81 FR 13012 - Self-Regulatory Organizations; Bats BZX Exchange, Inc. f/k/a BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.27(b), Compliance With Data Collection Requirements, Relating to the Regulation NMS Plan To Implement a Tick Size Pilot Program
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 48 (March 11, 2016)
Federal Register Volume 81, Issue 48 (March 11, 2016)
| Page Range | 13012-13015 | |
| FR Document | 2016-05441 |
[Federal Register Volume 81, Number 48 (Friday, March 11, 2016)] [Notices] [Pages 13012-13015] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-05441] [[Page 13012]] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77310; File No. SR-BATS-2016-27] Self-Regulatory Organizations; Bats BZX Exchange, Inc. f/k/a BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.27(b), Compliance With Data Collection Requirements, Relating to the Regulation NMS Plan To Implement a Tick Size Pilot Program March 7, 2016. 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 March 2, 2016, Bats BZX Exchange, Inc. f/k/a BATS Exchange, Inc. (the ``Exchange'' or ``BZX'') 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 Exchange has designated this proposal as a ``non- controversial'' proposed rule change pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ 15 U.S.C. 78s(b)(3)(A). \4\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- 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 11.27(b) regarding the requirements for the collection and transmission of data pursuant to Appendices B and C of the Regulation NMS Plan to Implement a Tick Size Pilot Program (``Plan''). 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose On August 25, 2014, NYSE Group, Inc., on behalf of BZX, BATS Y- Exchange, Inc., Chicago Stock Exchange, Inc. (``CHX''), EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc. (``FINRA''), NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, the Nasdaq Stock Market LLC, New York Stock Exchange LLC (``NYSE''), NYSE MKT LLC, and NYSE Arca, Inc. (collectively ``Participants''), filed with the Commission, pursuant to section 11A of the Act \5\ and Rule 608 of Regulation NMS thereunder,\6\ the Plan to Implement a Tick Size Pilot Program (``Pilot'').\7\ The Participants filed the Plan to comply with an order issued by the Commission on June 24, 2014.\8\ The Plan \9\ was published for comment in the Federal Register on November 7, 2014, and approved by the Commission, as modified, on May 6, 2015.\10\ --------------------------------------------------------------------------- \5\ 15 U.S.C. 78k-1. \6\ 17 CFR 242.608. \7\ See Letter from Brendon J. Weiss, Vice President, Intercontinental Exchange, Inc., to Secretary, Commission, dated August 25, 2014. \8\ See Securities Exchange Act Release No. 72460 (June 24, 2014), 79 FR 36840 (June 30, 2014). \9\ Unless otherwise specified, capitalized terms used in this rule filing are based on the defined terms of the Plan. \10\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 80 FR 27513 (May 13, 2015) (``Approval Order''). --------------------------------------------------------------------------- The Plan is designed to allow the Commission, market participants, and the public to study and assess the impact of increment conventions on the liquidity and trading of the common stocks of small- capitalization companies. Each Participant is required to comply, and to enforce compliance by its member organizations, as applicable, with the provisions of the Plan. As is described more fully below, the proposed rules would require Members \11\ to comply with the applicable data collection requirements of the Plan.\12\ --------------------------------------------------------------------------- \11\ The term ``Member'' is defined as ``any registered broker or dealer that has been admitted to membership in the Exchange. See Exchange Rule 1.5(n). \12\ The Exchange proposes to add Information and Policy .11 to Rule 11.27 to provide that the Rule shall be in effect during a pilot period to coincide with the pilot period for the Plan (including any extensions to the pilot period for the Plan). --------------------------------------------------------------------------- The Pilot will include stocks of companies with $3 billion or less in market capitalization, an average daily trading volume of one million shares or less, and a volume weighted average price of at least $2.00 for every trading day. The Pilot will consist of a control group of approximately 1400 Pilot Securities and three test groups with 400 Pilot Securities in each (selected by a stratified random sampling process).\13\ During the pilot, Pilot Securities in the control group will be quoted at the current tick size increment of $0.01 per share and will trade at the currently permitted increments. Pilot Securities in the first test group (``Test Group One'') will be quoted in $0.05 minimum increments but will continue to trade at any price increment that is currently permitted.\14\ Pilot Securities in the second test group (``Test Group Two'') will be quoted in $0.05 minimum increments and will trade at $0.05 minimum increments subject to a midpoint exception, a retail investor order exception, and a negotiated trade exception.\15\ Pilot Securities in the third test group (``Test Group Three'') will be subject to the same quoting and trading increments as Test Group Two and also will be subject to the ``Trade-at'' requirement to prevent price matching by a market participant that is not displaying at a Trading Center's ``Best Protected Bid'' or ``Best Protected Offer,'' unless an enumerated exception applies.\16\ In addition to the exceptions provided under Test Group Two, an exception for Block Size orders and exceptions that mirror those under Rule 611 of Regulation NMS \17\ will apply to the Trade-at requirement. --------------------------------------------------------------------------- \13\ See Section V of the Plan for identification of Pilot Securities, including criteria for selection and grouping. \14\ See Section VI(B) of the Plan. \15\ See Section VI(C) of the Plan. \16\ See Section VI(D) of the Plan. \17\ 17 CFR 242.611. --------------------------------------------------------------------------- In approving the Plan, the Commission noted that the Trading Center data reporting requirements would facilitate an analysis of the effects of the Pilot on liquidity (e.g., transaction costs by order size), execution quality (e.g., speed of order executions), market maker activity, competition between trading venues (e.g., routing frequency of market orders), transparency (e.g., choice between displayed and hidden orders), and market dynamics (e.g., rates and speed of order cancellations).\18\ The Commission noted that Market Maker [[Page 13013]] profitability data would assist the Commission in evaluating the effect, if any, of a widened tick increment on market marker profits and any corresponding changes in the liquidity of small-capitalization securities.\19\ --------------------------------------------------------------------------- \18\ See Approval Order, 80 FR at 27543. \19\ Id. --------------------------------------------------------------------------- Compliance With the Data Collection Requirements of the Plan The Plan contains requirements for collecting and transmitting data to the Commission and to the public.\20\ Specifically, Appendix B.I of the Plan (Market Quality Statistics) requires Trading Centers \21\ to submit variety of market quality statistics, including information about an order's original size, whether the order was displayable or not, the cumulative number of orders, the cumulative number of shares of orders, and the cumulative number of shares executed within specific time increments, e.g., from 30 seconds to less than 60 seconds after the time of order receipt. This information shall be categorized by security, order type, original order size, hidden status, and coverage under Rule 605.\22\ Appendix B.I of the Plan also contains additional requirements for market orders and marketable limit orders, including the share-weighted average effective spread for executions of orders; the cumulative number of shares of orders executed with price improvement; and, for shares executed with price improvement, the share-weighted average amount per share that prices were improved. --------------------------------------------------------------------------- \20\ The Exchange is also required by the Plan to establish, maintain, and enforce written policies and procedures that are reasonably designed to comply with applicable quoting and trading requirements specified in the Plan. The Exchange separately proposes rules that would require compliance by its Members with the applicable quoting and trading requirements specified in the Plan, and has reserved Paragraph (a) for such rules. See Securities Exchange Act Release No. 76552 (December 3, 2015), 80 FR 76591 (December 9, 2015) (SR-BATS-2015-108). \21\ The Plan incorporates the definition of a ``Trading Center'' from Rule 600(b)(78) of Regulation NMS. Regulation NMS defines a ``Trading Center'' as ``a national securities exchange or national securities association that operates an SRO trading facility, an alternative trading system, an exchange market maker, an OTC market maker, or any other broker or dealer that executes orders internally by trading as principal or crossing orders as agent.'' See 17 CFR 242.600(b). \22\ 17 CFR 242.605. --------------------------------------------------------------------------- Appendix B.II of the Plan (Market and Marketable Limit Order Data) requires Trading Centers to submit information relating to market orders and marketable limit orders, including the time of order receipt, order type, the order size, the National Best Bid and National Best Offer (``NBBO'') quoted price, the NBBO quoted depth, the average execution price-share-weighted average, and the average execution time- share-weighted average. The Plan requires Appendix B.I and B.II data to be submitted by Participants that operate a Trading Center, and by members of the Participants that operate Trading Centers. The Plan provides that each Participant that is the Designated Examining Authority (``DEA'') for a member of the Participant that operates a Trading Center shall collect such data in a pipe delimited format, beginning six months prior to the Pilot Period and ending six months after the end of the Pilot Period. The Plan also requires the Participant, operating as DEA, to transmit this information to the SEC within 30 calendar days following month end. On February 10, 2016, the Commission approved a proposed rule change by the Exchange to adopt Rule 11.27(b) which sets forth Member's requirements for the collection and transmission of data pursuant to Appendices B and C of the Plan.\23\ --------------------------------------------------------------------------- \23\ See Securities Exchange Act Release No. 77105 (February 10, 2016), 81 FR 8112 (February 17, 2016) (SR-BATS-2015-102). --------------------------------------------------------------------------- Description of Proposed Changes to Rule 11.27(b) Appendix B.IV (Daily Market Maker Participation Statistics) requires a Participant to collect data related to Market Maker participation from each Market Maker \24\ engaging in trading activity on a Trading Center operated by the Participant. Exchange Rule 11.27(b)(3)(A) provides that a Member that is a Market Maker shall collect and transmit to their DEA data relating to Item IV of Appendix B of the Plan with respect to activity conducted on any Trading Center in Pilot Securities and Pre-Pilot Data Collection Securities in furtherance of its status as a registered Market Maker, including a Trading Center that executes trades otherwise than on a national securities exchange, for transactions that have settled or reached settlement date. The rule requires Market Makers to transmit such data in a format required by their DEA, by 12:00 p.m. EST on T+4 for: (i) Transactions in each Pre-Pilot Data Collection Security for the period beginning six months prior to the Pilot Period through the trading day immediately preceding the Pilot Period; and (ii) for transactions in each Pilot Security for the period beginning on the first day of the Pilot Period through six months after the end of the Pilot Period. --------------------------------------------------------------------------- \24\ The Plan defines a Market Maker as ``a dealer registered with any self-regulatory organization, in accordance with the rules thereof, as (i) a market maker or (ii) a liquidity provider with an obligation to maintain continuous, two-sided trading interest.'' --------------------------------------------------------------------------- Appendix C.I (Market Maker Profitability) requires a Participant to collect data related to Market Maker profitability from each Market Maker for which it is the DEA. Specifically, the Participant is required to collect the total number of shares of orders executed by the Market Maker; the raw Market Maker realized trading profits, and the raw Market Maker unrealized trading profits. Data is to be collected for dates starting six months prior to the Pilot Period through six months after the end of the Pilot Period. This data is to be collected on a monthly basis, to be provided in a pipe delimited format to the Participant, as DEA, within 30 calendar days following month end. Appendix C.II (Aggregated Market Maker Profitability) requires the Participant, as DEA, to aggregate the Appendix C.I data, and to categorize this data by security as well as by the control group and each Test Group. That aggregated data will contain information relating to total raw Market Maker realized trading profits, volume- weighted average of raw Market Maker realized trading profits, the total raw Market Maker unrealized trading profits, and the volume- weighted average of Market Maker unrealized trading profits. Exchange Rule 11.27(b)(4) sets forth the requirements for the collection and transmission of data pursuant to Appendix C.I of the Plan. Rule 11.27(b)(4)(A) requires that a Member that is a Market Maker shall collect and transmit to their DEA the data described in Item I of Appendix C of the Plan with respect to executions in Pilot Securities that have settled or reached settlement date that were executed on any Trading Center. The rule also requires Members to provide such data in a format required by their DEA by 12 p.m. EST on T+4 for executions during and outside of Regular Trading Hours in each: (i) Pre-Pilot Data Collection Security for the period beginning six months prior to the Pilot Period through the trading day immediately preceding the Pilot Period; and (ii) Pilot Security for the period beginning on the first day of the Pilot Period through six months after the end of the Pilot Period. FINRA and CHX are Participants of the Plan and are to collect data relating to Item IV of Appendix B of the Plan and Item I of Appendix C of the Plan on behalf of the Participants. For Trading Centers for which it is the DEA, FINRA issued a Market Maker Transaction Data Technical Specification to collect data on Pre-Pilot Data Collection Securities and Pilot Securities from Trading Centers to comply with the Plan's data [[Page 13014]] collection requirements.\25\ CHX also adopted procedures to comply with the Plan's data collection requirements for Market Makers that CHX serves as DEA.\26\ --------------------------------------------------------------------------- \25\ FINRA members for which FINRA is their DEA should refer to the Tick Size OATS Data Specifications on the FINRA OATS Web site at http://www.finra.org/industry/oats/ for detailed information and FAQs about the proposed specific OATS Tick Size reporting requirements. \26\ See Tick Size Pilot Program--CHX MM Transaction Data Technical Specifications, available at http://www.chx.com/_literature_143998/Tick_Size_Pilot_Program_-_CHX_MM_Transaction_Data_Technical_Specification. --------------------------------------------------------------------------- FINRA and CHX serve as DEA for a large majority of Members. However, the Exchange understands that some Members that are Market Makers do not utilize FINRA or CHX as their DEA and have a DEA that is not a Participant to the Plan and, therefore, not subject to the Plan's data collection requirements. For example, the Chicago Board Options Exchange, Inc, (``CBOE'') is not a Participant to the Plan and acts as DEA for a small portion of the Exchange's Members. In such case, a DEA that is not a Participant of the Plan would not be required to collect the required data and may not establish procedures for which Members it acts a DEA for to report the data required under subparagraphs (b)(3)(A) and (b)(4)(A) of Rule 11.27 and in accordance with Item IV of Appendix B and Item I of Appendix C of the Plan. Therefore, the Exchange proposes to adopt subparagraph (b)(3)(B) to Rule 11.27 to require a Member that is a Market Maker whose DEA is not a Participant to the Plan to transmit the data collected pursuant to paragraph (3)(A) of Rule 11.27(b) to FINRA. The Exchange also proposes to adopt paragraph (b)(4)(B) of Rule 11.27 to require a Member that is a Market Maker whose DEA is not a Participant to the Plan to transmit the data collected pursuant to paragraph (4)(A) of Rule 11.27(b) to FINRA. The Exchange believes the proposed rule change is necessary to ensure that all of its Members are able to report the data required by subparagraphs (b)(3)(A) and (b)(4)(A) of Rule 11.27 in compliance with the Plan. As noted above, FINRA has established a process by which they are to collect data relating to Item IV of Appendix B and Item I of Appendix C of the Plan on behalf of the Participants for those Members that it serves as DEA.\27\ The Exchange believes requiring Members who utilize a DEA that is not a Participant to the Plan to report data required by subparagraphs (b)(3)(A) and (b)(4)(A) of Rule 11.27 to FINRA would provide such Members a viable option to report such data required by the Plan. --------------------------------------------------------------------------- \27\ See supra note 25. --------------------------------------------------------------------------- Like data collected by a DEA that is a Participant, Market Makers would be required to transmit the data required by subparagraphs (b)(3)(A) and (b)(4)(A) of the Rule 11.27 in a format required by FINRA by 12:00 p.m. EST on T+4 for: (i) Transactions in each Pre-Pilot Data Collection Security for the period beginning six months prior to the Pilot Period through the trading day immediately preceding the Pilot Period; and (ii) for transactions in each Pilot Security for the period beginning on the first day of the Pilot Period through six months after the end of the Pilot Period. Lastly, the Exchange proposes to amend current Exchange Rule 11.27(b)(3)(B). Current Exchange Rule 11.27(b)(3)(B) provides that the Exchange shall transmit the data collected by the DEA pursuant to Rule 11.27(b)(3)(A) above relating to Market Maker activity on a Trading Center operated by the Exchange to the SEC in a pipe delimited format within 30 calendar days following month end. This subparagraph would be renumbered as Rule 11.27(b)(3)(C) and amended to include the data collected by FINRA pursuant to subparagraph (b)(3)(B) as part of the Exchange's submission to the SEC. The Exchange shall also make such data publicly available on the Exchange Web site on a monthly basis at no charge and shall not identify the Trading Center that generated the data. Implementation Date The proposed rule change will be effective on April 4, 2016. 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act \28\ in general, and furthers the objectives of section 6(b)(5) of the Act \29\ in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes that this proposal is consistent with the Act because it ensures all Members are able to report the data required by subparagraphs (b)(3)(A) and (b)(4)(A) of Rule 11.27 in compliance with the Plan. The Exchange believes requiring Members who utilize a DEA that is not a Participant to the Plan to report data required by subparagraphs (b)(3)(A) and (b)(4)(A) of Rule 11.27 to FINRA would provide such Members a viable option to report such data required by the Plan. In approving the Plan, the SEC noted that the Pilot was an appropriate, data-driven test that was designed to evaluate the impact of a wider tick size on trading, liquidity, and the market quality of securities of smaller capitalization companies, and was therefore in furtherance of the purposes of the Act. In addition, ensuring that this data is properly reported by Trading Centers who's [sic] DEA is not a Participant of the Plan will facilitate the analysis of the effects of the Pilot on liquidity, execution quality, market maker activity, competition between trading venues, transparency, and market dynamics. The Exchange believes that this proposal is in furtherance of the objectives of the Plan, as identified by the SEC, and is therefore consistent with the Act because it is designed to assist the Exchange in meeting its regulatory obligations pursuant of the Plan as well as ensure Members are able to submit the required data in furtherance of compliance with the Plan. --------------------------------------------------------------------------- \28\ 15 U.S.C. 78f(b). \29\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule change ensures all Members are able to report the data required by subparagraphs (b)(3)(A) and (b)(4)(A) of Rule 11.27 in compliance with the Plan and is designed to assist the Exchange in meeting its regulatory obligations pursuant of the Plan. The Exchange also notes that the data collection requirements for Members that operate Trading Centers will apply equally to all such Members, as will the data collection requirements for Market Makers. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (A) Significantly affect the protection of investors or the public interest; (B) impose any significant [[Page 13015]] burden on competition; and (C) by its terms, become operative for 30 days from the date on which it was filed or such shorter time as the Commission may designate it has become effective pursuant to section 19(b)(3)(A) of the Act \30\ and paragraph (f)(6) of Rule 19b-4 thereunder,\31\ the Exchange has designated this rule filing as non- controversial. The Exchange has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. --------------------------------------------------------------------------- \30\ 15 U.S.C. 78s(b)(3)(A). \31\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (1) Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse 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-2016-27 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-BATS-2016-27. 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 the 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-2016-27, and should be submitted on or before April 1, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\32\ Robert W. Errett, Deputy Secretary. --------------------------------------------------------------------------- \32\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2016-05441 Filed 3-10-16; 8:45 am] BILLING CODE 8011-01-P
![13012 Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices
SECURITIES AND EXCHANGE proposed rule change. The text of these The Pilot will include stocks of
COMMISSION statements may be examined at the companies with $3 billion or less in
places specified in Item IV below. The market capitalization, an average daily
[Release No. 34–77310; File No. SR–BATS–
Exchange has prepared summaries, set trading volume of one million shares or
2016–27]
forth in Sections A, B, and C below, of less, and a volume weighted average
Self-Regulatory Organizations; Bats the most significant parts of such price of at least $2.00 for every trading
BZX Exchange, Inc. f/k/a BATS statements. day. The Pilot will consist of a control
Exchange, Inc.; Notice of Filing and group of approximately 1400 Pilot
A. Self-Regulatory Organization’s Securities and three test groups with
Immediate Effectiveness of a Proposed Statement of the Purpose of, and the
Rule Change To Amend Rule 11.27(b), 400 Pilot Securities in each (selected by
Statutory Basis for, the Proposed Rule a stratified random sampling process).13
Compliance With Data Collection Change
Requirements, Relating to the During the pilot, Pilot Securities in the
Regulation NMS Plan To Implement a 1. Purpose control group will be quoted at the
Tick Size Pilot Program On August 25, 2014, NYSE Group, current tick size increment of $0.01 per
Inc., on behalf of BZX, BATS Y- share and will trade at the currently
March 7, 2016.
Exchange, Inc., Chicago Stock Exchange, permitted increments. Pilot Securities in
Pursuant to section 19(b)(1) of the Inc. (‘‘CHX’’), EDGA Exchange, Inc., the first test group (‘‘Test Group One’’)
Securities Exchange Act of 1934 (the EDGX Exchange, Inc., Financial will be quoted in $0.05 minimum
‘‘Act’’),1 and Rule 19b-4 thereunder,2 increments but will continue to trade at
Industry Regulatory Authority, Inc.
notice is hereby given that on March 2, any price increment that is currently
(‘‘FINRA’’), NASDAQ OMX BX, Inc.,
2016, Bats BZX Exchange, Inc. f/k/a permitted.14 Pilot Securities in the
NASDAQ OMX PHLX LLC, the Nasdaq
BATS Exchange, Inc. (the ‘‘Exchange’’ second test group (‘‘Test Group Two’’)
Stock Market LLC, New York Stock
or ‘‘BZX’’) filed with the Securities and will be quoted in $0.05 minimum
Exchange LLC (‘‘NYSE’’), NYSE MKT
Exchange Commission (‘‘Commission’’) increments and will trade at $0.05
LLC, and NYSE Arca, Inc. (collectively
the proposed rule change as described minimum increments subject to a
‘‘Participants’’), filed with the
in Items I, II, and III below, which Items midpoint exception, a retail investor
Commission, pursuant to section 11A of
have been prepared by the Exchange. order exception, and a negotiated trade
the Act 5 and Rule 608 of Regulation
The Exchange has designated this exception.15 Pilot Securities in the third
NMS thereunder,6 the Plan to
proposal as a ‘‘non-controversial’’ test group (‘‘Test Group Three’’) will be
Implement a Tick Size Pilot Program subject to the same quoting and trading
proposed rule change pursuant to (‘‘Pilot’’).7 The Participants filed the
section 19(b)(3)(A) of the Act 3 and Rule increments as Test Group Two and also
Plan to comply with an order issued by will be subject to the ‘‘Trade-at’’
19b–4(f)(6)(iii) thereunder,4 which the Commission on June 24, 2014.8 The
renders it effective upon filing with the requirement to prevent price matching
Plan 9 was published for comment in the by a market participant that is not
Commission. The Commission is Federal Register on November 7, 2014,
publishing this notice to solicit displaying at a Trading Center’s ‘‘Best
and approved by the Commission, as Protected Bid’’ or ‘‘Best Protected
comments on the proposed rule change modified, on May 6, 2015.10
from interested persons. Offer,’’ unless an enumerated exception
The Plan is designed to allow the
applies.16 In addition to the exceptions
I. Self-Regulatory Organization’s Commission, market participants, and
provided under Test Group Two, an
Statement of the Terms of Substance of the public to study and assess the
exception for Block Size orders and
the Proposed Rule Change impact of increment conventions on the
exceptions that mirror those under Rule
liquidity and trading of the common
The Exchange filed a proposal to 611 of Regulation NMS 17 will apply to
stocks of small-capitalization
amend Exchange Rule 11.27(b) the Trade-at requirement.
companies. Each Participant is required
regarding the requirements for the In approving the Plan, the
to comply, and to enforce compliance
collection and transmission of data Commission noted that the Trading
by its member organizations, as
pursuant to Appendices B and C of the Center data reporting requirements
applicable, with the provisions of the
Regulation NMS Plan to Implement a would facilitate an analysis of the
Plan. As is described more fully below,
Tick Size Pilot Program (‘‘Plan’’). effects of the Pilot on liquidity (e.g.,
the proposed rules would require
The text of the proposed rule change transaction costs by order size),
Members 11 to comply with the
is available at the Exchange’s Web site execution quality (e.g., speed of order
applicable data collection requirements executions), market maker activity,
at www.batstrading.com, at the
of the Plan.12 competition between trading venues
principal office of the Exchange, and at
the Commission’s Public Reference 5 15 U.S.C. 78k–1.
(e.g., routing frequency of market
Room. 6 17 CFR 242.608. orders), transparency (e.g., choice
7 See Letter from Brendon J. Weiss, Vice between displayed and hidden orders),
II. Self-Regulatory Organization’s
President, Intercontinental Exchange, Inc., to and market dynamics (e.g., rates and
Statement of the Purpose of, and Secretary, Commission, dated August 25, 2014. speed of order cancellations).18 The
Statutory Basis for, the Proposed Rule 8 See Securities Exchange Act Release No. 72460
Commission noted that Market Maker
Change (June 24, 2014), 79 FR 36840 (June 30, 2014).
9 Unless otherwise specified, capitalized terms
In its filing with the Commission, the used in this rule filing are based on the defined shall be in effect during a pilot period to coincide
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Exchange included statements terms of the Plan. with the pilot period for the Plan (including any
extensions to the pilot period for the Plan).
concerning the purpose of and basis for 10 See Securities Exchange Act Release No. 74892
13 See Section V of the Plan for identification of
the proposed rule change and discussed (May 6, 2015), 80 FR 27513 (May 13, 2015)
(‘‘Approval Order’’). Pilot Securities, including criteria for selection and
any comments it received on the 11 The term ‘‘Member’’ is defined as ‘‘any grouping.
14 See Section VI(B) of the Plan.
registered broker or dealer that has been admitted
1 15 U.S.C. 78s(b)(1). 15 See Section VI(C) of the Plan.
to membership in the Exchange. See Exchange Rule
2 17 CFR 240.19b–4. 16 See Section VI(D) of the Plan.
1.5(n).
3 15 U.S.C. 78s(b)(3)(A). 12 The Exchange proposes to add Information and 17 17 CFR 242.611.
4 17 CFR 240.19b–4(f)(6)(iii). Policy .11 to Rule 11.27 to provide that the Rule 18 See Approval Order, 80 FR at 27543.
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![13014 Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices
collection requirements.25 CHX also provide such Members a viable option a Participant to the Plan to report data
adopted procedures to comply with the to report such data required by the Plan. required by subparagraphs (b)(3)(A) and
Plan’s data collection requirements for Like data collected by a DEA that is (b)(4)(A) of Rule 11.27 to FINRA would
Market Makers that CHX serves as a Participant, Market Makers would be provide such Members a viable option
DEA.26 required to transmit the data required by to report such data required by the Plan.
FINRA and CHX serve as DEA for a subparagraphs (b)(3)(A) and (b)(4)(A) of In approving the Plan, the SEC noted
large majority of Members. However, the the Rule 11.27 in a format required by that the Pilot was an appropriate, data-
Exchange understands that some FINRA by 12:00 p.m. EST on T+4 for: driven test that was designed to evaluate
Members that are Market Makers do not (i) Transactions in each Pre-Pilot Data the impact of a wider tick size on
utilize FINRA or CHX as their DEA and Collection Security for the period trading, liquidity, and the market
have a DEA that is not a Participant to beginning six months prior to the Pilot quality of securities of smaller
the Plan and, therefore, not subject to Period through the trading day capitalization companies, and was
the Plan’s data collection requirements. immediately preceding the Pilot Period; therefore in furtherance of the purposes
For example, the Chicago Board Options and (ii) for transactions in each Pilot of the Act. In addition, ensuring that
Exchange, Inc, (‘‘CBOE’’) is not a Security for the period beginning on the this data is properly reported by Trading
Participant to the Plan and acts as DEA first day of the Pilot Period through six Centers who’s [sic] DEA is not a
for a small portion of the Exchange’s months after the end of the Pilot Period. Participant of the Plan will facilitate the
Members. In such case, a DEA that is Lastly, the Exchange proposes to analysis of the effects of the Pilot on
not a Participant of the Plan would not amend current Exchange Rule liquidity, execution quality, market
be required to collect the required data 11.27(b)(3)(B). Current Exchange Rule maker activity, competition between
and may not establish procedures for 11.27(b)(3)(B) provides that the trading venues, transparency, and
which Members it acts a DEA for to Exchange shall transmit the data market dynamics. The Exchange
report the data required under collected by the DEA pursuant to Rule believes that this proposal is in
subparagraphs (b)(3)(A) and (b)(4)(A) of 11.27(b)(3)(A) above relating to Market furtherance of the objectives of the Plan,
Rule 11.27 and in accordance with Item Maker activity on a Trading Center as identified by the SEC, and is
IV of Appendix B and Item I of operated by the Exchange to the SEC in therefore consistent with the Act
Appendix C of the Plan. Therefore, the a pipe delimited format within 30 because it is designed to assist the
Exchange proposes to adopt calendar days following month end. Exchange in meeting its regulatory
subparagraph (b)(3)(B) to Rule 11.27 to This subparagraph would be obligations pursuant of the Plan as well
require a Member that is a Market Maker renumbered as Rule 11.27(b)(3)(C) and as ensure Members are able to submit
whose DEA is not a Participant to the amended to include the data collected the required data in furtherance of
Plan to transmit the data collected by FINRA pursuant to subparagraph compliance with the Plan.
pursuant to paragraph (3)(A) of Rule (b)(3)(B) as part of the Exchange’s
B. Self-Regulatory Organization’s
11.27(b) to FINRA. The Exchange also submission to the SEC. The Exchange
Statement on Burden on Competition
proposes to adopt paragraph (b)(4)(B) of shall also make such data publicly
available on the Exchange Web site on The Exchange does not believe that
Rule 11.27 to require a Member that is
a monthly basis at no charge and shall the proposed rule change will result in
a Market Maker whose DEA is not a
not identify the Trading Center that any burden on competition that is not
Participant to the Plan to transmit the
generated the data. necessary or appropriate in furtherance
data collected pursuant to paragraph
of the purposes of the Act. The
(4)(A) of Rule 11.27(b) to FINRA. Implementation Date Exchange notes that the proposed rule
The Exchange believes the proposed The proposed rule change will be change ensures all Members are able to
rule change is necessary to ensure that effective on April 4, 2016. report the data required by
all of its Members are able to report the
2. Statutory Basis subparagraphs (b)(3)(A) and (b)(4)(A) of
data required by subparagraphs (b)(3)(A)
Rule 11.27 in compliance with the Plan
and (b)(4)(A) of Rule 11.27 in The Exchange believes that its and is designed to assist the Exchange
compliance with the Plan. As noted proposal is consistent with section 6(b) in meeting its regulatory obligations
above, FINRA has established a process of the Act 28 in general, and furthers the pursuant of the Plan. The Exchange also
by which they are to collect data objectives of section 6(b)(5) of the Act 29 notes that the data collection
relating to Item IV of Appendix B and in particular, in that it is designed to requirements for Members that operate
Item I of Appendix C of the Plan on promote just and equitable principles of Trading Centers will apply equally to all
behalf of the Participants for those trade, to foster cooperation and such Members, as will the data
Members that it serves as DEA.27 The coordination with persons engaged in collection requirements for Market
Exchange believes requiring Members facilitating transactions in securities, to Makers.
who utilize a DEA that is not a remove impediments to and perfect the
Participant to the Plan to report data mechanism of a free and open market C. Self-Regulatory Organization’s
required by subparagraphs (b)(3)(A) and and a national market system and, in Statement on Comments on the
(b)(4)(A) of Rule 11.27 to FINRA would general, to protect investors and the Proposed Rule Change Received From
public interest. The Exchange believes Members, Participants, or Others
25 FINRA members for which FINRA is their DEA
that this proposal is consistent with the Written comments were neither
should refer to the Tick Size OATS Data
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Specifications on the FINRA OATS Web site at
Act because it ensures all Members are solicited nor received.
http://www.finra.org/industry/oats/ for detailed able to report the data required by
III. Date of Effectiveness of the
information and FAQs about the proposed specific subparagraphs (b)(3)(A) and (b)(4)(A) of
OATS Tick Size reporting requirements. Proposed Rule Change and Timing for
Rule 11.27 in compliance with the Plan.
26 See Tick Size Pilot Program—CHX MM Commission Action
The Exchange believes requiring
Transaction Data Technical Specifications, Because the foregoing proposed rule
available at http://www.chx.com/_literature_ Members who utilize a DEA that is not
143998/Tick_Size_Pilot_Program_-_CHX_MM_ change does not: (A) Significantly affect
Transaction_Data_Technical_Specification. 28 15 U.S.C. 78f(b). the protection of investors or the public
27 See supra note 25. 29 15 U.S.C. 78f(b)(5). interest; (B) impose any significant
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![Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices 13015
burden on competition; and (C) by its with respect to the proposed rule permits: (a) Actively-managed series of
terms, become operative for 30 days change that are filed with the certain open-end management
from the date on which it was filed or Commission, and all written investment companies to issue shares
such shorter time as the Commission communications relating to the (‘‘Shares’’) redeemable in large
may designate it has become effective proposed rule change between the aggregations only (‘‘Creation Units’’); (b)
pursuant to section 19(b)(3)(A) of the Commission and any person, other than secondary market transactions in Shares
Act 30 and paragraph (f)(6) of Rule 19b– those that may be withheld from the to occur at negotiated market prices; (c)
4 thereunder,31 the Exchange has public in accordance with the certain series to pay redemption
designated this rule filing as non- provisions of 5 U.S.C. 552, will be proceeds, under certain circumstances,
controversial. The Exchange has given available for Web site viewing and more than seven days from the tender of
the Commission written notice of its printing in the Commission’s Public Shares for redemption; (d) certain
intent to file the proposed rule change, Reference Room, 100 F Street NE., affiliated persons of the series to deposit
along with a brief description and text Washington, DC 20549, on official securities into, and receive securities
of the proposed rule change at least five business days between the hours of from, the series in connection with the
business days prior to the date of filing 10:00 a.m. and 3:00 p.m. Copies of the purchase and redemption of Creation
of the proposed rule change, or such filing also will be available for Units; and (e) certain registered
shorter time as designated by the inspection and copying at the principal management investment companies and
Commission. office of the Exchange. All comments unit investment trusts outside of the
At any time within 60 days of the received will be posted without change; same group of investment companies as
filing of the proposed rule change, the the Commission does not edit personal the series to acquire Shares.
Commission summarily may identifying information from DATES: Filing Dates: The application
temporarily suspend such rule change if submissions. You should submit only was filed on November 10, 2015 and
it appears to the Commission that such information that you wish to make amended on December 23, 2015 and
action is: (1) Necessary or appropriate in available publicly. All submissions February 3, 2016.
the public interest; (2) for the protection should refer to File Number SR–BATS–
HEARING OR NOTIFICATION OF HEARING:
of investors; or (3) otherwise in 2016–27, and should be submitted on or
furtherance of the purposes of the Act. An order granting the requested relief
before April 1, 2016.
If the Commission takes such action, the will be issued unless the Commission
For the Commission, by the Division of orders a hearing. Interested persons may
Commission shall institute proceedings Trading and Markets, pursuant to delegated
to determine whether the proposed rule request a hearing by writing to the
authority.32 Commission’s Secretary and serving
should be approved or disapproved. Robert W. Errett, applicants with a copy of the request,
IV. Solicitation of Comments Deputy Secretary. personally or by mail. Hearing requests
Interested persons are invited to [FR Doc. 2016–05441 Filed 3–10–16; 8:45 am] should be received by the Commission
submit written data, views, and BILLING CODE 8011–01–P by 5:30 p.m. on April 1, 2016, and
arguments concerning the foregoing, should be accompanied by proof of
including whether the proposed rule service on applicants, in the form of an
change is consistent with the Act. SECURITIES AND EXCHANGE affidavit or, for lawyers, a certificate of
Comments may be submitted by any of COMMISSION service. Pursuant to rule 0–5 under the
the following methods: [Investment Company Act Release No. Act, hearing requests should state the
32023; 812–14577] nature of the writer’s interest, any facts
Electronic Comments bearing upon the desirability of a
• Use the Commission’s Internet Pointbreak Advisers LLC, et al.; Notice hearing on the matter, the reason for the
comment form (http://www.sec.gov/ of Application request, and the issues contested.
rules/sro.shtml); or Persons who wish to be notified of a
• Send an email to rule-comments@ March 7, 2016.
hearing may request notification by
sec.gov. Please include File Number SR– AGENCY: Securities and Exchange writing to the Commission’s Secretary.
BATS–2016–27 on the subject line. Commission (‘‘Commission’’).
ADDRESSES: Secretary, U.S. Securities
ACTION: Notice of an application for an
Paper Comments and Exchange Commission, 100 F Street
order under section 6(c) of the NE., Washington, DC 20549–1090.
• Send paper comments in triplicate Investment Company Act of 1940 Applicants: Pointbreak Advisers and
to Secretary, Securities and Exchange (‘‘Act’’) for an exemption from sections Trust, P.O. Box 347312, San Francisco,
Commission, 100 F Street NE., 2(a)(32), 5(a)(1), 22(d) and 22(e) of the CA 94134; Distributor, 1290 Broadway,
Washington, DC 20549–1090. Act and rule 22c–1 under the Act, under Suite 1100, Denver, CO 80203.
All submissions should refer to File sections 6(c) and 17(b) of the Act for an
FOR FURTHER INFORMATION CONTACT: Hae-
Number SR–BATS–2016–27. This file exemption from sections 17(a)(1) and
number should be included on the (a)(2) of the Act, and under section Sung Lee, Attorney-Adviser, at (202)
subject line if email is used. To help the 12(d)(1)(J) of the Act for an exemption 551–7345; Bruce MacNeil, Senior
Commission process and review your from sections 12(d)(1)(A) and (B) of the Counsel, at (202) 551–6817 or Daniele
comments more efficiently, please use Act. Marchesani, Branch Chief, at (202) 551–
6821 (Division of Investment
asabaliauskas on DSK3SPTVN1PROD with NOTICES
only one method. The Commission will
post all comments on the Commission’s APPLICANTS: Pointbreak Advisers LLC Management, Chief Counsel’s Office).
Internet Web site (http://www.sec.gov/ (‘‘Pointbreak Advisers’’), Pointbreak SUPPLEMENTARY INFORMATION: The
rules/sro.shtml). Copies of the ETF Trust (the ‘‘Trust’’), and ALPS following is a summary of the
submission, all subsequent Distributors, Inc. (the ‘‘Distributor’’). application. The complete application
amendments, all written statements SUMMARY: Summary of Application: may be obtained via the Commission’s
Applicants request an order that Web site by searching for the file
30 15 U.S.C. 78s(b)(3)(A). number, or for an applicant using the
31 17 CFR 240.19b–4. 32 17 CFR 200.30–3(a)(12). Company name box, at http://
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Document Created: 2016-03-11 01:51:00
Document Modified: 2016-03-11 01:51:00
| 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 13012 |
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