80 FR 65824 - Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.24, Retail Price Improvement Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 207 (October 27, 2015)

Page Range		65824-65826
FR Document		2015-27219

Federal Register, Volume 80 Issue 207 (Tuesday, October 27, 2015)

[Federal Register Volume 80, Number 207 (Tuesday, October 27, 2015)]
[Notices]
[Pages 65824-65826]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-27219]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76207; File No. SR-BYX-2015-45]

Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 11.24, Retail Price Improvement Program

October 21, 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 October 14, 2015, BATS Y-Exchange, Inc. (the ``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
has designated this proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it effective upon filing with the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

The Exchange filed a proposal to amend Rule 11.24, which governs
the Exchange's Retail Price Improvement Program (``Retail Program''),
to distinguish between retail orders routed on behalf of other broker-
dealers and retail orders that are routed on behalf of introduced
retail accounts that are carried on a fully disclosed basis, as further
described below.
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 amend Rule 11.24, which governs the
Exchange's Retail Program,\5\ to distinguish between orders routed on
behalf of other broker-dealers and orders routed on behalf of
introduced retail accounts that are carried on a fully disclosed basis,
as further described below.
---------------------------------------------------------------------------

\5\ In November 2012, the Commission approved the RPI Program on
a pilot basis. See Securities Exchange Act Release No. 68303
(November 27, 2012), 77 FR 71652 (December 3, 2012) (SR-BYX-2012-
019).
---------------------------------------------------------------------------

The Exchange established the Retail Program in an attempt to
attract retail order flow to the Exchange by potentially providing
price improvement to such order flow. Under the Retail Program, Retail
Member Organizations \6\ (``RMOs'') are permitted to submit Retail
Orders.\7\ All Exchange Users \8\ are permitted members to submit
Retail Price Improvement Orders (``RPI Orders''),\9\ which are designed
to provide potential price improvement for Retail Orders in the form of
non-displayed interest that is better than the national best bid that
is a Protected Quotation (``Protected NBB'') or the national best offer
that is a Protected Quotation (``Protected NBO'', and together with the
Protected NBB, the ``Protected NBBO'').\10\ In addition, RMOs may
optionally designate Retail Orders to be identified as Retail on the
Exchange's proprietary data feeds.\11\
---------------------------------------------------------------------------

\6\ A Retail Member Organization is a Member (or a division
thereof) that has been approved by the Exchange under Rule 11.24 to
submit Retail Orders.
\7\ A Retail Order is an agency order that originates from a
natural person and is submitted to the Exchange by a RMO, provided
that no change is made to the terms of the order with respect to
price or side of market and the order does not originate from a
trading algorithm or any computerized methodology.
\8\ A ``User'' is defined ``as any member or sponsored
participant who is authorized to obtain access to the System.'' See
Rule 1.5(cc).
\9\ A ``Retail Price Improvement Order'' is defined in Rule
11.24(a)(3) as an order that consists of non-displayed interest on
the Exchange that is priced better than the Protected NBB or
Protected NBO by at least $0.001 and that is identified as such. See
Rule 11.24(a)(3).
\10\ The term Protected Quotation is defined in Rule 1.5(t) and
has the same meaning as is set forth in Regulation NMS Rule
600(b)(58). The terms Protected NBB and Protected NBO are defined in
Rule 1.5(s). The Protected NBB is the best-priced protected bid and
the Protected NBO is the best-priced protected offer.
\11\ See Rule 11.24(i).
---------------------------------------------------------------------------

Exchange Rule 11.24(b)(1) currently states that ``[t]o qualify as a
Retail Member Organization, a Member must conduct a retail business or
handle retail orders on behalf of another broker-dealer.'' \12\ Rather
than stating that one way to qualify as an RMO is to ``handle'' retail
orders on behalf of another broker-dealer, the Exchange proposes to
state that a Member may qualify as an RMO if it ``routes'' retail
orders on behalf of another broker-dealer. The Exchange believes that
providing routing services on behalf of other broker-dealers with
retail order flow was the intended meaning of the provision and that
the term ``handle'' is vague. Thus, the Exchange believes that the
description

[[Page 65825]]

would be better if it referred to routing services provided to another
broker-dealer with retail customers. The Exchange also proposes to
distinguish such routing services on behalf of another broker-dealer
from services provided by broker-dealers that carry retail customer
accounts on a fully disclosed basis, as described below.
---------------------------------------------------------------------------

\12\ Emphasis added.
---------------------------------------------------------------------------

As background with respect to the proposed change, the Exchange
first would like to describe the terms ``introducing broker'',
``carrying firm'' or ``carrying broker-dealer'', and ``fully
disclosed,'' as such terms are commonly used in the securities
industry. An ``introducing'' broker-dealer is ``one that has a
contractual arrangement with another firm, known as the carrying or
clearing firm, under which the carrying firm agrees to perform certain
services for the introducing firm. Usually, the introducing firm
submits its customer accounts and customer orders to the carrying firm,
which executes the orders and carries the account. The carrying firm's
duties include the proper disposition of the customer funds and
securities after the trade date, the custody of customer securities and
funds, and the recordkeeping associated with carrying customer
accounts.'' \13\
---------------------------------------------------------------------------

\13\ See Securities Exchange Act Release No. 31511 (Nov. 24,
1992), 57 FR 56973 (December 2, 1992).
---------------------------------------------------------------------------

Further, a ``fully disclosed'' introducing arrangement is
``distinguished from an omnibus clearing arrangement where the clearing
firm maintains one account for all the customer transactions of the
introducing firm. In an omnibus relationship, the clearing firm does
not know the identity of the customers of the introducing firm. In a
fully disclosed clearing arrangement, the clearing firm knows the
names, addresses, securities positions and other relevant data as to
each customer.'' \14\
---------------------------------------------------------------------------

\14\ Id.
---------------------------------------------------------------------------

With respect to a broker-dealer that is routing on behalf of
another broker-dealer, the Exchange does not believe that the routing
broker-dealer has sufficient information to assess whether orders are
truly retail in nature, and thus, requires an RMO routing on behalf of
other broker-dealers to maintain additional supervisory procedures and
obtain annual attestations, as described below, in order to submit
Retail Orders to the Exchange. In contrast, however, if a broker-dealer
is carrying a customer account on a fully disclosed basis, then such
carrying broker-dealer is required to perform certain diligence
regarding such account that the Exchange believes is sufficient to
assess whether a customer is a retail customer in order to submit
orders on behalf of such a customer to the Exchange as a Retail Order.
The carrying broker of an account typically handles orders from its
retail customers that are ``introduced'' by an introducing broker.
However, as noted above, in contrast to a typical routing relationship
on behalf of another broker-dealer, a carrying broker does obtain a
significant level of information regarding each customer introduced by
the introducing broker. Accordingly, the Exchange proposes to state in
Rule 11.24(b)(1) that for purposes of Rule 11.24, ``conducting a retail
business shall include carrying retail customer accounts on a fully
disclosed basis.''
Rule 11.24(b)(6) currently states, in part, that ``[i]f a Retail
Member Organization represents Retail Orders from another broker-dealer
customer, the Retail Member Organization's supervisory procedures must
be reasonably designed to assure that the orders it receives from such
broker-dealer customer that it designates as Retail Orders meet the
definition of a Retail Order.'' This includes obtaining attestations
from the other broker-dealers for whom the RMO routes. In addition to
the proposed changes to Rule 11.24(b)(1) described above, the Exchange
proposes to modify the language of Rule 11.24(b)(6) to again
distinguish between an RMO that conducts a retail business because it
carries accounts on a fully disclosed basis from an RMO that routes
orders on behalf of another broker-dealer. As proposed, the additional
attestation requirements of Rule 11.24(b)(6) would apply to an RMO that
does not itself conduct a retail business but routes Retail Orders on
behalf of other broker-dealers. In turn, such attestation requirements
would not apply to an RMO that carries retail customer accounts on a
fully disclosed basis. In connection with this change, the Exchange is
proposing various edits to the existing rule text so that the reference
is consistently to ``other broker-dealers'' rather than ``broker-dealer
customers.''
The Exchange believes that allowing an RMO that carries retail
customer accounts on a fully disclosed basis to submit Retail Orders to
the Exchange without obtaining attestations from broker-dealers that
might introduce such accounts will encourage participation in the
Retail Program. As noted above, the Exchange believes that the carrying
broker has sufficient information to itself confirm that orders are
Retail Orders without such attestations. The Exchange still believes it
is necessary to require the attestation by broker-dealers that route
Retail Orders on behalf of other broker-dealers, because, in contrast,
such broker-dealers typically do not have a relationship with the
retail customer and would not be in position to confirm that such
customers are in fact retail customers.
2. Statutory Basis
The Exchange believes the rule change proposed in this submission
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.\15\ Specifically, the proposed change is consistent with
Section 6(b)(5) of the Act,\16\ in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and to remove impediments to and perfect
the mechanism of a free and open market and a national market system.
---------------------------------------------------------------------------

\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices because it
highlights the parties for whom additional procedures are required
because they do not maintain relationships with the end customer (i.e.,
routing brokers) and still requires the RMO to follow such procedures
to ensure that such orders qualify as Retail Orders. As proposed,
however, an RMO would not be required to follow such procedures,
including obtaining annual attestations, to the extent such RMO
actually knows the end customer and carries the account of such
customer and thus can itself confirm that the orders qualify as Retail
Orders.
The Exchange believes that the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it will allow RMOs that carry retail
customer accounts to participate in the Program without imposing
additional attestation requirements that the Exchange did not initially
intend to impose upon them. By removing impediments to participation in
the Program, the proposed change would permit expanded access of retail
customers to the Program.

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

[[Page 65826]]

necessary or appropriate in furtherance of the purposes of the Act. The
Exchange believes that the amendment, by increasing the level of
participation in the Program, will increase the level of competition
around retail executions. The Exchange believes that the transparency
and competitiveness of operating a program such as the Program on an
exchange market would result in better prices for retail investors and
benefits retail investors by expanding the capabilities of Exchanges to
encompass practices currently allowed on non-exchange venues.

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 designated this rule filing as non-controversial
under Section 19(b)(3)(A) of the Act \17\ and paragraph (f)(6) of Rule
19b-4 thereunder.\18\ The 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.\19\
---------------------------------------------------------------------------

\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4.
\19\ The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

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 rule-comments@sec.gov. Please include
File Number SR-BYX-2015-45 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-BYX-2015-45. 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
a.m. and 3 p.m. Copies of such 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-BYX-2015-45, and should be
submitted on or before November 17, 2015.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

\20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-27219 Filed 10-26-15; 8:45 am]
BILLING CODE 8011-01-P

65824 Federal Register / Vol. 80, No. 207 / Tuesday, October 27, 2015 / Notices

for execution. The proposed rule change Securities and Exchange Commission routed on behalf of introduced retail
was published for comment in the (‘‘Commission’’) the proposed rule accounts that are carried on a fully
Federal Register on September 10, change as described in Items I and II disclosed basis, as further described
2015.4 below, which Items have been prepared below.
Section 19(b)(2) of the Act 5 provides by the Exchange. The Exchange has The Exchange established the Retail
that, within 45 days of the publication designated this proposal as a ‘‘non- Program in an attempt to attract retail
of notice of the filing of a proposed rule controversial’’ proposed rule change order flow to the Exchange by
change, or within such longer period up pursuant to Section 19(b)(3)(A) of the potentially providing price
to 90 days as the Commission may Act 3 and Rule 19b–4(f)(6) thereunder,4 improvement to such order flow. Under
designate if it finds such longer period which renders it effective upon filing the Retail Program, Retail Member
to be appropriate and publishes its with the Commission. The Commission Organizations 6 (‘‘RMOs’’) are permitted
reasons for so finding or as to which the is publishing this notice to solicit to submit Retail Orders.7 All Exchange
self-regulatory organization consents, comments on the proposed rule change Users 8 are permitted members to submit
the Commission shall either approve the from interested persons. Retail Price Improvement Orders (‘‘RPI
proposed rule change, disapprove the Orders’’),9 which are designed to
I. Self-Regulatory Organization’s provide potential price improvement for
proposed rule change, or institute Statement of the Terms of the Substance
proceedings to determine whether the Retail Orders in the form of non-
of the Proposed Rule Change displayed interest that is better than the
proposed rule change should be
disapproved. The Commission is The Exchange filed a proposal to national best bid that is a Protected
extending this 45-day time period. The amend Rule 11.24, which governs the Quotation (‘‘Protected NBB’’) or the
Commission finds that it is appropriate Exchange’s Retail Price Improvement national best offer that is a Protected
to designate a longer period within Program (‘‘Retail Program’’), to Quotation (‘‘Protected NBO’’, and
which to take action on the proposed distinguish between retail orders routed together with the Protected NBB, the
rule change so that it has sufficient time on behalf of other broker-dealers and ‘‘Protected NBBO’’).10 In addition,
to consider the proposed rule change. retail orders that are routed on behalf of RMOs may optionally designate Retail
Accordingly, the Commission, introduced retail accounts that are Orders to be identified as Retail on the
pursuant to Section 19(b)(2) of the Act,6 carried on a fully disclosed basis, as Exchange’s proprietary data feeds.11
designates December 9, 2015, as the date further described below. Exchange Rule 11.24(b)(1) currently
The text of the proposed rule change states that ‘‘[t]o qualify as a Retail
by which the Commission shall either
is available at the Exchange’s Web site Member Organization, a Member must
approve or disapprove or institute
at www.batstrading.com, at the conduct a retail business or handle
proceedings to determine whether to
principal office of the Exchange, and at retail orders on behalf of another broker-
disapprove the proposed rule change
the Commission’s Public Reference dealer.’’ 12 Rather than stating that one
(File Number SR–BYX–2015–38).
Room. way to qualify as an RMO is to ‘‘handle’’
For the Commission, by the Division of retail orders on behalf of another broker-
Trading and Markets, pursuant to delegated II. Self-Regulatory Organization’s
Statement of the Purpose of, and dealer, the Exchange proposes to state
authority.7
Statutory Basis for, the Proposed Rule that a Member may qualify as an RMO
Brent J. Fields, if it ‘‘routes’’ retail orders on behalf of
Secretary. Change
another broker-dealer. The Exchange
[FR Doc. 2015–27220 Filed 10–26–15; 8:45 am] In its filing with the Commission, the believes that providing routing services
BILLING CODE 8011–01–P Exchange included statements on behalf of other broker-dealers with
concerning the purpose of and basis for retail order flow was the intended
the proposed rule change and discussed meaning of the provision and that the
SECURITIES AND EXCHANGE any comments it received on the term ‘‘handle’’ is vague. Thus, the
COMMISSION proposed rule change. The text of these Exchange believes that the description
statements may be examined at the
[Release No. 34–76207; File No. SR–BYX– places specified in Item IV below. The 6 A Retail Member Organization is a Member (or
2015–45]
Exchange has prepared summaries, set a division thereof) that has been approved by the
forth in Sections A, B, and C below, of Exchange under Rule 11.24 to submit Retail Orders.
Self-Regulatory Organizations; BATS 7 A Retail Order is an agency order that originates
Y-Exchange, Inc.; Notice of Filing and the most significant parts of such
from a natural person and is submitted to the
Immediate Effectiveness of a Proposed statements. Exchange by a RMO, provided that no change is
Rule Change To Amend Rule 11.24, made to the terms of the order with respect to price
A. Self-Regulatory Organization’s or side of market and the order does not originate
Retail Price Improvement Program Statement of the Purpose of, and from a trading algorithm or any computerized
Statutory Basis for, the Proposed Rule methodology.
October 21, 2015. 8 A ‘‘User’’ is defined ‘‘as any member or
Change
Pursuant to Section 19(b)(1) of the sponsored participant who is authorized to obtain
Securities Exchange Act of 1934 (the 1. Purpose access to the System.’’ See Rule 1.5(cc).
9 A ‘‘Retail Price Improvement Order’’ is defined
‘‘Act’’),1 and Rule 19b–4 thereunder,2 The Exchange proposes to amend in Rule 11.24(a)(3) as an order that consists of non-
notice is hereby given that on October Rule 11.24, which governs the displayed interest on the Exchange that is priced
14, 2015, BATS Y-Exchange, Inc. (the Exchange’s Retail Program,5 to better than the Protected NBB or Protected NBO by
‘‘Exchange’’ or ‘‘BYX’’) filed with the distinguish between orders routed on at least $0.001 and that is identified as such. See
Rule 11.24(a)(3).
behalf of other broker-dealers and orders 10 The term Protected Quotation is defined in
tkelley on DSK3SPTVN1PROD with NOTICES

4 See Securities Exchange Act Release No. 75831
Rule 1.5(t) and has the same meaning as is set forth
(September 3, 2015), 80 FR 54631 (SR–BYX–2015– 3 15 U.S.C. 78s(b)(3)(A). in Regulation NMS Rule 600(b)(58). The terms
38). 4 17 CFR 240.19b–4(f)(6). Protected NBB and Protected NBO are defined in
5 15 U.S.C. 78s(b)(2).
5 In November 2012, the Commission approved Rule 1.5(s). The Protected NBB is the best-priced
6 Id.
the RPI Program on a pilot basis. See Securities protected bid and the Protected NBO is the best-
7 17 CFR 200.30–3(a)(31). priced protected offer.
Exchange Act Release No. 68303 (November 27,
1 15 U.S.C. 78s(b)(1). 11 See Rule 11.24(i).
2012), 77 FR 71652 (December 3, 2012) (SR–BYX–
2 17 CFR 240.19b–4. 2012–019). 12 Emphasis added.

VerDate Sep<11>2014 18:24 Oct 26, 2015 Jkt 238001 PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 E:\FR\FM\27OCN1.SGM 27OCN1

Federal Register / Vol. 80, No. 207 / Tuesday, October 27, 2015 / Notices 65825

would be better if it referred to routing submit orders on behalf of such a by broker-dealers that route Retail
services provided to another broker- customer to the Exchange as a Retail Orders on behalf of other broker-dealers,
dealer with retail customers. The Order. The carrying broker of an because, in contrast, such broker-dealers
Exchange also proposes to distinguish account typically handles orders from typically do not have a relationship
such routing services on behalf of its retail customers that are with the retail customer and would not
another broker-dealer from services ‘‘introduced’’ by an introducing broker. be in position to confirm that such
provided by broker-dealers that carry However, as noted above, in contrast to customers are in fact retail customers.
retail customer accounts on a fully a typical routing relationship on behalf
2. Statutory Basis
disclosed basis, as described below. of another broker-dealer, a carrying
As background with respect to the broker does obtain a significant level of The Exchange believes the rule
proposed change, the Exchange first information regarding each customer change proposed in this submission is
would like to describe the terms introduced by the introducing broker. consistent with the requirements of the
‘‘introducing broker’’, ‘‘carrying firm’’ or Accordingly, the Exchange proposes to Act and the rules and regulations
‘‘carrying broker-dealer’’, and ‘‘fully state in Rule 11.24(b)(1) that for thereunder that are applicable to a
disclosed,’’ as such terms are commonly purposes of Rule 11.24, ‘‘conducting a national securities exchange, and, in
used in the securities industry. An retail business shall include carrying particular, with the requirements of
‘‘introducing’’ broker-dealer is ‘‘one that retail customer accounts on a fully Section 6(b) of the Act.15 Specifically,
has a contractual arrangement with disclosed basis.’’ the proposed change is consistent with
another firm, known as the carrying or Rule 11.24(b)(6) currently states, in Section 6(b)(5) of the Act,16 in that it is
clearing firm, under which the carrying part, that ‘‘[i]f a Retail Member designed to prevent fraudulent and
firm agrees to perform certain services Organization represents Retail Orders manipulative acts and practices, to
for the introducing firm. Usually, the from another broker-dealer customer, promote just and equitable principles of
introducing firm submits its customer the Retail Member Organization’s trade, and to remove impediments to
accounts and customer orders to the supervisory procedures must be and perfect the mechanism of a free and
carrying firm, which executes the orders reasonably designed to assure that the open market and a national market
and carries the account. The carrying orders it receives from such broker- system.
firm’s duties include the proper dealer customer that it designates as The Exchange believes that the
disposition of the customer funds and Retail Orders meet the definition of a proposed rule change is designed to
securities after the trade date, the Retail Order.’’ This includes obtaining prevent fraudulent and manipulative
custody of customer securities and attestations from the other broker- acts and practices because it highlights
funds, and the recordkeeping associated dealers for whom the RMO routes. In the parties for whom additional
with carrying customer accounts.’’ 13 addition to the proposed changes to procedures are required because they do
Further, a ‘‘fully disclosed’’ Rule 11.24(b)(1) described above, the not maintain relationships with the end
introducing arrangement is Exchange proposes to modify the customer (i.e., routing brokers) and still
‘‘distinguished from an omnibus language of Rule 11.24(b)(6) to again requires the RMO to follow such
clearing arrangement where the clearing distinguish between an RMO that procedures to ensure that such orders
firm maintains one account for all the conducts a retail business because it qualify as Retail Orders. As proposed,
customer transactions of the introducing carries accounts on a fully disclosed however, an RMO would not be
firm. In an omnibus relationship, the basis from an RMO that routes orders on required to follow such procedures,
clearing firm does not know the identity behalf of another broker-dealer. As including obtaining annual attestations,
of the customers of the introducing firm. proposed, the additional attestation to the extent such RMO actually knows
In a fully disclosed clearing requirements of Rule 11.24(b)(6) would the end customer and carries the
arrangement, the clearing firm knows apply to an RMO that does not itself account of such customer and thus can
the names, addresses, securities conduct a retail business but routes itself confirm that the orders qualify as
positions and other relevant data as to Retail Orders on behalf of other broker- Retail Orders.
each customer.’’ 14 dealers. In turn, such attestation The Exchange believes that the
With respect to a broker-dealer that is requirements would not apply to an proposed rule change will remove
routing on behalf of another broker- RMO that carries retail customer impediments to and perfect the
dealer, the Exchange does not believe accounts on a fully disclosed basis. In mechanism of a free and open market
that the routing broker-dealer has connection with this change, the and a national market system because it
sufficient information to assess whether Exchange is proposing various edits to will allow RMOs that carry retail
orders are truly retail in nature, and the existing rule text so that the customer accounts to participate in the
thus, requires an RMO routing on behalf reference is consistently to ‘‘other Program without imposing additional
of other broker-dealers to maintain broker-dealers’’ rather than ‘‘broker- attestation requirements that the
additional supervisory procedures and dealer customers.’’ Exchange did not initially intend to
obtain annual attestations, as described The Exchange believes that allowing impose upon them. By removing
below, in order to submit Retail Orders an RMO that carries retail customer impediments to participation in the
to the Exchange. In contrast, however, if accounts on a fully disclosed basis to Program, the proposed change would
a broker-dealer is carrying a customer submit Retail Orders to the Exchange permit expanded access of retail
account on a fully disclosed basis, then without obtaining attestations from customers to the Program.
such carrying broker-dealer is required broker-dealers that might introduce
such accounts will encourage B. Self-Regulatory Organization’s
to perform certain diligence regarding
Statement on Burden on Competition
tkelley on DSK3SPTVN1PROD with NOTICES

such account that the Exchange believes participation in the Retail Program. As
is sufficient to assess whether a noted above, the Exchange believes that The Exchange does not believe that
customer is a retail customer in order to the carrying broker has sufficient the proposed rule change will impose
information to itself confirm that orders any burden on competition that is not
13 See Securities Exchange Act Release No. 31511 are Retail Orders without such
(Nov. 24, 1992), 57 FR 56973 (December 2, 1992). attestations. The Exchange still believes 15 15 U.S.C. 78f(b).
14 Id. it is necessary to require the attestation 16 15 U.S.C. 78f(b)(5).

VerDate Sep<11>2014 18:24 Oct 26, 2015 Jkt 238001 PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 E:\FR\FM\27OCN1.SGM 27OCN1

65826 Federal Register / Vol. 80, No. 207 / Tuesday, October 27, 2015 / Notices

necessary or appropriate in furtherance IV. Solicitation of Comments For the Commission, by the Division of
of the purposes of the Act. The Trading and Markets, pursuant to delegated
Exchange believes that the amendment, Interested persons are invited to authority.20
by increasing the level of participation submit written data, views, and Brent J. Fields,
in the Program, will increase the level arguments concerning the foregoing, Secretary.
of competition around retail executions. including whether the proposed rule [FR Doc. 2015–27219 Filed 10–26–15; 8:45 am]
The Exchange believes that the change is consistent with the Act. BILLING CODE 8011–01–P
transparency and competitiveness of Comments may be submitted by any of
operating a program such as the the following methods:
Program on an exchange market would SECURITIES AND EXCHANGE
result in better prices for retail investors Electronic Comments COMMISSION
and benefits retail investors by • Use the Commission’s Internet [Release No. 34–76215; File No. SR–
expanding the capabilities of Exchanges comment form (http://www.sec.gov/ NYSEMKT–2015–79]
to encompass practices currently rules/sro.shtml); or
allowed on non-exchange venues. Self-Regulatory Organizations; NYSE
• Send an email to rule-comments@ MKT LLC; Notice of Filing and
C. Self-Regulatory Organization’s sec.gov. Please include File Number SR–
Statement on Comments on the Immediate Effectiveness of Proposed
BYX–2015–45 on the subject line. Rule Change Modifying the NYSE
Proposed Rule Change Received From
Members, Participants, or Others Paper Comments Amex Options Fee Schedule
The Exchange has neither solicited • Send paper comments in triplicate October 21, 2015.
nor received written comments on the to Brent J. Fields, Secretary, Securities Pursuant to Section 19(b)(1) 1 of the
proposed rule change. and Exchange Commission, 100 F Street Securities Exchange Act of 1934 (the
III. Date of Effectiveness of the NE., Washington, DC 20549–1090. ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
Proposed Rule Change and Timing for notice is hereby given that, on October
All submissions should refer to File 15, 2015, NYSE MKT LLC (the
Commission Action
Number SR–BYX–2015–45. This file ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
The Exchange has designated this rule number should be included on the the Securities and Exchange
filing as non-controversial under subject line if email is used. To help the Commission (the ‘‘Commission’’) the
Section 19(b)(3)(A) of the Act 17 and Commission process and review your proposed rule change as described in
paragraph (f)(6) of Rule 19b–4 comments more efficiently, please use Items I, II, and III below, which Items
thereunder.18 The proposed rule change only one method. The Commission will have been prepared by the self-
effects a change that (A) does not post all comments on the Commission’s regulatory organization. The
significantly affect the protection of Commission is publishing this notice to
Internet Web site (http://www.sec.gov/
investors or the public interest; (B) does solicit comments on the proposed rule
rules/sro.shtml). Copies of the
not impose any significant burden on change from interested persons.
competition; and (C) by its terms, does submission, all subsequent
not become operative for 30 days after amendments, all written statements I. Self-Regulatory Organization’s
the date of the filing, or such shorter with respect to the proposed rule Statement of the Terms of the Substance
time as the Commission may designate change that are filed with the of the Proposed Rule Change
if consistent with the protection of Commission, and all written The Exchange proposes to modify the
investors and the public interest; communications relating to the NYSE Amex Options Fee Schedule. The
provided that the self-regulatory proposed rule change between the Exchange proposes to implement the fee
organization has given the Commission Commission and any person, other than change effective October 15, 2015. The
written notice of its intent to file the those that may be withheld from the text of the proposed rule change is
proposed rule change, along with a brief public in accordance with the available on the Exchange’s Web site at
description and text of the proposed provisions of 5 U.S.C. 552, will be www.nyse.com, at the principal office of
rule change, at least five business days available for Web site viewing and the Exchange, and at the Commission’s
prior to the date of filing of the printing in the Commission’s Public Public Reference Room.
proposed rule change, or such shorter Reference Room, 100 F Street NE.,
time as designated by the II. Self-Regulatory Organization’s
Washington, DC 20549 on official
Commission.19 Statement of the Purpose of, and
business days between the hours of 10
At any time within 60 days of the Statutory Basis for, the Proposed Rule
a.m. and 3 p.m. Copies of such filing Change
filing of the proposed rule change, the also will be available for inspection and
Commission may summarily copying at the principal office of the In its filing with the Commission, the
temporarily suspend such rule change if Exchange. All comments received will self-regulatory organization included
it appears to the Commission that such be posted without change; the statements concerning the purpose of,
action is: (1) Necessary or appropriate in and basis for, the proposed rule change
Commission does not edit personal
the public interest; (2) for the protection and discussed any comments it received
identifying information from
of investors; or (3) otherwise in on the proposed rule change. The text
furtherance of the purposes of the Act. submissions. You should submit only
of those statements may be examined at
If the Commission takes such action, the information that you wish to make
the places specified in Item IV below.
tkelley on DSK3SPTVN1PROD with NOTICES

Commission shall institute proceedings available publicly. All submissions The Exchange has prepared summaries,
to determine whether the proposed rule should refer to File Number SR–BYX– set forth in sections A, B, and C below,
should be approved or disapproved. 2015–45, and should be submitted on or
before November 17, 2015. 20 17 CFR 200.30–3(a)(12).
17 15 U.S.C. 78s(b)(3)(A). 1 15 U.S.C. 78s(b)(1).
18 17 CFR 240.19b–4. 2 15 U.S.C. 78a.
19 The Exchange has satisfied this requirement. 3 17 CFR 240.19b–4.

VerDate Sep<11>2014 18:24 Oct 26, 2015 Jkt 238001 PO 00000 Frm 00140 Fmt 4703 Sfmt 4703 E:\FR\FM\27OCN1.SGM 27OCN1

Document Created: 2015-12-14 15:36:23
Document Modified: 2015-12-14 15:36:23

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 65824