[Federal Register Volume 75, Number 202 (Wednesday, October 20, 2010)]
[Notices]
[Pages 64767-64769]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26335]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63097; File No. SR-BYX-2010-002]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing of Proposed Rule Change To Amend BATS Y-Exchange Rules To
Conform to the Current Rules of BATS Exchange
October 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 October 4, 2010, BATS Y-Exchange, Inc. (the ``Exchange'' or
``BYX'') 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 is proposing to amend BYX Rules 11.9, 11.13, 11.17,
and 11.18 in order to bring BYX Rules up to date with recent changes
that have been made to the rules of the Exchange's affiliate, BATS
Exchange, Inc. (``BATS Exchange''). 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
[[Page 64768]]
the most significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend BYX Rules 11.9, 11.13, 11.17, and
11.18 in order to bring BYX Rules up to date with the changes that were
made to the rules of BATS Exchange while BYX's Form 1 Application to
register as a national security exchange was pending approval.
Background:
BYX plans to commence operations as a national securities exchange
registered under Section 6 of the Act \5\ on October 15, 2010. As
described more fully in BYX's Form 1 application,\6\ the Exchange is an
affiliate of BATS Exchange: both are wholly owned subsidiaries of BATS
Global Markets, Inc. (``BGM''). BYX Rules, in their current form, were
filed as part of Amendment No. 1 to its Form 1 on July 1, 2010 and, at
that time, were nearly identical to BATS Exchange Rules. In the time
between when BYX was preparing to file Amendment No. 1 to its Form 1
and the filing of this proposed rule change, BATS Exchange has made
several changes to its rule book. Despite the limited time frame since
the Commission approved BYX to operate as a national stock exchange,
BYX and BATS Exchange already have many common members and the Exchange
anticipates that the number of common members will only continue to
grow. In order to prevent confusion among common members, to ensure
consistent operation of both BYX and BATS Exchange, and to bring the
Exchange's Rules in line with industry standards, the Exchange proposes
to amend BYX Rules as described below.
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\5\ 15 U.S.C. 78f.
\6\ 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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Match Trade Prevention:
The Exchange proposes to make a minor change to its Member Match
Trade Prevention, or MMTP, functionality, described in BYX Rule 11.9(f)
and to rename the functionality as Match Trade Prevention.
Specifically, the Exchange is proposing to allow Users to opt-out of
the default behavior of the MMTP Decrement and Cancel (``MDC'')
modifier to automatically cancel two orders in their entirety when the
resting order contains an MMTP modifier rather than MDC and is larger
than the incoming order. Also, as mentioned above, the Exchange also
proposes to rename the functionality as Match Trade Prevention
(``MTP''). These changes would make BYX Rule 11.9(f) consistent with
BATS Exchange Rule 11.9(f) and are identical to changes made by BATS
Exchange when modifying its MMTP rules.\7\
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\7\ Securities Exchange Act Release No. 62102 (May 13, 2010), 75
FR 28670 (May 21, 2010) (SR-BATS-2010-11).
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Routing Strategies:
The Exchange also proposes to amend Rule 11.13(a), which describes
its order routing processes, to modify the existing general description
of Exchange routing functionality, to describe available routing
options in greater detail, and to add certain new routing options.
Specifically, the Exchange is proposing various modifications to its
general routing standards, which modifications, the Exchange believes,
will help clarify the rule, including adding a reference to the
``RECYCLE Option'' in its rule. Additionally, the Exchange is proposing
to amend the Rule to include a definition of ``System routing table,''
in order to reflect the fact that the Exchange, like other trading
venues, maintains different routing tables for different routing
options and modifies them on a regular basis to reflect assessments
about the destination markets. Finally, the Exchange proposes to add
descriptions of the following routing options: CYCLE, Parallel D,
Parallel 2D, Parallel T, DRT, and Destination Specific Orders. These
changes would make BYX Rule 11.13 consistent with BATS Exchange Rule
11.13 and are substantively identical to changes made by BATS Exchange
when modifying its execution and routing rules.\8\
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\8\ Securities Exchange Act Release No. 61883 (April 9, 2010),
75 FR 20418 (April 19, 2010) (SR-BATS-2010-007).
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Clearly Erroneous Executions:
The Exchange also proposes to amend its Rule 11.17, entitled
Clearly Erroneous Executions, to provide for uniform treatment: (1) Of
clearly erroneous execution reviews in Multi-Stock Events involving
twenty or more securities; and (2) in the event transactions occur that
result in the issuance of an individual stock trading pause by the
primary market and subsequent transactions that occur before the
trading pause is in effect on the Exchange. The Exchange also proposes
additional changes to Rule 11.17 that reduce the ability of the
Exchange to deviate from the objective standards set forth in the Rule.
These changes would make BYX Rule 11.17 consistent with BATS Exchange
Rule 11.17 and are identical to changes made by BATS Exchange when
modifying its clearly erroneous executions rules.\9\
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\9\ Securities Exchange Act Release No. 62886 (September 10,
2010), 75 FR 56613 (September 16, 2010) (SR-BATS-2010-016).
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Individual Stock Trading Pause:
The Exchange also proposes to amend its Rule 11.18, which describes
BYX's procedures for trading halts due to extraordinary market
volatility, on a pilot basis so that the Exchange may, from time to
time, pause trading in an individual stock when the primary listing
market for such stock issues a trading pause in any of the securities
covered by the pilot. The Exchange is proposing the rule change in
order to recognize what is now a uniform market-wide trading pause
standards for individual securities in the S&P 500[reg] Index, the
Russell 1000[reg] Index and specified Exchange Trade Products that
experience rapid price movement. These changes would make BYX Rule
11.18 consistent with BATS Exchange Rule 11.18 and are identical to
changes made by BATS Exchange when modifying its trading halt rule.\10\
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\10\ Securities Exchange Act Release No. 62884 (September 10,
2010), 75 FR 56618 (September 16, 2010) (SR-BATS-2010-018).
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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.\11\ In particular,
the proposed changes are consistent with Section 6(b)(5) of the
Act,\12\ because they 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. Specifically, the Exchange believes
that although BYX Rules may, in certain instances, intentionally differ
from BATS Exchange rules, the proposed changes will promote uniformity
with BATS Exchange with respect to rules that are intended to be
identical but were difficult to modify until BYX's Form 1 application
had been approved. The Exchange believes that it will reduce the
potential for confusion by its members that are also members of BATS
Exchange if it commences operations with only those differences between
BYX and BATS Exchange rules that are intentional. Furthermore, certain
of the
[[Page 64769]]
proposed changes will align the Exchange's rules with rules of other
market centers that were recently amended to address the type of sudden
price declines that the market experienced on the afternoon of May 6,
2010.
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\11\ 15 U.S.C. 78f(b).
\12\ 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, if
consistent with the protection of investors and the public interest, it
has become effective pursuant to Section 19(b)(3)(A) of the Act \13\
and Rule 19b-4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the self-regulatory organization to submit to the
Commission written notice of its 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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The Exchange has requested that the Commission waive the 30-day
operative delay to permit the Exchange to commence operations as a
national securities exchange with rules substantively identical to the
equity trading rules of BATS Exchange. The Commission finds that waiver
of the operative delay is consistent with the protection of investors
and the public interest because such waiver will align the Exchange's
rules with recently amended rules of BATS Exchange. Therefore, the
Commission designates the proposal operative upon commencement of
Exchange operation, which the Exchange anticipates will be October 15,
2010.\15\
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\15\ For purposes only of waiving the 30-day operative delay,
the Commission has 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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal 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-BYX-2010-002 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-BYX-2010-002. 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,\16\ 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 changes 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. 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-BYX-
2010-002 and should be submitted on or before November 10, 2010.
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\16\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov/.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26335 Filed 10-19-10; 8:45 am]
BILLING CODE 8011-01-P