81 FR 10345 - Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend Its Rules Regarding the Auction Process for Securities Subject to an Initial Public Offering
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 39 (February 29, 2016)
Federal Register Volume 81, Issue 39 (February 29, 2016)
| Page Range | 10345-10350 | |
| FR Document | 2016-04358 |
[Federal Register Volume 81, Number 39 (Monday, February 29, 2016)] [Notices] [Pages 10345-10350] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-04358] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77222; File No. SR-BATS-2016-17] Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend Its Rules Regarding the Auction Process for Securities Subject to an Initial Public Offering February 24, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on February 10, 2016, BATS Exchange, Inc. (the ``Exchange'' or ``BATS'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. On February 22, 2016, the Exchange filed Amendment No. 1 to the proposal.\3\ The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ In Amendment No. 1, the Exchange proposes to correct a technical error regarding incorrect terminology used in a footnote and to clarify a sentence regarding an order with a time-in-force of RHO that would be converted to an order with a time-in-force of Day under the proposed rule change. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend Exchange Rule 11.23 entitled ``Auctions'' to: (i) Modify the definition of the term ``Eligible Auction Order'' under paragraph (a)(8) to refine the types of orders that may participate in an auction for a BATS listed corporate security \4\ in an initial public offering (``IPO'') on the Exchange (``IPO Auction'') and make a related change to Exchange Rule 11.1, Hours of Trading and Trading Days; (ii) extend the Quote-Only Period \5\ under paragraph (d)(1)(A); (iii) state that the Quote-Only Period may be extended in the event of an Exchange technical or systems issue under proposed paragraph (d)(2)(B)(iv); and (iv) make technical changes to paragraphs (b)(1)(A), (c)(1)(A), and (d)(2). --------------------------------------------------------------------------- \4\ A BATS listed corporate security is a security listed on the Exchange pursuant to Chapter 14 of the Exchange's Rules that is not an Exchange Traded Product (``ETP'') listed on the Exchange pursuant to Exchange Rule 14.11. See also infra note 7. \5\ See Exchange Rule 11.23(a)(17). --------------------------------------------------------------------------- The text of the proposed rule change is available at the Exchange's Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Exchange Rule 11.23 entitled ``Auctions'' to: (i) Modify the definition of the term ``Eligible Auction Order'' under paragraph (a)(8) to refine the types of orders that may participate in an IPO Auction and make a related change to Exchange Rule 11.1, Hours of Trading and Trading Days; (ii) extend the Quote-Only Period under paragraph (d)(1)(A); (iii) state that the Quote-Only Period may be extended in the event of an Exchange technical or systems issue under proposed paragraph (d)(2)(B)(iv); and (iv) make technical changes to paragraphs (b)(1)(A), (c)(1)(A), and (d)(2). Eligible Auction Orders The Exchange proposes to refine the types of orders that may participate in an IPO Auction for a BATS listed corporate security by amending the definition of Eligible Auction Orders under Exchange Rule 11.23(a)(8) to either reject, convert, or ignore certain types of orders, as set forth below. As proposed, Limit Orders \6\ and BATS Market Orders,\7\ the two main types of orders offered by the Exchange, would be allowed to participate in an IPO Auction for a BATS listed corporate security. The Exchange does not propose to amend the types of Eligible Auction Orders that may participate in an auction for a newly listed Exchange Traded Product.\8\ The Exchange believes refining the types of orders processed in an IPO Auction and/or placed onto the BATS Book \9\ following such IPO Auction would simplify and reduce the complexity of the IPO Auction for BATS listed corporate securities. The Exchange believes doing so would aid in ensuring a robust but streamlined IPO Auction process for a newly listed corporate securities. --------------------------------------------------------------------------- \6\ See Exchange Rule 11.9(a)(1). \7\ See Exchange Rule 11.9(a)(2). \8\ An Exchange Traded Product is a security that is listed on the Exchange pursuant to Rule 14.11. \9\ See Exchange Rule 1.5(e). --------------------------------------------------------------------------- Types of Orders to be Accepted or Rejected. The term Eligible Auction Order is currently defined under Exchange Rule 11.23(a)(8) as any Market-On-Open (``MOO''),\10\ Limit-On- [[Page 10346]] Open (``LOO''),\11\ Late-Limit-On-Open (``LLOO''),\12\ Market-On-Close (``MOC''),\13\ Limit-On-Close (``LOC''),\14\ or Late-Limit-On-Close (``LLOC'') \15\ order that is entered in compliance with its respective cutoff for an Opening or Closing Auction,\16\ any Regular Hours Only (``RHO'') \17\ order prior to the Opening Auction, any Limit or Market Order not designated to exclusively participate in the Closing Auction entered during the Quote-Only Period of an IPO Auction,\18\ and any Limit or Market Order not designated to exclusively participate in the Opening or Closing Auction entered during the Quote-Only Period of a Halt Auction.\19\ The Exchange proposes to amend the definition of Eligible Auction Orders to refine the types of orders that may participate in an IPO Auction for a BATS listed corporate security. --------------------------------------------------------------------------- \10\ See Exchange Rule 11.23(a)(16). \11\ See Exchange Rule 11.23(a)(14). \12\ See Exchange Rule 11.23(a)(12). \13\ See Exchange Rule 11.23(a)(15). \14\ See Exchange Rule 11.23(a)(13). \15\ See Exchange Rule 11.23(a)(11). \16\ The Opening and Closing Auction processes are described in Exchange Rules 11.23(b) and (c). \17\ See Exchange Rule 11.9(b)(7). \18\ See Exchange Rules 11.23(d)(1)(A). \19\ Id. The Exchange also proposes to amend Rule 11.1 to make clear that it will not accept BATS Market Orders that are not Eligible Auction Orders prior to 8:00 a.m. Eastern Time. --------------------------------------------------------------------------- As is currently the case, Limit Orders and BATS Market Orders entered during the Quote-Only Period would be allowed to participate in an IPO Auction for a BATS listed corporate security provided they do not also include one or more of the modifiers described below that would result in rejection. Specifically, the Exchange proposes to exclude under proposed subparagraph (a)(8)(A) to Rule 11.23 the following types of orders from participation in an IPO Auction and to reject such orders: Stop Orders \20\ and Stop Limit Orders; \21\ Pegged Orders,\22\ Mid-Point Peg Orders,\23\ Market Maker Peg Orders \24\ and Supplemental Peg Orders; \25\ Minimum Quantity Orders \26\ and Discretionary Orders; \27\ MOC, LOC and LLOC orders; and orders with a time-in-force of Fill-or-Kill (``FOK'') \28\ and orders with a time-in- force of Good-'til-Day (``GTD'') with an expiration time earlier than 4:00 p.m. Eastern Time.\29\ Such orders entered to participate in an IPO Auction would be rejected. --------------------------------------------------------------------------- \20\ See Exchange Rule 11.9(c)(17). \21\ See Exchange Rule 11.9(c)(18). \22\ See Exchange Rule 11.9(c)(8). \23\ See Exchange Rule 11.9(c)(9). \24\ See Exchange Rule 11.9(c)(16). \25\ See Exchange Rule 11.9(c)(19). \26\ See Exchange Rule 11.9(c)(5). \27\ See Exchange Rule 11.9(b)(10) [sic]. \28\ See Exchange Rule 11.9(c)(6) [sic]. \29\ See Exchange Rule 11.9(b)(4). --------------------------------------------------------------------------- The Exchange believes it is reasonable to reject orders with the above characteristics from participating in the IPO Auction because doing so will aid in reducing systems complexity and risk associated both with completing the IPO Auction and with transferring any unexecuted portion of such orders to the BATS Book once the auction is complete. These orders are also not commonly utilized as compared to other types of orders and the rejection of such orders should not have a significant impact on Members. In addition, the Exchange believes these types of orders contain certain attributes that are not compatible with the process of an IPO Auction. For example, Stop Orders and Stop Limit Orders are not eligible for execution until their stop price is triggered by an execution, which is an attribute that is not compatible with the IPO Auction process, as that process will result in the first execution for an IPO Security. In addition, Pegged Orders, Mid-Point Peg Orders, Market Maker Peg Orders, and Supplemental Peg Orders are priced in relation to the National Best Bid or Offer (``NBBO''). An NBBO is not established until after the IPO Auction is complete and secondary trading begins. Therefore, the participation of these orders is also incompatible with the IPO Auction process. The Exchange also proposes to reject Minimum Quantity Orders and Discretionary Orders entered to participate in an IPO Auction. In sum, Minimum Quantity Orders will only execute if a minimum number of shares can be obtained while a Discretionary Order includes both a displayed price and a non-displayed discretionary price. Orders entered to participate in an IPO Auction need to represent the full trading interest for the security subject to the IPO Auction because that auction relies on matching buy and sell orders based on their displayed price and full displayed size. Therefore, the Exchange believes it is reasonable to reject Discretionary Orders and Minimum Quantity Orders entered to participate in the IPO Auction as these types of orders contain variables (i.e., minimum execution size or a non-displayed discretionary price) that are not compatible with the IPO Auction process. The Exchange also believes it is reasonable to reject orders with a time-in-force of FOK, a time-in-force of GTD with an expiration time earlier than 4:00 p.m. Eastern Time, as well as MOC, LOC, and LLOC orders that are entered to participate in an IPO Auction. Orders with a time-in-force of FOK require that they be executed in full or will be cancelled upon receipt by the Exchange. Orders with a time-in-force of FOK are therefore not compatible with the IPO Auction process as orders participating in the IPO Auction process may not be fully executed in the auction and seeking to honor the intent of the instruction would complicate the processing of the IPO Auction. The Exchange also believes it is reasonable to reject GTD Orders with an expiration time earlier than 4:00 p.m. Eastern Time entered to participate in an IPO Auction. Doing so would prevent the possibility of entry of GTD Orders with an expiration time either prior to, during or immediately following the IPO Auction, thereby reducing system complexity associated with processing such orders. Lastly, the Exchange also believes it is reasonable to reject MOC, LOC, and LLOC orders entered to participate in an IPO Auction because the terms of those orders require that they participate in the Exchange's closing auction process. The Exchange notes that such orders are already excluded from an IPO Auction based on the definition of Eligible Auction Order, however, the Exchange believes it is reasonable to include such orders in the list with other rejected types of orders to avoid potential confusion. Types of Orders to be Converted. The Exchange also proposes to adopt subparagraph (a)(8)(B) to Rule 11.23, which would set forth the types of orders that would be converted by the Exchange for purposes of participating in the IPO Auction for a BATS listed corporate security. First, orders with a time-in-force of Immediate-or-Cancel (``IOC'') \30\ will be converted as follows: A Market Order with a time-in-force of IOC will be converted to a MOO and a Limit Order with a time-in- force of IOC will be converted to a LOO. Second, orders with a time-in- force of RHO will be converted to orders with a time-in-force of Day. Third, any orders eligible to be routed will be converted to a BATS Only Order.\31\ Upon completion of the IPO Auction, any remainder not executed in the auction will be placed on the BATS Book, executed, cancelled or routed away in accordance with the converted terms of the order. Such orders would not revert back to the original type modifier the User included with the order. --------------------------------------------------------------------------- \30\ See Exchange Rule 11.9(c)(4). \31\ See Exchange Rule 11.9(b)(1). --------------------------------------------------------------------------- As stated above, the types of orders entered to participate in the IPO Auction that the Exchange proposes to reject under proposed Rule [[Page 10347]] 11.23(a)(8)(A) are less commonly used and the rejection of such orders should not have a significant impact on Members. In contrast, the types of orders the Exchange proposes to convert into other types of orders are more commonly used by Members. Also, the types of orders that the Exchange proposes to convert to do not materially deviate from the type of order that was originally entered. The Exchange believes it is reasonable to convert rather than reject the above types of orders because it would accommodate those Members that have automated their systems to send orders to the Exchange without significantly altering the operation of the order from what the Member originally instructed. Such Members may also not be able to re-submit a rejected order with the correct modifier in time to participate in the IPO Auction. Therefore, the Exchange is concerned that rejecting, rather than converting those types of orders as proposed, would inappropriately burden those Members and deter their participation in an IPO Auction. First, the Exchange believes it is reasonable to convert Market Orders with a time-in-force of IOC to MOOs and Limit Orders with a time-in-force of IOC to LOOs and notes that each of these orders would operate in substantially similar ways. Each of the above orders would be eligible for execution in the IPO Auction and any remainder would be cancelled once the IPO Auction is complete. Second, the Exchange also believes that converting the time-in-force of RHO to the time-in-force of Day is also reasonable based on the similarity between these times- in-force. For instance, both orders with a time-in-force of RHO and orders with a time-in-force of Day are ineligible for execution until the start of Regular Trading Hours \32\ at 9:30 a.m.\33\ and are cancelled at 4:00 p.m. Eastern Time.\34\ By converting the order, however, the Exchange is able to reduce the number of types of orders that will be handled in an IPO Auction and/or placed on the BATS Book following such IPO Auction. Lastly, the Exchange also believes it is reasonable to convert routable orders to BATS Only Orders because there would be no other markets to route orders to from the time of the IPO Auction until secondary trading commences. Any remainder of a routable order that is converted to a BATS Only Order would be posted to the BATS Book upon completion of an IPO Auction. At that time, the Member could cancel the order and resubmit a routable order if such Member wished to do so. --------------------------------------------------------------------------- \32\ See Exchange Rule 1.5(w). \33\ An IPO Auction will only occur after 9:30 a.m. Eastern Time. \34\ The Exchange notes that any portion of a market order with a time-in-force of RHO will be cancelled immediately following any auction in which it is not executed. See Exchange Rule 11.9(c)(7). The Exchange does not accept market orders with a time-in-force of Day. --------------------------------------------------------------------------- Modifiers to be Ignored. The Exchange also proposes to adopt subparagraph (a)(8)(C) to Rule 11.23, which would set forth the modifiers on an order that has been entered to participate in an IPO Auction that would be ignored for purposes of completing the IPO Auction. Such modifiers would be permanently ignored with respect to an order, including after placement on the BATS Book, unless otherwise specified in the proposed Rule. First, as proposed, Match Trade Prevention (``MTP'') modifiers \35\ will not be applied until the IPO Auction is complete but will be applied in the event any unexecuted portion is placed on the BATS Book. Pursuant to Rule 11.9(f), any incoming order designated with an MTP modifier will normally be prevented from executing against a resting opposite side order also designated with an MTP modifier and originating from the same User. However, during an IPO Auction the MTP Modifier would be ignored and such orders may be matched against each other. Upon completion of the IPO Auction, an MTP modifier will be recognized and any remainder not executed in the auction will be placed on the BATS Book and executed or cancelled in accordance with the original MTP modifier appended to the order. The Exchange believes it is reasonable to ignore an MTP modifier during the IPO Auction as preventing such a Member's orders from executing against each other during an IPO Auction would add unnecessary complexity. Most Members that utilize MTP modifiers have configured their connectivity to the Exchange to add the MTP Modifier to all of their orders. If the Exchange were to reject orders with a MTP modifier it would impose an inappropriate burden on Members who utilize such modifiers, thereby impairing their ability to participate in the IPO Auction. The Exchange notes that any remainder not executed in the IPO Auction will be executed or cancelled in accordance with the original MTP modifier. --------------------------------------------------------------------------- \35\ See Exchange Rule 11.9(f). --------------------------------------------------------------------------- Second, an instruction to treat an order as an Attributable Order will be ignored, meaning that any such order's execution will be displayed anonymously.\36\ The Exchange believes it is reasonable to ignore such instructions as orders entered into an IPO Auction as not displayed individually but instead as aggregated interest in the Exchange's data feeds. --------------------------------------------------------------------------- \36\ See also Nasdaq Stock Market LLC (``Nasdaq'') Rule 4753(b)(4) (stating that orders executed as part of the Nasdaq Halt Cross shall be trade reported anonymously). --------------------------------------------------------------------------- Third, an ISO instruction or a Post Only instruction included with a Limit Order will also be ignored during the IPO Auction. The Exchange believes it is reasonable to ignore an ISO instruction are such instructions are incompatible with an IPO Auction. For instance, an ISO instruction informs the Exchange that the sender simultaneously routed one or more additional limit orders, as necessary, to execute against the full displayed size of any protected bid or offer with a price that is superior to the limit price of the limit order identified as an ISO. The Exchange is the sole market for a security subject to an IPO Auction up until the time secondary trading commences and the ISO designation is therefore incompatible with the IPO Auction. Similarly, BATS Post Only Order is an order that instructs the Exchange not to remove liquidity from the BATS Book, provided that BATS Post Only Orders do remove liquidity under certain circumstances outlined in Rule 11.9(c)(6). In an IPO Auction, orders are matched and there is no true ``adder'' or ``remover'' of liquidity. Accordingly, a Post Only instruction is incompatible with the IPO Auction. In contrast to orders under proposed Rule 11.23(a)(8)(A) discussed above, which the Exchange proposes to reject, the Exchange believes that it is reasonable to ignore an ISO instruction or a Post Only instruction on an order rather than to reject such orders because such orders are sufficiently common and may require additional programming by Members in order to avoid sending such instructions solely for an IPO Auction. Lastly, the Maximum Remove Percentage of a Partial Post Only at Limit Order \37\ as well as the replenishment range of a Reserve Order with a Random Replenishment instruction will be ignored during the IPO Auction.\38\ The Exchange also [[Page 10348]] believes it is reasonable to ignore these order instructions for the same reason it proposes to reject Discretionary Orders and Minimum Quantity Order under proposed Rule 11.23(a)(8)(A) discussed above. Orders entered to participate in an IPO Auction need to represent the full trading interest for the security subject to the IPO Auction because that auction relies on matching buy and sell orders based on their displayed prices and full displayed size. Therefore, the Exchange believes it is reasonable to ignore the Maximum Remove Percentage of a Partial Post Only at Limit Order and the replenishment range of a Reserve Order with a Random Replenishment instruction entered to participate in the IPO Auction as these types of order instructions contain variables (i.e., maximum remove requirements or non-displayed size) that are not compatible with the IPO Auction process. In contrast to Discretionary Orders and Minimum Quantity Orders under proposed Rule 11.23(a)(8)(A) discussed above, which the Exchange proposes to reject, the Exchange believes that it is reasonable to ignore the Maximum Remove Percentage of a Partial Post Only at Limit Order and the replenishment range of a Reserve Order with a Random Replenishment instruction rather than to reject such orders because such orders can still be handled consistent with the overall intent of the order. --------------------------------------------------------------------------- \37\ See Exchange Rule 11.9(c)(7). In sum, the Maximum Remove Percentage enables a User to enter a Partial Post Only at Limit Order instructing the Exchange to also remove liquidity from the BATS Book at the order's limit price up to a designated percentage of the remaining size of the order after any execution pursuant to paragraph (A) of Rule 11.9(c)(7). See Exchange Rule 11.9(c)(7)(B). \38\ Random Replenishment is an instruction that a User may attach to an order with Reserve Quantity where replenishment quantities for the order are randomly determined by the System within a replenishment range established by the User. In particular, the User entering an order into the System subject to the Random Replenishment instruction must select a replenishment value and a Max Floor. The initial Display Quantity will be the Max Floor. The Display Quantity of an order when replenished will be determined by the System randomly selecting a round lot number of shares within a replenishment range that is between: (i) the Max Floor minus the replenishment value; and (ii) the Max Floor plus the replenishment value. See Exchange Rule 11.9(c)(1)(A). --------------------------------------------------------------------------- With the exception of MTP modifiers discussed above, all modifiers listed under proposed Rule 11.23(a)(8)(C) will not be further considered with respect to an order upon completion of the IPO Auction. Any remainder not executed in the auction will be placed on the BATS Book, executed, cancelled or routed away in accordance with the modified terms of the order. Extension of Quote-Only Period The Exchange proposes to extend the Quote-Only Period for an IPO Auction under Exchange Rule 11.23(d)(1)(A). The Quote-Only Period is the designated period of time prior to a Halt Auction, a Volatility Closing Auction, or an IPO Auction during which Users may submit orders to the Exchange for participation in the auction.\39\ With regard to an IPO Auction, the Quote-Only Period currently begins fifteen (15) minutes plus a short random period prior to such Auction.\40\ The Exchange proposes to amend Rule 11.23(d)(1)(A) to extend the Quote-Only Period for an ETP such that it commences at 8:00 a.m., which is the beginning of the Exchange's Pre-Opening Session. With regard to an ETP, the Exchange does not believe that there is reason to restrict quoting in such products to a specified amount of time prior to the auction and that additional time is warranted. In particular, the Exchange believes that allowing a longer Quote-Only Period will encourage the entry of orders prior to an IPO Auction for a newly issued ETP, which typically have low participation rates especially when compared to IPO Auctions for corporate securities. Further, while an IPO Auction for a corporate security is typically conducted at least 30 minutes after the commencement of Regular Trading Hours, an IPO Auction for a newly issued ETP is typically conducted at the beginning of Regular Trading Hours (i.e., 9:30 Eastern Time), and thus may not afford much time for participants to enter orders prior to such auction. For these reasons, the Exchange believes that a longer Quote-Only Period for ETPs is warranted. --------------------------------------------------------------------------- \39\ See Exchange Rule 11.23(a)(17). \40\ See Exchange Rule 11.23(d)(1)(A). --------------------------------------------------------------------------- The Exchange proposes to extend the Quote-Only Period for a BATS listed corporate security to begin at a time announced in advance by the Exchange that shall be between fifteen (15) and thirty (30) minutes plus a short random period prior to such IPO Auction. The Exchange believes that extending the Quote-Only period as proposed is reasonable as it would provide market participants more time to enter orders to participate in the IPO Auction. Extension of the Quote-Only Period would also enable the underwriters more time to evaluate the scope of demand for, and supply of, the security subject to the IPO Auction (``IPO Security''), in a manner that will allow it to make more informed decisions about the appropriate time to initiate the opening of the IPO Security through the IPO Auction. The Exchange would determine the length of time of the Quote-Only Period for a BATS listed corporate security (i.e., what time between fifteen (15) and thirty (30) minutes) in consultation with the issuer of the IPO security and would announce the length of time for the Quote-Only Period in advance of the commencement of such period.\41\ --------------------------------------------------------------------------- \41\ The scope of market participants notified regarding the anticipated commencement the Quote-Only Period (or extension of Quote-Only Period, as described below) would include but would not be limited to Members of the Exchange. Such notice would also include those market participants, individuals or entities that have subscribed to the Exchange's notification system. The Exchange intends to send notifications regarding the Quote-Only Period via email, as it does with most public notifications today. The Exchange notes that it does, in certain circumstances, post information on its public Web site in addition to email dissemination. --------------------------------------------------------------------------- (a) [sic] Currently, the Exchange may extend the Quote-Only Period under Rule 11.23(d)(2)(B) for an IPO Auction beyond the above timeframes where: (i) There are unmatched Market Orders on the Auction Book; (ii) the underwriter requests an extension; or (iii) where the Indicative Price moves the greater of 10% or fifty (50) cents in the fifteen (15) seconds prior to the auction. The Exchange proposes to amend Rule 11.23(d)(2)(B) to enable it to also extend the Quote-Only Period in the event of a technical or systems issue at the Exchange that may impair the ability of Users to participate in the IPO Auction or of the Exchange to complete the IPO Auction. The Exchange believes it is reasonable to be able to extend the Quote-Only Period in the event of a technical or systems issue at the Exchange as such an issue may prevent market participants from entering orders during the Quote- Only Period, resulting in less liquidity which may prevent the underwriters from adequately accessing the trading interest of the IPO Security. In such case, the Exchange believes it is reasonable to extend the Quote-Only Period in the event of a technical or systems issue to provide market participants the adequate time to enter orders to participate in the IPO auction. The Exchange also proposes to adopt paragraph (C) to codify its intention to notify market participants regarding extensions to the Quote-Only Period. As proposed, the Exchange will notify market participants in the event of any extension to the Quote-Only Period pursuant to paragraph (B), including details regarding the circumstances and length of the extension.\42\ In connection with this change, the Exchange proposes to designate current paragraph (C) of Rule 11.23(d)(2) as paragraph (D). --------------------------------------------------------------------------- \42\ Id. --------------------------------------------------------------------------- Technical Changes The Exchange also proposes to make the following technical changes to Rule 11.23:Amend paragraphs (b)(1)(A) and (c)(1)(A) to replace the phrase ``starting at 8:00 a.m., the beginning of the Pre- [[Page 10349]] Opening Session'' with ``as set forth in Rule 11.1''. Paragraph (b)(1)(A) sets forth when a User may enter or cancel orders that are to participate in the opening auction. Paragraph (c)(1)(A) sets forth when a User may enter or cancel orders that are to participate in the closing auction. Rule 11.1 governs when orders may be entered into the System and when they may be eligible for execution. The Exchange believes cross-referencing Rule 11.1 within paragraphs (b)(1)(A) and (c)(1)(A) would assist in avoiding investor confusion as Rule 11.1 provides additional detail on when and orders may be entered into the System Amend paragraph (d)(2)(A) to replace with term ``quotation only period'' with the defined term ``Quote-Only Period''. Neither of the above proposed changes would amend the meaning or operation of paragraphs (b)(1)(A), (c)(1)(A), or (d)(2)(A) of Rule 11.23. The Exchange simply proposes these changes to make the rules easier to understand and avoid potential investor confusion. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,\43\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\44\ in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. The Exchange believes amending the definition of Eligible Auction Orders to reject, convert, or ignore certain types of orders in connection with the IPO Auction process for a BATS listed corporate security would promote just and equitable principles of trade by simplifying and reducing the complexity of the auction process as well as the process of transferring unexecuted interest to the BATS Book following the auction process. The Exchange also believes the proposed limitations remove impediments to and perfect the mechanism of a free and open market and a national market system by appropriately limiting the types of orders that may participate to those types of orders that are consistent with the purpose of an IPO Auction. --------------------------------------------------------------------------- \43\ 15 U.S.C. 78f. \44\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes extending the Quote-Only period would promote just and equitable principles of trade, and to remove impediments to and perfect the mechanism of a free and open market and a national market system by providing market participants with additional time to enter orders to participate in the IPO Auction. The Exchange believes that allowing a longer Quote-Only Period for ETPs will encourage the entry of orders prior to an IPO Auction for a newly issued ETP. Extension of the Quote-Only Period for a corporate security would similarly provide market participants with additional time to enter orders to participate in the IPO Auction and would also enable the underwriters more time to evaluate the scope of demand for, and supply of, the IPO Security, in a manner that will allow it to make more informed decisions about the appropriate time to initiate the opening of the IPO Security through the IPO Auction. The Exchange believes that extending the Quote-Only Period in the event of a technical or systems issue at the Exchange also remove impediments to and perfect the mechanism of a free and open market and a national market system. A technical or systems issue may prevent market participants from entering orders during the Quote-Only Period or prevent the Exchange from successfully completing the IPO Auction. In such case, the Exchange believes it is reasonable to extend the Quote-Only Period to provide market participants with additional time to enter orders and access the market for the IPO Security after the technical or systems issue is remedied. Lastly, the Exchange believes that the technical changes to paragraphs (b)(1)(A), (c)(1)(A), or (d)(2)(A) of Rule 11.23 are consistent with Section 6(b)(5) of the Act \45\ because they are intended to make the rules easier to understand and avoid potential investor confusion, thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system, and, in general, protecting investors and the public interest. --------------------------------------------------------------------------- \45\ Id. --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes its proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposal would increase competition by reducing the complexity of its IPO Auction process for BATS listed corporate securities through reducing the number of allowable types of orders. In addition, the Exchange believes that the proposed extensions of the Quote-Only Period would also increase competition by providing additional time for market participants to enter orders to participate in the IPO Auction, potentially resulting in improved liquidity and price discovery. Lastly, the Exchange believes that the technical changes to paragraphs (b)(1)(A), (c)(1)(A), or (d)(2)(A) of Rule 11.23 would not impose any burden on completion as they are not intended to amend the meaning or operation of these rules. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from Members or other interested parties. 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 up to 90 days (i) as the Commission may designate 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, as modified by Amendment No. 1, 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-2016-17 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. [[Page 10350]] All submissions should refer to File Number SR-BATS-2016-17. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-BATS-2016-17, and should be submitted on or before March 21, 2016. --------------------------------------------------------------------------- \46\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\46\ Robert W. Errett, Deputy Secretary. [FR Doc. 2016-04358 Filed 2-26-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 39 / Monday, February 29, 2016 / Notices 10345
7. Count and volume arriving of limit sell (‘‘SEC’’ or ‘‘Commission’’) the proposed the most significant parts of such
orders priced at or above NBBO mid- rule change as described in Items I and statements.
point plus $0.05 II below, which Items have been
8. Count and volume arriving of limit buy
prepared by the Exchange. On February A. Self-Regulatory Organization’s
orders priced at or below NBBO mid- Statement of the Purpose of, and
point minus $0.05 22, 2016, the Exchange filed
Amendment No. 1 to the proposal.3 The Statutory Basis for, the Proposed Rule
9. Count and volume of (3–8) for cancels
10. Include: ticker, date, time at start, time Commission is publishing this notice to Change
of Limit State, all data item fields in 1, solicit comments on the proposed rule 1. Purpose
last sale prior to 15-second period (null change, as modified by Amendment No.
if no trades today), range during 15- 1, from interested persons. The Exchange proposes to amend
second period, last trade during 15- Exchange Rule 11.23 entitled
second period I. Self-Regulatory Organization’s ‘‘Auctions’’ to: (i) Modify the definition
III. On May 28, 2015, Participants provided Statement of the Terms of Substance of of the term ‘‘Eligible Auction Order’’
to the SEC a supplemental joint assessment the Proposed Rule Change
under paragraph (a)(8) to refine the
relating to the impact of the Plan and
calibration of the Percentage Parameters as The Exchange filed a proposal to types of orders that may participate in
follows: amend Exchange Rule 11.23 entitled an IPO Auction and make a related
A. Assess the statistical and economic impact ‘‘Auctions’’ to: (i) Modify the definition change to Exchange Rule 11.1, Hours of
on liquidity of approaching Price Bands. of the term ‘‘Eligible Auction Order’’ Trading and Trading Days; (ii) extend
B. Assess the statistical and economic impact under paragraph (a)(8) to refine the the Quote-Only Period under paragraph
of the Price Bands on erroneous trades. types of orders that may participate in (d)(1)(A); (iii) state that the Quote-Only
C. Assess the statistical and economic impact an auction for a BATS listed corporate Period may be extended in the event of
of the appropriateness of the Percentage security 4 in an initial public offering an Exchange technical or systems issue
Parameters used for the Price Bands. under proposed paragraph (d)(2)(B)(iv);
(‘‘IPO’’) on the Exchange (‘‘IPO
D. Assess whether the Limit State is the
appropriate length to allow for liquidity Auction’’) and make a related change to and (iv) make technical changes to
replenishment when a Limit State is Exchange Rule 11.1, Hours of Trading paragraphs (b)(1)(A), (c)(1)(A), and
reached because of a temporary liquidity and Trading Days; (ii) extend the Quote- (d)(2).
gap. Only Period 5 under paragraph (d)(1)(A);
E. Evaluate concerns from the options Eligible Auction Orders
(iii) state that the Quote-Only Period
markets regarding the statistical and may be extended in the event of an The Exchange proposes to refine the
economic impact of Limit States on Exchange technical or systems issue
liquidity and market quality in the types of orders that may participate in
under proposed paragraph (d)(2)(B)(iv); an IPO Auction for a BATS listed
options markets. (Participants that
operate options exchange should also and (iv) make technical changes to corporate security by amending the
prepare such assessment reports.) paragraphs (b)(1)(A), (c)(1)(A), and definition of Eligible Auction Orders
F. Assess whether the process for entering a (d)(2). under Exchange Rule 11.23(a)(8) to
Limit State should be adjusted and The text of the proposed rule change either reject, convert, or ignore certain
whether Straddle States are problematic. is available at the Exchange’s Web site types of orders, as set forth below. As
G. Assess whether the process for exiting a
at www.batstrading.com, at the proposed, Limit Orders 6 and BATS
Limit State should be adjusted.
H. Assess whether the Trading Pauses are too principal office of the Exchange, and at Market Orders,7 the two main types of
long or short and whether the reopening the Commission’s Public Reference orders offered by the Exchange, would
procedures should be adjusted. Room. be allowed to participate in an IPO
[FR Doc. 2016–04246 Filed 2–26–16; 8:45 am] Auction for a BATS listed corporate
II. Self-Regulatory Organization’s
security. The Exchange does not
BILLING CODE 8011–01–P Statement of the Purpose of, and
propose to amend the types of Eligible
Statutory Basis for, the Proposed Rule
Auction Orders that may participate in
Change
SECURITIES AND EXCHANGE an auction for a newly listed Exchange
COMMISSION In its filing with the Commission, the Traded Product.8 The Exchange believes
Exchange included statements refining the types of orders processed in
[Release No. 34–77222; File No. SR–BATS– an IPO Auction and/or placed onto the
concerning the purpose of and basis for
2016–17]
the proposed rule change and discussed BATS Book 9 following such IPO
Self-Regulatory Organizations; BATS any comments it received on the Auction would simplify and reduce the
Exchange, Inc.; Notice of Filing of a proposed rule change. The text of these complexity of the IPO Auction for BATS
Proposed Rule Change, as Modified by statements may be examined at the listed corporate securities. The
Amendment No. 1 Thereto, To Amend places specified in Item IV below. The Exchange believes doing so would aid
Its Rules Regarding the Auction Exchange has prepared summaries, set in ensuring a robust but streamlined IPO
Process for Securities Subject to an forth in Sections A, B, and C below, of Auction process for a newly listed
Initial Public Offering corporate securities.
3 In Amendment No. 1, the Exchange proposes to
Types of Orders to be Accepted or
February 24, 2016. correct a technical error regarding incorrect Rejected. The term Eligible Auction
Pursuant to Section 19(b)(1) of the terminology used in a footnote and to clarify a
sentence regarding an order with a time-in-force of Order is currently defined under
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Securities Exchange Act of 1934 RHO that would be converted to an order with a Exchange Rule 11.23(a)(8) as any
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 time-in-force of Day under the proposed rule Market-On-Open (‘‘MOO’’),10 Limit-On-
notice is hereby given that on February change.
10, 2016, BATS Exchange, Inc. (the 4 A BATS listed corporate security is a security
6 See Exchange Rule 11.9(a)(1).
‘‘Exchange’’ or ‘‘BATS’’) filed with the listed on the Exchange pursuant to Chapter 14 of
7 See Exchange Rule 11.9(a)(2).
the Exchange’s Rules that is not an Exchange
Securities and Exchange Commission Traded Product (‘‘ETP’’) listed on the Exchange 8 An Exchange Traded Product is a security that
pursuant to Exchange Rule 14.11. See also infra is listed on the Exchange pursuant to Rule 14.11.
1 15 U.S.C. 78s(b)(1). note 7. 9 See Exchange Rule 1.5(e).
2 17 CFR 240.19b–4. 5 See Exchange Rule 11.23(a)(17). 10 See Exchange Rule 11.23(a)(16).
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![10346 Federal Register / Vol. 81, No. 39 / Monday, February 29, 2016 / Notices
Open (‘‘LOO’’),11 Late-Limit-On-Open Such orders entered to participate in an with a time-in-force of FOK require that
(‘‘LLOO’’),12 Market-On-Close IPO Auction would be rejected. they be executed in full or will be
(‘‘MOC’’),13 Limit-On-Close (‘‘LOC’’),14 The Exchange believes it is reasonable cancelled upon receipt by the Exchange.
or Late-Limit-On-Close (‘‘LLOC’’) 15 to reject orders with the above Orders with a time-in-force of FOK are
order that is entered in compliance with characteristics from participating in the therefore not compatible with the IPO
its respective cutoff for an Opening or IPO Auction because doing so will aid Auction process as orders participating
Closing Auction,16 any Regular Hours in reducing systems complexity and risk in the IPO Auction process may not be
Only (‘‘RHO’’) 17 order prior to the associated both with completing the IPO fully executed in the auction and
Opening Auction, any Limit or Market Auction and with transferring any seeking to honor the intent of the
Order not designated to exclusively unexecuted portion of such orders to the instruction would complicate the
participate in the Closing Auction BATS Book once the auction is processing of the IPO Auction. The
entered during the Quote-Only Period of complete. These orders are also not Exchange also believes it is reasonable
an IPO Auction,18 and any Limit or commonly utilized as compared to other to reject GTD Orders with an expiration
Market Order not designated to types of orders and the rejection of such time earlier than 4:00 p.m. Eastern Time
exclusively participate in the Opening orders should not have a significant entered to participate in an IPO
or Closing Auction entered during the impact on Members. In addition, the Auction. Doing so would prevent the
Quote-Only Period of a Halt Auction.19 Exchange believes these types of orders possibility of entry of GTD Orders with
The Exchange proposes to amend the contain certain attributes that are not an expiration time either prior to,
definition of Eligible Auction Orders to compatible with the process of an IPO during or immediately following the
refine the types of orders that may Auction. For example, Stop Orders and IPO Auction, thereby reducing system
Stop Limit Orders are not eligible for complexity associated with processing
participate in an IPO Auction for a
execution until their stop price is such orders. Lastly, the Exchange also
BATS listed corporate security.
triggered by an execution, which is an believes it is reasonable to reject MOC,
As is currently the case, Limit Orders attribute that is not compatible with the LOC, and LLOC orders entered to
and BATS Market Orders entered during IPO Auction process, as that process participate in an IPO Auction because
the Quote-Only Period would be will result in the first execution for an the terms of those orders require that
allowed to participate in an IPO Auction IPO Security. In addition, Pegged they participate in the Exchange’s
for a BATS listed corporate security Orders, Mid-Point Peg Orders, Market closing auction process. The Exchange
provided they do not also include one Maker Peg Orders, and Supplemental notes that such orders are already
or more of the modifiers described Peg Orders are priced in relation to the excluded from an IPO Auction based on
below that would result in rejection. National Best Bid or Offer (‘‘NBBO’’). the definition of Eligible Auction Order,
Specifically, the Exchange proposes to An NBBO is not established until after however, the Exchange believes it is
exclude under proposed subparagraph the IPO Auction is complete and reasonable to include such orders in the
(a)(8)(A) to Rule 11.23 the following secondary trading begins. Therefore, the list with other rejected types of orders
types of orders from participation in an participation of these orders is also to avoid potential confusion.
IPO Auction and to reject such orders: incompatible with the IPO Auction Types of Orders to be Converted. The
Stop Orders 20 and Stop Limit Orders; 21 process. Exchange also proposes to adopt
Pegged Orders,22 Mid-Point Peg The Exchange also proposes to reject subparagraph (a)(8)(B) to Rule 11.23,
Orders,23 Market Maker Peg Orders 24 Minimum Quantity Orders and which would set forth the types of
and Supplemental Peg Orders; 25 Discretionary Orders entered to orders that would be converted by the
Minimum Quantity Orders 26 and participate in an IPO Auction. In sum, Exchange for purposes of participating
Discretionary Orders; 27 MOC, LOC and Minimum Quantity Orders will only in the IPO Auction for a BATS listed
LLOC orders; and orders with a time-in- execute if a minimum number of shares corporate security. First, orders with a
force of Fill-or-Kill (‘‘FOK’’) 28 and can be obtained while a Discretionary time-in-force of Immediate-or-Cancel
orders with a time-in-force of Good-’til- Order includes both a displayed price (‘‘IOC’’) 30 will be converted as follows:
Day (‘‘GTD’’) with an expiration time and a non-displayed discretionary price. A Market Order with a time-in-force of
earlier than 4:00 p.m. Eastern Time.29 Orders entered to participate in an IPO IOC will be converted to a MOO and a
Auction need to represent the full Limit Order with a time-in-force of IOC
11 See Exchange Rule 11.23(a)(14).
trading interest for the security subject will be converted to a LOO. Second,
12 See Exchange Rule 11.23(a)(12). to the IPO Auction because that auction orders with a time-in-force of RHO will
13 See Exchange Rule 11.23(a)(15). relies on matching buy and sell orders be converted to orders with a time-in-
14 See Exchange Rule 11.23(a)(13). based on their displayed price and full force of Day. Third, any orders eligible
15 See Exchange Rule 11.23(a)(11). displayed size. Therefore, the Exchange to be routed will be converted to a
16 The Opening and Closing Auction processes believes it is reasonable to reject BATS Only Order.31 Upon completion
are described in Exchange Rules 11.23(b) and (c). Discretionary Orders and Minimum of the IPO Auction, any remainder not
17 See Exchange Rule 11.9(b)(7).
18 See Exchange Rules 11.23(d)(1)(A).
Quantity Orders entered to participate executed in the auction will be placed
19 Id. The Exchange also proposes to amend Rule
in the IPO Auction as these types of on the BATS Book, executed, cancelled
11.1 to make clear that it will not accept BATS orders contain variables (i.e., minimum or routed away in accordance with the
Market Orders that are not Eligible Auction Orders execution size or a non-displayed converted terms of the order. Such
prior to 8:00 a.m. Eastern Time. discretionary price) that are not orders would not revert back to the
20 See Exchange Rule 11.9(c)(17).
compatible with the IPO Auction
asabaliauskas on DSK5VPTVN1PROD with NOTICES
21 See Exchange Rule 11.9(c)(18).
original type modifier the User included
22 See Exchange Rule 11.9(c)(8).
process. with the order.
23 See Exchange Rule 11.9(c)(9).
The Exchange also believes it is As stated above, the types of orders
24 See Exchange Rule 11.9(c)(16).
reasonable to reject orders with a time- entered to participate in the IPO
25 See Exchange Rule 11.9(c)(19). in-force of FOK, a time-in-force of GTD Auction that the Exchange proposes to
26 See Exchange Rule 11.9(c)(5). with an expiration time earlier than 4:00 reject under proposed Rule
27 See Exchange Rule 11.9(b)(10) [sic]. p.m. Eastern Time, as well as MOC,
28 See Exchange Rule 11.9(c)(6) [sic]. LOC, and LLOC orders that are entered 30 See Exchange Rule 11.9(c)(4).
29 See Exchange Rule 11.9(b)(4). to participate in an IPO Auction. Orders 31 See Exchange Rule 11.9(b)(1).
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![10348 Federal Register / Vol. 81, No. 39 / Monday, February 29, 2016 / Notices
believes it is reasonable to ignore these submit orders to the Exchange for Period in advance of the
order instructions for the same reason it participation in the auction.39 With commencement of such period.41
proposes to reject Discretionary Orders regard to an IPO Auction, the Quote- (a) [sic] Currently, the Exchange may
and Minimum Quantity Order under Only Period currently begins fifteen (15) extend the Quote-Only Period under
proposed Rule 11.23(a)(8)(A) discussed minutes plus a short random period Rule 11.23(d)(2)(B) for an IPO Auction
above. Orders entered to participate in prior to such Auction.40 The Exchange beyond the above timeframes where: (i)
an IPO Auction need to represent the proposes to amend Rule 11.23(d)(1)(A) There are unmatched Market Orders on
full trading interest for the security to extend the Quote-Only Period for an the Auction Book; (ii) the underwriter
subject to the IPO Auction because that ETP such that it commences at 8:00 requests an extension; or (iii) where the
auction relies on matching buy and sell a.m., which is the beginning of the Indicative Price moves the greater of
orders based on their displayed prices Exchange’s Pre-Opening Session. With 10% or fifty (50) cents in the fifteen (15)
and full displayed size. Therefore, the regard to an ETP, the Exchange does not seconds prior to the auction. The
Exchange believes it is reasonable to believe that there is reason to restrict Exchange proposes to amend Rule
ignore the Maximum Remove quoting in such products to a specified 11.23(d)(2)(B) to enable it to also extend
Percentage of a Partial Post Only at amount of time prior to the auction and the Quote-Only Period in the event of a
Limit Order and the replenishment that additional time is warranted. In technical or systems issue at the
range of a Reserve Order with a Random particular, the Exchange believes that Exchange that may impair the ability of
Replenishment instruction entered to allowing a longer Quote-Only Period Users to participate in the IPO Auction
participate in the IPO Auction as these will encourage the entry of orders prior or of the Exchange to complete the IPO
types of order instructions contain to an IPO Auction for a newly issued Auction. The Exchange believes it is
variables (i.e., maximum remove ETP, which typically have low reasonable to be able to extend the
requirements or non-displayed size) that participation rates especially when Quote-Only Period in the event of a
are not compatible with the IPO Auction compared to IPO Auctions for corporate technical or systems issue at the
process. In contrast to Discretionary securities. Further, while an IPO Exchange as such an issue may prevent
Orders and Minimum Quantity Orders Auction for a corporate security is market participants from entering orders
under proposed Rule 11.23(a)(8)(A) typically conducted at least 30 minutes during the Quote-Only Period, resulting
discussed above, which the Exchange after the commencement of Regular in less liquidity which may prevent the
proposes to reject, the Exchange Trading Hours, an IPO Auction for a underwriters from adequately accessing
believes that it is reasonable to ignore newly issued ETP is typically the trading interest of the IPO Security.
the Maximum Remove Percentage of a conducted at the beginning of Regular In such case, the Exchange believes it is
Partial Post Only at Limit Order and the Trading Hours (i.e., 9:30 Eastern Time), reasonable to extend the Quote-Only
replenishment range of a Reserve Order and thus may not afford much time for Period in the event of a technical or
with a Random Replenishment participants to enter orders prior to such systems issue to provide market
instruction rather than to reject such auction. For these reasons, the Exchange participants the adequate time to enter
orders because such orders can still be believes that a longer Quote-Only Period orders to participate in the IPO auction.
handled consistent with the overall for ETPs is warranted. The Exchange also proposes to adopt
intent of the order. paragraph (C) to codify its intention to
The Exchange proposes to extend the notify market participants regarding
With the exception of MTP modifiers Quote-Only Period for a BATS listed
discussed above, all modifiers listed extensions to the Quote-Only Period. As
corporate security to begin at a time proposed, the Exchange will notify
under proposed Rule 11.23(a)(8)(C) will announced in advance by the Exchange market participants in the event of any
not be further considered with respect that shall be between fifteen (15) and extension to the Quote-Only Period
to an order upon completion of the IPO thirty (30) minutes plus a short random pursuant to paragraph (B), including
Auction. Any remainder not executed in period prior to such IPO Auction. The details regarding the circumstances and
the auction will be placed on the BATS Exchange believes that extending the length of the extension.42 In connection
Book, executed, cancelled or routed Quote-Only period as proposed is with this change, the Exchange proposes
away in accordance with the modified reasonable as it would provide market to designate current paragraph (C) of
terms of the order. participants more time to enter orders to Rule 11.23(d)(2) as paragraph (D).
Extension of Quote-Only Period participate in the IPO Auction.
Extension of the Quote-Only Period Technical Changes
The Exchange proposes to extend the would also enable the underwriters The Exchange also proposes to make
Quote-Only Period for an IPO Auction more time to evaluate the scope of the following technical changes to Rule
under Exchange Rule 11.23(d)(1)(A). demand for, and supply of, the security 11.23:
The Quote-Only Period is the subject to the IPO Auction (‘‘IPO • Amend paragraphs (b)(1)(A) and
designated period of time prior to a Halt Security’’), in a manner that will allow (c)(1)(A) to replace the phrase ‘‘starting
Auction, a Volatility Closing Auction, or it to make more informed decisions at 8:00 a.m., the beginning of the Pre-
an IPO Auction during which Users may about the appropriate time to initiate the
opening of the IPO Security through the 41 The scope of market participants notified
where replenishment quantities for the order are regarding the anticipated commencement the
randomly determined by the System within a
IPO Auction. The Exchange would Quote-Only Period (or extension of Quote-Only
replenishment range established by the User. In determine the length of time of the Period, as described below) would include but
Quote-Only Period for a BATS listed
asabaliauskas on DSK5VPTVN1PROD with NOTICES
particular, the User entering an order into the would not be limited to Members of the Exchange.
System subject to the Random Replenishment corporate security (i.e., what time Such notice would also include those market
instruction must select a replenishment value and participants, individuals or entities that have
a Max Floor. The initial Display Quantity will be
between fifteen (15) and thirty (30) subscribed to the Exchange’s notification system.
the Max Floor. The Display Quantity of an order minutes) in consultation with the issuer The Exchange intends to send notifications
when replenished will be determined by the System of the IPO security and would announce regarding the Quote-Only Period via email, as it
randomly selecting a round lot number of shares the length of time for the Quote-Only does with most public notifications today. The
within a replenishment range that is between: (i) Exchange notes that it does, in certain
the Max Floor minus the replenishment value; and circumstances, post information on its public Web
39 See Exchange Rule 11.23(a)(17). site in addition to email dissemination.
(ii) the Max Floor plus the replenishment value. See
Exchange Rule 11.9(c)(1)(A). 40 See Exchange Rule 11.23(d)(1)(A). 42 Id.
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![10350 Federal Register / Vol. 81, No. 39 / Monday, February 29, 2016 / Notices
All submissions should refer to File ‘‘Exchange’’ or ‘‘BATS’’) filed with the from 9:30 a.m. to 4:00 p.m. Eastern
Number SR–BATS–2016–17. This file Securities and Exchange Commission Time; and (iii) the After Hours Session,
number should be included on the (‘‘Commission’’) the proposed rule which runs from 4:00 p.m. to 5:00 p.m.
subject line if email is used. To help the change as described in Items I, II and III Eastern Time. The Exchange proposes to
Commission process and review your below, which Items have been prepared amend its rules to create a new trading
comments more efficiently, please use by the Exchange. The Commission is session to be known as the Early
only one method. The Commission will publishing this notice to solicit Trading Session, which will run from
post all comments on the Commission’s comments on the proposed rule change 7:00 a.m. to 8:00 a.m. Eastern Time.4
Internet Web site (http://www.sec.gov/ from interested persons. Exchange Rule 1.5 would be amended to
rules/sro.shtml). Copies of the add a new definition for the term ‘‘Early
submission, all subsequent I. Self-Regulatory Organization’s Trading Session’’ under new paragraph
amendments, all written statements Statement of the Terms of Substance of (ee). ‘‘Early Trading Session’’ would be
with respect to the proposed rule the Proposed Rule Change defined as ‘‘the time between 7:00 a.m.
change that are filed with the The Exchange filed a proposal to and 8:00 a.m. Eastern Time.’’ 5
Commission, and all written amend its rules to: (i) Create a new The Exchange also proposes to amend
communications relating to the trading session to be known as the Early Rule 11.1(a) to account for the Early
proposed rule change between the Trading Session, which will run from Trading Session starting at 7:00 a.m.
Commission and any person, other than 7:00 a.m. to 8:00 a.m. Eastern Time; and Eastern Time. Other than the proposal
those that may be withheld from the (ii) adopt three new Time-in-Force to adopt an Early Trading Session
public in accordance with the (‘‘TIF’’) instructions. starting at 7:00 a.m. Eastern Time, the
provisions of 5 U.S.C. 552, will be The text of the proposed rule change Exchange does not propose to amend
available for Web site viewing and is available at the Exchange’s Web site the substance or operation of Rule
printing in the Commission’s Public at www.batstrading.com, at the 11.1(a).
Reference Room, 100 F Street NE., principal office of the Exchange, and at Users currently designate when their
Washington, DC 20549 on official the Commission’s Public Reference orders are eligible for execution by
business days between the hours of Room. selecting the desired TIF instruction
10:00 a.m. and 3:00 p.m. Copies of such under Exchange Rule 11.9(b). Orders
filing also will be available for II. Self-Regulatory Organization’s entered between 6:00 a.m. and 8:00 a.m.
inspection and copying at the principal Statement of the Purpose of, and Eastern Time are not eligible for
offices of the Exchange. All comments Statutory Basis for, the Proposed Rule execution until the start of the Pre-
received will be posted without change; Change Opening Session, or Regular Trading
the Commission does not edit personal In its filing with the Commission, the Hours,6 depending on the TIF selected
identifying information from Exchange included statements by the User. Users may enter orders in
submissions. You should submit only concerning the purpose of and basis for advance of the trading session they
information that you wish to make the proposed rule change and discussed intend the order to be eligible for. For
available publicly. All submissions any comments it received on the example, Users may enter orders
should refer to File Number SR–BATS– proposed rule change. The text of these starting at 6:00 a.m. Eastern Time with
2016–17, and should be submitted on or statements may be examined at the a TIF of Regular Hours Only, which
before March 21, 2016. places specified in Item IV below. The designates that the order only be eligible
For the Commission, by the Division of Exchange has prepared summaries, set for execution during Regular Trading
Trading and Markets, pursuant to delegated forth in Sections A, B, and C below, of Hours.7 As stated above, Users may
authority.46 the most significant parts of such enter orders as early as 6:00 a.m. Eastern
Robert W. Errett, statements. Time, but those orders would not be
Deputy Secretary. eligible for execution until the start of
(A) Self-Regulatory Organization’s the Pre-Opening Session at 8:00 a.m.
[FR Doc. 2016–04358 Filed 2–26–16; 8:45 am] Statement of the Purpose of, and
BILLING CODE 8011–01–P Statutory Basis for, the Proposed Rule 4 The Exchange notes that NYSE Arca, Inc.
Change (‘‘NYSE Arca’’) operates an Opening Session that
starts at 4:00 a.m. Eastern Time (1:00 a.m. Pacific
SECURITIES AND EXCHANGE 1. Purpose Time) and ends at 9:30 a.m. Eastern Time (6:30 a.m.
COMMISSION Pacific Time). See NYSE Arca Rule 7.34(a)(1). The
The Exchange proposes to amend its Nasdaq Stock Market LLC (‘‘Nasdaq’’) operates a
[Release No. 34–77214; File No. SR–BATS– rules to: (i) Create a new trading session pre-market session that also opens at 4:00 a.m. and
2016–14] to be known as the Early Trading ends at 9:30 a.m. Eastern Time. See Nasdaq Rule
Session, which will run from 7:00 a.m. 4701(g). See also Securities Exchange Act Release
No. 69151 (March 15, 2013), 78 FR 17464 (March
Self-Regulatory Organizations; BATS to 8:00 a.m. Eastern Time; and (ii) adopt 21, 2013) (SR–Nasdaq–2013–033) (Notice of Filing
Exchange, Inc.; Notice of Filing of a three new TIF instructions. and Immediate Effectiveness of Proposed Rule
Proposed Rule Change To Adopt an Change to Extend the Pre-Market Hours of the
Early Trading Session and Three New Early Trading Session Exchange to 4:00 a.m. EST).
5 An Exchange having bifurcated after hours
Time-in-Force Instructions The Exchange trading day is currently
trading sessions is not novel. For example, the
divided into three sessions of which a Chicago Stock Exchange, Inc. (‘‘CHX’’) maintains
February 23, 2016.
User 3 may select their order(s) be two after hours trading sessions. See CHX Article
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Pursuant to Section 19(b)(1) of the eligible for execution: (i) The Pre- 20, Rule 1(b). See also Securities Exchange Act
Securities Exchange Act of 1934 (the Opening Session which starts at 8:00 Release No. 60605 (September 1, 2009), 74 FR
‘‘Act’’),1 and Rule 19b–4 thereunder,2 a.m. and ends at 9:30 a.m. Eastern Time;
46277 (September 8, 2009) (SR–CHX–2009–13)
notice is hereby given that on February (Notice of Filing and Immediate Effectiveness of
(ii) Regular Trading Hours which runs Proposed Rule Change Adding Additional Trading
12, 2016, BATS Exchange, Inc. (the Sessions).
3 ‘‘User’’ is defined as ‘‘any Member or Sponsored 6 ‘‘Regular Trading Hours’’ is defined as ‘‘the time
46 17 CFR 200.30–3(a)(12). Participant who is authorized to obtain access to the between 9:30 a.m. and 4:00 p.m. Eastern Time.’’ See
1 15 U.S.C. 78s(b)(1). Exchange Rule 1.5(w).
System pursuant to Rule 11.3.’’ See Exchange Rule
2 17 CFR 240.19b–4. 1.5(cc). 7 See Exchange Rule 11.9(b)(7).
VerDate Sep<11>2014 19:23 Feb 26, 2016 Jkt 238001 PO 00000 Frm 00146 Fmt 4703 Sfmt 4703 E:\FR\FM\29FEN1.SGM 29FEN1](https://thefederalregister.org/doc/81_FR_10384/page/6.svg)
Document Created: 2016-02-27 02:05:24
Document Modified: 2016-02-27 02:05:24
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 10345 |
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