[Federal Register Volume 75, Number 180 (Friday, September 17, 2010)]
[Notices]
[Pages 57097-57098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-23299]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62901; File No. SR-BATS-2010-024]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt
BATS Rule 2.12, Entitled ``BATS Trading, Inc. as Inbound Router'' and
To Make Related Changes
September 13, 2010.
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 September 9, 2010, 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 proposes to adopt new BATS Rule 2.12, entitled ``BATS
Trading, Inc. as Inbound Router'' and to make other related changes.
The text of the proposed rule change is available at the Exchange's
Web site at http://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
On August 13, 2010, the Commission approved the application of BATS
Y-Exchange, Inc. (``BYX''), an affiliate of the Exchange, to register
as a national securities exchange.\5\ Included in the approved rules of
BYX is BYX Rule 2.12, which governs the routing of orders by BYX's (and
the Exchange's) affiliated broker-dealer, BATS Trading, Inc. (``BATS
Trading'') to BYX as inbound router in its capacity as a routing
facility of the Exchange. The Exchange is proposing to adopt the same
inbound routing rule, also numbered Rule 2.12, which will govern BATS
Trading's status as an inbound router that sends orders to the Exchange
in its capacity as a routing facility of BYX. Pursuant to proposed Rule
2.12, BATS Trading's inbound routing services from BYX to the Exchange
would be subject to the following conditions and limitations:
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\5\ See Securities Exchange Act Release No. 34-62716 (August 13,
2010), 75 FR 51295 (August 19, 2010) (order approving application of
BATS Y-Exchange, Inc. for registration as a national securities
exchange).
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(1) The Exchange must enter into (1) a plan pursuant to Rule 17d-2
under the Act with a non-affiliated self-regulatory organization
(``SRO'') to relieve the Exchange of regulatory responsibilities for
BATS Trading with respect to rules that are common rules between the
Exchange and the non-affiliated SRO, and (2) a regulatory services
contract (``Regulatory Contract'') with a non-affiliated SRO to perform
regulatory responsibilities for BATS Trading for unique Exchange rules.
(2) The Regulatory Contract must require the Exchange to provide
the non-affiliated SRO with information, in an easily accessible
manner, regarding all exception reports, alerts, complaints, trading
errors, cancellations, investigations, and enforcement matters
(collectively ``Exceptions'') in which BATS Trading is identified as a
participant that has potentially violated Exchange or Commission Rules,
and requires that FINRA provide a report, at least quarterly, to the
Exchange quantifying all Exceptions in which BATS Trading is identified
as a participant that has potentially violated Exchange or Commission
rules.
(3) The Exchange, on behalf of its parent company, BATS Global
Markets, Inc., must establish and maintain procedures and internal
controls reasonably designed to ensure that BATS Trading does not
develop or implement changes to its system based on non-public
information obtained as a result of its affiliation with the Exchange,
until such information is available generally to similarly situated
members of the Exchange.
The Exchange has proposed adoption of new Rule 2.12 on a pilot
basis. The Exchange requests that this pilot period run concurrently
with the twelve month period for BYX's receipt of inbound routes from
the Exchange, which is set to expire one year after the commencement of
operations by BYX. BYX currently plans to commence operations on
October 15, 2010.
In addition to the adoption of an inbound routing rule, the
Exchange proposes minor modifications to its existing rule applicable
to BATS Trading's status as an outbound router. Specifically, Rule 2.11
currently states that BATS Trading will not engage in any business
other than its outbound router function and any other activities it may
engage in as approved by the Commission. The Exchange proposes to add
acting as inbound router to the list of activities in which BATS
Trading will engage.
[[Page 57098]]
Finally, due to the adoption of Rule 2.12, the Exchange proposes to
re-number existing Rule 2.12 as 2.13.
2. Statutory Basis
The rule change proposed in this submission 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.\6\ In particular, the
proposed change is consistent with Section 6(b)(5) of the Act,\7\
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, and, in general, protect investors and
the public interest, by implementing a rule to allow BATS Trading, Inc.
to route orders to the Exchange in its capacity as an order routing
facility of BYX.
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\6\ 15 U.S.C. 78f(b).
\7\ 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 imposes
any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing 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, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6)(iii) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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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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.
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 e-mail to [email protected]. Please include
File No. SR-BATS-2010-024 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File No. SR-BATS-2010-024. This file
number should be included on the subject line if e-mail 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
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of BATS. 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-2010-024 and should be
submitted on or before October 8, 2010.
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\10\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-23299 Filed 9-16-10; 8:45 am]
BILLING CODE 8010-01-P