[Federal Register Volume 75, Number 67 (Thursday, April 8, 2010)]
[Notices]
[Pages 17985-17987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7977]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61834; File No. SR-BATS-2010-006]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
BATS Rule 11.9(c)(12), entitled ``Destination Specific Order''
April 2, 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 March 30, 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 is proposing to amend BATS Rule 11.9(c)(12), entitled
``Destination Specific Order.''
The text of the proposed rule change is available at the Exchange's
Web site at http://www.batstrading.com, on the Commission's Web site at
http://www.sec.gov, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to provide an additional
option to Users of the Exchange with respect to the designation of a
``Destination Specific Order''. Destination Specific Orders are market
or limit orders that are routed by BATS to an away trading center after
first being exposed to the BATS order book (``BATS Book''). As
currently written, the Rule 11.9(c)(12) requires the specification of a
particular away trading center to which an order will route after
checking the BATS Book. Accordingly, BATS currently offers Users
options to route to a single trading center designated by the User
after first being exposed to the BATS Book. For instance, a User can
currently send an order that first checks the BATS Book for liquidity
and then routes to the New York Stock Exchange. The Exchange also
currently offers Users with the option to send a ``Modified Destination
Specific Order,'' defined in BATS Rule 11.9(c)(13), which routes to one
or more away trading centers without first checking the BATS Book. The
only form of Modified Destination Specific Order currently offered by
the Exchange routes to multiple Alternative Trading Systems disclosed
by the Exchange prior to checking the BATS Book (referred to by the
Exchange as a ``Dark Scan'' order). Although the identity of the
Alternative Trading Systems to which a Dark Scan order may route is
disclosed to Exchange Users, Users cannot designate the specific
Alternative Trading System or Systems, but rather, rely on the
Exchange's smart order router to determine the Alternative Trading
System or Systems to which the order will be routed and the order of
such routing.
The proposed rule change is being submitted by the Exchange so that
BATS can offer Users the additional option to designate an order to
route to various undisclosed Alternative Trading Systems selected by
the Exchange after first being exposed to the BATS Book (a ``BATS +
DART Order''). Accordingly, as amended, a User will be able to
designate an order that will first check the BATS Book for liquidity
and then be routed to one or to multiple Alternative Trading Systems
with which the Exchange has connections. Similar to a Dark Scan order,
a User will not be able to designate any specific Alternative Trading
System or Systems to which the order will be routed, but rather, the
Exchange will make the routing decisions with respect to any BATS +
DART Order that is not filled on the Exchange. Orders that are not
executed in full after routing away would continue to be processed by
the Exchange as described in BATS Rule 11.13(a)(2).
The Exchange is not proposing at this time to add functionality
that would allow Users to designate multiple specific venues to which
an order will route. Rather, a Destination Specific Order will continue
to refer to an order that first checks the Exchange for liquidity and
then routes to a specific venue or venues, with the only choice of
multiple venues being the undisclosed list of Alternative Trading
Systems offered through the DART routing program. Users that wish to
have the Exchange first attempt to execute an order on the BATS Book
and, if not executed, then route to multiple different venues,
including Alternative Trading Systems, can use the Exchange's general
best execution routing strategies, DART and CYCLE, but cannot
specifically identify the venues to which the Exchange will route.
As occurs today, the routing performed in connection with this
proposed change will be conducted by an affiliate of the Exchange, BATS
[[Page 17986]]
Trading, Inc. (the ``Outbound Router''), which is regulated as a
facility of the Exchange (as defined in Section 3(a)(2) of the Act),\5\
subject to Section 6 of the Act.\6\ The role and functions of the
Outbound Router are set forth in BATS Rule 2.11, which has previously
been approved by the Commission. Routing of Destination Specific Orders
under this proposed amendment will be subject to the same requirements
as other orders routed by the Outbound Router, which are contained in
Rule 2.11. Accordingly, the Exchange believes that routing of
Destination Specific Orders under this proposed amendment continues to
be consistent with the previously approved functions of the Outbound
Router, and the Exchange does not believe that such functions are
expanded through this proposed amendment.
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\5\ 15 U.S.C. 78c(a)(2).
\6\ 15 U.S.C. 78f.
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2. Statutory Basis
Approval of 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.\7\ In particular, the proposed change is consistent with
Section 6(b)(5) of the Act,\8\ 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. Specifically,
the Exchange believes that the proposed amendment to the Destination
Specific Order will enhance order execution opportunities for market
participants by allowing such participants to access, at a potentially
reduced fee, pools of liquidity in addition to orders resting on the
Exchange.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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A. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change imposes
any burden on competition.
B. 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.
i. 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 \9\ and Rule 19b-
4(f)(6)(iii) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\12\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. The Exchange
states that the proposed rule change does not significantly affect the
protection of investors or the public interest and does not impose any
significant burden on competition. In addition, the Exchange believes
that the proposed rule change is consistent with other rules of the
Exchange previously approved by the Commission, including (1) the
Exchange's Modified Destination Specific Order \13\ and (2) Rule 2.11,
which governs the Outbound Router of the Exchange.
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\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ See BATS Rule 11.9(c)(13).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
The Commission believes that waiving the 30-day operative delay will
immediately provide market participants with additional choices in
order execution and access to additional pools of liquidity. For these
reasons, the Commission designates the proposed rule change as
operative upon filing.\14\
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\14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change'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 may summarily abrogate 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.
ii. 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 Number SR-BATS-2010-006 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 Number SR-BATS-2010-006. 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 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
[[Page 17987]]
available publicly. All submissions should refer to File Number SR-
BATS-2010-006 and should be submitted on or before April 29, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7977 Filed 4-7-10; 8:45 am]
BILLING CODE 8011-01-P