82 FR 8462 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change to EDGX Rule 21.19, Bats Auction Mechanism, as it Applies to the Equity Options Platform
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 15 (January 25, 2017)
Federal Register Volume 82, Issue 15 (January 25, 2017)
| Page Range | 8462-8464 | |
| FR Document | 2017-01616 |
[Federal Register Volume 82, Number 15 (Wednesday, January 25, 2017)] [Notices] [Pages 8462-8464] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-01616] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79838; File No. SR-BatsEDGX-2017-05] Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change to EDGX Rule 21.19, Bats Auction Mechanism, as it Applies to the Equity Options Platform January 18, 2017. 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 January 13, 2017, Bats EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and, for the reasons discussed below, is approving the proposal on an accelerated basis. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal for the Exchange's equity options platform (``EDGX Options'') concerning a price improvement mechanism operated by EDGX Options, the Bats Auction Mechanism (``BAM'' or ``BAM Auction''), which was recently approved by the Commission.\3\ A specific aspect of BAM is currently operating on a pilot basis (``Pilot''), which is set to expire on January 18, 2017.\4\ The Pilot concerns the fact that there is no minimum size requirement for orders to be eligible for a BAM Auction, as described below. The Exchange seeks to make the Pilot permanent but does not propose any other changes to BAM. --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release No. 79718 (January 3, 2017) (SR-BatsEDGX-2016-41). \4\ See id. --------------------------------------------------------------------------- The text of the proposed rule change is available at the Exchange's Web site at www.bats.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 III below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects 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 this filing is to make permanent an aspect of BAM that is operating as a Pilot by removing Interpretation and Policy .05 from Rule 21.19. Background The Exchange proposed BAM in September of 2016 as a price improvement mechanism on the Exchange.\5\ The Proposal was amended by the Exchange on December 15, 2016,\6\ and approved, as amended, on January 3, 2017.\7\ BAM Auctions were launched on the Exchange effective January 4, 2017. BAM includes functionality in which a Member (an ``Initiating Member'') may electronically submit for execution an order it represents as agent on behalf of a Priority Customer,\8\ broker dealer, or any other person or entity (``Agency Order'') against principal interest or against any other order it represents as agent (an ``Initiating Order'') provided it submits the Agency Order for electronic execution into the BAM Auction pursuant Rule 21.19. All options traded on EDGX Options are eligible for BAM. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release No. 78988 (September 29, 2016), 81 FR 69172 (October 5, 2016) (SR-BatsEDGX-2016-41) (``Proposal''). \6\ See supra, note 3; see also SR-BatsEDGX-2016-41 Amendment No. 1, available at: http://www.bats.com/us/options/regulation/rule_filings/edgx/. \7\ See supra, note 3. \8\ The term ``Priority Customer'' means any person or entity that is not: (A) A broker or dealer in securities; or (B) a Professional. The term ``Priority Customer Order'' means an order for the account of a Priority Customer. See Rule 16.1(a)(45). A ``Professional'' is 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). All Professional orders shall be appropriately marked by Options Members. See Rule 16.1(a)(46). --------------------------------------------------------------------------- Pilot Program One component of BAM as approved by the Commission is currently operating as a Pilot, which is set to expire on January 18, 2017. The Pilot concerns that there is no minimum size requirement for orders to be eligible for a BAM Auction. The Exchange now seeks to remove Interpretation and Policy .05 from Rule 21.19 so that the Pilot may operate on a permanent basis. Pursuant to the Pilot, there is no minimum size requirement for orders to be eligible for a BAM Auction. During this Pilot, the Exchange agreed to submit certain data, periodically as required by the Commission, to provide supporting evidence that, among other things, there is meaningful competition for all size orders and that there is an active and liquid market functioning on the Exchange outside of the Auction mechanism. The Exchange proposed to adopt this provision on a pilot basis based on the fact that multiple other options exchanges have a similar provision with respect to their own price improvement mechanisms and such provisions have been operating on a pilot basis.\9\ Although the Exchange only recently launched BAM and does not yet have meaningful data to analyze pursuant to the Pilot, the Exchange is proposing to make the Pilot permanent based on the recent filings by multiple other options exchanges to make analogous provisions permanent.\10\ The [[Page 8463]] Exchange believes that BAM is sufficiently similar to these processes that there is no need to continue the Pilot in light of the recent filings to operate similar processes on a permanent basis. In particular, based on the rules discussed in additional detail below as well as the results of similar mechanisms operated by several other options exchanges, the Exchange believes that there will be meaningful competition in BAM for auctions of all sizes, that there will continue to be an active and liquid market functioning on the Exchange outside of the auction mechanism, and that there will be opportunities for price improvement for orders executed through BAM. --------------------------------------------------------------------------- \9\ See, e.g., Securities Exchange Act Release Nos. 53222 (February 3, 2006), 71 FR 7089 (February 10, 2006) (SR-CBOE-2005-60) (order approving the CBOE AIM price improvement mechanism, including that there is no minimum size requirement on a pilot basis); 73590 (November 13, 2014), 79 FR 68919 (November 19, 2014) (SR-MIAX-2014- 56) (order approving the MIAX PRIME price improvement mechanism, including that there is no minimum size requirement on a pilot basis); 76301 (October 29, 2015), 80 FR 68347 (November 4, 2015) (SR-BX-2015-032) (order approving the NASDAQ BX PRISM price improvement mechanism, including that there is no minimum size requirement on a pilot basis). \10\ See, e.g., Securities Exchange Act Release Nos. 79499 (December 7 2016), 81 FR 90012 (December 13, 2016) (SR-CBOE-2016- 084) (proposal to modify the CBOE AIM price improvement mechanism including the proposal to make the process permanent, specifically that there is no minimum size requirement); 79500 (December 7, 2016), 81 FR 90030 (December 13, 2016) (SR-MIAX-2016-46) (proposal to modify the MIAX PRIME price improvement mechanism including the proposal to make the process permanent, specifically that there is no minimum size requirement); 79465 (December 5, 2016), 81 FR 79465 [sic] (December 9, 2016) (SR-BX-2016-063) (proposal to modify certain aspects of the NASDAQ BX PRISM price improvement mechanism including the proposal to make the process permanent, including that there is no minimum size requirement). --------------------------------------------------------------------------- The Exchange believes BAM process will promote meaningful competition because it is open to all Members of the Exchange and, thus, all Members will have an equal opportunity to respond with their best prices during a BAM Auction. Since the Exchange considers all interest present in the Exchange's system, and not solely BAM responses, for execution against Agency Orders, those participants who are not explicit responders to a BAM Auction will expect executions via BAM as well.\11\ Further, once an Initiating Member has submitted an Agency Order for processing in a BAM Auction, such Agency Order may not be modified or cancelled.\12\ In addition, the Exchange believes there will be meaningful competition because an Initiating Order may not be a solicited order for the account of any market maker on EDGX Options (``Options Market Maker'') assigned in the affected series on the Exchange.\13\ Thus, such Options Market Makers assigned in the affected series will presumably be actively quoting in such series, and participate in BAM as unrelated orders, and/or will be responding to BAM Auctions in such series. --------------------------------------------------------------------------- \11\ See Exchange Rule 21.19(b)(3). \12\ See Exchange Rule 21.19(b)(1)(A). \13\ See Exchange Rule 21.19(a)(6). --------------------------------------------------------------------------- Similarly, the Exchange believes there will continue to be an active and liquid market functioning on the Exchange outside of the auction mechanism for the same reason noted above, namely that an Initiating Order may not be a solicited order for the account of an Options Market Maker.\14\ In addition, resting quotes and orders that were at a price that is equal to the NBBO on the opposite side of the market from the Agency Order (``Priority Orders'') would have priority up to their size in the NBBO at the time an Auction is initiated (``Initial NBBO'') at each price level at or better than such Initial NBBO after Priority Customer and the Initiating Member have received allocations.\15\ Thus, the concept of Priority Orders is intended to incentivize active participation on the EDGX Options order book outside of BAM Auctions. --------------------------------------------------------------------------- \14\ See id. \15\ See Exchange Rule 21.19(b)(4)(B)(iii). --------------------------------------------------------------------------- Finally, the Exchange believes that there will be opportunities for price improvement for orders executed through BAM, including for smaller sized Agency Orders when the difference between the NBB and NBO is $0.01. Pursuant to BAM, if any Agency Order is for less than 50 option contracts and the difference between the NBB and NBO is $0.01, the Initiating Member must stop the entire Agency Order at one minimum price improvement increment better than the NBBO, which increment shall be determined by the Exchange but may not be smaller than $0.01.\16\ Thus, even for an Agency Order that may be less likely to receive price improvement as compared to other Agency Orders, namely a smaller order when the spread is one penny wide, the rules of BAM require that such order will receive price improvement. --------------------------------------------------------------------------- \16\ See Exchange Rule 21.19(a)(1)(A). --------------------------------------------------------------------------- Based on the foregoing, the Exchange believes it is appropriate to continue the no minimum size requirement on a permanent basis. 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.\17\ In particular, the proposal is consistent with Section 6(b)(5) of the Act \18\ because it would promote just and equitable principles of trade, remove impediments to, and perfect the mechanism of, a free and open market and a national market system. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78f(b). \18\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Specifically, the Exchange believes that BAM, including the Pilot, results in increased liquidity available at improved prices, with competitive final pricing out of the Initiating Member's complete control. The Exchange believes that BAM promotes and fosters competition and affords the opportunity for price improvement to more options contracts. The Exchange believes that allowing BAM to continue without a minimum size requirement is consistent with the Act based on similar pilots operated by other options exchanges with respect to similar price improvement mechanisms and the recent filings to operate such mechanisms and certain aspects thereof on a permanent basis.\19\ In addition, the Exchange believes that the rules governing BAM, as adopted, will ensure: (i) That there is meaningful competition in BAM for auctions of all sizes; \20\ (ii) that there continues to be an active and liquid market functioning on the Exchange outside of the auction mechanism; \21\ and (iii) that there will be opportunities for price improvement for orders executed through BAM.\22\ The Exchange notes that this proposal does not propose any new policies or provisions that are unique or unproven, but instead relates to the continuation of a program that briefly operated on a pilot basis. --------------------------------------------------------------------------- \19\ See supra, note 10. \20\ See supra, notes 11-13 and accompanying text. \21\ See supra, notes 14-15 and accompanying text. \22\ See supra, note 16 and accompanying text. --------------------------------------------------------------------------- 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. In this regard, the Exchange notes that the rule change is being proposed in order to continue BAM without a minimum size requirement. BAM itself was a competitive response to analogous programs offered by other options exchanges but was only recently approved and launched. At the same time, other options exchanges that have been operating similar price improvement mechanisms for longer periods of time recently filed to operate such mechanisms on a permanent basis, including with regard to the fact that such mechanisms to not have a minimum size requirement.\23\ Accordingly, the Exchange's proposal to operate BAM without a minimum size requirement is a competitive proposal and the Exchange believes this proposed rule change is necessary to permit fair competition among the options exchanges. --------------------------------------------------------------------------- \23\ See supra, note 10. --------------------------------------------------------------------------- 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 [[Page 8464]] comments from members or other interested parties. III. 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-BatsEDGX-2017-05 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-BatsEDGX-2017-05. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal 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- BatsEDGX-2017-05, and should be submitted on or before February 15, 2017. IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change After careful review, 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 exchange and, in particular, with Section 6(b) of the Act.\24\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,\25\ which requires, among other things, that the rules of a national securities exchange be 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 regulating, clearing, settling, processing information with respect to, and 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 customers, issuers, brokers and dealers. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78f(b). In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \25\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission notes that BAM is designed to provide customers with an opportunity for price improvement to orders, including orders of fewer than 50 contracts. The Commission also notes that BAM currently requires price improvement for Agency Orders of fewer than 50 contracts when the NBBO has a bid/ask differential of $0.01, a situation in which an Agency Order may be less likely to receive price improvement due to the limited spread.\26\ In addition, the Commission notes that BAM is designed to encourage competition and promote an active and liquid market outside of BAM. Specifically, the Commission notes that the Exchange's rules provide for broad participation in BAM,\27\ promote market maker participation by prohibiting an Initiating Order from being a solicited order for the account of a market maker assigned in the affected series,\28\ and encourage competitive quoting outside BAM by providing Priority Order status in a BAM Auction.\29\ Finally, the Commission notes that the rules governing EDGX's BAM are similar to those governing auction mechanisms operating at other options exchanges.\30\ Thus, the Commission has determined to approve the Exchange's proposal to approve the Pilot on a permanent basis. --------------------------------------------------------------------------- \26\ See Exchange Rule 21.19(a)(1)(A). Other options exchanges with price improvement auctions have provided data to the Commission demonstrating that such orders receive relatively small amounts of price improvement. See, e.g., Securities Exchange Act Release No. 79465 (December 5, 2016), 81 FR 89167, 89169 (December 9, 2016) (SR- BX-2016-063). \27\ See, e.g., Exchange Rule 21.19(b)(3). \28\ See Exchange Rule 21.19(a)(6). \29\ See Exchange Rule 21.19(b)(4)(B)(iii). \30\ See, e.g., CBOE Rule 6.74A and Chapter VI, Section 9 of the BX Options Rules. These rules have also been operating on a pilot basis, which the exchanges have similarly proposed to make permanent. See supra note 10. The Commission notes that, in conjunction with EDGX's proposal, it is approving comparable pilot programs in effect on other options exchanges. See e.g., Securities Exchange Act Release No. 79812 (January 17, 2017) (SR-BOX-2016-58). --------------------------------------------------------------------------- The Exchange has requested that the Commission find good cause for approving the proposed rule change prior to the 30th day after publication of the notice thereof in the Federal Register. The Exchange stated that accelerated approval of its proposal would allow the applicable rules to remain in effect following the expiration of the Pilot on January 18, 2017, which would provide certainty to members of the Exchange because it will allow BAM to continue on the Exchange uninterrupted. For this reason, the Commission believes that good cause exists for accelerated approval of the proposed rule change. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,\31\ to approve the proposed rule change prior to the 30th day after the date of publication of the notice of filing thereof in the Federal Register. --------------------------------------------------------------------------- \31\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\32\ that the proposed rule change (SR-BatsEDGX-2017-05) be, and hereby is, approved on an accelerated basis. --------------------------------------------------------------------------- \32\ 15 U.S.C. 78s(b)(2). \33\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\33\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-01616 Filed 1-24-17; 8:45 am] BILLING CODE 8011-01-P
![8462 Federal Register / Vol. 82, No. 15 / Wednesday, January 25, 2017 / Notices
For the Commission, by the Division of at www.bats.com, at the principal office Order for electronic execution into the
Trading and Markets, pursuant to delegated of the Exchange, and at the BAM Auction pursuant Rule 21.19. All
authority.36 Commission’s Public Reference Room. options traded on EDGX Options are
Eduardo A. Aleman, eligible for BAM.
Assistant Secretary. II. Self-Regulatory Organization’s
Statement of the Purpose of, and Pilot Program
[FR Doc. 2017–01614 Filed 1–24–17; 8:45 am]
Statutory Basis for, the Proposed Rule One component of BAM as approved
BILLING CODE 8011–01–P
Change by the Commission is currently
In its filing with the Commission, the operating as a Pilot, which is set to
SECURITIES AND EXCHANGE Exchange included statements expire on January 18, 2017. The Pilot
COMMISSION concerning the purpose of and basis for concerns that there is no minimum size
the proposed rule change and discussed requirement for orders to be eligible for
[Release No. 34–79838; File No. SR–
BatsEDGX–2017–05]
any comments it received on the a BAM Auction. The Exchange now
proposed rule change. The text of these seeks to remove Interpretation and
Self-Regulatory Organizations; Bats statements may be examined at the Policy .05 from Rule 21.19 so that the
EDGX Exchange, Inc.; Notice of Filing places specified in Item III below. The Pilot may operate on a permanent basis.
and Order Granting Accelerated Exchange has prepared summaries, set Pursuant to the Pilot, there is no
Approval of a Proposed Rule Change forth in sections A, B, and C below, of minimum size requirement for orders to
to EDGX Rule 21.19, Bats Auction the most significant aspects of such be eligible for a BAM Auction. During
Mechanism, as it Applies to the Equity statements. this Pilot, the Exchange agreed to
Options Platform submit certain data, periodically as
A. Self-Regulatory Organization’s required by the Commission, to provide
January 18, 2017. Statement of the Purpose of, and supporting evidence that, among other
Pursuant to Section 19(b)(1) of the Statutory Basis for, the Proposed Rule things, there is meaningful competition
Securities Exchange Act of 1934 (the Change for all size orders and that there is an
‘‘Act’’),1 and Rule 19b–4 thereunder,2 1. Purpose active and liquid market functioning on
notice is hereby given that, on January the Exchange outside of the Auction
The purpose of this filing is to make
13, 2017, Bats EDGX Exchange, Inc. (the mechanism. The Exchange proposed to
‘‘Exchange’’ or ‘‘EDGX’’) filed with the permanent an aspect of BAM that is
adopt this provision on a pilot basis
Securities and Exchange Commission operating as a Pilot by removing
based on the fact that multiple other
(the ‘‘Commission’’) the proposed rule Interpretation and Policy .05 from Rule
options exchanges have a similar
change as described in Items I and II 21.19.
provision with respect to their own
below, which Items have been prepared Background price improvement mechanisms and
by the Exchange. The Commission is The Exchange proposed BAM in such provisions have been operating on
publishing this notice to solicit September of 2016 as a price a pilot basis.9 Although the Exchange
comments on the proposed rule change improvement mechanism on the only recently launched BAM and does
from interested persons and, for the Exchange.5 The Proposal was amended not yet have meaningful data to analyze
reasons discussed below, is approving by the Exchange on December 15, 2016,6 pursuant to the Pilot, the Exchange is
the proposal on an accelerated basis. proposing to make the Pilot permanent
and approved, as amended, on January
I. Self-Regulatory Organization’s 3, 2017.7 BAM Auctions were launched based on the recent filings by multiple
Statement of the Terms of Substance of on the Exchange effective January 4, other options exchanges to make
the Proposed Rule Change 2017. BAM includes functionality in analogous provisions permanent.10 The
The Exchange filed a proposal for the which a Member (an ‘‘Initiating 9 See, e.g., Securities Exchange Act Release Nos.
Exchange’s equity options platform Member’’) may electronically submit for 53222 (February 3, 2006), 71 FR 7089 (February 10,
(‘‘EDGX Options’’) concerning a price execution an order it represents as agent 2006) (SR–CBOE–2005–60) (order approving the
improvement mechanism operated by on behalf of a Priority Customer,8 broker CBOE AIM price improvement mechanism,
dealer, or any other person or entity including that there is no minimum size
EDGX Options, the Bats Auction requirement on a pilot basis); 73590 (November 13,
Mechanism (‘‘BAM’’ or ‘‘BAM (‘‘Agency Order’’) against principal 2014), 79 FR 68919 (November 19, 2014) (SR–
Auction’’), which was recently interest or against any other order it MIAX–2014–56) (order approving the MIAX PRIME
approved by the Commission.3 A represents as agent (an ‘‘Initiating price improvement mechanism, including that there
Order’’) provided it submits the Agency is no minimum size requirement on a pilot basis);
specific aspect of BAM is currently 76301 (October 29, 2015), 80 FR 68347 (November
operating on a pilot basis (‘‘Pilot’’), 4, 2015) (SR–BX–2015–032) (order approving the
5 See Securities Exchange Act Release No. 78988
which is set to expire on January 18, NASDAQ BX PRISM price improvement
(September 29, 2016), 81 FR 69172 (October 5, mechanism, including that there is no minimum
2017.4 The Pilot concerns the fact that 2016) (SR–BatsEDGX–2016–41) (‘‘Proposal’’). size requirement on a pilot basis).
there is no minimum size requirement 6 See supra, note 3; see also SR–BatsEDGX–2016– 10 See, e.g., Securities Exchange Act Release Nos.
for orders to be eligible for a BAM 41 Amendment No. 1, available at: http:// 79499 (December 7 2016), 81 FR 90012 (December
Auction, as described below. The www.bats.com/us/options/regulation/rule_filings/ 13, 2016) (SR–CBOE–2016–084) (proposal to
Exchange seeks to make the Pilot edgx/. modify the CBOE AIM price improvement
7 See supra, note 3.
permanent but does not propose any mechanism including the proposal to make the
8 The term ‘‘Priority Customer’’ means any person process permanent, specifically that there is no
other changes to BAM. or entity that is not: (A) A broker or dealer in minimum size requirement); 79500 (December 7,
The text of the proposed rule change securities; or (B) a Professional. The term ‘‘Priority 2016), 81 FR 90030 (December 13, 2016) (SR–
mstockstill on DSK3G9T082PROD with NOTICES
is available at the Exchange’s Web site Customer Order’’ means an order for the account of MIAX–2016–46) (proposal to modify the MIAX
a Priority Customer. See Rule 16.1(a)(45). A PRIME price improvement mechanism including
36 17 ‘‘Professional’’ is any person or entity that: (A) is the proposal to make the process permanent,
CFR 200.30–3(a)(12).
1 15
not a broker or dealer in securities; and (B) places specifically that there is no minimum size
U.S.C. 78s(b)(1). more than 390 orders in listed options per day on requirement); 79465 (December 5, 2016), 81 FR
2 17 CFR 240.19b–4.
average during a calendar month for its own 79465 [sic] (December 9, 2016) (SR–BX–2016–063)
3 See Securities Exchange Act Release No. 79718
beneficial account(s). All Professional orders shall (proposal to modify certain aspects of the NASDAQ
(January 3, 2017) (SR–BatsEDGX–2016–41). be appropriately marked by Options Members. See BX PRISM price improvement mechanism
4 See id. Rule 16.1(a)(46). including the proposal to make the process
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![8464 Federal Register / Vol. 82, No. 15 / Wednesday, January 25, 2017 / Notices
comments from members or other IV. Commission’s Findings and Order BAM Auction.29 Finally, the
interested parties. Granting Accelerated Approval of Commission notes that the rules
Proposed Rule Change governing EDGX’s BAM are similar to
III. Solicitation of Comments
After careful review, the Commission those governing auction mechanisms
Interested persons are invited to finds that the proposed rule change is operating at other options exchanges.30
submit written data, views, and consistent with the requirements of the Thus, the Commission has determined
arguments concerning the foregoing, Act and the rules and regulations to approve the Exchange’s proposal to
including whether the proposed rule thereunder applicable to a national approve the Pilot on a permanent basis.
change is consistent with the Act. securities exchange and, in particular, The Exchange has requested that the
Comments may be submitted by any of with Section 6(b) of the Act.24 In Commission find good cause for
the following methods: particular, the Commission finds that approving the proposed rule change
the proposed rule change is consistent prior to the 30th day after publication of
Electronic Comments with Section 6(b)(5) of the Act,25 which the notice thereof in the Federal
• Use the Commission’s Internet requires, among other things, that the Register. The Exchange stated that
comment form (http://www.sec.gov/ rules of a national securities exchange accelerated approval of its proposal
rules/sro.shtml); or be designed to prevent fraudulent and would allow the applicable rules to
manipulative acts and practices, to
• Send an email to rule-comments@ remain in effect following the expiration
promote just and equitable principles of
sec.gov. Please include File Number SR– of the Pilot on January 18, 2017, which
trade, to foster cooperation and
BatsEDGX–2017–05 on the subject line. coordination with persons engaged in would provide certainty to members of
regulating, clearing, settling, processing the Exchange because it will allow BAM
Paper Comments to continue on the Exchange
information with respect to, and
• Send paper comments in triplicate facilitating transactions in securities, to uninterrupted. For this reason, the
to Secretary, Securities and Exchange remove impediments to and perfect the Commission believes that good cause
Commission, 100 F Street NE., mechanism of a free and open market exists for accelerated approval of the
Washington, DC 20549–1090. and a national market system, and, in proposed rule change. Accordingly, the
general, to protect customers, issuers, Commission finds good cause, pursuant
All submissions should refer to File brokers and dealers. to Section 19(b)(2) of the Act,31 to
Number SR–BatsEDGX–2017–05. This The Commission notes that BAM is approve the proposed rule change prior
file number should be included on the designed to provide customers with an to the 30th day after the date of
subject line if email is used. To help the opportunity for price improvement to publication of the notice of filing thereof
Commission process and review your orders, including orders of fewer than in the Federal Register.
comments more efficiently, please use 50 contracts. The Commission also
only one method. The Commission will notes that BAM currently requires price V. Conclusion
post all comments on the Commission’s improvement for Agency Orders of It is therefore ordered, pursuant to
Internet Web site (http://www.sec.gov/ fewer than 50 contracts when the NBBO Section 19(b)(2) of the Act,32 that the
rules/sro.shtml). Copies of the has a bid/ask differential of $0.01, a proposed rule change (SR–BatsEDGX–
submission, all subsequent situation in which an Agency Order 2017–05) be, and hereby is, approved on
amendments, all written statements may be less likely to receive price an accelerated basis.
with respect to the proposed rule improvement due to the limited
change that are filed with the spread.26 In addition, the Commission For the Commission, by the Division of
Commission, and all written notes that BAM is designed to Trading and Markets, pursuant to delegated
communications relating to the encourage competition and promote an authority.33
proposed rule change between the active and liquid market outside of Eduardo A. Aleman,
Commission and any person, other than BAM. Specifically, the Commission Assistant Secretary.
those that may be withheld from the notes that the Exchange’s rules provide [FR Doc. 2017–01616 Filed 1–24–17; 8:45 am]
public in accordance with the for broad participation in BAM,27 BILLING CODE 8011–01–P
provisions of 5 U.S.C. 552, will be promote market maker participation by
available for Web site viewing and prohibiting an Initiating Order from
printing in the Commission’s Public being a solicited order for the account
Reference Room, 100 F Street NE., of a market maker assigned in the
Washington, DC 20549 on official affected series,28 and encourage
business days between the hours of competitive quoting outside BAM by
10:00 a.m. and 3:00 p.m. Copies of such providing Priority Order status in a
filing also will be available for 29 See Exchange Rule 21.19(b)(4)(B)(iii).
24 15 U.S.C. 78f(b). In approving this proposed
inspection and copying at the principal rule change, the Commission has considered the 30 See, e.g., CBOE Rule 6.74A and Chapter VI,
office of the Exchange. All comments proposed rule’s impact on efficiency, competition, Section 9 of the BX Options Rules. These rules have
received will be posted without change; and capital formation. See 15 U.S.C. 78c(f). also been operating on a pilot basis, which the
the Commission does not edit personal 25 15 U.S.C. 78f(b)(5).
exchanges have similarly proposed to make
26 See Exchange Rule 21.19(a)(1)(A). Other
identifying information from permanent. See supra note 10. The Commission
mstockstill on DSK3G9T082PROD with NOTICES
options exchanges with price improvement notes that, in conjunction with EDGX’s proposal, it
submissions. You should submit only auctions have provided data to the Commission is approving comparable pilot programs in effect on
information that you wish to make demonstrating that such orders receive relatively other options exchanges. See e.g., Securities
available publicly. All submissions small amounts of price improvement. See, e.g.,
Exchange Act Release No. 79812 (January 17, 2017)
should refer to File Number SR– Securities Exchange Act Release No. 79465
(December 5, 2016), 81 FR 89167, 89169 (December (SR–BOX–2016–58).
BatsEDGX–2017–05, and should be 9, 2016) (SR–BX–2016–063). 31 15 U.S.C. 78s(b)(2).
submitted on or before February 15, 27 See, e.g., Exchange Rule 21.19(b)(3). 32 15 U.S.C. 78s(b)(2).
2017. 28 See Exchange Rule 21.19(a)(6). 33 17 CFR 200.30–3(a)(12).
VerDate Sep<11>2014 21:25 Jan 24, 2017 Jkt 241001 PO 00000 Frm 00069 Fmt 4703 Sfmt 9990 E:\FR\FM\25JAN1.SGM 25JAN1](https://thefederalregister.org/doc/82_FR_8477/page/3.svg)
Document Created: 2017-01-25 00:09:17
Document Modified: 2017-01-25 00:09:17
| 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 | 82 FR 8462 |
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