81 FR 20709 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Changes in Connection With the Operation of the Exchange's Equity Options Platform

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 68 (April 8, 2016)

[Federal Register Volume 81, Number 68 (Friday, April 8, 2016)]
[Notices]
[Pages 20709-20711]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-08044]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77509; File No. SR-BatsBZX-2016-02]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Changes in 
Connection With the Operation of the Exchange's Equity Options Platform

April 4, 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 24, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend Rule 21.15, Data 
Dissemination, in connection with the operation BZX Options, as 
described below. In connection with this change the Exchange also 
proposes to adopt definitions of ``Priority Customer'' and ``Priority 
Customer Order'' in Rule 16.1. Finally, the Exchange also proposes a 
related change to Rule 20.6.
    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

[[Page 20710]]

statements may be examined at the places specified in Item IV below. 
The Exchange has prepared summaries, set forth in Sections A, B, and C 
below, of the most significant parts of such statements.

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

1. Purpose
    The Exchange is proposing to modify Rule 21.15, Data Dissemination, 
which sets forth information regarding quotations and data feeds 
provided by BZX Options. Specifically, the Exchange proposes to adopt 
new paragraph (c) to provide information regarding the existence of 
Priority Customer interest on the BZX order book (``BZX Book''). In 
connection with this change the Exchange also proposes to adopt 
definitions of ``Priority Customer'' and ``Priority Customer Order'' in 
Rule 16.1. Finally, the Exchange also proposes a related change to Rule 
20.6.
    As proposed, the Exchange will make available to all market 
participants through the Options Price Reporting Authority (``OPRA'') 
an indication that there is Priority Customer interest included in the 
best bid or offer (``BBO'') disseminated by the Exchange. Further, the 
Exchange will identify Priority Customer orders and trades as such on 
messages disseminated by the Exchange through its Multicast PITCH data 
feed. The proposed rule is similar to and based on Rule 21.15(c) of the 
Exchange's affiliated options exchange, the options platform operated 
by Bats EDGX Exchange, Inc. (``EDGX Options'').
    The Exchange notes that EDGX Options Rule 21.15(c) is identical to 
the proposed rule with the exception that EDGX Options Rule 21.15(c) 
currently refers to Customers, which term also includes broker-dealers 
and Public Customers, rather than Priority Customers as proposed by the 
Exchange. The Exchange notes that simultaneous with this proposal, Bats 
EDGX Exchange, Inc. is filing a proposal to modify Rule 21.15 to change 
the reference in such rule to ``Priority Customer'' and to adopt 
definitions of ``Priority Customer'' and ``Priority Customer Order.'' 
\5\
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    \5\ See SR-BatsEDGX-2016-03, available at: http://www.batstrading.com/regulation/rule_filings/edgx/.
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    In addition to the change described above, the Exchange proposes to 
adopt definitions of ``Priority Customer'' and ``Priority Customer 
Order'' in Rule 16.1 and to use such defined terms in proposed Rule 
21.15(c). As proposed, a Priority Customer would mean any person or 
entity that is not: (A) a broker or dealer in securities; or (B) a 
Professional.\6\ In turn, a Priority Customer Order would means an 
order for the account of a Priority Customer. The proposed definitions 
are similar to and based on the definitions of the same terms set forth 
in MIAX Rule 100. The Exchange proposes to adopt these new definitions 
in new paragraph (a)(45) and to re-number existing paragraphs (a)(45) 
through (a)(47) as paragraphs (a)(46) through (a)(48). In addition, 
because the defined term ``Public Customer Order'' is not currently 
utilized in Exchange Rules, the Exchange proposes to delete this 
definition, which is currently contained in paragraph (a)(48).
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    \6\ Pursuant to Rule 16.1(a)(45) (proposed to be renumbered as 
16.1(a)(46)), the Exchange defines a ``Professional'' as any person 
or entity that (A) is not a broker or dealer in securities, and (B) 
places more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial account(s).
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    The Exchange proposes to adopt the definition of Priority Customer 
to exclude both broker-dealers and Professionals. This change is 
consistent with the Exchange's fee schedule, which already excludes 
Professionals from the definition of the term Customer for purposes of 
pricing on the Exchange.\7\
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    \7\ See the BZX Options fee schedule available at: http://www.batsoptions.com/support/fee_schedule/bzx. As defined on the fee 
schedule, a ``Customer'' is synonymous with the proposed term 
Priority Customer in the Exchange's Rules as the definition excludes 
both broker dealers and Professionals as defined in BZX Rule 16.1.
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    In addition to the proposed changes described above, the Exchange 
also proposes to modify Rule 20.6(a)(1) to use the defined term of 
``Professional'' rather than the term ``Professional Customer,'' which 
is not defined in Rule 16.1.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of Section 6(b) of the Act.\8\ In particular, the 
proposal is consistent with Section 6(b)(5) of the Act \9\ because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, to protect investors and the public interest. The proposed 
rule change will allow the Exchange to provide information that is 
provided by other options exchanges.\10\ Equivalent information from 
the Exchange will enable market participants to participate on the 
Exchange in the same way that they participate on other options 
exchanges. In particular, the indication that Priority Customer 
interest exists on the BZX Book might increase the likelihood of 
executions for such orders. As set forth above, proposed Exchange Rule 
21.15(c) is based on EDGX Rule 21.15(c) and will be identical to such 
rule following a modification by EDGX Options to instead use the term 
Priority Customer rather than Customer. Further, the definitions of 
Priority Customer and Priority Customer Order are similar to and based 
on the definitions of the same terms set forth in MIAX Rule 100.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ See EDGX Rule 21.15; see also MIAX Rule 506(c); Securities 
Exchange Act Release No. 62399 (June 28, 2010), 75 FR 38587 (July 2, 
2010) (SR-ISE-2010-34) (Order Approving Proposed Rule Change to Fees 
for the ISE Order Feed) (describing that information is contained on 
individual limit orders indicating whether such orders are customer 
orders).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change 
does not introduce any burden on competition, but rather, would allow 
the Exchange to provide information provided by other option exchanges 
regarding the existence of customer interest on the order book.\11\ 
Similarly, the proposed definitions of Priority Customer and Priority 
Customer Order would align the Exchange's rules more closely with those 
of other options exchanges.
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    \11\ See id.
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(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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

    Because the proposed rule change does not: (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become

[[Page 20711]]

operative for 30 days from the date on which it was filed, or such 
shorter time as the Commission may designate, the proposed rule change 
has become effective pursuant to Section 19(b)(3)(A) of the Act \12\ 
and Rule 19b-4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's 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. The Exchange has satisfied this 
requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) under the Act 
\14\ normally does not become operative for 30 days after the date of 
filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiver of the 30-day operative delay is appropriate because it 
will allow the Exchange to immediately begin providing information 
regarding the existence of a Priority Customer on the order book that 
is similar to information provided by other options exchanges. The 
Commission also believes that it is appropriate for the Exchange to 
adopt definitions of Priority Customer and Priority Customer Order as 
they are similar to and based on MIAX Rule 100. Accordingly, the 
proposed definitions are similar to existing rules of other options 
exchanges and do not raise any new policy issues. Based on the 
foregoing, the Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest.\16\ The Commission hereby grants the Exchange's request and 
designates the proposal operative upon filing.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BatsBZX-2016-02 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-BatsBZX-2016-02. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BatsBZX-2016-02 and should 
be submitted on or before April 29, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08044 Filed 4-7-16; 8:45 am]
 BILLING CODE 8011-01-P