81 FR 30395 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change To Adopt FINRA Rule 4554, Alternative Trading Systems-Recording and Reporting Requirements of Order and Execution Information for NMS Stocks

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 94 (May 16, 2016)

Page Range		30395-30397
FR Document		2016-11409
Federal Register, Volume 81 Issue 94 (Monday, May 16, 2016)
[Federal Register Volume 81, Number 94 (Monday, May 16, 2016)]
[Notices]
[Pages 30395-30397]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-11409]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77798; File No. SR-FINRA-2016-010]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving a Proposed Rule Change To Adopt FINRA 
Rule 4554, Alternative Trading Systems--Recording and Reporting 
Requirements of Order and Execution Information for NMS Stocks

May 10, 2016.

I. Introduction

    On February 29, 2016, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to require alternative trading systems (``ATSs'') 
to submit additional order information to FINRA. The proposed rule 
change was published for comment in the Federal Register on March 7, 
2016.\3\ The Commission received one comment letter on the proposal.\4\ 
On April 22, 2016, FINRA responded to the comment letter.\5\ This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77269 (March 1, 
2016), 81 FR 11851 (March 7, 2016) (``Notice''). On April 15, 2016, 
the Commission extended the time period for Commission action on the 
proposed rule change until June 3, 2016. See Securities Exchange Act 
Release No. 77635 (April 15, 2016), 81 FR 23536 (April 21, 2016).
    \4\ See Letter from Theodore R. Lazo, Managing Director and 
Associate General Counsel, Securities Industry and Financial Markets 
Association (``SIFMA''), dated April 1, 2016 (``SIFMA Letter'').
    \5\ See Letter from Andrew Madar, Associate General Counsel, 
FINRA, dated April 22, 2016 (``FINRA Response Letter'').
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II. Description of the Proposal

    FINRA proposed Rule 4554 to impose additional reporting 
requirements on trading venues that have filed a Form ATS with the 
Commission.\6\ The proposal is intended to enhance FINRA's order-based 
surveillance by requiring ATSs to report additional ATS-specific order 
information for NMS stocks.\7\ While ATSs submit order information to 
FINRA under the Order Audit Trail System (``OATS'') rules,\8\ there is 
order information not currently required to be reported to OATS, such 
as order re-pricing events and order display and reserve size 
information, which FINRA needs so that it can more fully reconstruct an 
ATS's order book and perform certain order-based surveillance.
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    \6\ See 17 CFR 242.300(a).
    \7\ See 17 CFR 242.600(b)(47).
    \8\ For example, upon receipt of an order, a member must report 
the number of shares to which the order applies, any limit or stop 
price prescribed in the order, special handling requests, and the 
time at which the order is received. See FINRA Rule 7440(b). Upon 
the modification or execution of an order, the member must report 
the time of modification or execution, whether the order was fully 
or partially executed, the number of unexecuted shares remaining if 
the order was only partially executed, and the execution price. See 
FINRA Rule 7440(d).
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    Specifically, proposed Rule 4554 sets forth four categories of 
reporting requirements: (1) Data to be reported by all ATSs at the time 
of order receipt; (2) data to be reported by all ATSs at the time of 
order execution; (3) data to be reported by ATSs that display 
subscriber orders; and (4) data to be reported by ATSs that are 
registered as ADF Trading Centers. The proposed requirements would 
apply to order and execution information for NMS stocks. ATSs would be 
required to report this information to FINRA consistent with current 
OATS reporting requirements.

Reporting Requirements for Receipt of Orders

    Proposed Rule 4554 would require, among other things, each ATS to 
indicate on all orders received whether it displays subscriber orders 
outside of the ATS (other than to ATS employees).\9\ This information 
will enable FINRA to distinguish between ATSs that display orders 
outside the ATS (``display ATS''), either to subscribers or through 
consolidated quote data, and ATSs that do not display orders outside 
the ATS (``non-display ATS'').\10\ A display ATS would also be required 
to indicate whether the order book is displayed to subscribers only, or 
distributed for publication in the consolidated quotation data.
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    \9\ The proposed requirements apply to any alternative trading 
system, as defined in Rule 300(a)(1) of SEC Regulation ATS, that has 
filed a Form ATS with the SEC and is subject to FINRA's OATS and 
equity trade reporting rules. See 17 CFR 242.300(a)(1).
    For purposes of this rule, the term ``order'' includes a broker-
dealer's proprietary quotes that are transmitted to an ATS.
    \10\ If an ATS meets the applicable volume thresholds, it is 
required to make its best bid and best offer available for 
publication in the consolidated quotation data. See 17 CFR 
242.301(b)(3).
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    Each ATS would also be required to indicate whether it is an ADF 
Trading Center as defined in Rule 6220, whether a specific order can be 
routed away from the ATS for execution, and whether there are any 
counter-party restrictions on the order. ATSs would also be required to 
provide FINRA with a

[[Page 30396]]

unique identifier representing the specific order type.\11\ ATSs will 
be required to provide FINRA with a list of all of their order types 
twenty days before the order types become effective, and if the ATS 
makes any subsequent changes to its order types, twenty days before the 
changes become effective, which will enable FINRA to map the identifier 
to a specific order type.\12\
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    \11\ This requirement would not apply to market and limit orders 
that have no other handling instructions.
    \12\ FINRA will provide a deadline prior to the implementation 
date by which current ATSs must submit lists of their existing order 
types. See Notice at 11851.
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    An ATS also would be required to report, for all orders, the NBBO 
(or relevant reference price) in effect at the time of order receipt 
and the timestamp of when the ATS captured the effective NBBO (or 
relevant reference price); as part of this report, the ATS must 
identify the market data feed it used to obtain the NBBO (or relevant 
reference price). These two data elements will enable FINRA to 
ascertain if the NBBO changed between the time of order receipt and the 
time the ATS captured the effective NBBO.\13\ Finally, each ATS would 
be required to provide the sequence number assigned to the order event 
by the ATS's matching engine.
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    \13\ See Notice at 11852.
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Reporting Requirements for Execution of Orders

    The second category of proposed changes applies to all ATSs when 
reporting the execution of an order to OATS. Specifically, each ATS 
must record and report the NBBO (or relevant reference price) in effect 
at the time of order execution, and the timestamp of when the ATS 
captured the effective NBBO (or relevant reference price). An ATS must 
identify the market data feed used by the ATS to obtain the NBBO (or 
other reference price).\14\
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    \14\ If for any reason, the ATS uses a feed other than the one 
that was reported on its ATS data submission, the ATS must notify 
FINRA via email of the fact that an alternative source was used, 
identify the alternative source, and specify the date(s), time(s) 
and securities for which the alternative source was used.
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Reporting Requirements for Display ATSs

    The third category of changes applies only to display ATSs and 
requires that those ATSs report the following order receipt 
information: (1) Whether the order is hidden or displayable; (2) 
display quantity; (3) reserve quantity, if applicable; (4) displayed 
price; and (5) the price entered. If the matching engine re-prices a 
displayed order or changes the display quantity of a displayed order, 
the ATS must report the time of the modification and the applicable new 
display price or size. FINRA stated that it needs this information from 
display ATSs to have an accurate, time sequenced audit trail to 
reconstruct the displayed market and noted that the pricing and size 
changes are being displayed to others.\15\
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    \15\ See Notice at 11852.
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Reporting Requirements for ADF Trading Centers

    Finally, FINRA proposed to require ADF Trading Centers to report 
the quote identifier provided to the ADF if a change to the displayed 
size or price of an order resulted in a new quote being transmitted to 
the ADF. If an order held by the ADF Trading Center becomes associated 
with a quote identifier based on an action by the matching engine 
related to a different order(s), (e.g., another order is cancelled 
making the order being held the best priced order in the matching 
engine), the ADF Trading Center must provide FINRA the new quote 
identifier.

III. Comment Letter

    The Commission received one comment letter \16\ on the proposal and 
a response to the comment letter from FINRA.\17\ The commenter 
suggested that FINRA amend the proposal to eliminate the requirement 
for ATSs to submit NBBO timestamp information to OATS.\18\ The 
commenter sought clarification that the proposal does not require an 
ATS to report the time it actually received the NBBO, but would require 
the time the ATS's matching engine took the action to evaluate the NBBO 
after receiving or executing an order. According to the commenter, many 
ATS matching engines receive only the price changes in the NBBO, and 
not volume changes, to avoid unnecessary trading latency. Therefore, a 
comparison of the time the NBBO was received to the time of order 
receipt or execution could show significant time lag, which the 
commenter believes could give FINRA the impression that an ATS is not 
regularly updating its quotes.\19\ In addition, with regard to the 
proposed requirement to identify the market data feed used by the ATS 
to record the NBBO (or other reference price), the commenter believes 
that FINRA should specify a list of market data feed types that should 
be used to populate the field, and that the best approach would be to 
designate general categories, such as ``SIP,'' ``direct,'' ``hybrid,'' 
and ``third party vendor.'' \20\
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    \16\ See supra, note 4.
    \17\ See supra, note 5.
    \18\ See SIFMA Letter at 1.
    \19\ See id. at 2.
    \20\ See id.
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    In its response to these comments, FINRA clarified that an ATS 
would comply with this NBBO timestamp requirement by reporting the time 
the ATS captured the NBBO, and not the time the ATS actually received 
the NBBO. In regard to the requirement to identify the market data feed 
used by the ATS to record the NBBO (or other reference price), FINRA 
stated that it will consider the commenter's suggestion when developing 
the technical specifications to implement the proposal.\21\
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    \21\ See FINRA Response Letter at 3.
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    The commenter also suggested that FINRA eliminate the requirement 
to submit order type information to OATS and the corresponding 
requirement for ATSs to provide FINRA with advance notice of order 
types and changes.\22\ The commenter stated that because the Commission 
has proposed new requirements for ATSs that trade NMS stocks,\23\ 
including a requirement to provide advance notice of changes to order 
types, ``FINRA should not use this proposal to get ahead of the 
Commission's final action.'' \24\
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    \22\ See SIFMA Letter at 3.
    \23\ See Securities and Exchange Release No. 76474 (November 18, 
2015), 80 FR 80998 (December 28, 2015). The Commission's proposal, 
among other things, would require ATSs to provide advance notice of 
material changes to the operation of an ATS, including changes to 
order types.
    \24\ See SIFMA Letter at 3.
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    In its response to these comments, FINRA noted that the order type 
requirement set forth in its proposal is independent of the 
Commission's proposed action with respect to order types, and that 
FINRA has fully explained and justified its requirement in the 
proposal. FINRA stated that the reference to the Commission's proposed 
action was solely for background purposes. In addition, FINRA believes 
that the 20-day advance notice requirement is consistent with current 
reporting obligations under Regulation ATS and thus would not increase 
the reporting burden on ATSs.\25\
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    \25\ See FINRA Response Letter at 3.
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    Finally, the commenter requested clarification on technical 
reporting aspects of counter-party restrictions and sequence 
numbers.\26\ Specifically, the commenter requested that FINRA clarify 
if ATSs must report counter-party restrictions on a ``yes/no'' basis or 
if specific counter-party restrictions must be reported. In addition, 
the commenter requested that FINRA clarify if ATSs must report the 
sequence number a

[[Page 30397]]

specific ATS's matching engine assigns, or if all ATSs must adopt a 
uniform method of assigning sequence numbers.
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    \26\ See SIFMA Letter at 4.
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    In its response to these comments, FINRA clarified that the 
requirement to identify any counter-party restrictions is a yes or no 
response, and that the ATS would not be required to provide the 
specific counter-party restriction.\27\ In addition, FINRA clarified 
that it is not mandating a particular or uniform format by which ATSs 
must report sequence numbers, and that requiring an ATS to report the 
sequence number as it currently exists in the ATS will satisfy this 
requirement.\28\
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    \27\ See FINRA Response Letter at 4.
    \28\ See id. at 4-5.
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IV. Discussion and Commission Findings

    After careful review of the proposal, the comment letter received, 
and FINRA's response, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
association.\29\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 15A(b)(6) of the Act,\30\ which 
requires, among other things, that FINRA rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and in general, to protect investors and 
the public interest.
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    \29\ In approving this proposed rule change, the Commission has 
considered the proposed rule change's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \30\ 15 U.S.C. 78o-3(b)(6).
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    The Commission believes that the stated objectives of the 
proposal--to enhance FINRA's ability to surveil activity occurring 
within an ATS, and by extension FINRA's ability to surveil for 
potentially abusive algorithmic trading activity more generally across 
markets--are consistent with the purposes of the Act and with FINRA's 
responsibility to enforce compliance by its members with its rules and 
with the Act. The additional information provided by ATSs will better 
enable FINRA to reconstruct an ATS order book and more effectively 
conduct quotation-based surveillance. FINRA will integrate the 
additional information into its surveillance patterns to support the 
generation and analysis of alerts, which will increase FINRA's ability 
to detect a wide range of potential market-specific and cross-market 
manipulative activities.
    The Commission further believes that applying this proposal to NMS 
stocks is consistent with the Act because the potentially abusive 
trading activity that the proposal is designed to detect is of 
particular concern with respect to NMS stocks. The Commission believes 
that gaps in ATS order book data should be addressed in the near-term 
to ensure effective surveillance of ATSs and, by extension, abusive 
algorithmic trading activity more generally across markets. The 
Commission believes that FINRA adequately responded to the issues 
raised in the comment letter.
    Accordingly, for the reasons discussed above, the Commission finds 
that the proposed rule change is consistent with Section 15A of the 
Act.

V. Conclusion

    It Is Therefore Ordered pursuant to Section 19(b)(2) of the Act 
\31\ that the proposed rule change (SR-FINRA-2016-010) be and hereby is 
approved.
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    \31\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-11409 Filed 5-13-16; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 81, No. 94 / Monday, May 16, 2016 / Notices 30395

Paper Comments SECURITIES AND EXCHANGE there is order information not currently
COMMISSION required to be reported to OATS, such
• Send paper comments in triplicate as order re-pricing events and order
to Secretary, Securities and Exchange [Release No. 34–77798; File No. SR–FINRA–
2016–010]
display and reserve size information,
Commission, 100 F Street NE., which FINRA needs so that it can more
Washington, DC 20549–1090. Self-Regulatory Organizations; fully reconstruct an ATS’s order book
All submissions should refer to File Financial Industry Regulatory and perform certain order-based
Number SR–ISEGemini–2016–05. This Authority, Inc.; Order Approving a surveillance.
Proposed Rule Change To Adopt Specifically, proposed Rule 4554 sets
file number should be included on the
FINRA Rule 4554, Alternative Trading forth four categories of reporting
subject line if email is used.
Systems—Recording and Reporting requirements: (1) Data to be reported by
To help the Commission process and Requirements of Order and Execution all ATSs at the time of order receipt; (2)
review your comments more efficiently, Information for NMS Stocks data to be reported by all ATSs at the
please use only one method. The time of order execution; (3) data to be
Commission will post all comments on May 10, 2016. reported by ATSs that display
the Commission’s Internet Web site I. Introduction subscriber orders; and (4) data to be
(http://www.sec.gov/rules/sro.shtml). reported by ATSs that are registered as
On February 29, 2016, the Financial ADF Trading Centers. The proposed
Copies of the submission, all subsequent Industry Regulatory Authority, Inc.
amendments, all written statements requirements would apply to order and
(‘‘FINRA’’) filed with the Securities and
with respect to the proposed rule execution information for NMS stocks.
Exchange Commission (‘‘Commission’’),
change that are filed with the ATSs would be required to report this
pursuant to Section 19(b)(1) of the
Commission, and all written information to FINRA consistent with
Securities Exchange Act of 1934
communications relating to the current OATS reporting requirements.
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change between the proposed rule change to require Reporting Requirements for Receipt of
Commission and any person, other than alternative trading systems (‘‘ATSs’’) to Orders
those that may be withheld from the submit additional order information to Proposed Rule 4554 would require,
public in accordance with the FINRA. The proposed rule change was among other things, each ATS to
provisions of 5 U.S.C. 552, will be published for comment in the Federal indicate on all orders received whether
available for Web site viewing and Register on March 7, 2016.3 The it displays subscriber orders outside of
printing in the Commission’s Public Commission received one comment the ATS (other than to ATS
Reference Room on official business letter on the proposal.4 On April 22, employees).9 This information will
days between the hours of 10:00 a.m. 2016, FINRA responded to the comment enable FINRA to distinguish between
and 3:00 p.m. Copies of such filing also letter.5 This order approves the ATSs that display orders outside the
will be available for inspection and proposed rule change. ATS (‘‘display ATS’’), either to
copying at the principal offices of the II. Description of the Proposal subscribers or through consolidated
Exchange. All comments received will FINRA proposed Rule 4554 to impose quote data, and ATSs that do not
be posted without change; the additional reporting requirements on display orders outside the ATS (‘‘non-
Commission does not edit personal trading venues that have filed a Form display ATS’’).10 A display ATS would
identifying information from ATS with the Commission.6 The also be required to indicate whether the
submissions. You should submit only proposal is intended to enhance order book is displayed to subscribers
information that you wish to make FINRA’s order-based surveillance by only, or distributed for publication in
available publicly. All submissions requiring ATSs to report additional the consolidated quotation data.
should refer to File Number SR– ATS-specific order information for NMS Each ATS would also be required to
ISEGemini–2016–05, and should be stocks.7 While ATSs submit order indicate whether it is an ADF Trading
submitted on or before June 6, 2016. Center as defined in Rule 6220, whether
information to FINRA under the Order
a specific order can be routed away from
For the Commission, by the Division of Audit Trail System (‘‘OATS’’) rules,8
the ATS for execution, and whether
Trading and Markets, pursuant to delegated there are any counter-party restrictions
1 15 U.S.C. 78s(b)(1).
authority.69 2 17 on the order. ATSs would also be
CFR 240.19b–4.
Robert W. Errett, 3 See Securities Exchange Act Release No. 77269 required to provide FINRA with a
Deputy Secretary. (March 1, 2016), 81 FR 11851 (March 7, 2016)
(‘‘Notice’’). On April 15, 2016, the Commission order, the member must report the time of
[FR Doc. 2016–11406 Filed 5–13–16; 8:45 am]
extended the time period for Commission action on modification or execution, whether the order was
BILLING CODE 8011–01–P the proposed rule change until June 3, 2016. See fully or partially executed, the number of
Securities Exchange Act Release No. 77635 (April unexecuted shares remaining if the order was only
15, 2016), 81 FR 23536 (April 21, 2016). partially executed, and the execution price. See
4 See Letter from Theodore R. Lazo, Managing
FINRA Rule 7440(d).
Director and Associate General Counsel, Securities 9 The proposed requirements apply to any
Industry and Financial Markets Association alternative trading system, as defined in Rule
(‘‘SIFMA’’), dated April 1, 2016 (‘‘SIFMA Letter’’). 300(a)(1) of SEC Regulation ATS, that has filed a
5 See Letter from Andrew Madar, Associate
Form ATS with the SEC and is subject to FINRA’s
asabaliauskas on DSK3SPTVN1PROD with NOTICES

General Counsel, FINRA, dated April 22, 2016 OATS and equity trade reporting rules. See 17 CFR
(‘‘FINRA Response Letter’’). 242.300(a)(1).
6 See 17 CFR 242.300(a).
For purposes of this rule, the term ‘‘order’’
7 See 17 CFR 242.600(b)(47). includes a broker-dealer’s proprietary quotes that
8 For example, upon receipt of an order, a are transmitted to an ATS.
member must report the number of shares to which 10 If an ATS meets the applicable volume

the order applies, any limit or stop price prescribed thresholds, it is required to make its best bid and
in the order, special handling requests, and the time best offer available for publication in the
at which the order is received. See FINRA Rule consolidated quotation data. See 17 CFR
69 17 CFR 200.30–3(a)(12). 7440(b). Upon the modification or execution of an 242.301(b)(3).

VerDate Sep<11>2014 18:48 May 13, 2016 Jkt 238001 PO 00000 Frm 00159 Fmt 4703 Sfmt 4703 E:\FR\FM\16MYN1.SGM 16MYN1
Federal Register / Vol. 81, No. 94 / Monday, May 16, 2016 / Notices 30397

specific ATS’s matching engine assigns, potentially abusive trading activity that thereunder,4 which renders it effective
or if all ATSs must adopt a uniform the proposal is designed to detect is of upon filing with the Commission. The
method of assigning sequence numbers. particular concern with respect to NMS Commission is publishing this notice to
In its response to these comments, stocks. The Commission believes that solicit comments on the proposed rule
FINRA clarified that the requirement to gaps in ATS order book data should be change from interested persons.
identify any counter-party restrictions is addressed in the near-term to ensure
a yes or no response, and that the ATS I. Self-Regulatory Organization’s
effective surveillance of ATSs and, by Statement of the Terms of Substance of
would not be required to provide the extension, abusive algorithmic trading
specific counter-party restriction.27 In the Proposed Rule Change
activity more generally across markets.
addition, FINRA clarified that it is not The Commission believes that FINRA The Exchange filed a proposal to
mandating a particular or uniform adequately responded to the issues adopt Exchange Rule 11.21(a) to
format by which ATSs must report raised in the comment letter. implement the quoting and trading
sequence numbers, and that requiring Accordingly, for the reasons provisions of the Regulation NMS Plan
an ATS to report the sequence number discussed above, the Commission finds to Implement a Tick Size Pilot Program
as it currently exists in the ATS will that the proposed rule change is (‘‘Plan’’). The proposed rule change is
satisfy this requirement.28 consistent with Section 15A of the Act. substantially similar to a proposed rule
change approved by the Commission by
IV. Discussion and Commission V. Conclusion the Bats BZX Exchange, Inc. f/k/a BATS
Findings
It Is Therefore Ordered pursuant to Exchange, Inc. (‘‘BZX’’) to adopt BZX
After careful review of the proposal, Section 19(b)(2) of the Act 31 that the Rule 11.27(a) which also implemented
the comment letter received, and proposed rule change (SR–FINRA– the quoting and trading provisions of
FINRA’s response, the Commission 2016–010) be and hereby is approved. the Plan.5
finds that the proposed rule change is The text of the proposed rule change
For the Commission, by the Division of
consistent with the requirements of the Trading and Markets, pursuant to delegated is available at the Exchange’s Web site
Act and the rules and regulations authority.32 at www.batstrading.com, at the
thereunder applicable to a national Robert W. Errett, principal office of the Exchange, and at
securities association.29 In particular, Deputy Secretary. the Commission’s Public Reference
the Commission finds that the proposed Room.
[FR Doc. 2016–11409 Filed 5–13–16; 8:45 am]
rule change is consistent with Section
15A(b)(6) of the Act,30 which requires, BILLING CODE 8011–01–P II. Self-Regulatory Organization’s
among other things, that FINRA rules be Statement of the Purpose of, and
designed to prevent fraudulent and Statutory Basis for, the Proposed Rule
SECURITIES AND EXCHANGE Change
manipulative acts and practices, to
COMMISSION
promote just and equitable principles of In its filing with the Commission, the
trade, and in general, to protect [Release No. 34–77792; File No. SR- Exchange included statements
investors and the public interest. BatsEDGA–2016–08] concerning the purpose of and basis for
The Commission believes that the the proposed rule change and discussed
stated objectives of the proposal—to Self-Regulatory Organizations; Bats any comments it received on the
enhance FINRA’s ability to surveil EDGA Exchange, Inc. f/k/a EDGA proposed rule change. The text of these
activity occurring within an ATS, and Exchange, Inc.; Notice of Filing and statements may be examined at the
by extension FINRA’s ability to surveil Immediate Effectiveness of a Proposed places specified in Item IV below. The
for potentially abusive algorithmic Rule Change To Adopt Exchange Rule Exchange has prepared summaries, set
trading activity more generally across 11.21(a) To Implement the Quoting and forth in Sections A, B, and C below, of
markets—are consistent with the Trading Provisions of the Regulation the most significant parts of such
purposes of the Act and with FINRA’s NMS Plan To Implement a Tick Size statements.
responsibility to enforce compliance by Pilot Program
its members with its rules and with the A. Self-Regulatory Organization’s
May 10, 2016. Statement of the Purpose of, and
Act. The additional information Pursuant to Section 19(b)(1) of the
provided by ATSs will better enable Statutory Basis for, the Proposed Rule
Securities Exchange Act of 1934 (the Change
FINRA to reconstruct an ATS order ‘‘Act’’),1 and Rule 19b–4 thereunder,2
book and more effectively conduct notice is hereby given that on May 2, 1. Purpose
quotation-based surveillance. FINRA 2016, Bats EDGA Exchange, Inc. f/k/a On August 25, 2014, NYSE Group,
will integrate the additional information EDGA Exchange, Inc. (the ‘‘Exchange’’ Inc., on behalf of the Exchange, BZX,
into its surveillance patterns to support or ‘‘EDGA’’) filed with the Securities Chicago Stock Exchange, Inc., Bats BYX
the generation and analysis of alerts, and Exchange Commission Exchange, Inc. f/k/a BATS Y-Exchange,
which will increase FINRA’s ability to (‘‘Commission’’) the proposed rule Inc., Bats EDGX Exchange, Inc. f/k/a
detect a wide range of potential market- change as described in Items I, II and III EDGX Exchange, Inc., Financial
specific and cross-market manipulative below, which Items have been prepared Industry Regulatory Authority, Inc.
activities. by the Exchange. The Exchange has
The Commission further believes that (‘‘FINRA’’), NASDAQ OMX BX, Inc.,
designated this proposal as a ‘‘non- NASDAQ OMX PHLX LLC, the Nasdaq
applying this proposal to NMS stocks is
asabaliauskas on DSK3SPTVN1PROD with NOTICES

controversial’’ proposed rule change Stock Market LLC, New York Stock
consistent with the Act because the
pursuant to Section 19(b)(3)(A) of the Exchange LLC (‘‘NYSE’’), NYSE MKT
27 See FINRA Response Letter at 4.
Act 3 and Rule 19b-4(f)(6)(iii) LLC, and NYSE Arca, Inc. (collectively
28 See id. at 4–5. ‘‘Participants’’), filed with the
31 15 U.S.C. 78s(b)(2).
29 In approving this proposed rule change, the
32 17 CFR 200.30–3(a)(12).
Commission has considered the proposed rule 4 17 CFR 240.19b–4(f)(6)(iii).
1 15 U.S.C. 78s(b)(1).
change’s impact on efficiency, competition, and 5 See Securities Exchange Act Release No. 77291
capital formation. See 15 U.S.C. 78c(f). 2 17 CFR 240.19b–4.
(March 3, 2016), 81 FR 12543 (March 9, 2016)
30 15 U.S.C. 78o–3(b)(6). 3 15 U.S.C. 78s(b)(3)(A). (order approving SR–BATS–2015–108).

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Document Created: 2016-05-14 01:16:56
Document Modified: 2016-05-14 01:16:56
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 30395