Self-Regulatory Organizations; Bats BZX 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, 47065-47069 [2017-21674]
Download as PDF
Federal Register / Vol. 82, No. 194 / Tuesday, October 10, 2017 / Notices
open market and a national market
system, and, in general to protect
investors and the public interest, by
removing obsolete rule text.
The Exchange proposes to remove
outdated references to ORF prior to
August 1, 2017. The Exchange believes
this rule change will provide clarity and
ease of reference when Participants
review the ORF rule.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed change is a non-substantive
amendment to remove obsolete rule
text.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 6 and
subparagraph (f)(6) of Rule 19b–4
thereunder.7
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: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) 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.
sradovich on DSK3GMQ082PROD with NOTICES
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
6 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
7 17
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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:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
Self-Regulatory Organizations; Bats
BZX 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
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2017–040 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BX–2017–040. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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–BX–
2017–040 and should be submitted on
or before October 31, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–21671 Filed 10–6–17; 8:45 am]
BILLING CODE 8011–01–P
8 17
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[Release No. 34–81807; File No. SR–
BatsBZX–2017–62]
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 BZX
Exchange, Inc. (‘‘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)
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
also 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 EDGX.6
The text of the proposed rule change
is available at the Exchange’s Web site
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
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
BZX Minimum Quantity Order).
2 17
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Federal Register / Vol. 82, No. 194 / Tuesday, October 10, 2017 / Notices
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 BZX 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 BZX 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.
sradovich on DSK3GMQ082PROD with NOTICES
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.
7 See
supra note 5.
EDGX Rule 11.9(h) [sic] (describing the
operation of the Minimum Execution Quantity
order instructions, which is functionally identical
to the BZX 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).
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 BZX 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
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
8 See
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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).
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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 BZX
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
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
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 ‘‘BZX 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).
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Order being posted to the BZX 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 BZX 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 BZX 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
optional functionality where a User may
alternatively specify that the incoming
order’s minimum quantity condition be
satisfied by each order resting on the
BZX 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
18 See supra notes 11 and 12 for a description of
the functionality associated with orders that may
also be Minimum Quantity Orders.
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BZX 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 BZX
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 BZX Book, the order will either be
posted to the BZX 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 BZX 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 BZX 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 BZX
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 BZX 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
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 BZX rules and is different only
to the extent necessary to conform to the
Exchange’s current rules. The Exchange
19 See
Exchange Rule 11.9(g)(4).
Nasdaq Rule 4703(e). See IEX Rule
11.190(h)(2).
21 See EDGX Rule 11.9(h) [sic] describing the
operation of the Minimum Execution Quantity
order instructions, which is functionally identical
to the BZX Minimum Quantity Order.
47067
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 BZX
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
BZX 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
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
20 See
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22 Orders will only post to the BZX 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 BZX Book.
23 See Exchange Rule 11.9(c)(1).
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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
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
24 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
26 See supra note 5.
25 15
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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
which have been recently approved by
the Commission.30
27 See
Exchange Rule 11.9(a)(1).
example, the BZX 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.
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)
28 For
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The Exchange also believes that repricing incoming Minimum Quantity
Orders where they may cross an order
posted on the BZX 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 BZX 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 BZX 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
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
(allowing the minimum quantity size of an order to
be changed via a replace message).
31 See supra note 5.
32 See BZX 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
Federal Register / Vol. 82, No. 194 / Tuesday, October 10, 2017 / Notices
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,
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
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
47069
submitted on or before October 31,
2017.
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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
Robert W. Errett,
Deputy Secretary.
IV. Solicitation of Comments
[FR Doc. 2017–21674 Filed 10–6–17; 8:45 am]
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:
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BatsBZX–2017–62 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–BatsBZX–2017–62. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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–
BatsBZX–2017–62, and should be
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #15338 and #15339;
Georgia Disaster Number GA–00101]
Presidential Declaration of a Major
Disaster for Public Assistance Only for
the State of Georgia
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Georgia (FEMA–4338–DR),
dated 09/28/2017.
Incident: Hurricane Irma.
Incident Period: 09/07/2017 through
09/20/2017.
DATES: Issued on 09/28/2017.
Physical Loan Application Deadline
Date: 11/27/2017.
Economic Injury (EIDL) Loan
Application Deadline Date: 06/28/2018.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
President’s major disaster declaration on
09/28/2017, Private Non-Profit
organizations that provide essential
services of a governmental nature may
file disaster loan applications at the
address listed above or other locally
announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Appling, Atkinson,
Bacon, Baker, Baldwin, Banks,
Barrow, Ben Hill, Berrien, Brantley,
Brooks, Bryan, Bulloch, Burke,
Butts, Calhoun, Camden, Candler,
Charlton, Chatham, Clay, Coffee,
Colquitt, Cook, Coweta, Crawford,
SUMMARY:
38 17
E:\FR\FM\10OCN1.SGM
CFR 200.30–3(a)(12).
10OCN1
Agencies
[Federal Register Volume 82, Number 194 (Tuesday, October 10, 2017)]
[Notices]
[Pages 47065-47069]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21674]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81807; File No. SR-BatsBZX-2017-62]
Self-Regulatory Organizations; Bats BZX 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 BZX Exchange, Inc. (``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) 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 also 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 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 BZX Minimum Quantity Order).
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Exchange's
Web site
[[Page 47066]]
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 BZX 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 BZX 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) [sic] (describing the operation of the
Minimum Execution Quantity order instructions, which is functionally
identical to the BZX 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 BZX 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 BZX 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 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
[[Page 47067]]
Order being posted to the BZX 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 ``BZX 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 BZX 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 BZX 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 BZX 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 BZX 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 BZX 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 BZX Book, the
order will either be posted to the BZX 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 BZX 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 BZX 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 BZX 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 BZX 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 BZX 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) [sic] describing the operation of the
Minimum Execution Quantity order instructions, which is functionally
identical to the BZX 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 BZX 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 BZX 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 BZX 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
BZX 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 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
[[Page 47068]]
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 BZX 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).
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The Exchange also believes that re-pricing incoming Minimum
Quantity Orders where they may cross an order posted on the BZX 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 BZX 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\
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\31\ See supra note 5.
\32\ See BZX Rule 11.9(g)(4).
\33\ See Nasdaq Rule 4703(e).
\34\ See IEX Rule 11.190(h)(2).
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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 BZX 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 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
[[Page 47069]]
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.
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\35\ See supra note 30.
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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.
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\36\ 15 U.S.C. 78s(b)(3)(A).
\37\ 17 CFR 240.19b-4.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (1)
Necessary or appropriate in the public interest; (2) for the protection
of investors; or (3) otherwise in furtherance of the purposes of the
Act. If the Commission takes such action, the Commission shall
institute proceedings to determine whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BatsBZX-2017-62 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-BatsBZX-2017-62. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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-BatsBZX-2017-62, 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. 2017-21674 Filed 10-6-17; 8:45 am]
BILLING CODE 8011-01-P