
investors, have avoided sending large orders to the Exchange to avoid 
potentially more expensive transactions.\29\ In this regard, the 
Exchange notes that the proposed new optional functionality may improve 
the Exchange's market by attracting more order flow. Such new order 
flow will further enhance the depth and liquidity on the Exchange, 
which supports just and equitable principals of trade. Furthermore, the 
proposed modification to Minimum Quantity Orders is consistent with 
providing market participants with greater control over the nature of 
their executions so that they may achieve their trading goals and 
improve the quality of their executions. Moreover, the proposed 
optional functionality for Minimum Quantity Orders is also 
substantially similar to that offered by Nasdaq and IEX, both of which 
have been recently approved by the Commission.\30\
---------------------------------------------------------------------------

    \29\ As noted, the proposal is designed to attract liquidity to 
the Exchange by allowing market participants to designate a minimum 
size of a contra-side order to interact with, thus providing them 
with functionality available to them on dark markets.
    \30\ See Nasdaq Rule 4703(e) (defining Minimum Quantity). See 
also Securities Exchange Act Release No. 73959 (December 30, 2014), 
80 FR 582 (January 6, 2015) (order approving new optional 
functionality for Minimum Quantity Orders). See IEX Rule 
11.190(b)(11) and Supplementary Material .03 (defining Minimum 
Quantity Orders and MinExec with Cancel Remaining and MinExec with 
AON Remaining). See also Securities Exchange Act Release No. 78101 
(June 17, 2016), 81 FR 41141 (June 23, 2016) (order approving the 
IEX exchange application, which included IEX's Minimum Quantity 
Orders). See also IEX Rule 11.190(d)(3) (allowing the minimum 
quantity size of an order to be changed via a replace message).
---------------------------------------------------------------------------

    The Exchange also believes that re-pricing incoming Minimum 
Quantity Orders where they may cross an order posted on the BYX Book 
promotes just and equitable principles of trade because it enables the 
Exchange to avoid an internally crossed book. The proposed re-pricing 
is identical to how EDGX reprices orders with a Minimum Quantity 
instruction \31\ and is similar to how BYX reprices non-displayed 
orders that cross an external market.\32\ In addition, both IEX and 
Nasdaq also re-price minimum quantity orders to avoid an internally 
crossed book. In certain circumstances, Nasdaq re-prices buy (sell) 
orders to one minimum price increment below (above) the lowest 
(highest) price of such orders.\33\ IEX re-prices non-displayed orders, 
such as minimum quantity orders, that include a limit price more 
aggressive than the midpoint of the NBBO to the midpoint of the 
NBBO.\34\
---------------------------------------------------------------------------

    \31\ See supra note 5.
    \32\ See BYX Rule 11.9(g)(4).
    \33\ See Nasdaq Rule 4703(e).
    \34\ See IEX Rule 11.190(h)(2).
---------------------------------------------------------------------------

    In addition, the additional proposed changes to the description of 
Minimum Quantity Orders would better align Exchange rules and system 
functionality with identical functionality and rules on its affiliate, 
EDGX. Consistent descriptions of identical functionality between the 
Exchange and EDGX will reduce complexity and avoid potential investor 
confusion. The proposed rule changes do not propose to implement new or 
unique functionality that has not been previously filed with the 
Commission or is not available on EDGX. The Exchange notes that the 
proposed rule text is based on applicable BYX rules; the proposed 
language of the Exchange's Rules differs only to extent necessary to 
conform to existing Exchange rule text or to account for details or 
descriptions included in the Exchange's Rules.
Clarification to Exchange Rule 11.9(e)(3)
    The Exchange believes the proposed amendments to paragraph (e)(3) 
of Rule

[[Page 47051]]

11.9 are also consistent with the Act in that they will provide 
additional specificity to the rules. In particular, the amendments to 
paragraph (e)(3) of Rule 11.10 [sic] will ensure the rule uses 
terminology consistent with the description of Replace messages and 
their impact on an order's priority under Exchange Rule 11.12(a)(4). 
Also, the Exchange notes that the proposed change would harmonize the 
description of Replace messages under Exchange Rule 11.9(e)(3) with 
EDGX Rule 11.10(e)(3).

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. On 
the contrary, the Exchange believes the proposed rule change promotes 
competition because it will enable the Exchange to offer functionality 
substantially similar to that offered by Nasdaq and IEX.\35\ In 
addition, the proposed amendments to paragraph (e)(3) of Rule 11.10 
[sic] would not have any impact on competition as they simply provide 
additional details to the rule and do not alter current System 
functionality. Therefore, the Exchange does not believe the proposed 
rule change will result in any burden on intermarket competition that 
is not necessary or appropriate in furtherance of the purposes of the 
Act.
---------------------------------------------------------------------------

    \35\ See supra note 30.
---------------------------------------------------------------------------

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 \36\ and 
paragraph (f)(6) of Rule 19b-4 thereunder.\37\ As required by Rule 19b-
4(f)(6)(iii), 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.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(3)(A).
    \37\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (1) 
Necessary or appropriate in the public interest; (2) for the protection 
of investors; or (3) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BatsBYX-2017-24 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-2017-24. 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 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-2017-24, and should 
be submitted on or before October 31, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
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    \38\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-21673 Filed 10-6-17; 8:45 am]
BILLING CODE 8011-01-P