80 FR 39816 - Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 21.1(d)(9), (h) and (i) To Modify the Operation of BATS Post Only Orders on the Exchange's Options Platform

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 132 (July 10, 2015)

[Federal Register Volume 80, Number 132 (Friday, July 10, 2015)]
[Notices]
[Pages 39816-39818]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-16857]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75360; File No. SR-BATS-2015-51]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
21.1(d)(9), (h) and (i) To Modify the Operation of BATS Post Only 
Orders on the Exchange's Options Platform

July 6, 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 June 30, 2015, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend Rules 21.1(d)(9), (h) and 
(i) to modify the operation of BATS Post Only Orders subject to the 
Price Adjust process on the Exchange's options platform (``BATS 
Options''). The proposed rule change is based on the operation of 
similar order types currently offered by the Nasdaq Stock Market LLC 
(``Nasdaq'') and Nasdaq OMX BX, Inc. (``BX'').\5\
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    \5\ See the description of Post-Only Orders under chapter VI, 
section 1(e)(11) of the Nasdaq Rules and chapter VI, section 
1(e)(10) of the BX Rules. See also Securities Exchange Act Release 
No. 65761 (November 16, 2011), 76 FR 72230 (November 22, 2011) (SR-
Nasdaq-2011-152) (Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change to Adopt a ``Post-Only'' Order Type). See also 
NYSE Arca, Inc. (``NYSE Arca'') Rule 6.62(y) for a description of 
PNP Plus orders.
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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 is proposing to amend Rules 21.1(d)(9), (h) and (i) to 
modify the operation of BATS Post Only Orders that are subject to the 
Price Adjust process on BATS Options. The proposed rule change is based 
on the operation of similar order types currently offered by Nasdaq and 
BX.\6\
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    \6\ See supra note 5.
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    BATS Post Only Orders are orders that are to be ranked and executed 
on the Exchange pursuant to Rule 21.8 (Order Display and Book 
Processing) or cancelled, as appropriate, without routing away to 
another trading center. Currently, a BATS Post Only Order will not 
remove liquidity from the BATS Options Book \7\ unless the value of 
price improvement associated with such execution equals or exceeds the 
sum of fees charged for such execution and the value of any rebate that 
would be

[[Page 39817]]

provided if the order posted to the BATS Options Book and subsequently 
provided liquidity. Unless otherwise instructed by the User,\8\ a BATS 
Post Only Order will be subject to the Display-Price Sliding process 
set forth under Rule 21.1(h).
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    \7\ ``BATS Options Book'' is defined as ``the electronic book of 
options orders maintained by the Trading System.'' See Exchange Rule 
16.1(a)(9).
    \8\ ``User'' is defined as ``any Options Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3 (Access).'' See Exchange Rule 16.1(a)(63).
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    The Exchange proposes to amend the operation of BATS Post Only 
Orders such that they will not remove liquidity from the BATS Options 
Book where the User elects that the order be subject to the Price 
Adjust process set forth under Exchange Rule 21.1(i). Specifically, a 
BATS Post Only Order subject to the Price Adjust process will no longer 
remove liquidity from the BATS Options Book pursuant to Rule 21.1(d)(9) 
where the value of price improvement associated with such execution 
equals or exceeds the sum of fees charged for such execution and the 
value of any rebate that would be provided if the order posted to the 
BATS Options Book and subsequently provided liquidity. Under the Price 
Adjust process, a BATS Post Only order that locks or crosses a 
Protected Quotation displayed by the Exchange upon entry will continue 
to be ranked and displayed by the System at one minimum price variation 
below the current NBO (for bids) or to one minimum price variation 
above the current NBB (for offers). As a result, the Exchange proposes 
to amend: (i) The description of BATS Post Only Orders under Rule 
21.1(d)(9) to specify that the price improvement formula described 
above would only be applied to BATS Post Only Orders subject to the 
Display-Price Sliding process; (ii) the description of the Price Adjust 
process under Rule 21.1(i)(4) to no longer state that a BATS Post Only 
Order subject to the Price Adjust process would be executed as set 
forth in Rule 21.1(d)(9); and (iii) Rule 21.1(h) to clarify it is 
limited to BATS Post Only Orders subject to the Display-Price Sliding 
process.
    The Exchange does not propose to amend the operation of BATS Post 
Only Orders subject to the Display-Price Sliding process. A BATS Post 
Only Order subject to the Display-Price Sliding process that locks or 
crosses a Protected Quotation displayed by the Exchange upon entry will 
either remove liquidity from the BATS Options Book pursuant to Rule 
21.1(d)(9) or be cancelled. Should the order lock or cross a Protected 
Quotation displayed by an external market upon entry, it will be 
subject to the Display-Price Sliding process described in Rule 21.1(h). 
A BATS Post Only Order subject to the Display-Price Sliding process 
would continue to be cancelled where the NBBO changes such that the 
order would be ranked at a price at which it could remove displayed 
liquidity from the BATS Options Book.
    The Exchange does, however, propose to amend the description of the 
Display-Price Sliding process under Rule 21.1(h)(4) to specify that a 
Partial Post Only at Limit Order that locks or crosses a Protected 
Quotation displayed by the Exchange upon entry will be executed subject 
to the price improvement formula set forth in Rule 21.1(d)(10) or 
cancelled when the order is subject to display-price sliding process. 
The Exchange does not propose to modify the operation of Partial Post 
Only at Limit Orders that are subject to the Display-Price Sliding 
Process.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of section 6(b) of the Act.\9\ In particular, the 
proposal is consistent with section 6(b)(5) of the Act \10\ because it 
is designed to encourage displayed liquidity and offer market 
participants greater flexibility to post liquidity on the BATS Options 
Book, thereby promoting just and equitable principles of trade, 
fostering cooperation and coordination with persons engaged in 
facilitating transactions in securities, removing impediments to, and 
perfecting the mechanism of, a free and open market and a national 
market system. The Exchange notes that Users who wish for their BATS 
Post Only Orders to post to the BATS Options Book and forego the 
opportunity to remove liquidity upon entry under Rule 21.1(d)(9) would 
be required to affirmatively elect that the order be subject to the 
Price Adjust process. Absent such an election, a BATS Post Only Order 
would be subject to the Display-Price Sliding process and eligible to 
remove liquidity from the BATS Options Book pursuant to the price 
improvement formula set forth under Rule 21.1(d)(9). In addition, the 
proposed operation of BATS Post Only Order subject to the Price Adjust 
process is based on the operation of similar order types, called Post-
Only Orders, currently offered by Nasdaq and BX.\11\ There are no 
differences between the operation of Post-Only Orders offered by Nasdaq 
and BX and the proposed amendments to the operation of BATS Post Only 
Orders subject to the Price Adjust process proposed herein.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ See supra note 5.
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    Lastly, the Exchange believes the proposed amendment to Rule 
21.1(h)(4) specifying that it applies to Partial Post Only at Limit 
Orders that are subject to the Display-Price Sliding process also 
promotes just and equitable principles of trade, and perfects the 
mechanism of a free and open market and a national market system 
because it provides additional specificity to the rule and does not 
modify the operation of Partial Post Only at Limit Orders that are 
subject to the Display-Price Sliding Process.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the contrary, the 
proposed rule change is a competitive change that is based on the 
operation of similar order types currently offered by Nasdaq and 
BX.\12\ The proposed rule change would, therefore, increase competition 
by enabling the Exchange to offer order type functionality that is 
identical to that offered by its competitors. For all the reasons 
stated above, the Exchange does not believe that the proposed rule 
changes will impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act, and believes the 
proposed change will enhance competition.
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    \12\ Id.
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(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change. The Exchange has not received any written 
comments from members or other interested parties.

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

    The Exchange has designated this rule filing as non-controversial 
under section 19(b)(3)(A) of the Act \13\ and paragraph (f)(6) of Rule 
19b-4 thereunder.\14\ The

[[Page 39818]]

proposed rule change effects a change that (A) does not significantly 
affect the protection of investors or the public interest; (B) does not 
impose any significant burden on competition; and (C) by its terms, 
does not become operative for 30 days after the date of the filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest; provided that the 
self-regulatory organization 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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 may summarily temporarily suspend such rule 
change if it appears to the Commission that such action is: (1) 
Necessary or appropriate in the public interest; (2) for the protection 
of investors; or (3) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BATS-2015-51 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-BATS-2015-51. 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-BATS-2015-51, 
and should be submitted on or before July 31, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Brent J. Fields,
Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-16857 Filed 7-9-15; 8:45 am]
 BILLING CODE 8011-01-P