81 FR 2266 - Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rules 27.1, Definitions, and 27.4, Temporary Rule Governing Phase-Out of P and P/A Orders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 10 (January 15, 2016)

[Federal Register Volume 81, Number 10 (Friday, January 15, 2016)]
[Notices]
[Pages 2266-2268]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-00641]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76864; File No. SR-BATS-2015-122]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rules 
27.1, Definitions, and 27.4, Temporary Rule Governing Phase-Out of P 
and P/A Orders

January 11, 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 December 28, 2015, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to authorize the BATS Options Market 
(``BATS Options'') to delete its rule entitled ``Temporary Rule 
Governing Phase-Out of P and P/A Orders'' and amend any references in 
the rules to the Plan for the Purpose of Creating and Operating an 
Intermarket Linkage (``Linkage Plan''). \5\
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    \5\ See Chapter XXVII, Intermarket Linkage Rules, Rule 27.4., 
Temporary Rule Governing Phase-Out of P and P/A Orders.
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.batstrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

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

1. Purpose
    The purpose of the proposed rule change is to eliminate existing 
references to the Linkage Plan and also replace any references to the 
Linkage Plan with references to the Options Order Protection and 
Locked/Crossed Market Plan (``Plan'') in order to clarify the current 
rules in effect.
    On February 4, 2010, the Exchange filed the Plan, joining all other 
approved options exchanges in adopting the Plan.\6\ The Plan required 
each options exchange to adopt rules implementing various requirements 
specified in the Plan. The Plan replaced the former Linkage Plan. The 
Linkage Plan required Participating Exchanges \7\ to operate a 
standalone system or ``Linkage'' for sending order-flow between 
exchanges to limit trade-throughs.\8\ The Options Clearing Corporation 
(``OCC'') operated the Linkage system (the ``System'').\9\ The Exchange 
adopted various rules in connection with the Plan to avoid trade-
throughs and locked markets, among other things.\10\ The Exchange 
currently offers private routing directly to away markets.
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    \6\ See Securities Exchange Act Release Nos. 61546 (February 19, 
2010), 75 FR 8762 (February 25, 2010) (Notice of Filing and 
Immediate Effectiveness of Amendment to the Options Order Protection 
and Locked/Crossed Markets Plan to Add the BATS Exchange, Inc. as a 
Participant).
    \7\ The term ``Participating Exchanges'' refers to all options 
exchanges that had been approved to participate in the Linkage Plan.
    \8\ See footnote 6.
    \9\ See footnote 6.
    \10\ See footnote 6.
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    The Exchange adopted a temporary rule entitled ``Temporary Rule 
Governing Phase-Out of P and P/A Orders'' (``Temporary Rule''),\11\ in 
order to facilitate the participation of certain Participating 
Exchanges who may require the use of Principal Acting as Agent Orders 
(``P/A Orders'') \12\ and

[[Page 2267]]

Principal Orders (``P'') \13\ after implementation of the Plan. Certain 
Participating Exchanges required a temporary transition period during 
which they continued to utilize these order types that existed under 
the Linkage Plan. The Exchange proposed substantially similar rules 
with that of the other Participating Exchanges to accommodate the 
possibility of continued use of P/A Orders and P Orders. At this time 
all Participating Exchanges have discontinued use of the Linkage Plan. 
The Exchange proposes at this time to delete this Temporary Rule 
because it is no longer necessary in light of the discontinued use of 
the Linkage Plan. Additionally, the Exchange proposes to amend Section 
17, Definitions, in Chapter XXVII, Intermarket Linkage Rules, to 
redefine ``Plan'' to comport with the Plan.
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    \11\ See Chapter XXVII, Intermarket Linkage Rules, Rule 27.4, 
``Temporary Rule Governing Phase-Out of P and P/A Orders''.
    \12\ A P/A Order is an order for the principal account of a 
Primary Market Maker (or equivalent entity on another Eligible 
Exchange that is authorized to represent Public Customer orders), 
reflecting the terms of a related unexecuted Public Customer order 
for which the Primary Market Maker is acting as agent. See Chapter 
XXVII, Rule 27.4(d)(4)(A).
    \13\ A Principal Order is an order for the principal account of 
a market maker (or equivalent entity on another Eligible Exchange) 
and is not a P/A Order. See Chapter XXVII, Rule 27.4(d)(4)(B).
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    In addition to the changes set forth above, the Exchange proposes 
to add the letter ``(a)'' to Rule 27.1 to conform with the typical 
numbering used in Exchange rules.
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.\14\ In particular, 
the proposal is consistent with Section 6(b)(5) of the Act \15\ 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 by proposing 
the elimination of the Temporary Rule, which reflects usage of the 
former Linkage Plan that has been replaced by the Plan. The Exchange 
believes that elimination of the reference to the Temporary Rule will 
help to avoid potential confusion by Members and other market 
participants because the Linkage Plan is and has been in full effect 
for some time, and, therefore, the Temporary Rule is outdated and 
unnecessary.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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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 proposal will simply 
eliminate the Temporary Rule, which is outdated and no longer necessary 
for the reasons described above. Accordingly, the Exchange does not 
believe that the proposal has any competitive effect.

(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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\ 
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 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 and Rule 19b-4(f)(6) 
thereunder.\18\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 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) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) 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 Exchange may eliminate its Temporary 
Rule, which has been replaced by the Plan. The Commission believes that 
removal of the obsolete rule could avoid potential confusion by Members 
and other market participants. 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.\19\ The Commission 
hereby grants the Exchange's request and designates the proposal 
operative upon filing.
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    \19\ 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 No. SR-BATS-2015-122 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-BATS-2015-122. 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

[[Page 2268]]

proposed rule change between the Commission and any person, other than 
those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-BATS-2015-122 and should be 
submitted on or before February 5, 2016.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00641 Filed 1-14-16; 8:45 am]
 BILLING CODE 8011-01-P