80_FR_8752 80 FR 8720 - Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Rules 11.9, 11.12, and 11.13 of BATS Exchange, Inc.

80 FR 8720 - Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Rules 11.9, 11.12, and 11.13 of BATS Exchange, Inc.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 32 (February 18, 2015)

Page Range8720-8727
FR Document2015-03222

Federal Register, Volume 80 Issue 32 (Wednesday, February 18, 2015)
[Federal Register Volume 80, Number 32 (Wednesday, February 18, 2015)]
[Notices]
[Pages 8720-8727]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-03222]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74247; File No. SR-BATS-2014-09]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To Amend Rules 11.9, 11.12, and 11.13 
of BATS Exchange, Inc.

February 11, 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 January 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, II 
and III 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 the 
Substance of the Proposed Rule Change

    The Exchange filed a proposal to amend Rules 11.9, 11.12, and 11.13 
to clarify and to include additional specificity regarding the current 
functionality of the Exchange's System,\3\ including the operation of 
its order types and order instructions, as further described below.
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    \3\ Exchange Rule 1.5(aa) defines ``System'' as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.''
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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.

[[Page 8721]]

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

1. Purpose
    On June 5, 2014, Chair Mary Jo White asked all national securities 
exchanges to conduct a comprehensive review of each order type offered 
to members and how it operates.\4\ The proposals set forth below, 
therefore, are the product of a comprehensive review of Exchange system 
functionality conducted by the Exchange and are intended to add 
additional clarity and specificity regarding the current functionality 
of the Exchange's System,\5\ including the operation of its order types 
and order instructions. The Exchange is not proposing any substantive 
modifications to the System.
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    \4\ See Mary Jo White, Chair, Commission, Speech at the Sandler 
O'Neill & Partners, L.P. Global Exchange ad Brokerage Conference, 
(June 5, 2014) (available at http://www.sec.gov/News/Speech/Detail/Speech/1370542004312#.VD2HW610s6Y).
    \5\ Exchange Rule 1.5(aa) defines ``System'' as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.''
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    The changes proposed below are designed to update the rulebook to 
reflect current System functionality and include: (i) Making clear that 
orders with a Time-in-Force (``TIF'') of Immediate-or-Cancel (``IOC'') 
can be routed away from the Exchange; (ii) specifying the methodology 
used by the Exchange to determine whether BATS Post Only Orders \6\ 
will remove liquidity from the BATS Book; \7\ (iii) adding additional 
detail to and re-structuring the description of Pegged Orders; (iv) 
adding additional detail to the description of Mid-Point Peg Orders; 
(v) adding additional detail to the description of Discretionary 
Orders; (vi) amending Rule 11.12, Priority of Orders, and Rule 11.13, 
Order Execution, to provide additional specificity and enhance the 
structure of Exchange rules describing the process for ranking, 
executing and routing orders; (vii) adding additional detail to the 
description of orders subject to Re-Route functionality; and (viii) 
making a series of conforming changes to Rules 11.9, 11.12 and 11.13 to 
update cross-references.
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    \6\ See Rule 11.9(c)(6).
    \7\ As defined in Rule 1.5(e).
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Routable Orders With Time in Force of Immediate-or-Cancel
    The Exchange proposes to modify Rule 11.9(b)(1) to update the 
description of the TIF of IOC to make clear that orders with a TIF of 
IOC are routable even though such TIF indicates an instruction to 
execute an order immediately in whole or in part and/or cancel it back. 
Under current rules, the TIF of IOC indicates that an order is to be 
executed in whole or in part as soon as such order is received and the 
portion not executed is to be cancelled. The Exchange proposes to 
expand upon the description of IOC to specify that an order with such 
TIF may be routed away from the Exchange but that in no event will an 
order with such TIF be posted to the BATS Book. The Exchange notes that 
IOC orders routed away from the Exchange are in turn routed as IOC 
orders. The Exchange also notes that current Rule 11.13(a)(2) already 
includes reference to routable IOCs, and the proposed modifications to 
the rule text are intended to add further specificity that IOCs are 
routable.
    In addition to the change described above, the Exchange proposes to 
make clear in Rule 11.9(b)(6) that an order with a TIF of FOK is not 
eligible for routing. Although orders with a TIF of FOK are generally 
treated the same as IOCs, the Exchange does not permit routing of 
orders with a FOK because the Exchange is unable to ensure the 
instruction of FOK (i.e., execution of an order in its entirety) 
through the routing process.
    Finally, in connection with these changes, the Exchange also 
proposes to modify current Rule 11.13(a)(2) (to be re-numbered as Rule 
11.13(b)(2)) to add the cancellation of an unfilled balance of an order 
as one possible outcome after an order has been routed away. Rule 
11.13(a)(2) currently describes other variations of how the Exchange 
handles an order after it has been routed away, but does not 
specifically state that it may be cancelled after the routing process, 
which would be the case with an order submitted to the Exchange with a 
TIF of IOC.
Computation of Economic Best Interest for BATS Post Only Orders
    The Exchange proposes to modify Rule 11.9(c)(6) to specify the 
methodology used by the Exchange to determine whether BATS Post Only 
Orders will remove liquidity from the Exchange's order book. Under the 
Exchange's current rules, a BATS Post Only Order is an order that an 
entering User \8\ intends to be posted to the BATS Book, and thus will 
not ordinarily remove liquidity from the Exchange. However, BATS Post 
Only Orders will remove liquidity from the BATS Book if such execution 
is in the economic best interests of the User entering the BATS Post 
Only Order, taking into account applicable fees and rebates.\9\ 
Specifically, as set forth in Rule 11.9(c)(6), BATS Post Only Orders 
remove liquidity from the BATS Book if 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 Book and subsequently 
provided liquidity. The Exchange proposes three changes to the 
description of BATS Post Only Orders to make clear the methodology used 
in calculating whether a BATS Post Only Order should remove liquidity 
on entry. The Exchange notes that each of these changes will conform 
the Exchange's rule governing BATS Post Only Orders with Rule 
11.6(n)(4) of the Exchange's affiliate, EDGX Exchange, Inc. (``EDGX'').
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    \8\ As defined in Exchange Rule 1.5(cc), a User as ``any Member 
or Sponsored Participant who is authorized to obtain access to the 
System pursuant to Rule 11.3.''
    \9\ See Securities Exchange Act Release No. 67093 (June 1, 
2012), 77 FR 33798 (June 7, 2012) (SR-BATS-2012-018) (notice of 
filing and immediate effectiveness of rule change to amend the 
operation of BATS Post Only Orders).
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    First, the Exchange proposes to clarify that rather than requiring 
price improvement, which indicates an execution at a better price level 
than an order's limit price, the Exchange calculates the value of the 
overall execution taking into account applicable fees and rebates. 
Accordingly, to the extent the fee and rebate structure on its own 
(i.e., even at the limit price) makes it economically advantageous to 
remove liquidity rather than post to the BATS Book and subsequently 
provide liquidity, the Exchange will allow a BATS Post Only Order to 
remove liquidity.
    Second, the Exchange proposes to make clear that this methodology 
is applied only to securities priced at $1.00 and above, and thus, that 
all BATS Post Only Orders in securities priced below $1.00 remove 
contra-side liquidity. The Exchange believes it is reasonable to allow 
BATS Post Only Orders to remove liquidity in lower priced securities 
because the Exchange's fee structure never has provided a significant 
rebate or charged a significant fee for such orders. Because the 
execution cost economics are relatively flat, the Exchange believes it 
is more efficient to simply allow all orders in such securities to 
remove liquidity.
    Third, the Exchange proposes to make clear its methodology for 
determining the applicable fees and rebates given the fact that the 
Exchange maintains a tiered

[[Page 8722]]

pricing structure. Under the Exchange's current tiered pricing 
structure, an entering User may receive a variable rebate for adding 
liquidity depending on the User's volume during the month in question. 
The Exchange determines whether Users qualify for higher rebates at the 
end of the month, looking back at the User's activity during the month. 
To account for this variable rebate structure and to ensure that the 
Exchange does not determine that an execution is in an entering User's 
economic best interests when, in fact, it is not due to a different 
rebate or fee \10\ ultimately achieved by the User, the Exchange 
applies the highest possible rebate provided and highest possible fee 
charged for such executions on the Exchange. The Exchange proposes to 
make this rebate and fee assumption clear in the Exchange's rule text.
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    \10\ The Exchange notes that its current fee structure does not 
have a variable fee depending on trading activity during the month. 
If, in the future, the Exchange implements such a fee structure the 
Exchange will use the highest possible fee for purposes of Rule 
11.9(c)(6).
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Pegged Orders
    The Exchange proposes to restructure Rule 11.9(c)(8), related to 
Pegged Orders, and to add additional detail to such Rule regarding the 
handling of such orders. With respect to restructuring, the Exchange 
currently offers two types of Pegged Orders pursuant to Rule 
11.9(c)(8), Primary Pegged Orders and Market Pegged Orders, and 
believes that each types of Pegged Order would be easier to understand 
if described in separate paragraphs. Given the proposal to split the 
Rule to address Primary Pegged Orders and Market Pegged Orders 
separately, the Exchange also proposes to add an additional lead-in 
sentence that summarizes the operation of Pegged Orders generally.
Mid-Point Peg Orders
    The Exchange proposes to add additional specificity regarding Mid-
Point Peg Orders and the handling of such orders when the market is 
locked or crossed. Specifically, the Exchange proposes to add language 
stating that upon instruction from a User Mid-Point Peg Orders will not 
execute when the market is locked. The Exchange makes this feature 
optional because while some Users may prefer not to execute in a locked 
market given that there is no real mid-point in such a situation and it 
might be evidence of a pricing disparity in a security, other Users may 
prefer an execution. The Exchange also proposes to state that Mid-Point 
Peg Orders are not eligible to execute when the NBBO is crossed. The 
Exchange does not execute Mid-Point Peg Orders in a crossed market 
because the pricing of the mid-point, and the security generally, is 
uncertain in such a situation.
Discretionary Orders
    The Exchange proposes to amend the description of Discretionary 
Orders contained in Rule 11.9(c)(10) and to add additional detail 
regarding the execution of such orders, as set forth below. First, the 
current description indicates that a Discretionary Order has a 
displayed price and size and a non-displayed ``discretionary price''. 
The Exchange proposes to make clear that although a Discretionary Order 
may have a displayed price and size as well as a discretionary price, a 
Discretionary Order may also be fully non-displayed, and thus, will 
have a non-displayed ranked price as well as a discretionary price. In 
addition to reflecting the ability to have a non-displayed 
Discretionary Order, the Exchange proposes various minor wording 
changes to improve the description of Discretionary Orders to make 
clear that such orders use the minimum amount of discretion when 
executing against incoming orders.
    The Exchange also proposes to make clear how a Discretionary Order 
interacts with a BATS Post Only Order or Partial Post Only at Limit 
Order entered at the displayed or non-displayed ranked price of such 
Discretionary Order that does not remove liquidity on entry pursuant to 
Rule 11.9(c)(6) or Rule 11.9(c)(7), respectively, by stating that the 
Discretionary Order is converted to an executable order and will remove 
liquidity against such incoming order. Similar to the Re-Route 
functionality described below, due to the fact that Discretionary 
Orders contain more aggressive prices at which they are willing to 
execute, the Exchange treats Discretionary Orders as aggressive orders 
that would prefer to execute at their displayed or non-displayed ranked 
price than to forgo an execution due to applicable fees or rebates. 
Accordingly, in order to facilitate transactions consistent with the 
instructions of its Users, the Exchange executes resting Discretionary 
Orders (and certain orders with a Re-Route instruction, as described 
below) against incoming orders, when such incoming orders would 
otherwise forego an execution. The Exchange notes that the 
determination of whether an order should execute on entry against 
resting interest, including against resting Discretionary Orders, is 
made prior to determining whether the price of such an incoming order 
should be adjusted pursuant to the Exchange's price sliding 
functionality pursuant to Rule 11.9(g). In other words, an execution 
will have already occurred as set forth above before the Exchange would 
consider whether an order could be displayed and/or posted to the BATS 
Book, and if so, at what price.
Examples--Discretionary Order Executes Against BATS Post Only Orders
    Assume that the NBBO is $10.00 by $10.05, and the Exchange's BBO is 
$9.99 by $10.06. Assume that the Exchange receives a non-routable order 
to buy 100 shares of a security at $10.00 per share designated with 
discretion to pay up to an additional $0.05 per share.
     Assume that the next order received by the Exchange is a 
BATS Post Only Order to sell 100 shares of the security at priced at 
$10.03 per share. The BATS Post Only Order would not remove any 
liquidity upon entry pursuant to the Exchange's economic best interest 
functionality, and would post to the BATS Book at $10.03. This would, 
in turn, trigger the discretion of the resting buy order and an 
execution would occur at $10.03. The BATS Post Only Order to sell would 
be treated as the adder of liquidity and the buy order with discretion 
would be treated as the remover of liquidity.
     Assume the same facts as above, but that the incoming BATS 
Post Only Order is priced at $10.00 instead of $10.03. As is true in 
the example above, the BATS Post Only Order would not remove any 
liquidity upon entry pursuant to the Exchange's economic best interest 
functionality. Rather than cancelling the incoming BATS Post Only Order 
to sell back to the User, particularly when the resting order is 
willing to buy the security for up to $10.05 per share, the Exchange 
executes at $10.00 the BATS Post Only Order against the resting buy 
order with discretion. As is also true in the example above, the BATS 
Post Only Order to sell would be treated as the liquidity adder and the 
buy order with discretion would be treated as the liquidity remover. As 
set forth in more detail below, if the incoming order was not a BATS 
Post Only Order to sell, the incoming order could be executed at the 
ranked price of the Discretionary Order without restriction and would 
therefore be treated as the liquidity remover.
    Additionally, the Exchange proposes to codify the process by which 
it handles all incoming orders that interact with Discretionary Orders. 
First, the Exchange proposes to codify its

[[Page 8723]]

handling of a contra-side order that executes against a resting 
Discretionary Order at its displayed or non-displayed ranked price or 
that contains a time-in-force of IOC or FOK and a price in the 
discretionary range by expressly stating that such an incoming order 
will remove liquidity against the Discretionary Order. Second, the 
Exchange proposes to codify its handling of orders that are intended to 
post to the BATS Book at a price within a Discretionary Order's 
discretionary range. This includes, but is not limited to, BATS Post 
Only Orders and Partial Post Only at Limit Orders. Specifically, the 
Exchange proposes to codify current System functionality whereby any 
contra-side order with a time-in-force other than IOC or FOK and a 
price within the discretionary range but not at the displayed or non-
displayed ranked price of a Discretionary Order will be posted to the 
BATS Book and then the Discretionary Order will remove liquidity 
against such posted order.
Examples--Discretionary Order Executes Against Non-Post Only Orders
    Assume that the NBBO is $10.00 by $10.05, and the Exchange's BBO is 
$9.99 by $10.06. Assume that the Exchange receives an order to buy 100 
shares of a security at $10.00 per share designated with discretion to 
pay up to an additional $0.05 per share.
     Assume that the next order received by the Exchange is a 
BATS Only Order to sell 100 shares of the security with a TIF other 
than IOC or FOK priced at $10.03 per share. The BATS Only Order would 
not remove any liquidity upon entry and would post to the BATS Book at 
$10.03. This would, in turn, trigger the discretion of the resting buy 
order and an execution would occur at $10.03. The BATS Only Order to 
sell would be treated as the adder of liquidity and the buy order with 
discretion would be treated as the remover of liquidity.
     Assume the same facts as above, but that the incoming BATS 
Only Order is priced at $10.00 instead of $10.03. The BATS Only Order 
would remove liquidity upon entry at $10.00 per share pursuant to the 
Exchange's order execution rules, as described in detail below. 
Contrary to the examples set forth above, the BATS Only Order to sell 
would be treated as the liquidity remover and the resting buy order 
with discretion would be treated as the liquidity adder. The Exchange 
notes that this example operates the same whether an order contains a 
TIF of IOC, FOK or any other TIF.
    The Exchange also proposes to modify the current description of the 
Discretionary Order by eliminating language stating, ``[i]f a 
Discretionary Order is not executed in full, the unexecuted portion of 
the order is automatically re-posted and displayed in the BATS Book 
with a new timestamp, at its original displayed price, and with its 
non-displayed discretionary price offset.'' The Exchange believes this 
language is unnecessarily confusing because the unexecuted portion of 
Discretionary Orders does not actually re-post solely because part of 
the order was executed. Rather, the remaining portion will remain 
resting on the BATS Book without being removed from the BATS Book.
    Finally, because Discretionary Orders have both a price at which 
they will be ranked and an additional discretionary price, the Exchange 
proposes to expressly state how the Exchange handles a routable 
Discretionary Order by stating that such an order will be routed away 
from the Exchange at its full discretionary price. As an example, 
assume the NBBO is $10.00 by $10.05 and the Exchange's BBO is $9.99 by 
$10.06. If the Exchange receives a routable Discretionary Order to buy 
at $10.00 with discretion to pay up to an additional $0.05 per share, 
the Exchange would route the order as a limit order to buy at $10.05. 
Any unexecuted portion of the order would be posted to the BATS Book 
with a ranked price of $10.00 and discretion to pay up to $10.05.
Priority and Execution Algorithm
    With respect to the Exchange's priority and execution algorithm, 
the Exchange is proposing various minor and structural changes that are 
intended to emphasize the processes by which orders are accepted, 
priced, ranked and executed, as well as a new provision related to the 
ability of orders to rest at locking prices that is consistent with the 
changes to provisions related to the operation of Discretionary Orders 
described above. First, the Exchange proposes to modify Rule 11.12, 
Priority of Orders, to make clear that the ranking of orders described 
in such rule is in turn dependent on Exchange Rule 11.13(a) which 
discusses the pricing and execution of orders. The Exchange believes 
that this has always been the case under Exchange rules based on the 
reference to the ``Execution Process'' in Rule 11.12; however, this 
reference did not include a cross-reference to Rule 11.13. The Exchange 
also proposes to change the reference within Rule 11.12 to refer to 
ranking rather than executing equally priced trading interest, as the 
Rule as a whole is intended to describe the manner in which resting 
orders are ranked and maintained, specifically in price and time 
priority, while awaiting execution against incoming orders. The 
Exchange does not believe that the proposed modifications substantively 
modify the operation of the rules; however, the Exchange believes that 
it is important to clarify that the ranking of orders is a separate 
process from the execution of orders.
    The Exchange also proposes to specify in Rule 11.12(a)(2)(C) that 
the priority afforded to Pegged Orders is applicable to all non-
displayed Pegged Orders. The Exchange recently began accepting Primary 
Pegged Orders that can be displayed, and if so displayed, the Exchange 
ranks such orders with all other displayed orders. Thus, the Exchange 
proposes to clarify that reference to Pegged Orders in 11.12(a)(2)(C), 
which have lower priority than the displayed size of limit orders and 
non-displayed orders, is a reference specifically to non-displayed 
Pegged Orders.
    Further, the Exchange proposes to adopt new Rule 11.12(a)(3), which 
recognizes existing match trade prevention rules that optionally 
prevent the execution of orders from the same User (i.e., based on the 
User's ``Unique Identifier'', as set forth in Rule 11.9(f)) by stating 
that in such a case the System will not permit such orders to execute 
against one another regardless of priority ranking. Proposed Rule 
11.12(a)(3) is based on EDGX Rule 11.9(a)(3). The Exchange also 
proposes changes to current Rule 11.9(a)(3) and (a)(4) to re-number 
such rules as (a)(4) and (a)(5) as well as to clarify that orders 
retain and lose ``time'' priority under certain circumstances, as 
opposed to priority generally, because retaining or losing price 
priority does not require the same descriptions, as price priority will 
always be retained unless the price of an order changes.
    Next, the Exchange proposes to re-structure Rule 11.13, which 
currently governs both execution and routing logic on the Exchange, by 
more clearly delineating between execution (to be contained in new 
paragraph (a)) and routing (to be contained in new paragraph (b)) and 
by adding additional sub-headings to the execution section. In this 
connection, the Exchange proposes to move language contained within 
Rule 11.13 to the beginning of new paragraph (a) such that the language 
is more generally applicable to the rules governing execution. 
Specifically, the Exchange proposes to relocate language stating that 
any order falling within the parameters of this paragraph shall be 
referred to as ``executable'' and that an order will be

[[Page 8724]]

cancelled back to the User if, based on market conditions, User 
instructions, applicable Exchange Rules and/or the Act and the rules 
and regulations thereunder, such order is not executable, cannot be 
routed to another Trading Center pursuant to Rule 11.13(b) (as proposed 
to be re-numbered) or cannot be posted to the BATS Book. The proposed 
sub-headings for paragraph (a) regarding order execution are intended 
to delineate between the various rules and National Market System 
(``NMS'') plans that may render an order executable or not, including 
Regulation NMS and Regulation SHO. The Exchange is proposing to add a 
cross-reference in Rule 11.13(a)(3) to its rules related to the Limit 
Up-Limit Down Plan, which is contained in Rule 11.18(e).
    The Exchange proposes to adopt paragraph (C) of Rule 11.13(a)(4) to 
provide further clarity regarding the situations where orders are not 
executable, which although covered in other existing rules, would focus 
on the incoming order on the same side of a displayed order rather than 
the resting order that is rendered not executable because it is 
opposite such displayed order. The proposed provision would replace 
existing text set forth in Rule 11.13(a)(1) to acknowledge that, under 
certain circumstances, there can be locking interest on the Exchange 
but that such interest will not be displayed by the System as a locked 
market. Proposed paragraph (C) would further state that if an incoming 
order is on the same side of the market as an order displayed on the 
BATS Book and upon entry would execute against contra-side interest at 
the same price as such displayed order, such incoming order will be 
cancelled or posted to the BATS Book and ranked in accordance with Rule 
11.12. The Exchange does not allow non-displayed interest that locks a 
contra-side displayed order to execute at such price to avoid an 
apparent priority issue.
    To demonstrate the functionality in place on the Exchange described 
above, assume the NBBO is $10.10 by $10.11. Assume the Exchange has a 
posted and displayed bid to buy 100 shares of a security priced at 
$10.10 per share and a resting non-displayed bid to buy 100 shares of a 
security priced at $10.11 per share. For purposes of this example, 
assume the resting non-displayed bid has not selected the Re-Route 
functionality, which, as described in further detail below, could make 
a resting order executable against an incoming BATS Post Only Order 
under certain circumstances.
     Assume that the next order received by the Exchange is a 
BATS Post Only Order to sell 100 shares of the security priced at 
$10.11 per share. The BATS Post Only Order would not remove any 
liquidity upon entry pursuant to the Exchange's economic best interest 
functionality, would post to the BATS Book, and would be displayed at 
$10.11. The display of this order would, in turn, make the resting non-
displayed bid not executable at $10.11.
     Assume the next order received by the Exchange is an order 
to sell 100 shares of the security priced at $10.11 per share. The 
order would not remove any liquidity upon entry because there is a 
displayed order to sell at $10.11 posted on the BATS Book and thus, by 
rule, the Exchange does not maintain any executable buy interest priced 
at $10.11. If the later arriving order to sell at $10.11 contained a 
TIF other than IOC or FOK, it would be posted to the BATS Book and 
displayed at $10.11. If the later arriving order to sell at $10.11 
contained a TIF of IOC or FOK, it would be cancelled back to the User.
     To the extent the BATS Book is in the state set forth to 
conclude the examples above, with a non-executable bid to buy at $10.11 
and one or more offers to sell displayed by the Exchange at $10.11; 
there are several potential outcomes. For instance, any incoming order 
to buy at $10.11 or higher \11\ will execute against the displayed 
order(s) to sell, as such resting orders are fully executable and 
displayed as available offers on the BATS Book. Once all displayed 
liquidity to sell at $10.11 has been executed on the Exchange, the 
resting non-displayed bid to buy at $10.11 will again be fully 
executable. Similarly, if the resting displayed orders to sell that are 
priced at $10.11 are cancelled then the resting non-displayed bid to 
buy at $10.11 will again be fully executable at that price. As 
described in the text and examples below, an incoming sell order priced 
at $10.10 or better will execute against the resting bid at $10.105. 
Finally, the User representing the non-displayed bid to buy at $10.11 
could cancel the order.
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    \11\ The Exchange notes that an incoming order for purposes of 
comparison to a resting order can be any incoming order unless the 
terms of that incoming order itself preclude execution. For 
instance, in this example, an incoming buy order could be routable 
or non-routable, the order could be selected for potential display 
or could include instructions not to display the order, the order 
could have a discretionary price, or several other characteristics. 
Upon entry, unless the terms of the order preclude removing 
liquidity, such as a BATS Post Only order, the characteristics that 
govern the way that the order may be handled once posted to the 
Exchange's order book are irrelevant and any incoming buy order 
priced at $10.11 or higher will execute against the resting offers.
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    The Exchange is also proposing to modify and place in new paragraph 
(D) rule language contained in current Rule 11.13(a)(1) that governs 
the price at which non-displayed locking interest is executable in 
order to further clarify such rule text. Specifically, for bids or 
offers equal to or greater than $1.00 per share, in the event that an 
incoming order is a market order or is a limit order priced more 
aggressively than an order displayed on the Exchange, the Exchange will 
execute the incoming order at, in the case of an incoming sell order, 
one-half minimum price variation less than the price of the displayed 
order, and, in the case of an incoming buy order, at one-half minimum 
price variation more than the price of the displayed order. As is true 
under existing functionality, this order handling is inapplicable for 
bids or offers under $1.00 per share. Proposed paragraph (D) does not 
substantively modify the existing operation of the System but is 
intended to better describe in rule text the process for matching an 
incoming order against an order on the BATS Book when there is a 
displayed order on the same side of the market as the incoming order.
    To demonstrate the operation of this provision, again assume the 
NBBO is $10.10 by $10.11. Assume the Exchange has a posted and 
displayed bid to buy 100 shares of a security priced at $10.10 per 
share and a resting non-displayed bid to buy 100 shares of a security 
priced at $10.11 per share.
     Assume that the next order received by the Exchange is a 
BATS Post Only Order to sell 100 shares of the security priced at 
$10.11 per share. The BATS Post Only Order would not remove any 
liquidity upon entry pursuant to the Exchange's economic best interest 
functionality, would post to the BATS Book and would be displayed at 
$10.11. The display of this order would, in turn, make the resting non-
displayed bid not executable at $10.11.
     If an incoming offer to sell 100 shares at $10.10 is 
entered into the BATS Book, the resting non-displayed bid originally 
priced at $10.11 will be executed at $10.105 per share, thus providing 
a half-penny of price improvement as compared to the order's limit 
price of $10.11. The execution at $10.105 per share also provides the 
incoming offer with a half-penny of price improvement as compared to 
its limit price of $10.10. The result would be the same for an incoming 
market order to sell or any other incoming limit order offer priced at 
$10.10 or below, which would execute against the non-

[[Page 8725]]

displayed bid at a price of $10.105 per share. As above, an offer at 
the full price of the resting and displayed $10.11 offer would not 
execute against the resting non-displayed bid, but would instead either 
cancel or post to the BATS Book behind the original $10.11 offer in 
priority.
    The Exchange notes that it is proposing to add descriptive titles 
to paragraphs (A) and (B) of Rule 11.13(a)(4), which describe the 
process by which executable orders are matched within the System. 
Specifically, so long as it is otherwise executable, an incoming order 
to buy will be automatically executed to the extent that it is priced 
at an amount that equals or exceeds any order to sell in the BATS Book 
and an incoming order to sell will be automatically executed to the 
extent that it is priced at an amount that equals or is less than any 
order to buy in the BATS Book. These rules further state that an order 
to buy shall be executed at the price(s) of the lowest order(s) to sell 
having priority in the BATS Book and an order to sell shall be executed 
at the price(s) of the highest order(s) to buy having priority in the 
BATS Book. The Exchange emphasizes these current rules only insofar as 
to highlight the interconnected nature of the priority rule.
    The Exchange also proposes to modify existing paragraph (b) of Rule 
11.13 to re-number it as paragraph (b)(5) and to clarify the Exchange's 
rule regarding the priority of routed orders. Paragraph (b) currently 
sets forth the proposition that a routed order does not retain priority 
on the Exchange while it is being routed to other markets. The Exchange 
believes that its proposed clarification to paragraph (b) is 
appropriate because it more clearly states that a routed order is not 
ranked and maintained in the BATS Book pursuant to Rule 11.12(a), and 
therefore is not available to execute against incoming orders pursuant 
to Rule 11.13.
Re-Route Functionality
    The Exchange currently allows Users to submit various types of 
limit orders to the Exchange that are processed pursuant to current 
Exchange Rule 11.13, as described elsewhere in this proposal. To the 
extent an order has not been executed in its entirety against the BATS 
Book, Rule 11.13 describes the process of routing marketable limit 
orders \12\ to one or more Trading Centers, including a description of 
how the Exchange treats any unfilled balance that returns to the 
Exchange following the first attempt to fill the order through the 
routing process. If not filled through routing, and based on the order 
instructions, the unfilled balance of the order may be posted to the 
BATS Book.
---------------------------------------------------------------------------

    \12\ Market orders are also routed away pursuant to Rule 11.13, 
however the Exchange is not proposing any changes to the treatment 
of routed market orders at this time.
---------------------------------------------------------------------------

    Pursuant to Exchange Rule 11.13(a)(4) (to be re-numbered as Rule 
11.13(b)(4) pursuant to this proposal), under certain circumstances the 
Exchange will re-route an order that has been posted to the BATS Book 
if subsequently locked or crossed by another accessible Trading Center. 
The Exchange offers two optional Re-Route instructions, the Super 
Aggressive Re-Route instruction and the Aggressive Re-Route 
instruction. The Super Aggressive Re-Route instruction reflects the 
willingness of the sender of the routable order posted to the BATS Book 
to route to away Trading Centers and to remove liquidity from such 
Trading Centers any time such order is locked or crossed (i.e., rather 
than passively waiting for an execution on the BATS Book). The 
Aggressive Re-Route instruction subjects an order to the routing 
process after being posted to the BATS Book only if the order is 
subsequently crossed by an accessible Trading Center (rather than if 
the order is locked or crossed). The Exchange proposes two changes to 
its rules to reflect current operation of the System in connection with 
Re-Route functionality, as described below.
Non-Displayed Routable Orders
    First, the Exchange proposes to add language to the Aggressive Re-
Route instruction that makes clear that any routable non-displayed 
limit order posted to the BATS Book that is crossed by another 
accessible Trading Center will be automatically routed to that Trading 
Center. As described in Rule 11.9(g)(4), the Exchange re-prices non-
displayed orders to the extent they are crossed by another Trading 
Center to avoid trading-through Protected Quotations displayed by such 
Trading Center. In the process of such price sliding, to the extent a 
non-displayed order is routable, the Exchange will attempt to route the 
order to the Trading Center displaying the crossing quotation that 
prompted the price sliding process.
    As an example of a routable non-displayed order that is handled 
consistent with the Aggressive Re-Route instruction, assume the 
Exchange receives a non-displayed order to buy 300 shares of a security 
at $10.10 per share. Assume further that the NBBO is $10.09 by $10.10 
when the order is received, and the Exchange's lowest priced offer is 
priced at $10.11. The Exchange will route the order away from the 
Exchange as a bid to buy 300 shares at $10.10. Assume that the order 
obtains one 100 share execution through the routing process and then 
returns to the Exchange. The Exchange will post the order as a non-
displayed bid to buy 200 shares at $10.10. If displayed liquidity then 
appears at one or more Trading Centers priced at $10.09 or lower (i.e., 
crossing the posted bid to buy at $10.10), the Exchange will take the 
non-displayed bid off of the BATS Book and again route such order to 
the displayed liquidity at other Trading Centers.
    Second, the Exchange proposes to codify existing System 
functionality by adding rule text to state that, consistent with the 
Super Aggressive Re-Route instruction described in Rule 11.13(b)(4)(B), 
when any order with a Super Aggressive Re-Route instruction is locked 
by an incoming BATS Post Only Order or Partial Post Only at Limit Order 
that does not remove liquidity pursuant to Rule 11.9(c)(6) or Rule 
11.9(c)(7), respectively,\13\ the Re-Route order is converted to an 
executable order and will remove liquidity against such incoming order. 
The Exchange applies this logic in order to facilitate executions that 
would otherwise not occur due to the instruction of a BATS Post Only 
Order or Partial Post Only at Limit Order to not remove liquidity. 
Because a Super Aggressive Re-Route eligible order is willing to route 
to an away Trading Center and remove liquidity (i.e., pay a fee at such 
Trading Center) when locked or crossed, the Exchange believes it is 
reasonable and consistent with the instruction to force an execution 
between an incoming BATS Post Only Order and an order that has been 
posted to the BATS Book with the Super Aggressive Re-Route instruction. 
The Exchange notes that the determination of whether an order should 
execute on entry against resting interest, including against resting 
orders with a Super Aggressive Re-Route instruction, is made prior to 
determining whether the price of such an incoming order should be 
adjusted pursuant to the Exchange's price sliding functionality 
pursuant to Rule 11.9(g). The Exchange has limited the proposed 
language to BATS Post Only Orders that

[[Page 8726]]

lock orders with a Super Aggressive Re-Route instruction because BATS 
Post Only Orders that cross resting orders will always remove liquidity 
because it is in their economic best interest to do so.\14\ Similarly, 
Partial Post Only Limit Orders execute against crossing interest as set 
forth in Rule 11.9(c)(7)(A). The Exchange also proposes to make clear 
that although it will execute an order with a Super Aggressive Re-Route 
instruction against a BATS Post Only Order that would lock it, if an 
order that does not contain a Super Aggressive Re-Route instruction 
maintains higher priority than one or more Super Aggressive Re-Route 
eligible orders, the Super Aggressive Re-Route eligible order(s) with 
lower priority will not be converted, as described above, and the 
incoming BATS Post Only Order or Partial Post Only at Limit Order will 
be posted or cancelled in accordance with Rule 11.9(c)(6) or Rule 
11.9(c)(7), respectively. The Exchange believes it is necessary to 
avoid applying the Re-Route functionality to Re-Route eligible orders 
that are resting behind orders that are not Re-Route eligible orders to 
avoid violating the Exchange's priority rule, Rule 11.12.
---------------------------------------------------------------------------

    \13\ The Exchange notes that pursuant to Rule 11.9(c)(6), BATS 
Post Only Orders remove liquidity in certain circumstances based on 
an economic analysis that takes into account applicable fees and 
rebates. The Exchange has proposed clarifications to this economic 
analysis as described above. Similarly, Partial Post Only at Limit 
Orders are permitted to remove price improving liquidity as well as 
a User-selected percentage of the remaining order at the limit price 
if, following such removal, the order can post at its limit price. 
See Rule 11.9(c)(7).
    \14\ See id.
---------------------------------------------------------------------------

Example--Super Aggressive Re-Route and BATS Post Only Orders
    Assume that the Exchange receives an order to buy 300 shares of a 
security at $10.10 per share designated with a Super Aggressive Re-
Route instruction. Assume further that the NBBO is $10.09 by $10.10 
when the order is received, and the Exchange's lowest offer is priced 
at $10.11. The Exchange will route the order away from the Exchange as 
a bid to buy 300 shares at $10.10. Assume that the order obtains one 
100 share execution through the routing process and then returns to the 
Exchange. The Exchange will post the order as a bid to buy 200 shares 
at $10.10. If the Exchange subsequently receives a BATS Post Only Order 
to sell priced at $10.09 per share, such order will execute against the 
posted order to buy with an execution price of $10.10. The posted buy 
order will be treated as the liquidity provider and the incoming BATS 
Post Only Order to sell will be treated as the liquidity remover, based 
on the Exchange's rules that execute BATS Post Only Orders on entry if 
such execution is in their economic interest.
    However, assuming the same facts as above, if the incoming BATS 
Post Only Order to sell is priced at $10.10 and thus does not remove 
liquidity pursuant to the economic best interest functionality, the 
posted order with a Super Aggressive Re-Route instruction will execute 
against such order at $10.10. In this scenario, the posted order to buy 
will be treated as the liquidity remover and the incoming BATS Post 
Only Order to sell will be treated as the liquidity provider.
    Finally, assume that the NBBO is $10.10 by $10.11 and that the 
Exchange has a displayed bid to buy 100 shares of a security at $10.10 
and a displayed offer to sell 100 shares of a security at $10.11. 
Assume that the displayed bid has not been designated with the Super 
Aggressive Re-Route instruction. Assume next that the Exchange receives 
a second displayable bid to buy 100 shares of the same security at 
$10.10 that has been designated as routable and subject to the Super 
Aggressive Re-Route instruction. Because there is no liquidity to which 
the Exchange can route the order, the second order will post to the 
BATS Book as a bid to buy at $10.10 behind the original displayed bid 
to buy at $10.10. If the Exchange then received a BATS Post Only Order 
to sell 100 shares at $10.10 then no execution would occur because the 
incoming BATS Post Only Order cannot remove liquidity at $10.10 based 
on the economic best interest analysis, the first order with priority 
to buy at $10.10 was not designated with the Super Aggressive Re-Route 
instruction and the second booked order to buy at $10.10 is not 
permitted to bypass the first order as this would result in a violation 
of the Exchange's priority rule, Rule 11.12.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act'') 
\15\ and further the objectives of Section 6(b)(5) of the Act \16\ 
because they are designed to promote just and equitable principles of 
trade, to remove impediments to and perfect the mechanism of a free and 
open market and a national market system, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and, in general, to protect investors and the public 
interest. The proposed rule changes are also designed to support the 
principles of Section 11A(a)(1) \17\ of the Act in that they seek to 
assure fair competition among brokers and dealers and among exchange 
markets.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------

    The modifications related to routable orders with a TIF of IOC, 
Pegged Orders, Mid-Point Peg Orders, Discretionary Orders, and the 
Exchange's priority, execution and routing rules are each designed to 
add clarity and transparency regarding Exchange System functionality 
without substantively modifying such functionality. Specifically, the 
Exchange believes that the proposed rule changes will provide 
additional clarity and specificity regarding the functionality of the 
System and thus would promote just and equitable principles of trade 
and remove impediments to a free and open market. The Exchange also 
believes that the proposed amendments will contribute to the protection 
of investors and the public interest by making the Exchange's rules 
easier to understand.
    With respect to the additional specificity proposed in connection 
with BATS Post Only Orders, the Exchange believes that the proposed 
rule change is consistent with the Act in that the change will help to 
clarify the methodology used by the Exchange to determine whether BATS 
Post Only Orders will remove liquidity from the BATS Book. The Exchange 
again notes that any methodology other than using the highest possible 
rebate and highest possible fee could result in the Exchange 
determining that an execution was in an entering User's economic best 
interest when, in fact, it was not. For the reasons articulated above, 
the Exchange believes that the proposal is consistent with and supports 
just and equitable principles of trade, removes impediments to, and 
helps to perfect the mechanism of, a free and open market and a 
national market system, and, in general, protects investors and the 
public interest.
    The Exchange also believes it is consistent with the Act to execute 
Discretionary orders and orders with a Super Aggressive Re-Route 
instruction against marketable liquidity (i.e., BATS Post Only Orders 
and Partial Post Only Orders) when an execution would not otherwise 
occur is consistent with both: (i) the Act, by facilitating executions, 
removing impediments and perfecting the mechanism of a free and open 
market and national market system; and (ii) a User's instructions, 
which have evidenced a willingness by the User to pay applicable 
execution fees and/or execute at more aggressive prices than they are 
currently ranked in favor of an execution. The Exchange also believes 
that the proposed rule change provides additional specificity regarding 
the functionality of the System with regard to routable non-displayed 
orders that have been crossed by another accessible Trading Center, 
thereby promoting just and equitable principles of trade and removing 
impediments to a free and open market.

[[Page 8727]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
rule changes are not designed to address any competitive issue but 
rather to add specificity and clarity to Exchange rules, thus providing 
greater transparency regarding the operation of the System.

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 changes.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will: (a) by order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be 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-2015-09 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-2015-09. 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 at 100 F Street NE., 
Washington, DC 20549-1090 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 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-
BATS-2015-09, and should be submitted on or before March 11, 2015.
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Brent J. Fields,
Secretary.
[FR Doc. 2015-03222 Filed 2-17-15; 8:45 am]
BILLING CODE 8011-01-P



                                                8720                          Federal Register / Vol. 80, No. 32 / Wednesday, February 18, 2015 / Notices

                                                B. Self-Regulatory Organization’s                       Comments may be submitted by any of                      SECURITIES AND EXCHANGE
                                                Statement on Burden on Competition                      the following methods:                                   COMMISSION
                                                  The Exchange does not believe that                    Electronic Comments                                      [Release No. 34–74247; File No. SR–BATS–
                                                the proposed rule change will impose                                                                             2014–09]
                                                any burden on competition that is not                     • Use the Commission’s Internet
                                                necessary or appropriate in furtherance                 comment form (http://www.sec.gov/                        Self-Regulatory Organizations; BATS
                                                of the purposes of the Act. The                         rules/sro.shtml); or                                     Exchange, Inc.; Notice of Filing of a
                                                proposed changes to alleviate confusion                   • Send an email to rule-                               Proposed Rule Change To Amend
                                                are not intended for competitive reasons                comments@sec.gov. Please include File                    Rules 11.9, 11.12, and 11.13 of BATS
                                                and only apply to C2. Additionally, the                 Number SR–C2–2015–002 on the                             Exchange, Inc.
                                                Exchange does not believe the proposed                  subject line.
                                                change to assess the PULSe login Id [sic]                                                                        February 11, 2015.
                                                fee to the first 15 login Ids [sic] of a                Paper Comments                                              Pursuant to Section 19(b)(1) of the
                                                Permit Holder will impose any burden                                                                             Securities Exchange Act of 1934 (the
                                                on intramarket competition that is not                    • Send paper comments in triplicate                    ‘‘Act’’),1 and Rule 19b–4 thereunder,2
                                                necessary or appropriate in furtherance                 to Brent J. Fields, Secretary, Securities                notice is hereby given that on January
                                                of the purposes of the Act because the                  and Exchange Commission, 100 F Street                    30, 2015, BATS Exchange, Inc. (the
                                                proposed change applies to all Permit                   NE., Washington, DC 20549–1090.                          ‘‘Exchange’’ or ‘‘BATS’’) filed with the
                                                Holders. The Exchange believes this                     All submissions should refer to File                     Securities and Exchange Commission
                                                proposal will not cause an unnecessary                  Number SR–C2–2015–002. This file                         (‘‘Commission’’) the proposed rule
                                                burden on intermarket competition                       number should be included on the                         change as described in Items I, II and III
                                                because the proposed change was not                     subject line if email is used. To help the               below, which Items have been prepared
                                                motivated by intermarket competition.                   Commission process and review your                       by the Exchange. The Commission is
                                                To the extent that the proposed changes                 comments more efficiently, please use                    publishing this notice to solicit
                                                make C2 a more attractive marketplace                   only one method. The Commission will                     comments on the proposed rule change
                                                for market participants at other                                                                                 from interested persons.
                                                                                                        post all comments on the Commission’s
                                                exchanges, such market participants are                 Internet Web site (http://www.sec.gov/                   I. Self-Regulatory Organization’s
                                                welcome to become C2 market                             rules/sro.shtml). Copies of the                          Statement of the Terms of the Substance
                                                participants.                                           submission, all subsequent                               of the Proposed Rule Change
                                                C. Self-Regulatory Organization’s                       amendments, all written statements                          The Exchange filed a proposal to
                                                Statement on Comments on the                            with respect to the proposed rule                        amend Rules 11.9, 11.12, and 11.13 to
                                                Proposed Rule Change Received From                      change that are filed with the                           clarify and to include additional
                                                Members, Participants, or Others                        Commission, and all written                              specificity regarding the current
                                                                                                        communications relating to the                           functionality of the Exchange’s System,3
                                                  The Exchange neither solicited nor
                                                                                                        proposed rule change between the                         including the operation of its order
                                                received comments on the proposed
                                                                                                        Commission and any person, other than                    types and order instructions, as further
                                                rule change.
                                                                                                        those that may be withheld from the                      described below.
                                                III. Date of Effectiveness of the                       public in accordance with the                               The text of the proposed rule change
                                                Proposed Rule Change and Timing for                     provisions of 5 U.S.C. 552, will be                      is available at the Exchange’s Web site
                                                Commission Action                                       available for Web site viewing and                       at www.batstrading.com, at the
                                                   The foregoing rule change has become                 printing in the Commission’s Public                      principal office of the Exchange, and at
                                                effective pursuant to Section 19(b)(3)(A)               Reference Room, 100 F Street NE.,                        the Commission’s Public Reference
                                                of the Act 6 and paragraph (f) of Rule                  Washington, DC 20549 on official                         Room.
                                                19b–4 7 thereunder. At any time within                  business days between the hours of
                                                                                                        10:00 a.m. and 3:00 p.m. Copies of the                   II. Self-Regulatory Organization’s
                                                60 days of the filing of the proposed rule                                                                       Statement of the Purpose of, and
                                                change, the Commission summarily may                    filing also will be available for
                                                                                                        inspection and copying at the principal                  Statutory Basis for, the Proposed Rule
                                                temporarily suspend such rule change if                                                                          Change
                                                it appears to the Commission that such                  office of the Exchange. All comments
                                                action is necessary or appropriate in the               received will be posted without change;                    In its filing with the Commission, the
                                                public interest, for the protection of                  the Commission does not edit personal                    Exchange included statements
                                                investors, or otherwise in furtherance of               identifying information from                             concerning the purpose of and basis for
                                                the purposes of the Act. If the                         submissions. You should submit only                      the proposed rule change and discussed
                                                Commission takes such action, the                       information that you wish to make                        any comments it received on the
                                                Commission will institute proceedings                   available publicly. All submissions                      proposed rule change. The text of these
                                                to determine whether the proposed rule                  should refer to File Number SR–C2–                       statements may be examined at the
                                                change should be approved or                            2015–002 and should be submitted on                      places specified in Item IV below. The
                                                disapproved.                                            or before March 11, 2015.                                Exchange has prepared summaries, set
                                                                                                          For the Commission, by the Division of
                                                                                                                                                                 forth in Sections A, B, and C below, of
                                                IV. Solicitation of Comments                                                                                     the most significant parts of such
                                                                                                        Trading and Markets, pursuant to delegated
emcdonald on DSK67QTVN1PROD with NOTICES




                                                  Interested persons are invited to                     authority.8                                              statements.
                                                submit written data, views, and                         Brent J. Fields,
                                                arguments concerning the foregoing,                                                                                1 15 U.S.C. 78s(b)(1).
                                                including whether the proposed rule                     Secretary.                                                 2 17 CFR 240.19b–4.
                                                change is consistent with the Act.                      [FR Doc. 2015–03225 Filed 2–17–15; 8:45 am]                3 Exchange Rule 1.5(aa) defines ‘‘System’’ as ‘‘the

                                                                                                        BILLING CODE 8011–01–P
                                                                                                                                                                 electronic communications and trading facility
                                                                                                                                                                 designated by the Board through which securities
                                                  6 15 U.S.C. 78s(b)(3)(A).                                                                                      orders of Users are consolidated for ranking,
                                                  7 17 CFR 240.19b–4(f).                                  8 17   CFR 200.30–3(a)(12).                            execution and, when applicable, routing away.’’



                                           VerDate Sep<11>2014   19:32 Feb 17, 2015   Jkt 235001   PO 00000   Frm 00132    Fmt 4703     Sfmt 4703   E:\FR\FM\18FEN1.SGM   18FEN1


                                                                            Federal Register / Vol. 80, No. 32 / Wednesday, February 18, 2015 / Notices                                                    8721

                                                A. Self-Regulatory Organization’s                        even though such TIF indicates an                     remove liquidity from the BATS Book if
                                                Statement of the Purpose of, and                         instruction to execute an order                       such execution is in the economic best
                                                Statutory Basis for, the Proposed Rule                   immediately in whole or in part and/or                interests of the User entering the BATS
                                                Change                                                   cancel it back. Under current rules, the              Post Only Order, taking into account
                                                                                                         TIF of IOC indicates that an order is to              applicable fees and rebates.9
                                                1. Purpose
                                                                                                         be executed in whole or in part as soon               Specifically, as set forth in Rule
                                                   On June 5, 2014, Chair Mary Jo White                  as such order is received and the                     11.9(c)(6), BATS Post Only Orders
                                                asked all national securities exchanges                  portion not executed is to be cancelled.              remove liquidity from the BATS Book if
                                                to conduct a comprehensive review of                     The Exchange proposes to expand upon                  the value of ‘‘price improvement’’
                                                each order type offered to members and                   the description of IOC to specify that an             associated with such execution equals
                                                how it operates.4 The proposals set forth                order with such TIF may be routed away                or exceeds the sum of fees charged for
                                                below, therefore, are the product of a                   from the Exchange but that in no event                such execution and the value of any
                                                comprehensive review of Exchange                         will an order with such TIF be posted                 rebate that would be provided if the
                                                system functionality conducted by the                    to the BATS Book. The Exchange notes                  order posted to the BATS Book and
                                                Exchange and are intended to add                         that IOC orders routed away from the                  subsequently provided liquidity. The
                                                additional clarity and specificity                       Exchange are in turn routed as IOC                    Exchange proposes three changes to the
                                                regarding the current functionality of                   orders. The Exchange also notes that                  description of BATS Post Only Orders
                                                the Exchange’s System,5 including the                    current Rule 11.13(a)(2) already                      to make clear the methodology used in
                                                operation of its order types and order                   includes reference to routable IOCs, and              calculating whether a BATS Post Only
                                                instructions. The Exchange is not                        the proposed modifications to the rule                Order should remove liquidity on entry.
                                                proposing any substantive modifications                  text are intended to add further                      The Exchange notes that each of these
                                                to the System.                                           specificity that IOCs are routable.                   changes will conform the Exchange’s
                                                   The changes proposed below are                                                                              rule governing BATS Post Only Orders
                                                                                                            In addition to the change described
                                                designed to update the rulebook to                                                                             with Rule 11.6(n)(4) of the Exchange’s
                                                                                                         above, the Exchange proposes to make
                                                reflect current System functionality and                                                                       affiliate, EDGX Exchange, Inc.
                                                                                                         clear in Rule 11.9(b)(6) that an order
                                                include: (i) Making clear that orders                                                                          (‘‘EDGX’’).
                                                                                                         with a TIF of FOK is not eligible for
                                                with a Time-in-Force (‘‘TIF’’) of                                                                                 First, the Exchange proposes to clarify
                                                                                                         routing. Although orders with a TIF of
                                                Immediate-or-Cancel (‘‘IOC’’) can be                                                                           that rather than requiring price
                                                                                                         FOK are generally treated the same as
                                                routed away from the Exchange; (ii)                                                                            improvement, which indicates an
                                                                                                         IOCs, the Exchange does not permit
                                                specifying the methodology used by the                                                                         execution at a better price level than an
                                                                                                         routing of orders with a FOK because
                                                Exchange to determine whether BATS                                                                             order’s limit price, the Exchange
                                                                                                         the Exchange is unable to ensure the
                                                Post Only Orders 6 will remove liquidity                                                                       calculates the value of the overall
                                                from the BATS Book; 7 (iii) adding                       instruction of FOK (i.e., execution of an
                                                                                                         order in its entirety) through the routing            execution taking into account applicable
                                                additional detail to and re-structuring                                                                        fees and rebates. Accordingly, to the
                                                the description of Pegged Orders; (iv)                   process.
                                                                                                            Finally, in connection with these                  extent the fee and rebate structure on its
                                                adding additional detail to the                                                                                own (i.e., even at the limit price) makes
                                                description of Mid-Point Peg Orders; (v)                 changes, the Exchange also proposes to
                                                                                                         modify current Rule 11.13(a)(2) (to be                it economically advantageous to remove
                                                adding additional detail to the                                                                                liquidity rather than post to the BATS
                                                description of Discretionary Orders; (vi)                re-numbered as Rule 11.13(b)(2)) to add
                                                                                                         the cancellation of an unfilled balance               Book and subsequently provide
                                                amending Rule 11.12, Priority of Orders,                                                                       liquidity, the Exchange will allow a
                                                and Rule 11.13, Order Execution, to                      of an order as one possible outcome
                                                                                                                                                               BATS Post Only Order to remove
                                                provide additional specificity and                       after an order has been routed away.
                                                                                                                                                               liquidity.
                                                enhance the structure of Exchange rules                  Rule 11.13(a)(2) currently describes                     Second, the Exchange proposes to
                                                describing the process for ranking,                      other variations of how the Exchange                  make clear that this methodology is
                                                executing and routing orders; (vii)                      handles an order after it has been routed             applied only to securities priced at
                                                adding additional detail to the                          away, but does not specifically state that            $1.00 and above, and thus, that all
                                                description of orders subject to Re-Route                it may be cancelled after the routing                 BATS Post Only Orders in securities
                                                functionality; and (viii) making a series                process, which would be the case with                 priced below $1.00 remove contra-side
                                                of conforming changes to Rules 11.9,                     an order submitted to the Exchange with               liquidity. The Exchange believes it is
                                                11.12 and 11.13 to update cross-                         a TIF of IOC.                                         reasonable to allow BATS Post Only
                                                references.                                              Computation of Economic Best Interest                 Orders to remove liquidity in lower
                                                                                                         for BATS Post Only Orders                             priced securities because the Exchange’s
                                                Routable Orders With Time in Force of
                                                                                                                                                               fee structure never has provided a
                                                Immediate-or-Cancel                                        The Exchange proposes to modify                     significant rebate or charged a
                                                  The Exchange proposes to modify                        Rule 11.9(c)(6) to specify the                        significant fee for such orders. Because
                                                Rule 11.9(b)(1) to update the description                methodology used by the Exchange to                   the execution cost economics are
                                                of the TIF of IOC to make clear that                     determine whether BATS Post Only                      relatively flat, the Exchange believes it
                                                orders with a TIF of IOC are routable                    Orders will remove liquidity from the                 is more efficient to simply allow all
                                                                                                         Exchange’s order book. Under the                      orders in such securities to remove
                                                   4 See Mary Jo White, Chair, Commission, Speech        Exchange’s current rules, a BATS Post                 liquidity.
                                                at the Sandler O’Neill & Partners, L.P. Global           Only Order is an order that an entering                  Third, the Exchange proposes to make
                                                Exchange ad Brokerage Conference, (June 5, 2014)         User 8 intends to be posted to the BATS
emcdonald on DSK67QTVN1PROD with NOTICES




                                                (available at http://www.sec.gov/News/Speech/                                                                  clear its methodology for determining
                                                Detail/Speech/1370542004312#.VD2HW610s6Y).
                                                                                                         Book, and thus will not ordinarily                    the applicable fees and rebates given the
                                                   5 Exchange Rule 1.5(aa) defines ‘‘System’’ as ‘‘the   remove liquidity from the Exchange.                   fact that the Exchange maintains a tiered
                                                electronic communications and trading facility           However, BATS Post Only Orders will
                                                designated by the Board through which securities                                                                  9 See Securities Exchange Act Release No. 67093
                                                orders of Users are consolidated for ranking,              8 As defined in Exchange Rule 1.5(cc), a User as    (June 1, 2012), 77 FR 33798 (June 7, 2012) (SR–
                                                execution and, when applicable, routing away.’’          ‘‘any Member or Sponsored Participant who is          BATS–2012–018) (notice of filing and immediate
                                                   6 See Rule 11.9(c)(6).
                                                                                                         authorized to obtain access to the System pursuant    effectiveness of rule change to amend the operation
                                                   7 As defined in Rule 1.5(e).                          to Rule 11.3.’’                                       of BATS Post Only Orders).



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                                                8722                       Federal Register / Vol. 80, No. 32 / Wednesday, February 18, 2015 / Notices

                                                pricing structure. Under the Exchange’s                 the NBBO is crossed. The Exchange                     determining whether the price of such
                                                current tiered pricing structure, an                    does not execute Mid-Point Peg Orders                 an incoming order should be adjusted
                                                entering User may receive a variable                    in a crossed market because the pricing               pursuant to the Exchange’s price sliding
                                                rebate for adding liquidity depending on                of the mid-point, and the security                    functionality pursuant to Rule 11.9(g).
                                                the User’s volume during the month in                   generally, is uncertain in such a                     In other words, an execution will have
                                                question. The Exchange determines                       situation.                                            already occurred as set forth above
                                                whether Users qualify for higher rebates                                                                      before the Exchange would consider
                                                                                                        Discretionary Orders
                                                at the end of the month, looking back at                                                                      whether an order could be displayed
                                                the User’s activity during the month. To                   The Exchange proposes to amend the                 and/or posted to the BATS Book, and if
                                                account for this variable rebate structure              description of Discretionary Orders                   so, at what price.
                                                and to ensure that the Exchange does                    contained in Rule 11.9(c)(10) and to add
                                                                                                        additional detail regarding the                       Examples—Discretionary Order
                                                not determine that an execution is in an
                                                                                                        execution of such orders, as set forth                Executes Against BATS Post Only
                                                entering User’s economic best interests
                                                                                                        below. First, the current description                 Orders
                                                when, in fact, it is not due to a different
                                                rebate or fee 10 ultimately achieved by                 indicates that a Discretionary Order has                 Assume that the NBBO is $10.00 by
                                                the User, the Exchange applies the                      a displayed price and size and a non-                 $10.05, and the Exchange’s BBO is $9.99
                                                highest possible rebate provided and                    displayed ‘‘discretionary price’’. The                by $10.06. Assume that the Exchange
                                                highest possible fee charged for such                   Exchange proposes to make clear that                  receives a non-routable order to buy 100
                                                executions on the Exchange. The                         although a Discretionary Order may                    shares of a security at $10.00 per share
                                                Exchange proposes to make this rebate                   have a displayed price and size as well               designated with discretion to pay up to
                                                and fee assumption clear in the                         as a discretionary price, a Discretionary             an additional $0.05 per share.
                                                Exchange’s rule text.                                   Order may also be fully non-displayed,                   • Assume that the next order received
                                                                                                        and thus, will have a non-displayed                   by the Exchange is a BATS Post Only
                                                Pegged Orders                                           ranked price as well as a discretionary               Order to sell 100 shares of the security
                                                  The Exchange proposes to restructure                  price. In addition to reflecting the                  at priced at $10.03 per share. The BATS
                                                Rule 11.9(c)(8), related to Pegged                      ability to have a non-displayed                       Post Only Order would not remove any
                                                Orders, and to add additional detail to                 Discretionary Order, the Exchange                     liquidity upon entry pursuant to the
                                                such Rule regarding the handling of                     proposes various minor wording                        Exchange’s economic best interest
                                                such orders. With respect to                            changes to improve the description of                 functionality, and would post to the
                                                restructuring, the Exchange currently                   Discretionary Orders to make clear that               BATS Book at $10.03. This would, in
                                                offers two types of Pegged Orders                       such orders use the minimum amount of                 turn, trigger the discretion of the resting
                                                pursuant to Rule 11.9(c)(8), Primary                    discretion when executing against                     buy order and an execution would occur
                                                Pegged Orders and Market Pegged                         incoming orders.                                      at $10.03. The BATS Post Only Order to
                                                Orders, and believes that each types of                    The Exchange also proposes to make                 sell would be treated as the adder of
                                                Pegged Order would be easier to                         clear how a Discretionary Order                       liquidity and the buy order with
                                                understand if described in separate                     interacts with a BATS Post Only Order                 discretion would be treated as the
                                                paragraphs. Given the proposal to split                 or Partial Post Only at Limit Order                   remover of liquidity.
                                                the Rule to address Primary Pegged                      entered at the displayed or non-                         • Assume the same facts as above, but
                                                Orders and Market Pegged Orders                         displayed ranked price of such                        that the incoming BATS Post Only
                                                separately, the Exchange also proposes                  Discretionary Order that does not                     Order is priced at $10.00 instead of
                                                to add an additional lead-in sentence                   remove liquidity on entry pursuant to                 $10.03. As is true in the example above,
                                                that summarizes the operation of Pegged                 Rule 11.9(c)(6) or Rule 11.9(c)(7),                   the BATS Post Only Order would not
                                                Orders generally.                                       respectively, by stating that the                     remove any liquidity upon entry
                                                                                                        Discretionary Order is converted to an                pursuant to the Exchange’s economic
                                                Mid-Point Peg Orders                                    executable order and will remove                      best interest functionality. Rather than
                                                   The Exchange proposes to add                         liquidity against such incoming order.                cancelling the incoming BATS Post
                                                additional specificity regarding Mid-                   Similar to the Re-Route functionality                 Only Order to sell back to the User,
                                                Point Peg Orders and the handling of                    described below, due to the fact that                 particularly when the resting order is
                                                such orders when the market is locked                   Discretionary Orders contain more                     willing to buy the security for up to
                                                or crossed. Specifically, the Exchange                  aggressive prices at which they are                   $10.05 per share, the Exchange executes
                                                proposes to add language stating that                   willing to execute, the Exchange treats               at $10.00 the BATS Post Only Order
                                                upon instruction from a User Mid-Point                  Discretionary Orders as aggressive                    against the resting buy order with
                                                Peg Orders will not execute when the                    orders that would prefer to execute at                discretion. As is also true in the
                                                market is locked. The Exchange makes                    their displayed or non-displayed ranked               example above, the BATS Post Only
                                                this feature optional because while                     price than to forgo an execution due to               Order to sell would be treated as the
                                                some Users may prefer not to execute in                 applicable fees or rebates. Accordingly,              liquidity adder and the buy order with
                                                a locked market given that there is no                  in order to facilitate transactions                   discretion would be treated as the
                                                real mid-point in such a situation and                  consistent with the instructions of its               liquidity remover. As set forth in more
                                                it might be evidence of a pricing                       Users, the Exchange executes resting                  detail below, if the incoming order was
                                                disparity in a security, other Users may                Discretionary Orders (and certain orders              not a BATS Post Only Order to sell, the
                                                prefer an execution. The Exchange also                  with a Re-Route instruction, as                       incoming order could be executed at the
emcdonald on DSK67QTVN1PROD with NOTICES




                                                proposes to state that Mid-Point Peg                    described below) against incoming                     ranked price of the Discretionary Order
                                                Orders are not eligible to execute when                 orders, when such incoming orders                     without restriction and would therefore
                                                                                                        would otherwise forego an execution.                  be treated as the liquidity remover.
                                                   10 The Exchange notes that its current fee           The Exchange notes that the                              Additionally, the Exchange proposes
                                                structure does not have a variable fee depending on     determination of whether an order                     to codify the process by which it
                                                trading activity during the month. If, in the future,
                                                the Exchange implements such a fee structure the
                                                                                                        should execute on entry against resting               handles all incoming orders that interact
                                                Exchange will use the highest possible fee for          interest, including against resting                   with Discretionary Orders. First, the
                                                purposes of Rule 11.9(c)(6).                            Discretionary Orders, is made prior to                Exchange proposes to codify its


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                                                                          Federal Register / Vol. 80, No. 32 / Wednesday, February 18, 2015 / Notices                                             8723

                                                handling of a contra-side order that                    language stating, ‘‘[i]f a Discretionary              ranked and maintained, specifically in
                                                executes against a resting Discretionary                Order is not executed in full, the                    price and time priority, while awaiting
                                                Order at its displayed or non-displayed                 unexecuted portion of the order is                    execution against incoming orders. The
                                                ranked price or that contains a time-in-                automatically re-posted and displayed                 Exchange does not believe that the
                                                force of IOC or FOK and a price in the                  in the BATS Book with a new                           proposed modifications substantively
                                                discretionary range by expressly stating                timestamp, at its original displayed                  modify the operation of the rules;
                                                that such an incoming order will                        price, and with its non-displayed                     however, the Exchange believes that it
                                                remove liquidity against the                            discretionary price offset.’’ The                     is important to clarify that the ranking
                                                Discretionary Order. Second, the                        Exchange believes this language is                    of orders is a separate process from the
                                                Exchange proposes to codify its                         unnecessarily confusing because the                   execution of orders.
                                                handling of orders that are intended to                 unexecuted portion of Discretionary                      The Exchange also proposes to specify
                                                post to the BATS Book at a price within                 Orders does not actually re-post solely               in Rule 11.12(a)(2)(C) that the priority
                                                a Discretionary Order’s discretionary                   because part of the order was executed.               afforded to Pegged Orders is applicable
                                                range. This includes, but is not limited                Rather, the remaining portion will                    to all non-displayed Pegged Orders. The
                                                to, BATS Post Only Orders and Partial                   remain resting on the BATS Book                       Exchange recently began accepting
                                                Post Only at Limit Orders. Specifically,                without being removed from the BATS                   Primary Pegged Orders that can be
                                                the Exchange proposes to codify current                 Book.                                                 displayed, and if so displayed, the
                                                System functionality whereby any                          Finally, because Discretionary Orders               Exchange ranks such orders with all
                                                contra-side order with a time-in-force                  have both a price at which they will be               other displayed orders. Thus, the
                                                other than IOC or FOK and a price                       ranked and an additional discretionary                Exchange proposes to clarify that
                                                within the discretionary range but not at               price, the Exchange proposes to                       reference to Pegged Orders in
                                                the displayed or non-displayed ranked                   expressly state how the Exchange                      11.12(a)(2)(C), which have lower
                                                price of a Discretionary Order will be                  handles a routable Discretionary Order                priority than the displayed size of limit
                                                posted to the BATS Book and then the                    by stating that such an order will be                 orders and non-displayed orders, is a
                                                Discretionary Order will remove                         routed away from the Exchange at its                  reference specifically to non-displayed
                                                liquidity against such posted order.                    full discretionary price. As an example,              Pegged Orders.
                                                                                                        assume the NBBO is $10.00 by $10.05                      Further, the Exchange proposes to
                                                Examples—Discretionary Order                            and the Exchange’s BBO is $9.99 by                    adopt new Rule 11.12(a)(3), which
                                                Executes Against Non-Post Only Orders                   $10.06. If the Exchange receives a                    recognizes existing match trade
                                                   Assume that the NBBO is $10.00 by                    routable Discretionary Order to buy at                prevention rules that optionally prevent
                                                $10.05, and the Exchange’s BBO is $9.99                 $10.00 with discretion to pay up to an                the execution of orders from the same
                                                by $10.06. Assume that the Exchange                     additional $0.05 per share, the Exchange              User (i.e., based on the User’s ‘‘Unique
                                                receives an order to buy 100 shares of                  would route the order as a limit order                Identifier’’, as set forth in Rule 11.9(f))
                                                a security at $10.00 per share designated               to buy at $10.05. Any unexecuted                      by stating that in such a case the System
                                                with discretion to pay up to an                         portion of the order would be posted to               will not permit such orders to execute
                                                additional $0.05 per share.                             the BATS Book with a ranked price of                  against one another regardless of
                                                   • Assume that the next order received                $10.00 and discretion to pay up to                    priority ranking. Proposed Rule
                                                by the Exchange is a BATS Only Order                    $10.05.                                               11.12(a)(3) is based on EDGX Rule
                                                to sell 100 shares of the security with a                                                                     11.9(a)(3). The Exchange also proposes
                                                TIF other than IOC or FOK priced at                     Priority and Execution Algorithm                      changes to current Rule 11.9(a)(3) and
                                                $10.03 per share. The BATS Only Order                     With respect to the Exchange’s                      (a)(4) to re-number such rules as (a)(4)
                                                would not remove any liquidity upon                     priority and execution algorithm, the                 and (a)(5) as well as to clarify that
                                                entry and would post to the BATS Book                   Exchange is proposing various minor                   orders retain and lose ‘‘time’’ priority
                                                at $10.03. This would, in turn, trigger                 and structural changes that are intended              under certain circumstances, as opposed
                                                the discretion of the resting buy order                 to emphasize the processes by which                   to priority generally, because retaining
                                                and an execution would occur at $10.03.                 orders are accepted, priced, ranked and               or losing price priority does not require
                                                The BATS Only Order to sell would be                    executed, as well as a new provision                  the same descriptions, as price priority
                                                treated as the adder of liquidity and the               related to the ability of orders to rest at           will always be retained unless the price
                                                buy order with discretion would be                      locking prices that is consistent with the            of an order changes.
                                                treated as the remover of liquidity.                    changes to provisions related to the                     Next, the Exchange proposes to re-
                                                   • Assume the same facts as above, but                operation of Discretionary Orders                     structure Rule 11.13, which currently
                                                that the incoming BATS Only Order is                    described above. First, the Exchange                  governs both execution and routing
                                                priced at $10.00 instead of $10.03. The                 proposes to modify Rule 11.12, Priority               logic on the Exchange, by more clearly
                                                BATS Only Order would remove                            of Orders, to make clear that the ranking             delineating between execution (to be
                                                liquidity upon entry at $10.00 per share                of orders described in such rule is in                contained in new paragraph (a)) and
                                                pursuant to the Exchange’s order                        turn dependent on Exchange Rule                       routing (to be contained in new
                                                execution rules, as described in detail                 11.13(a) which discusses the pricing                  paragraph (b)) and by adding additional
                                                below. Contrary to the examples set                     and execution of orders. The Exchange                 sub-headings to the execution section.
                                                forth above, the BATS Only Order to                     believes that this has always been the                In this connection, the Exchange
                                                sell would be treated as the liquidity                  case under Exchange rules based on the                proposes to move language contained
                                                remover and the resting buy order with                  reference to the ‘‘Execution Process’’ in             within Rule 11.13 to the beginning of
emcdonald on DSK67QTVN1PROD with NOTICES




                                                discretion would be treated as the                      Rule 11.12; however, this reference did               new paragraph (a) such that the
                                                liquidity adder. The Exchange notes that                not include a cross-reference to Rule                 language is more generally applicable to
                                                this example operates the same whether                  11.13. The Exchange also proposes to                  the rules governing execution.
                                                an order contains a TIF of IOC, FOK or                  change the reference within Rule 11.12                Specifically, the Exchange proposes to
                                                any other TIF.                                          to refer to ranking rather than executing             relocate language stating that any order
                                                   The Exchange also proposes to modify                 equally priced trading interest, as the               falling within the parameters of this
                                                the current description of the                          Rule as a whole is intended to describe               paragraph shall be referred to as
                                                Discretionary Order by eliminating                      the manner in which resting orders are                ‘‘executable’’ and that an order will be


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                                                8724                      Federal Register / Vol. 80, No. 32 / Wednesday, February 18, 2015 / Notices

                                                cancelled back to the User if, based on                    • Assume that the next order received               representing the non-displayed bid to
                                                market conditions, User instructions,                   by the Exchange is a BATS Post Only                    buy at $10.11 could cancel the order.
                                                applicable Exchange Rules and/or the                    Order to sell 100 shares of the security                  The Exchange is also proposing to
                                                Act and the rules and regulations                       priced at $10.11 per share. The BATS                   modify and place in new paragraph (D)
                                                thereunder, such order is not                           Post Only Order would not remove any                   rule language contained in current Rule
                                                executable, cannot be routed to another                 liquidity upon entry pursuant to the                   11.13(a)(1) that governs the price at
                                                Trading Center pursuant to Rule                         Exchange’s economic best interest                      which non-displayed locking interest is
                                                11.13(b) (as proposed to be re-                         functionality, would post to the BATS                  executable in order to further clarify
                                                numbered) or cannot be posted to the                    Book, and would be displayed at $10.11.                such rule text. Specifically, for bids or
                                                BATS Book. The proposed sub-headings                    The display of this order would, in turn,              offers equal to or greater than $1.00 per
                                                for paragraph (a) regarding order                       make the resting non-displayed bid not                 share, in the event that an incoming
                                                execution are intended to delineate                     executable at $10.11.                                  order is a market order or is a limit
                                                between the various rules and National                                                                         order priced more aggressively than an
                                                                                                           • Assume the next order received by                 order displayed on the Exchange, the
                                                Market System (‘‘NMS’’) plans that may                  the Exchange is an order to sell 100
                                                render an order executable or not,                                                                             Exchange will execute the incoming
                                                                                                        shares of the security priced at $10.11                order at, in the case of an incoming sell
                                                including Regulation NMS and
                                                                                                        per share. The order would not remove                  order, one-half minimum price variation
                                                Regulation SHO. The Exchange is
                                                                                                        any liquidity upon entry because there                 less than the price of the displayed
                                                proposing to add a cross-reference in
                                                                                                        is a displayed order to sell at $10.11                 order, and, in the case of an incoming
                                                Rule 11.13(a)(3) to its rules related to
                                                                                                        posted on the BATS Book and thus, by                   buy order, at one-half minimum price
                                                the Limit Up-Limit Down Plan, which is
                                                                                                        rule, the Exchange does not maintain                   variation more than the price of the
                                                contained in Rule 11.18(e).
                                                                                                        any executable buy interest priced at                  displayed order. As is true under
                                                   The Exchange proposes to adopt                       $10.11. If the later arriving order to sell
                                                paragraph (C) of Rule 11.13(a)(4) to                                                                           existing functionality, this order
                                                                                                        at $10.11 contained a TIF other than                   handling is inapplicable for bids or
                                                provide further clarity regarding the                   IOC or FOK, it would be posted to the
                                                situations where orders are not                                                                                offers under $1.00 per share. Proposed
                                                                                                        BATS Book and displayed at $10.11. If                  paragraph (D) does not substantively
                                                executable, which although covered in
                                                                                                        the later arriving order to sell at $10.11             modify the existing operation of the
                                                other existing rules, would focus on the
                                                                                                        contained a TIF of IOC or FOK, it would                System but is intended to better
                                                incoming order on the same side of a
                                                                                                        be cancelled back to the User.                         describe in rule text the process for
                                                displayed order rather than the resting
                                                                                                           • To the extent the BATS Book is in                 matching an incoming order against an
                                                order that is rendered not executable
                                                                                                        the state set forth to conclude the                    order on the BATS Book when there is
                                                because it is opposite such displayed
                                                                                                        examples above, with a non-executable                  a displayed order on the same side of
                                                order. The proposed provision would
                                                                                                        bid to buy at $10.11 and one or more                   the market as the incoming order.
                                                replace existing text set forth in Rule                                                                           To demonstrate the operation of this
                                                11.13(a)(1) to acknowledge that, under                  offers to sell displayed by the Exchange
                                                                                                        at $10.11; there are several potential                 provision, again assume the NBBO is
                                                certain circumstances, there can be                                                                            $10.10 by $10.11. Assume the Exchange
                                                locking interest on the Exchange but                    outcomes. For instance, any incoming
                                                                                                                                                               has a posted and displayed bid to buy
                                                that such interest will not be displayed                order to buy at $10.11 or higher 11 will
                                                                                                                                                               100 shares of a security priced at $10.10
                                                by the System as a locked market.                       execute against the displayed order(s) to
                                                                                                                                                               per share and a resting non-displayed
                                                Proposed paragraph (C) would further                    sell, as such resting orders are fully
                                                                                                                                                               bid to buy 100 shares of a security
                                                state that if an incoming order is on the               executable and displayed as available
                                                                                                                                                               priced at $10.11 per share.
                                                same side of the market as an order                     offers on the BATS Book. Once all                         • Assume that the next order received
                                                displayed on the BATS Book and upon                     displayed liquidity to sell at $10.11 has              by the Exchange is a BATS Post Only
                                                entry would execute against contra-side                 been executed on the Exchange, the                     Order to sell 100 shares of the security
                                                interest at the same price as such                      resting non-displayed bid to buy at                    priced at $10.11 per share. The BATS
                                                displayed order, such incoming order                    $10.11 will again be fully executable.                 Post Only Order would not remove any
                                                will be cancelled or posted to the BATS                 Similarly, if the resting displayed orders             liquidity upon entry pursuant to the
                                                Book and ranked in accordance with                      to sell that are priced at $10.11 are                  Exchange’s economic best interest
                                                Rule 11.12. The Exchange does not                       cancelled then the resting non-                        functionality, would post to the BATS
                                                allow non-displayed interest that locks                 displayed bid to buy at $10.11 will                    Book and would be displayed at $10.11.
                                                a contra-side displayed order to execute                again be fully executable at that price.               The display of this order would, in turn,
                                                at such price to avoid an apparent                      As described in the text and examples                  make the resting non-displayed bid not
                                                priority issue.                                         below, an incoming sell order priced at                executable at $10.11.
                                                   To demonstrate the functionality in                  $10.10 or better will execute against the                 • If an incoming offer to sell 100
                                                place on the Exchange described above,                  resting bid at $10.105. Finally, the User              shares at $10.10 is entered into the
                                                assume the NBBO is $10.10 by $10.11.                                                                           BATS Book, the resting non-displayed
                                                Assume the Exchange has a posted and                      11 The Exchange notes that an incoming order for     bid originally priced at $10.11 will be
                                                displayed bid to buy 100 shares of a                    purposes of comparison to a resting order can be       executed at $10.105 per share, thus
                                                                                                        any incoming order unless the terms of that
                                                security priced at $10.10 per share and                 incoming order itself preclude execution. For
                                                                                                                                                               providing a half-penny of price
                                                a resting non-displayed bid to buy 100                  instance, in this example, an incoming buy order       improvement as compared to the order’s
                                                shares of a security priced at $10.11 per               could be routable or non-routable, the order could     limit price of $10.11. The execution at
emcdonald on DSK67QTVN1PROD with NOTICES




                                                share. For purposes of this example,                    be selected for potential display or could include     $10.105 per share also provides the
                                                                                                        instructions not to display the order, the order
                                                assume the resting non-displayed bid                    could have a discretionary price, or several other
                                                                                                                                                               incoming offer with a half-penny of
                                                has not selected the Re-Route                           characteristics. Upon entry, unless the terms of the   price improvement as compared to its
                                                functionality, which, as described in                   order preclude removing liquidity, such as a BATS      limit price of $10.10. The result would
                                                further detail below, could make a                      Post Only order, the characteristics that govern the   be the same for an incoming market
                                                                                                        way that the order may be handled once posted to
                                                resting order executable against an                     the Exchange’s order book are irrelevant and any
                                                                                                                                                               order to sell or any other incoming limit
                                                incoming BATS Post Only Order under                     incoming buy order priced at $10.11 or higher will     order offer priced at $10.10 or below,
                                                certain circumstances.                                  execute against the resting offers.                    which would execute against the non-


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                                                                          Federal Register / Vol. 80, No. 32 / Wednesday, February 18, 2015 / Notices                                                     8725

                                                displayed bid at a price of $10.105 per                 the Exchange treats any unfilled balance              from the Exchange as a bid to buy 300
                                                share. As above, an offer at the full price             that returns to the Exchange following                shares at $10.10. Assume that the order
                                                of the resting and displayed $10.11 offer               the first attempt to fill the order through           obtains one 100 share execution through
                                                would not execute against the resting                   the routing process. If not filled through            the routing process and then returns to
                                                non-displayed bid, but would instead                    routing, and based on the order                       the Exchange. The Exchange will post
                                                either cancel or post to the BATS Book                  instructions, the unfilled balance of the             the order as a non-displayed bid to buy
                                                behind the original $10.11 offer in                     order may be posted to the BATS Book.                 200 shares at $10.10. If displayed
                                                priority.                                                  Pursuant to Exchange Rule 11.13(a)(4)              liquidity then appears at one or more
                                                   The Exchange notes that it is                        (to be re-numbered as Rule 11.13(b)(4)                Trading Centers priced at $10.09 or
                                                proposing to add descriptive titles to                  pursuant to this proposal), under certain             lower (i.e., crossing the posted bid to
                                                paragraphs (A) and (B) of Rule                          circumstances the Exchange will re-                   buy at $10.10), the Exchange will take
                                                11.13(a)(4), which describe the process                 route an order that has been posted to                the non-displayed bid off of the BATS
                                                by which executable orders are matched                  the BATS Book if subsequently locked                  Book and again route such order to the
                                                within the System. Specifically, so long                or crossed by another accessible Trading              displayed liquidity at other Trading
                                                as it is otherwise executable, an                       Center. The Exchange offers two                       Centers.
                                                incoming order to buy will be                           optional Re-Route instructions, the                      Second, the Exchange proposes to
                                                automatically executed to the extent                    Super Aggressive Re-Route instruction                 codify existing System functionality by
                                                that it is priced at an amount that equals              and the Aggressive Re-Route                           adding rule text to state that, consistent
                                                or exceeds any order to sell in the BATS                instruction. The Super Aggressive Re-                 with the Super Aggressive Re-Route
                                                Book and an incoming order to sell will                 Route instruction reflects the                        instruction described in Rule
                                                be automatically executed to the extent                 willingness of the sender of the routable             11.13(b)(4)(B), when any order with a
                                                that it is priced at an amount that equals              order posted to the BATS Book to route                Super Aggressive Re-Route instruction
                                                or is less than any order to buy in the                 to away Trading Centers and to remove                 is locked by an incoming BATS Post
                                                BATS Book. These rules further state                    liquidity from such Trading Centers any               Only Order or Partial Post Only at Limit
                                                that an order to buy shall be executed                  time such order is locked or crossed                  Order that does not remove liquidity
                                                at the price(s) of the lowest order(s) to               (i.e., rather than passively waiting for an           pursuant to Rule 11.9(c)(6) or Rule
                                                sell having priority in the BATS Book                   execution on the BATS Book). The                      11.9(c)(7), respectively,13 the Re-Route
                                                and an order to sell shall be executed at               Aggressive Re-Route instruction subjects              order is converted to an executable
                                                the price(s) of the highest order(s) to buy             an order to the routing process after                 order and will remove liquidity against
                                                having priority in the BATS Book. The                   being posted to the BATS Book only if                 such incoming order. The Exchange
                                                Exchange emphasizes these current                       the order is subsequently crossed by an               applies this logic in order to facilitate
                                                rules only insofar as to highlight the                  accessible Trading Center (rather than if             executions that would otherwise not
                                                interconnected nature of the priority                   the order is locked or crossed). The                  occur due to the instruction of a BATS
                                                rule.                                                   Exchange proposes two changes to its                  Post Only Order or Partial Post Only at
                                                   The Exchange also proposes to modify                 rules to reflect current operation of the             Limit Order to not remove liquidity.
                                                existing paragraph (b) of Rule 11.13 to                 System in connection with Re-Route                    Because a Super Aggressive Re-Route
                                                re-number it as paragraph (b)(5) and to                 functionality, as described below.                    eligible order is willing to route to an
                                                clarify the Exchange’s rule regarding the                                                                     away Trading Center and remove
                                                                                                        Non-Displayed Routable Orders
                                                priority of routed orders. Paragraph (b)                                                                      liquidity (i.e., pay a fee at such Trading
                                                                                                           First, the Exchange proposes to add                Center) when locked or crossed, the
                                                currently sets forth the proposition that               language to the Aggressive Re-Route                   Exchange believes it is reasonable and
                                                a routed order does not retain priority                 instruction that makes clear that any                 consistent with the instruction to force
                                                on the Exchange while it is being routed                routable non-displayed limit order                    an execution between an incoming
                                                to other markets. The Exchange believes                 posted to the BATS Book that is crossed               BATS Post Only Order and an order that
                                                that its proposed clarification to                      by another accessible Trading Center                  has been posted to the BATS Book with
                                                paragraph (b) is appropriate because it                 will be automatically routed to that                  the Super Aggressive Re-Route
                                                more clearly states that a routed order                 Trading Center. As described in Rule                  instruction. The Exchange notes that the
                                                is not ranked and maintained in the                     11.9(g)(4), the Exchange re-prices non-               determination of whether an order
                                                BATS Book pursuant to Rule 11.12(a),                    displayed orders to the extent they are               should execute on entry against resting
                                                and therefore is not available to execute               crossed by another Trading Center to                  interest, including against resting orders
                                                against incoming orders pursuant to                     avoid trading-through Protected                       with a Super Aggressive Re-Route
                                                Rule 11.13.                                             Quotations displayed by such Trading                  instruction, is made prior to
                                                Re-Route Functionality                                  Center. In the process of such price                  determining whether the price of such
                                                                                                        sliding, to the extent a non-displayed                an incoming order should be adjusted
                                                  The Exchange currently allows Users                   order is routable, the Exchange will
                                                to submit various types of limit orders                                                                       pursuant to the Exchange’s price sliding
                                                                                                        attempt to route the order to the Trading             functionality pursuant to Rule 11.9(g).
                                                to the Exchange that are processed                      Center displaying the crossing quotation
                                                pursuant to current Exchange Rule                                                                             The Exchange has limited the proposed
                                                                                                        that prompted the price sliding process.              language to BATS Post Only Orders that
                                                11.13, as described elsewhere in this                      As an example of a routable non-
                                                proposal. To the extent an order has not                displayed order that is handled                         13 The Exchange notes that pursuant to Rule
                                                been executed in its entirety against the               consistent with the Aggressive Re-Route               11.9(c)(6), BATS Post Only Orders remove liquidity
                                                BATS Book, Rule 11.13 describes the
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                                                                                                        instruction, assume the Exchange                      in certain circumstances based on an economic
                                                process of routing marketable limit                     receives a non-displayed order to buy                 analysis that takes into account applicable fees and
                                                orders 12 to one or more Trading                                                                              rebates. The Exchange has proposed clarifications
                                                                                                        300 shares of a security at $10.10 per                to this economic analysis as described above.
                                                Centers, including a description of how                 share. Assume further that the NBBO is                Similarly, Partial Post Only at Limit Orders are
                                                                                                        $10.09 by $10.10 when the order is                    permitted to remove price improving liquidity as
                                                  12 Market orders are also routed away pursuant to                                                           well as a User-selected percentage of the remaining
                                                Rule 11.13, however the Exchange is not proposing
                                                                                                        received, and the Exchange’s lowest                   order at the limit price if, following such removal,
                                                any changes to the treatment of routed market           priced offer is priced at $10.11. The                 the order can post at its limit price. See Rule
                                                orders at this time.                                    Exchange will route the order away                    11.9(c)(7).



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                                                8726                      Federal Register / Vol. 80, No. 32 / Wednesday, February 18, 2015 / Notices

                                                lock orders with a Super Aggressive Re-                 Super Aggressive Re-Route instruction                  execution and routing rules are each
                                                Route instruction because BATS Post                     will execute against such order at                     designed to add clarity and
                                                Only Orders that cross resting orders                   $10.10. In this scenario, the posted                   transparency regarding Exchange
                                                will always remove liquidity because it                 order to buy will be treated as the                    System functionality without
                                                is in their economic best interest to do                liquidity remover and the incoming                     substantively modifying such
                                                so.14 Similarly, Partial Post Only Limit                BATS Post Only Order to sell will be                   functionality. Specifically, the Exchange
                                                Orders execute against crossing interest                treated as the liquidity provider.                     believes that the proposed rule changes
                                                as set forth in Rule 11.9(c)(7)(A). The                    Finally, assume that the NBBO is                    will provide additional clarity and
                                                Exchange also proposes to make clear                    $10.10 by $10.11 and that the Exchange                 specificity regarding the functionality of
                                                that although it will execute an order                  has a displayed bid to buy 100 shares                  the System and thus would promote just
                                                with a Super Aggressive Re-Route                        of a security at $10.10 and a displayed                and equitable principles of trade and
                                                instruction against a BATS Post Only                    offer to sell 100 shares of a security at              remove impediments to a free and open
                                                Order that would lock it, if an order that              $10.11. Assume that the displayed bid                  market. The Exchange also believes that
                                                does not contain a Super Aggressive Re-                 has not been designated with the Super                 the proposed amendments will
                                                Route instruction maintains higher                      Aggressive Re-Route instruction.                       contribute to the protection of investors
                                                priority than one or more Super                         Assume next that the Exchange receives                 and the public interest by making the
                                                Aggressive Re-Route eligible orders, the                a second displayable bid to buy 100                    Exchange’s rules easier to understand.
                                                Super Aggressive Re-Route eligible                      shares of the same security at $10.10                     With respect to the additional
                                                order(s) with lower priority will not be                that has been designated as routable and               specificity proposed in connection with
                                                converted, as described above, and the                  subject to the Super Aggressive Re-                    BATS Post Only Orders, the Exchange
                                                incoming BATS Post Only Order or                        Route instruction. Because there is no                 believes that the proposed rule change
                                                Partial Post Only at Limit Order will be                liquidity to which the Exchange can                    is consistent with the Act in that the
                                                posted or cancelled in accordance with                  route the order, the second order will                 change will help to clarify the
                                                Rule 11.9(c)(6) or Rule 11.9(c)(7),                     post to the BATS Book as a bid to buy                  methodology used by the Exchange to
                                                respectively. The Exchange believes it is               at $10.10 behind the original displayed                determine whether BATS Post Only
                                                necessary to avoid applying the Re-                     bid to buy at $10.10. If the Exchange                  Orders will remove liquidity from the
                                                Route functionality to Re-Route eligible                then received a BATS Post Only Order                   BATS Book. The Exchange again notes
                                                orders that are resting behind orders                   to sell 100 shares at $10.10 then no                   that any methodology other than using
                                                that are not Re-Route eligible orders to                execution would occur because the                      the highest possible rebate and highest
                                                avoid violating the Exchange’s priority                 incoming BATS Post Only Order cannot                   possible fee could result in the
                                                rule, Rule 11.12.                                       remove liquidity at $10.10 based on the                Exchange determining that an execution
                                                                                                        economic best interest analysis, the first             was in an entering User’s economic best
                                                Example—Super Aggressive Re-Route                                                                              interest when, in fact, it was not. For the
                                                and BATS Post Only Orders                               order with priority to buy at $10.10 was
                                                                                                        not designated with the Super                          reasons articulated above, the Exchange
                                                   Assume that the Exchange receives an                 Aggressive Re-Route instruction and the                believes that the proposal is consistent
                                                order to buy 300 shares of a security at                second booked order to buy at $10.10 is                with and supports just and equitable
                                                $10.10 per share designated with a                      not permitted to bypass the first order                principles of trade, removes
                                                Super Aggressive Re-Route instruction.                  as this would result in a violation of the             impediments to, and helps to perfect the
                                                Assume further that the NBBO is $10.09                  Exchange’s priority rule, Rule 11.12.                  mechanism of, a free and open market
                                                by $10.10 when the order is received,                                                                          and a national market system, and, in
                                                and the Exchange’s lowest offer is                      2. Statutory Basis                                     general, protects investors and the
                                                priced at $10.11. The Exchange will                        The Exchange believes that the                      public interest.
                                                route the order away from the Exchange                  proposed rule changes are consistent                      The Exchange also believes it is
                                                as a bid to buy 300 shares at $10.10.                   with Section 6(b) of the Securities                    consistent with the Act to execute
                                                Assume that the order obtains one 100                   Exchange Act of 1934 (the ‘‘Act’’) 15 and              Discretionary orders and orders with a
                                                share execution through the routing                     further the objectives of Section 6(b)(5)              Super Aggressive Re-Route instruction
                                                process and then returns to the                         of the Act 16 because they are designed                against marketable liquidity (i.e., BATS
                                                Exchange. The Exchange will post the                    to promote just and equitable principles               Post Only Orders and Partial Post Only
                                                order as a bid to buy 200 shares at                     of trade, to remove impediments to and                 Orders) when an execution would not
                                                $10.10. If the Exchange subsequently                    perfect the mechanism of a free and                    otherwise occur is consistent with both:
                                                receives a BATS Post Only Order to sell                 open market and a national market                      (i) the Act, by facilitating executions,
                                                priced at $10.09 per share, such order                  system, to foster cooperation and                      removing impediments and perfecting
                                                will execute against the posted order to                coordination with persons engaged in                   the mechanism of a free and open
                                                buy with an execution price of $10.10.                  facilitating transactions in securities,               market and national market system; and
                                                The posted buy order will be treated as                 and, in general, to protect investors and              (ii) a User’s instructions, which have
                                                the liquidity provider and the incoming                 the public interest. The proposed rule                 evidenced a willingness by the User to
                                                BATS Post Only Order to sell will be                    changes are also designed to support the               pay applicable execution fees and/or
                                                treated as the liquidity remover, based                 principles of Section 11A(a)(1) 17 of the              execute at more aggressive prices than
                                                on the Exchange’s rules that execute                    Act in that they seek to assure fair                   they are currently ranked in favor of an
                                                BATS Post Only Orders on entry if such                  competition among brokers and dealers                  execution. The Exchange also believes
                                                execution is in their economic interest.                and among exchange markets.                            that the proposed rule change provides
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                                                   However, assuming the same facts as                     The modifications related to routable               additional specificity regarding the
                                                above, if the incoming BATS Post Only                   orders with a TIF of IOC, Pegged Orders,               functionality of the System with regard
                                                Order to sell is priced at $10.10 and                   Mid-Point Peg Orders, Discretionary                    to routable non-displayed orders that
                                                thus does not remove liquidity pursuant                 Orders, and the Exchange’s priority,                   have been crossed by another accessible
                                                to the economic best interest                                                                                  Trading Center, thereby promoting just
                                                functionality, the posted order with a                    15 15 U.S.C. 78f(b).                                 and equitable principles of trade and
                                                                                                          16 15 U.S.C. 78f(b)(5).                              removing impediments to a free and
                                                  14 See   id.                                            17 15 U.S.C. 78k–1(a)(1).                            open market.


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                                                                          Federal Register / Vol. 80, No. 32 / Wednesday, February 18, 2015 / Notices                                                      8727

                                                B. Self-Regulatory Organization’s                       Internet Web site (http://www.sec.gov/                 The Commission is publishing this
                                                Statement on Burden on Competition                      rules/sro.shtml). Copies of the                        notice to solicit comments on the
                                                   The Exchange does not believe that                   submission, all subsequent                             proposed rule change from interested
                                                the proposed rule changes will result in                amendments, all written statements                     persons.
                                                any burden on competition that is not                   with respect to the proposed rule
                                                                                                        change that are filed with the                         I. Self-Regulatory Organization’s
                                                necessary or appropriate in furtherance                                                                        Statement of the Terms of the Substance
                                                of the purposes of the Act. The                         Commission, and all written
                                                                                                        communications relating to the                         of the Proposed Rule Change
                                                proposed rule changes are not designed
                                                to address any competitive issue but                    proposed rule change between the                          The Exchange proposes to clarify the
                                                rather to add specificity and clarity to                Commission and any person, other than                  fees applicable to the list of securities
                                                Exchange rules, thus providing greater                  those that may be withheld from the                    eligible for the Select Symbol program
                                                transparency regarding the operation of                 public in accordance with the                          under Rule 7018(a)(4), and to clarify
                                                the System.                                             provisions of 5 U.S.C. 552, will be                    that the fees of the program are on a per
                                                                                                        available for Web site viewing and                     share basis.
                                                C. Self-Regulatory Organization’s                       printing in the Commission’s Public                       The text of the proposed rule change
                                                Statement on Comments on the                            Reference Room at 100 F Street NE.,                    is available on the Exchange’s Web site
                                                Proposed Rule Change Received From                      Washington, DC 20549–1090 on official                  at http://nasdaq.cchwallstreet.com, at
                                                Members, Participants, or Others                        business days between the hours of                     the principal office of the Exchange, and
                                                  The Exchange has neither solicited                    10:00 a.m. and 3:00 p.m. Copies of such                at the Commission’s Public Reference
                                                nor received written comments on the                    filing also will be available for                      Room.
                                                proposed rule changes.                                  inspection and copying at the principal
                                                                                                                                                               II. Self-Regulatory Organization’s
                                                                                                        office of the Exchange. All comments
                                                III. Date of Effectiveness of the                                                                              Statement of the Purpose of, and
                                                                                                        received will be posted without change;
                                                Proposed Rule Change and Timing for                     the Commission does not edit personal                  Statutory Basis for, the Proposed Rule
                                                Commission Action                                       identifying information from                           Change
                                                   Within 45 days of the date of                        submissions. You should submit only                      In its filing with the Commission, the
                                                publication of this notice in the Federal               information that you wish to make                      Exchange included statements
                                                Register or within such longer period (i)               available publicly. All submissions                    concerning the purpose of and basis for
                                                as the Commission may designate up to                   should refer to File Number SR–BATS–                   the proposed rule change and discussed
                                                90 days of such date if it finds such                   2015–09, and should be submitted on or                 any comments it received on the
                                                longer period to be appropriate and                     before March 11, 2015.                                 proposed rule change. The text of these
                                                publishes its reasons for so finding or                   For the Commission, by the Division of               statements may be examined at the
                                                (ii) as to which the Exchange consents,                 Trading and Markets, pursuant to delegated             places specified in Item IV below. The
                                                the Commission will: (a) by order                       authority.18                                           Exchange has prepared summaries, set
                                                approve or disapprove such proposed                     Brent J. Fields,                                       forth in sections A, B, and C below, of
                                                rule change, or (b) institute proceedings               Secretary.                                             the most significant aspects of such
                                                to determine whether the proposed rule                  [FR Doc. 2015–03222 Filed 2–17–15; 8:45 am]            statements.
                                                change should be disapproved.                           BILLING CODE 8011–01–P                                 A. Self-Regulatory Organization’s
                                                IV. Solicitation of Comments                                                                                   Statement of the Purpose of, and
                                                  Interested persons are invited to                                                                            Statutory Basis for, the Proposed Rule
                                                                                                        SECURITIES AND EXCHANGE                                Change
                                                submit written data, views, and                         COMMISSION
                                                arguments concerning the foregoing,                                                                            1. Purpose
                                                including whether the proposed rule                     [Release No. 34–74259; File No. SR–
                                                                                                        NASDAQ–2015–010]                                         The purpose of the proposed rule
                                                change is consistent with the Act.
                                                                                                                                                               change is to clarify that routing fees
                                                Comments may be submitted by any of                     Self-Regulatory Organizations; The                     under Rules 7018(a)(1) through (3)
                                                the following methods:                                  NASDAQ Stock Market LLC; Notice of                     apply to the securities of the Select
                                                Electronic Comments                                     Filing and Immediate Effectiveness of                  Symbol program under Rule 7018(a)(4),
                                                  • Use the Commission’s Internet                       Proposed Rule Change To Clarify the                    and to clarify that fees and credits under
                                                comment form (http://www.sec.gov/                       Application of Fees to Securities Under                the program are calculated on a per
                                                rules/sro.shtml); or                                    the Select Symbol Program of Rule                      share executed basis. NASDAQ recently
                                                  • Send an email to rule-comments@                     7018(a)(4)                                             adopted the Select Symbol program,3
                                                sec.gov. Please include File Number SR–                                                                        which provides lower fees for
                                                                                                        February 11, 2015.
                                                BATS–2015–09 on the subject line.                                                                              executions received on NASDAQ in a
                                                                                                           Pursuant to Section 19(b)(1) of the
                                                                                                                                                               select group of securities where access
                                                Paper Comments                                          Securities Exchange Act of 1934
                                                                                                                                                               fees may be discouraging the use of
                                                                                                        (‘‘Act’’),1 and Rule 19b–4 thereunder,2
                                                  • Send paper comments in triplicate                   notice is hereby given that on February                public markets. NASDAQ implemented
                                                to Brent J. Fields, Secretary, Securities               2, 2015, The NASDAQ Stock Market                       the program on February 2, 2015. Under
                                                and Exchange Commission, 100 F Street                   LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed                 the new rule, the Exchange states that it
                                                NE., Washington, DC 20549–1090.                         with the Securities and Exchange
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                                                                                                                                                                 3 See Securities Exchange Act Release No. 73967
                                                All submissions should refer to File                    Commission (‘‘SEC’’ or ‘‘Commission’’)                 (December 30, 2014), 80 FR 594 (January 6, 2015)
                                                Number SR–BATS–2015–09. This file                       the proposed rule change as described                  (SR–NASDAQ–2014–128). On January 27, 2015, the
                                                number should be included on the                        in Items I and II below, which Items                   Exchange filed an immediately effective filing
                                                subject line if email is used. To help the              have been prepared by the Exchange.                    replacing a security on the list of securities under
                                                Commission process and review your                                                                             the rule. See SR–NASDAQ–2015–006 available at
                                                                                                                                                               http://nasdaq.cchwallstreet.com/NASDAQ/pdf/
                                                comments more efficiently, please use                     18 17 CFR 200.30–3(a)(12).                           nasdaq-filings/2015/SR-NASDAQ-2015-006.pdf
                                                only one method. The Commission will                      1 15 U.S.C. 78s(b)(1).                               (awaiting Commission notice and publication in the
                                                post all comments on the Commission’s                     2 17 CFR 240.19b–4.                                  Federal Register).



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Document Created: 2018-02-16 11:10:12
Document Modified: 2018-02-16 11:10:12
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 8720 

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