80_FR_15102 80 FR 15048 - Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt Rule 12.14, Front Running of Block Transactions

80 FR 15048 - Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt Rule 12.14, Front Running of Block Transactions

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 54 (March 20, 2015)

Page Range15048-15050
FR Document2015-06362

Federal Register, Volume 80 Issue 54 (Friday, March 20, 2015)
[Federal Register Volume 80, Number 54 (Friday, March 20, 2015)]
[Notices]
[Pages 15048-15050]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-06362]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74514; File No. SR-BYX-2015-13]


Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt 
Rule 12.14, Front Running of Block Transactions

March 16, 2015.
    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 March 3, 2015, BATS Y-Exchange, Inc. (the ``Exchange'' or 
``BYX'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I and II 
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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to adopt new Rule 12.14, Front 
Running of Block Transactions, to conform with the rules of the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') for purposes 
of an agreement between the Exchange and FINRA pursuant to Rule 17d-2 
under the Act.\3\ The proposed rule change is identical to proposed 
rule changes submitted by the EDGX Exchange, Inc. (``EDGX'') and the 
EDGA Exchange, Inc. (``EDGA'') that were published by the 
Commission.\4\
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    \3\ 17 CFR 240.17d-2.
    \4\ See Securities Exchange Act Release Nos. 70625 (October 8, 
2013), 78 FR 62842 (October 22, 2013) (SR-EDGA-2013-29) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to Amend 
EDGA Rules 3.22, 13.3, and Adopt Rule 12.14, Front Running of Block 
Transactions to Conform With the Rules of Other Self-Regulatory 
Organizations); and 70626 (October 8, 2013), 78 FR 62855 (October 
22, 2013) (SR-EDGX-2013-36) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change to Amend EDGA [sic] Rules 
3.22, 13.3, and Adopt Rule 12.14, Front Running of Block 
Transactions to Conform With the Rules of Other Self-Regulatory 
Organizations).
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.batstrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to adopt new Rule 12.14, Front Running of 
Block Transactions, which would require that Members and persons 
associated with a Member shall comply with FINRA Rule 5270 as if such 
Rule were part of the Exchange's Rules.\5\ FINRA Rule 5270 states that 
no FINRA member or person associated with a member shall cause to be 
executed an order to buy or sell a security or a related financial 
instrument \6\ when such member or person associated with a member has 
material, non-public market information concerning an imminent block 
transaction \7\ in that security, a related financial instrument or a 
security

[[Page 15049]]

underlying the related financial instrument.
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    \5\ The proposed rule text is substantially the same as IM-2110-
3 of the Nasdaq Stock Market LLC (``Nasdaq''), which has been 
approved by the Commission. See Securities Exchange Act Release No. 
53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (order 
approving Nasdaq's application for registration as a national 
securities exchange). See also Securities Exchange Act Release No. 
58069 (June 30, 2008), 73 FR 39360 (July 9, 2008) (SR-Nasdaq-2008-
054) (Notice of Filing and Immediate Effectiveness). Securities 
Exchange Act Release No. 34-67774 (September 4, 2012), 77 FR 55519 
(September 12 [sic], 2012) (Approval Order). See also supra note 4.
    \6\ FINRA Rule 5270 defines the term ``related financial 
instrument'' as ``any option, derivative, security-based swap, or 
other financial instrument overlying a security, the value of which 
is materially related to, or otherwise acts as a substitute for, 
such security, as well as any contract that is the functional 
economic equivalent of a position in such security.''
    \7\ Under FINRA Rule 5270, a transaction involving 10,000 shares 
or more of a security, an underlying security, or a related 
financial instrument overlying such number of shares, is generally 
deemed to be a block transaction, although a transaction of fewer 
than 10,000 shares could be considered a block transaction. A block 
transaction that has been agreed upon does not lose its identity as 
such by arranging for partial executions of the full transaction in 
portions which themselves are not of block size if the execution of 
the full transaction may have a material impact on the market.
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    FINRA Rule 5270 includes exceptions to the general prohibitions of 
the rule where a member can demonstrate that a transaction is unrelated 
to the material, non-public market information received in connection 
with the customer order. The Supplementary Material to FINRA Rule 5270 
includes an illustrative list of potentially permitted transactions as 
examples of transactions that, depending upon the circumstances, may be 
unrelated to the customer block order. These types of transactions may 
include: Where the member has information barriers established to 
prevent internal disclosure of such information; actions [sic] in the 
same security related to a prior customer order in that security; 
transactions to correct bona fide errors; or transactions to offset 
odd-lot orders.
    In addition, Rule 5270 does not preclude transactions undertaken 
for the purpose of fulfilling, or facilitating the execution of, the 
customer block order. However, when engaging in trading activity that 
could affect the market for the security that is the subject of the 
customer block order, the member must minimize any potential 
disadvantage or harm in the execution of the customer's order, must not 
place the member's financial interests ahead of those of its customer, 
and must obtain the customer's consent to such trading activity. A 
member may obtain its customers' consent through affirmative written 
consent or through the use of a negative consent letter. The negative 
consent letter must clearly disclose to the customer the terms and 
conditions for handling the customer's orders; if the customer does not 
object, then the member may reasonably conclude that the customer has 
consented and the member may rely on such letter for all or a portion 
of the customer's orders. In addition, a member may provide clear and 
comprehensive oral disclosure to and obtain consent from the customer 
on an order-by-order basis, provided that the member documents who 
provided such consent and such consent evidences the customer's 
understanding of the terms and conditions for handling the customer's 
order.
    The Exchange also proposes to state in new Rule 12.14 that although 
the prohibitions in Rule 5270 are limited to imminent block 
transactions, the front running of other types of orders that place the 
financial interests of the Member or persons associated with a Member 
ahead of those of its customer or the misuse of knowledge of an 
imminent customer order may violate other Exchange rules, including 
Rule 3.1 and Rule 12.6, or provisions of the federal securities laws.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\8\ which requires, among other things, 
that the Exchange's rules be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. By incorporating FINRA Rule 5270, 
new Rule 12.14 prohibits front running trading activity that the 
Exchange believes is inconsistent with just and equitable principles of 
trade while also ensuring that Members may continue to engage in 
transactions that do not present the risk of abusive trading practices 
that the rule is intended to prevent. The Exchange believes that Rule 
12.14 would enhance the protection of customer orders by addressing 
various types of abusive trading that may be intended to take advantage 
of customer orders. As previously noted, the proposed rule text is 
substantially similar to Nasdaq's IM-2110-3, which has been approved by 
the Commission,\9\ as well as EDGA Rule 12.14 and EDGX Rule 12.14, 
which have been previously published by the Commission.\10\ By adopting 
Rule 12.14, the Exchange believes that imminent customer block orders 
would be better protected and that the proposed rule change will 
prevent fraudulent and manipulative acts and practices, promote just 
and equitable principles of trade, and better protect investors and the 
public interest.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b)(5).
    \9\ See Securities Exchange Act Release No. 53128 (January 13, 
2006), 71 FR 3550 (January 23, 2006) (order approving Nasdaq's 
application for registration as a national securities exchange). See 
also Securities Exchange Act Release No. 58069 (June 30, 2008), 73 
FR 39360 (July 9, 2008) (SR-Nasdaq-2008-054) (Notice of Filing and 
Immediate Effectiveness). Securities Exchange Act Release No. 34-
67774 (September 4, 2012), 77 FR 55519 (September 12, 2012) 
(Approval Order).
    \10\ See supra note 4.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issues but rather is designed 
to enable the Exchange to better protect imminent customer block 
orders, as well as to provide greater harmonization among Exchange and 
FINRA rules, resulting in less burdensome and more efficient regulatory 
compliance for common members.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately upon filing. The Exchange 
argues that waiver of the operative delay would enable it to enhance 
its rules protecting customer orders in a timely manner by explicitly 
prohibiting Members from trading ahead of block

[[Page 15050]]

transaction in violation of proposed Rule 12.14 during what would be 
the operative delay period.\17\ The Exchange also represents that 
waiver of the operative delay would allow it to promptly incorporate 
Rule 12.14 into the 17d-2 Agreement, further reducing duplicative 
regulation of Exchange Members that are also members of FINRA. In 
addition, the Exchange states that waiving the operative delay would 
provide greater harmonization among Exchange, EDGA, EDGX, and FINRA 
rules, resulting in less burdensome and more efficient regulatory 
compliance for Members and facilitating FINRA's performance of its 
regulatory functions under the 17d-2 Agreement in a timelier manner. 
Based on the foregoing, the Commission believes that waiver of the 
operative delay is consistent with the protection of investors and the 
public interest. Accordingly, the Commission hereby waives the 30-day 
operative delay and designates the proposal operative upon filing.\18\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ The Exchange also represents that it has already informed 
its Members that it will implement the proposed rule change on March 
23, 2015, a date that was determined based upon the effective date 
of a prior version of this filing. See BZX and BYX Regulatory 
Circular 15-003, Front Running of Block Transactions, dated February 
24, 2015.
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BYX-2015-13 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-BYX-2015-13. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal offices 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-BYX-2015-13, 
and should be submitted on or before April 10, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Brent J. Fields,
Secretary.
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    \19\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-06362 Filed 3-19-15; 8:45 am]
 BILLING CODE 8011-01-P



                                                  15048                             Federal Register / Vol. 80, No. 54 / Friday, March 20, 2015 / Notices

                                                  Paper Comments                                            SECURITIES AND EXCHANGE                               II. Self-Regulatory Organization’s
                                                                                                            COMMISSION                                            Statement of the Purpose of, and
                                                    • Send paper comments in triplicate                                                                           Statutory Basis for, the Proposed Rule
                                                  to Secretary, Securities and Exchange                                                                           Change
                                                                                                            [Release No. 34–74514; File No. SR–BYX–
                                                  Commission, 100 F Street NE.,
                                                                                                            2015–13]                                                 In its filing with the Commission, the
                                                  Washington, DC 20549–1090.
                                                                                                                                                                  Exchange included statements
                                                  All submissions should refer to File                      Self-Regulatory Organizations; BATS                   concerning the purpose of and basis for
                                                  Number SR–BATS–2015–16. This file                         Y-Exchange, Inc.; Notice of Filing and                the proposed rule change and discussed
                                                  number should be included on the                          Immediate Effectiveness of a Proposed                 any comments it received on the
                                                  subject line if email is used. To help the                Rule Change To Adopt Rule 12.14,                      proposed rule change. The text of these
                                                  Commission process and review your                        Front Running of Block Transactions                   statements may be examined at the
                                                  comments more efficiently, please use                                                                           places specified in Item IV below. The
                                                                                                            March 16, 2015.                                       Exchange has prepared summaries, set
                                                  only one method. The Commission will
                                                  post all comments on the Commission’s                        Pursuant to Section 19(b)(1) of the                forth in Sections A, B, and C below, of
                                                  Internet Web site (http://www.sec.gov/                    Securities Exchange Act of 1934 (the                  the most significant parts of such
                                                  rules/sro.shtml). Copies of the                           ‘‘Act’’),1 and Rule 19b–4 thereunder,2                statements.
                                                  submission, all subsequent                                notice is hereby given that on March 3,               A. Self-Regulatory Organization’s
                                                  amendments, all written statements                        2015, BATS Y-Exchange, Inc. (the                      Statement of the Purpose of, and
                                                  with respect to the proposed rule                         ‘‘Exchange’’ or ‘‘BYX’’) filed with the               Statutory Basis for, the Proposed Rule
                                                  change that are filed with the                            Securities and Exchange Commission                    Change
                                                  Commission, and all written                               (‘‘Commission’’) a proposed rule change
                                                                                                                                                                  1. Purpose
                                                  communications relating to the                            as described in Items I and II below,
                                                  proposed rule change between the                          which Items have been prepared by the                    The Exchange proposes to adopt new
                                                  Commission and any person, other than                     Exchange. The Commission is                           Rule 12.14, Front Running of Block
                                                  those that may be withheld from the                       publishing this notice to solicit                     Transactions, which would require that
                                                                                                            comments on the proposed rule change                  Members and persons associated with a
                                                  public in accordance with the
                                                                                                            from interested persons.                              Member shall comply with FINRA Rule
                                                  provisions of 5 U.S.C. 552, will be
                                                                                                                                                                  5270 as if such Rule were part of the
                                                  available for Web site viewing and                        I. Self-Regulatory Organization’s                     Exchange’s Rules.5 FINRA Rule 5270
                                                  printing in the Commission’s Public                       Statement of the Terms of Substance of                states that no FINRA member or person
                                                  Reference Room, 100 F Street NE.,                         the Proposed Rule Change                              associated with a member shall cause to
                                                  Washington, DC 20549 on official                                                                                be executed an order to buy or sell a
                                                  business days between the hours of                           The Exchange filed a proposal to                   security or a related financial
                                                  10:00 a.m. and 3:00 p.m. Copies of such                   adopt new Rule 12.14, Front Running of                instrument 6 when such member or
                                                  filing also will be available for                         Block Transactions, to conform with the               person associated with a member has
                                                  inspection and copying at the principal                   rules of the Financial Industry                       material, non-public market information
                                                  offices of the Exchange. All comments                     Regulatory Authority, Inc. (‘‘FINRA’’)                concerning an imminent block
                                                  received will be posted without change;                   for purposes of an agreement between                  transaction 7 in that security, a related
                                                  the Commission does not edit personal                     the Exchange and FINRA pursuant to                    financial instrument or a security
                                                  identifying information from                              Rule 17d–2 under the Act.3 The
                                                  submissions. You should submit only                       proposed rule change is identical to                     5 The proposed rule text is substantially the same

                                                  information that you wish to make                                                                               as IM–2110–3 of the Nasdaq Stock Market LLC
                                                                                                            proposed rule changes submitted by the                (‘‘Nasdaq’’), which has been approved by the
                                                  available publicly. All submissions                       EDGX Exchange, Inc. (‘‘EDGX’’) and the                Commission. See Securities Exchange Act Release
                                                  should refer to File Number SR–BATS–                      EDGA Exchange, Inc. (‘‘EDGA’’) that                   No. 53128 (January 13, 2006), 71 FR 3550 (January
                                                  2015–16, and should be submitted on or                    were published by the Commission.4                    23, 2006) (order approving Nasdaq’s application for
                                                                                                                                                                  registration as a national securities exchange). See
                                                  before April 10, 2015.                                       The text of the proposed rule change               also Securities Exchange Act Release No. 58069
                                                    For the Commission, by the Division of                  is available at the Exchange’s Web site               (June 30, 2008), 73 FR 39360 (July 9, 2008) (SR–
                                                                                                                                                                  Nasdaq–2008–054) (Notice of Filing and Immediate
                                                  Trading and Markets, pursuant to delegated                at www.batstrading.com, at the                        Effectiveness). Securities Exchange Act Release No.
                                                  authority.19                                              principal office of the Exchange, and at              34–67774 (September 4, 2012), 77 FR 55519
                                                  Brent J. Fields,                                          the Commission’s Public Reference                     (September 12 [sic], 2012) (Approval Order). See
                                                                                                                                                                  also supra note 4.
                                                  Secretary.                                                Room.                                                    6 FINRA Rule 5270 defines the term ‘‘related

                                                  [FR Doc. 2015–06361 Filed 3–19–15; 8:45 am]                                                                     financial instrument’’ as ‘‘any option, derivative,
                                                                                                              1 15 U.S.C. 78s(b)(1).                              security-based swap, or other financial instrument
                                                  BILLING CODE 8011–01–P
                                                                                                              2 17 CFR 240.19b–4.                                 overlying a security, the value of which is
                                                                                                              3 17 CFR 240.17d–2.                                 materially related to, or otherwise acts as a
                                                                                                              4 See Securities Exchange Act Release Nos. 70625
                                                                                                                                                                  substitute for, such security, as well as any contract
                                                                                                                                                                  that is the functional economic equivalent of a
                                                                                                            (October 8, 2013), 78 FR 62842 (October 22, 2013)     position in such security.’’
                                                                                                            (SR–EDGA–2013–29) (Notice of Filing and                  7 Under FINRA Rule 5270, a transaction involving
                                                                                                            Immediate Effectiveness of Proposed Rule Change
                                                                                                                                                                  10,000 shares or more of a security, an underlying
                                                                                                            to Amend EDGA Rules 3.22, 13.3, and Adopt Rule        security, or a related financial instrument overlying
mstockstill on DSK4VPTVN1PROD with NOTICES




                                                                                                            12.14, Front Running of Block Transactions to         such number of shares, is generally deemed to be
                                                                                                            Conform With the Rules of Other Self-Regulatory       a block transaction, although a transaction of fewer
                                                                                                            Organizations); and 70626 (October 8, 2013), 78 FR    than 10,000 shares could be considered a block
                                                                                                            62855 (October 22, 2013) (SR–EDGX–2013–36)            transaction. A block transaction that has been
                                                                                                            (Notice of Filing and Immediate Effectiveness of      agreed upon does not lose its identity as such by
                                                                                                            Proposed Rule Change to Amend EDGA [sic] Rules        arranging for partial executions of the full
                                                                                                            3.22, 13.3, and Adopt Rule 12.14, Front Running of    transaction in portions which themselves are not of
                                                                                                            Block Transactions to Conform With the Rules of       block size if the execution of the full transaction
                                                    19 17   CFR 200.30–3(a)(12).                            Other Self-Regulatory Organizations).                 may have a material impact on the market.



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                                                                                  Federal Register / Vol. 80, No. 54 / Friday, March 20, 2015 / Notices                                                       15049

                                                  underlying the related financial                        other Exchange rules, including Rule 3.1               rather is designed to enable the
                                                  instrument.                                             and Rule 12.6, or provisions of the                    Exchange to better protect imminent
                                                     FINRA Rule 5270 includes exceptions                  federal securities laws.                               customer block orders, as well as to
                                                  to the general prohibitions of the rule                                                                        provide greater harmonization among
                                                  where a member can demonstrate that a                   2. Statutory Basis
                                                                                                                                                                 Exchange and FINRA rules, resulting in
                                                  transaction is unrelated to the material,                  The Exchange believes that the                      less burdensome and more efficient
                                                  non-public market information received                  proposed rule change is consistent with                regulatory compliance for common
                                                  in connection with the customer order.                  Section 6(b)(5) of the Act,8 which                     members.
                                                  The Supplementary Material to FINRA                     requires, among other things, that the
                                                  Rule 5270 includes an illustrative list of              Exchange’s rules be designed to prevent                C. Self-Regulatory Organization’s
                                                  potentially permitted transactions as                   fraudulent and manipulative acts and                   Statement on Comments on the
                                                  examples of transactions that,                          practices, to promote just and equitable               Proposed Rule Change Received From
                                                  depending upon the circumstances, may                   principles of trade, to foster cooperation             Members, Participants, or Others
                                                  be unrelated to the customer block                      and coordination with persons engaged                    The Exchange has neither solicited
                                                  order. These types of transactions may                  in facilitating transactions in securities,            nor received written comments on the
                                                  include: Where the member has                           and to remove impediments to and                       proposed rule change.
                                                  information barriers established to                     perfect the mechanism of a free and
                                                                                                                                                                 III. Date of Effectiveness of the
                                                  prevent internal disclosure of such                     open market and a national market
                                                                                                                                                                 Proposed Rule Change and Timing for
                                                  information; actions [sic] in the same                  system. By incorporating FINRA Rule
                                                                                                                                                                 Commission Action
                                                  security related to a prior customer                    5270, new Rule 12.14 prohibits front
                                                  order in that security; transactions to                 running trading activity that the                         The Exchange has filed the proposed
                                                  correct bona fide errors; or transactions               Exchange believes is inconsistent with                 rule change pursuant to Section
                                                  to offset odd-lot orders.                               just and equitable principles of trade                 19(b)(3)(A)(iii) of the Act 11 and Rule
                                                     In addition, Rule 5270 does not                      while also ensuring that Members may                   19b–4(f)(6) thereunder.12 Because the
                                                  preclude transactions undertaken for the                continue to engage in transactions that                proposed rule change does not: (i)
                                                  purpose of fulfilling, or facilitating the              do not present the risk of abusive                     Significantly affect the protection of
                                                  execution of, the customer block order.                 trading practices that the rule is                     investors or the public interest; (ii)
                                                  However, when engaging in trading                       intended to prevent. The Exchange                      impose any significant burden on
                                                  activity that could affect the market for               believes that Rule 12.14 would enhance                 competition; and (iii) become operative
                                                  the security that is the subject of the                 the protection of customer orders by                   for 30 days from the date on which it
                                                  customer block order, the member must                   addressing various types of abusive                    was filed, or such shorter time as the
                                                  minimize any potential disadvantage or                  trading that may be intended to take                   Commission may designate, if
                                                  harm in the execution of the customer’s                 advantage of customer orders. As                       consistent with the protection of
                                                  order, must not place the member’s                      previously noted, the proposed rule text               investors and the public interest, the
                                                  financial interests ahead of those of its               is substantially similar to Nasdaq’s IM–               proposed rule change has become
                                                  customer, and must obtain the                           2110–3, which has been approved by                     effective pursuant to Section 19(b)(3)(A)
                                                  customer’s consent to such trading                      the Commission,9 as well as EDGA Rule                  of the Act 13 and Rule 19b–4(f)(6)(iii)
                                                  activity. A member may obtain its                       12.14 and EDGX Rule 12.14, which have                  thereunder.14
                                                  customers’ consent through affirmative                  been previously published by the                          A proposed rule change filed under
                                                  written consent or through the use of a                 Commission.10 By adopting Rule 12.14,                  Rule 19b–4(f)(6) 15 normally does not
                                                  negative consent letter. The negative                   the Exchange believes that imminent                    become operative prior to 30 days after
                                                  consent letter must clearly disclose to                 customer block orders would be better                  the date of the filing. However, pursuant
                                                  the customer the terms and conditions                   protected and that the proposed rule                   to Rule 19b–4(f)(6)(iii),16 the
                                                  for handling the customer’s orders; if                  change will prevent fraudulent and                     Commission may designate a shorter
                                                  the customer does not object, then the                  manipulative acts and practices,                       time if such action is consistent with the
                                                  member may reasonably conclude that                     promote just and equitable principles of               protection of investors and the public
                                                  the customer has consented and the                      trade, and better protect investors and                interest. The Exchange has asked the
                                                  member may rely on such letter for all                  the public interest.                                   Commission to waive the 30-day
                                                  or a portion of the customer’s orders. In                                                                      operative delay so that the proposed
                                                  addition, a member may provide clear                    B. Self-Regulatory Organization’s                      rule change may become operative
                                                  and comprehensive oral disclosure to                    Statement on Burden on Competition                     immediately upon filing. The Exchange
                                                  and obtain consent from the customer                      The Exchange does not believe that                   argues that waiver of the operative delay
                                                  on an order-by-order basis, provided                    the proposed rule change would impose                  would enable it to enhance its rules
                                                  that the member documents who                           any burden on competition that is not                  protecting customer orders in a timely
                                                  provided such consent and such                          necessary or appropriate in furtherance                manner by explicitly prohibiting
                                                  consent evidences the customer’s                        of the purposes of the Act. The                        Members from trading ahead of block
                                                  understanding of the terms and                          proposed rule change is not designed to
                                                  conditions for handling the customer’s                  address any competitive issues but                       11 15  U.S.C. 78s(b)(3)(A)(iii).
                                                  order.                                                                                                           12 17  CFR 240.19b–4(f)(6).
                                                     The Exchange also proposes to state                    8 15  U.S.C. 78f(b)(5).                                 13 15 U.S.C. 78s(b)(3)(A).
                                                                                                                                                                    14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
                                                  in new Rule 12.14 that although the                       9 See  Securities Exchange Act Release No. 53128
                                                                                                          (January 13, 2006), 71 FR 3550 (January 23, 2006)      4(f)(6)(iii) requires the Exchange to give the
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                                                  prohibitions in Rule 5270 are limited to                                                                       Commission written notice of the Exchange’s intent
                                                                                                          (order approving Nasdaq’s application for
                                                  imminent block transactions, the front                  registration as a national securities exchange). See   to file the proposed rule change, along with a brief
                                                  running of other types of orders that                   also Securities Exchange Act Release No. 58069         description and text of the proposed rule change,
                                                  place the financial interests of the                    (June 30, 2008), 73 FR 39360 (July 9, 2008) (SR–       at least five business days prior to the date of filing
                                                                                                          Nasdaq–2008–054) (Notice of Filing and Immediate       of the proposed rule change, or such shorter time
                                                  Member or persons associated with a                                                                            as designated by the Commission. The Exchange
                                                                                                          Effectiveness). Securities Exchange Act Release No.
                                                  Member ahead of those of its customer                   34–67774 (September 4, 2012), 77 FR 55519              has satisfied this requirement.
                                                  or the misuse of knowledge of an                        (September 12, 2012) (Approval Order).                    15 17 CFR 240.19b–4(f)(6).

                                                  imminent customer order may violate                        10 See supra note 4.                                   16 17 CFR 240.19b–4(f)(6)(iii).




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                                                  15050                           Federal Register / Vol. 80, No. 54 / Friday, March 20, 2015 / Notices

                                                  transaction in violation of proposed                    Paper Comments                                         2459), Executive Order 12047 of March
                                                  Rule 12.14 during what would be the                        • Send paper comments in triplicate                 27, 1978, the Foreign Affairs Reform and
                                                  operative delay period.17 The Exchange                  to Secretary, Securities and Exchange                  Restructuring Act of 1998 (112 Stat.
                                                  also represents that waiver of the                      Commission, 100 F Street NE.,                          2681, et seq.; 22 U.S.C. 6501 note, et
                                                  operative delay would allow it to                       Washington, DC 20549–1090.                             seq.), Delegation of Authority No. 234 of
                                                  promptly incorporate Rule 12.14 into                                                                           October 1, 1999, and Delegation of
                                                  the 17d–2 Agreement, further reducing                   All submissions should refer to File                   Authority No. 236–3 of August 28, 2000
                                                  duplicative regulation of Exchange                      Number SR–BYX–2015–13. This file                       (and, as appropriate, Delegation of
                                                  Members that are also members of                        number should be included on the                       Authority No. 257 of April 15, 2003), I
                                                  FINRA. In addition, the Exchange states                 subject line if email is used. To help the             hereby determine that the objects to be
                                                  that waiving the operative delay would                  Commission process and review your                     included in the exhibition ‘‘Arctic
                                                  provide greater harmonization among                     comments more efficiently, please use                  Ambitions: Captain Cook and the
                                                  Exchange, EDGA, EDGX, and FINRA                         only one method. The Commission will                   Northwest Passage,’’ imported from
                                                  rules, resulting in less burdensome and                 post all comments on the Commission’s                  abroad for temporary exhibition within
                                                  more efficient regulatory compliance for                Internet Web site (http://www.sec.gov/                 the United States, are of cultural
                                                  Members and facilitating FINRA’s                        rules/sro.shtml). Copies of the                        significance. The objects are imported
                                                  performance of its regulatory functions                 submission, all subsequent                             pursuant to loan agreements with the
                                                  under the 17d–2 Agreement in a                          amendments, all written statements                     foreign owners or custodians. I also
                                                  timelier manner. Based on the foregoing,                with respect to the proposed rule                      determine that the exhibition or display
                                                  the Commission believes that waiver of                  change that are filed with the                         of the exhibit objects at the Anchorage
                                                  the operative delay is consistent with                  Commission, and all written                            Museum at Rasmuson Center,
                                                  the protection of investors and the                     communications relating to the                         Anchorage, Alaska, from on or about
                                                  public interest. Accordingly, the                       proposed rule change between the                       March 27, 2015, until on or about
                                                  Commission hereby waives the 30-day                     Commission and any person, other than                  September 7, 2015, the Washington
                                                  operative delay and designates the                      those that may be withheld from the                    State History Museum, Tacoma,
                                                  proposal operative upon filing.18                       public in accordance with the                          Washington, from on or about October
                                                                                                          provisions of 5 U.S.C. 552, will be                    16, 2015, until on or about January 10,
                                                     At any time within 60 days of the                    available for Web site viewing and                     2016, and at possible additional
                                                  filing of the proposed rule change, the                 printing in the Commission’s Public                    exhibitions or venues yet to be
                                                  Commission summarily may                                Reference Room, 100 F Street NE.,                      determined, is in the national interest.
                                                  temporarily suspend such rule change if                 Washington, DC 20549 on official                       I have ordered that Public Notice of
                                                  it appears to the Commission that such                  business days between the hours of                     these Determinations be published in
                                                  action is necessary or appropriate in the               10:00 a.m. and 3:00 p.m. Copies of such                the Federal Register.
                                                  public interest, for the protection of                  filing also will be available for                      FOR FURTHER INFORMATION CONTACT: For
                                                  investors, or otherwise in furtherance of               inspection and copying at the principal
                                                  the purposes of the Act. If the                                                                                further information, including a list of
                                                                                                          offices of the Exchange. All comments                  the imported objects, contact the Office
                                                  Commission takes such action, the                       received will be posted without change;
                                                  Commission shall institute proceedings                                                                         of the Legal Adviser, U.S. Department of
                                                                                                          the Commission does not edit personal                  State, SA–5, L/PD, Fifth Floor (Suite
                                                  to determine whether the proposed rule                  identifying information from
                                                  should be approved or disapproved.                                                                             5H03), Washington, DC 20522–0505.
                                                                                                          submissions. You should submit only
                                                                                                                                                                    Dated: March 17, 2015.
                                                  IV. Solicitation of Comments                            information that you wish to make
                                                                                                          available publicly. All submissions                    Kelly Keiderling,
                                                    Interested persons are invited to                     should refer to File Number SR–BYX–                    Principal Deputy Assistant Secretary, Bureau
                                                  submit written data, views, and                         2015–13, and should be submitted on or                 of Educational and Cultural Affairs,
                                                                                                                                                                 Department of State.
                                                  arguments concerning the foregoing,                     before April 10, 2015.
                                                                                                                                                                 [FR Doc. 2015–06421 Filed 3–19–15; 8:45 am]
                                                  including whether the proposed rule                       For the Commission, by the Division of
                                                  change is consistent with the Act.                                                                             BILLING CODE 4710–05–P
                                                                                                          Trading and Markets, pursuant to delegated
                                                  Comments may be submitted by any of                     authority.19
                                                  the following methods:                                  Brent J. Fields,
                                                                                                                                                                 DEPARTMENT OF TRANSPORTATION
                                                  Electronic Comments                                     Secretary.
                                                                                                          [FR Doc. 2015–06362 Filed 3–19–15; 8:45 am]            Federal Highway Administration
                                                    • Use the Commission’s Internet                       BILLING CODE 8011–01–P
                                                  comment form (http://www.sec.gov/                                                                              Environmental Impact Statement:
                                                  rules/sro.shtml); or                                                                                           Orange County and Riverside County,
                                                    • Send an email to rule-comments@                     DEPARTMENT OF STATE                                    California
                                                  sec.gov. Please include File Number SR–                                                                        AGENCY: Federal Highway
                                                  BYX–2015–13 on the subject line.                        [Public Notice 9064]
                                                                                                                                                                 Administration (FHWA), DOT.
                                                                                                          Culturally Significant Objects Imported                ACTION: Notice of intent.
                                                    17 The  Exchange also represents that it has
                                                                                                          for Exhibition Determinations: ‘‘Arctic
                                                  already informed its Members that it will
                                                                                                          Ambitions: Captain Cook and the                        SUMMARY:   The FHWA, on behalf of the
                                                  implement the proposed rule change on March 23,
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                                                                                                          Northwest Passage’’                                    California Department of Transportation
                                                  2015, a date that was determined based upon the
                                                  effective date of a prior version of this filing. See                                                          (Caltrans), is issuing this notice to
                                                  BZX and BYX Regulatory Circular 15–003, Front           SUMMARY:  Notice is hereby given of the                advise the public that a Supplemental
                                                  Running of Block Transactions, dated February 24,       following determinations: Pursuant to                  Draft Environmental Impact Statement
                                                  2015.                                                                                                          (Supplemental Draft EIS) will be
                                                     18 For purposes only of waiving the 30-day
                                                                                                          the authority vested in me by the Act of
                                                  operative delay, the Commission has considered the      October 19, 1965 (79 Stat. 985; 22 U.S.C.              prepared for a proposed highway project
                                                  proposed rule’s impact on efficiency, competition,                                                             in Orange County and Riverside County,
                                                  and capital formation. See 15 U.S.C. 78c(f).              19 17   CFR 200.30–3(a)(12).                         California. The original Notice of Intent


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Document Created: 2015-12-18 11:34:27
Document Modified: 2015-12-18 11:34:27
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation80 FR 15048 

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