[Federal Register Volume 75, Number 82 (Thursday, April 29, 2010)]
[Notices]
[Pages 22668-22669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9874]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61960; File No. SR-BATS-2010-008]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing of Proposed Rule Change To Amend BATS Rules 2.5 and 17.2
Applicable to Registration Requirements
April 22, 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 April 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, II
and III 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 2.5, entitled
``Restrictions,'' to require each Exchange Member to register with the
Exchange: (i) At least two principals to supervise Authorized Traders
of the Member (subject to certain exceptions), and (ii) at least one
financial and operations principal. The Exchange also proposes a
technical amendment to BATS Rule 17.2(g)(4) to eliminate language that
becomes unnecessary due to the changes to BATS Rule 2.5.
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.\3\
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\3\ The text is attached as Attachment A to this filing.
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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
Exchange Rule 2.5 states that the Series 7 is required for
registration with the Exchange as an Authorized Trader. The term
``Authorized Trader'' means ``a person who may submit orders (or who
supervises a routing engine that may automatically submit orders) to
the Exchange's trading facilities on behalf of his or her Member or
Sponsored Participant. Accordingly, all traders that participate in the
routing of orders to the Exchange, including proprietary traders, are
required to be registered with the Exchange and Series 7 qualified.
Further, the term Authorized Trader includes a trader that submits
orders, or supervises a routing engine that automatically submits
orders, to either the Exchange's equities platform, options platform,
or both.
The purpose of the proposed rule change is to expand the
representative registration requirements applicable to each Member of
the Exchange to ensure that Authorized Traders of Members are
appropriately supervised and that the Exchange does not, through its
rules, generate any gaps that permit a Member to operate differently
than such Member would have to operate under the registration rules of
other self-regulatory organizations. Specifically, the Exchange
proposes to require each Member to register as representatives with the
Exchange at least two Series 24 qualified Principals (subject to
certain exceptions) to supervise such Member's Authorized Traders and
one Series 27 qualified principal to supervise the financial and
operational activities of such Member. The Exchange believes that the
proposed rule change will help to make the Exchange's registration
requirements more consistent with the registration requirements of
other self-regulatory organizations. The Exchange understands that
other self-regulatory organizations that do not require registered
principals to supervise certain activities are currently undertaking a
similar rulemaking effort.
The Exchange has proposed certain exceptions to the general
requirements that a Member register two Series 24 qualified Principals
and one Series 27 qualified Financial/Operations Principal. With
respect to the two Principal requirement, the Exchange proposes to
exempt any Member that meets the proposed definition of a ``proprietary
trading firm'' and has 25 or fewer Authorized Traders. Such Members,
defined as Limited Size Proprietary Firms for purposes of the proposed
Interpretation and Policy, are only required to maintain one Series 24
registered Principal. In addition, under the proposed Rule the Exchange
may waive the requirement to register two Series 24 qualified
Principals if the Member can demonstrate that such waiver is warranted
under the circumstances. The Exchange has proposed to define a
proprietary trading firm as ``a Member that trades its own capital,
that does not have customers, and that is not a member of the Financial
Industry Regulatory Authority.'' \4\ In addition, as proposed, the Rule
states that funds used by a proprietary trading firm must be
exclusively firm funds, that all trading must be in the firm's
accounts, and that traders must be owners of, employees of, or
contractors to the firm. The Exchange has also proposed to exclude
brokers or dealers from the definition of customer for purposes of the
proprietary trading firm definition.\5\ With respect to the Financial/
Operations Principal requirement, the Exchange may waive the
requirement to register a Series 27 qualified Financial/Operations
Principal if such registration is not required by the Member's
designated examining authority. Finally, any Member that conducts
business on the Exchange as an Options Member is required by BATS Rules
17.1(b) and 17.2(g) to register an Options Principal with the Exchange
who is responsible for that Member's options related activities on the
Exchange. Accordingly, the proposed rule makes clear that a Member that
solely conducts business on the Exchange as an Options Member is not
also required to register Series 24 qualified Principals with the
Exchange.
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\4\ See proposed BATS Rule 2.5, Interpretation and Policy
.01(g).
\5\ See proposed BATS Rule 2.5, Interpretation and Policy
.01(h).
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In addition to adopting the principal registration requirements
described
[[Page 22669]]
above, the Exchange proposes modifications to Interpretation and Policy
.02, which currently requires Authorized Traders to complete continuing
education requirements similar to those required by other national
securities exchanges. Due to the addition of the principal registration
requirements described above and the recent addition of an Options
Principal requirement, the Exchange proposes to modify its continuing
education rule to make clear that all Authorized Traders, Principals,
Financial/Operations Principals and Options Principals (collectively
``Registered Representatives'') are subject to continuing education
requirements in order to maintain their registrations with the
Exchange. Because the text would then become unnecessary, the Exchange
also proposes to delete language from BATS Rule 17.2(g)(4) that
currently makes clear that an Options Principal is subject to
continuing education requirements.
Although the Exchange believes that most of its Members will be in
position to quickly register Principals and Financial/Operations
Principals with the Exchange due to the rules of other self-regulatory
organizations to which such Members belong, it has proposed a
compliance date of September 30, 2010. The Exchange believes that such
date will provide its Members with adequate time to the extent
additional personnel must pass qualification examinations in order for
their Member firms to be compliant with the proposed Rules.
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\ Specifically, 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 adopting rules requiring supervisory principals
to pass qualification examinations and maintain their registrations in
a manner consistent with the requirements of other self-regulatory
organizations.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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The proposed change is also consistent with Section 6(c)(3)(B) of
the Act,\8\ since under that section it is the Exchange's
responsibility to prescribe standards of training, experience and
competence for persons associated with Exchange Members. In addition,
the Exchange has authority under Section 6(c)(3)(B) of the Act,\9\ to
bar a natural person from becoming a Member or person associated with a
Member, if the person does not meet the standards of training,
experience and competence as are prescribed in the rules of the
Exchange.
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\8\ 15 U.S.C. 78f(c)(3)(B).
\9\ 15 U.S.C. 78f(c)(3)(B).
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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
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
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-2010-008 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-2010-008. 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-2010-008 and should be
submitted on or before May 20, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-9874 Filed 4-28-10; 8:45 am]
BILLING CODE 8011-01-P