80 FR 80865 - Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 21.8, Order Display and Book Processing

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 248 (December 28, 2015)

[Federal Register Volume 80, Number 248 (Monday, December 28, 2015)]
[Notices]
[Pages 80865-80867]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-32524]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76715; File No. SR-EDGX-2015-65]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
21.8, Order Display and Book Processing

December 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 December 16, 2015, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 authorize the Exchange's equity 
options platform (``EDGX Options'') to make a modification to Rule 21.8 
(Order Display and Book Processing).

[[Page 80866]]

    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 modify Rule 21.8, Order Display and 
Book Processing, which sets forth the priority rules applicable to EDGX 
Options as well as the Exchange's program for accepting Directed 
Orders. Specifically, Rule 21.8 describes the general priority rules 
for EDGX Options, including that quotes and orders are prioritized by 
price and then on a pro-rata basis according to size. Rule 21.8 also 
describes additional priority overlays, including special priority 
provisions for Customer orders, Directed Market Makers and Primary 
Market Makers. The purpose of this rule filing is to make a minor 
modification to the Directed Order program, as described below.
    Pursuant to Rule 21.8(f), an Options Member may designate a Market 
Maker (``Directed Market Maker'') on orders it enters into the 
Exchange's system (``Directed Orders''). A Directed Market Maker 
receives certain participation entitlements described in Rule 21.8 
subject to certain conditions, which conditions are also set forth in 
the Rule. For instance, the Directed Market Maker must be registered 
with the Exchange as a Market Maker in the relevant option class at the 
time of receipt of the Directed Order to be eligible to receive the 
Directed Market Maker participation entitlement. One current limitation 
on the Directed Market Maker priority overlay is that only Customer 
Orders are eligible to be directed by an Options Member to a Directed 
Market Maker. The Exchange proposes to eliminate this limitation to 
align more closely with the directed order rules applicable to options 
trading on the options trading platform of NASDAQ OMX BX, Inc. (``BX 
Options'') \5\ and other options exchanges.\6\ Accordingly, as 
proposed, an Options Member could direct any order to a Directed Market 
Maker, not just a Customer Order.
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    \5\ See BX Options, Chapter VI, Section 10(1)(C)(2)(iii), which 
does not limit ``Directed Orders'' on BX Options to ``Customer'' 
orders. A ``Directed Order'' is defined in BX Options Chapter VI, 
Section 1(e)(2) as ``an order to buy or sell which has been 
directed, provided it is properly marked as such, to a particular 
market maker. . . .'' A ``Customer'' is defined in BX Options 
Chapter 1, Section 1(a)(22) and is equivalent to a Customer on the 
Exchange.
    \6\ See, e.g., NYSE Arca Rules 6.1A(4) and 6.76A; NASDAQ PHLX 
Rules 1014(g)(vii) and 1080(l).
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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.\7\ In particular, the 
proposal is consistent with Section 6(b)(5) of the Act \8\ because it 
is 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, to remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, to protect investors and the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change will allow the Exchange to accept Directed 
Orders on the EDGX Options platform without restricting such orders to 
Customer Orders. The Exchange believes that the change is appropriate 
and consistent with the Act because it recognizes that orders of other 
participants, not just Customers, could potentially be directed to a 
Directed Market Maker. As noted above, other options exchanges operate 
with similar directed order programs.\9\
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    \9\ See supra notes 5 and 6.
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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. The proposed rule change is 
not designed to address any competitive issues but rather to make a 
modification to the Exchange's Directed Order program. As noted above, 
the change would make the Exchange's rule similar to that of other 
options exchanges.\10\ The Exchange believes that the proposed change 
will have a positive competitive impact by allowing additional Directed 
Orders to be submitted to the Exchange.
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    \10\ 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 not solicited, and does not intend to solicit, 
comments on this 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

    Because the foregoing proposed rule change does not: (A) 
Significantly affect the protection of investors or the public 
interest; (B) impose any significant burden on competition; and (C) by 
its terms, become operative for 30 days from the date on which it was 
filed or such shorter time as the Commission may designate it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \11\ and 
paragraph (f)(6) of Rule 19b-4 thereunder,\12\ the Exchange has 
designated this rule filing as non-controversial. The Exchange has 
given the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change at least five business days prior to the date of filing of 
the proposed rule change, or such shorter time as designated by the 
Commission.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (1) 
Necessary or appropriate in the public interest; (2) for the protection 
of investors; or (3) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Comments may

[[Page 80867]]

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 No. SR-EDGX-2015-65 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 No. SR-EDGX-2015-65. 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 will also 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 No. SR-EDGX-2015-65 and should be 
submitted on or before January 19, 2016.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Brent J. Fields,
Secretary.
[FR Doc. 2015-32524 Filed 12-24-15; 8:45 am]
 BILLING CODE 8011-01-P