[Federal Register Volume 74, Number 110 (Wednesday, June 10, 2009)]
[Notices]
[Pages 27577-27578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-13552]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60040; File No. SR-BATS-2009-014]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change, as Modified 
by Amendment No. 1 Thereto, To Amend BATS Rule 11.13, Entitled ``Order 
Execution''

June 3, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 22, 2009, BATS Exchange, Inc. (``BATS'' or the ``Exchange'') 
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 BATS. On May 29, 2009, BATS filed Amendment No. 1 
to the proposed rule change. BATS has designated the proposed rule 
change, as amended, as constituting a rule change under Rule 19b-
4(f)(6) under the Act,\3\ which renders the proposal, as amended, 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change, as 
amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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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 11.13, entitled 
``Order Execution,'' to add a new order type (a ``BATS Only BOLT 
Order'') and a pre-routing processing method (``BOLT Routing'') that 
will each include an optional display period through which a marketable 
order will be displayed to Exchange Users (and market data recipients) 
for a brief period of time designated by the Exchange prior to being 
routed, cancelled, or posted to the BATS Book.
    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
    The purpose of the proposed rule change is to provide Users of the 
Exchange with another order type, as well as another option with 
respect to the order processing methods offered by the Exchange in 
connection with routing away from the Exchange. Specifically, both the 
order type and the pre-routing processing method will, after first 
seeking to execute against the BATS Book, display a marketable order at 
the NBB for a sell order or the NBO for a buy order to Exchange Users 
and market data recipients for a brief, variable amount of time (not to 
exceed 500 milliseconds) for potential execution. BATS notes that pre-
routing display functionality has already been approved by the 
Commission for use by the CBOE Stock Exchange and that such 
functionality can be expected to provide System Users with greater 
control over their trading. Except for the addition of a variation of 
the BATS Only order type and changes to the routing functionality for 
market and marketable limit orders described herein, nothing in the 
proposal will modify or alter any existing rule or process related to 
order priority, order execution, trade-through protection or locked or 
crossed markets. The Exchange will implement the proposed changes such 
that marketable BATS Only BOLT Orders and routable orders will be 
distinguishable from the Exchange's protected bid and protected offer 
while displayed by the Exchange for potential execution during the 
variable time period described in this filing.
(i) Proposed BATS Only BOLT Order
    The proposed order type, a BATS Only BOLT Order, will first seek to 
execute against the BATS Book. If such order would lock or cross a 
Protected Quotation when entered it will be displayed at the NBB for a 
sell order or the NBO for a buy order to Exchange Users (and market 
data recipients) for potential execution for a variable time period not 
to exceed 500 milliseconds, such time period to be designated by the 
Exchange. Any unfilled balance of the order remaining after this 
variable period of time will be cancelled back to the User if such 
balance would continue to lock or cross a Protected Quotation. If, 
however, after the variable period of time the unfilled balance would 
not lock or cross a Protected Quotation, then such unfilled balance 
will remain posted in the BATS Book.
(ii) Proposed BOLT Routing
    The proposed order processing method, set forth in BATS Rule 11.13, 
will apply when an unfilled balance of a routable market or limit order 
that is marketable against the existing NBBO remains after the Exchange 
has attempted to execute the order against the BATS Book. Specifically, 
the Exchange proposes to offer a method of processing that can be used 
in conjunction with, or instead of, routing options offered by the 
Exchange, through which such order will be briefly displayed to Users 
of the Exchange (and to Exchange market data recipients) for potential 
execution at a price equal to the NBB for a sell order or the NBO for a 
buy order.
    The Exchange currently allows Users to submit various types of 
orders to the Exchange that are processed pursuant to Rules 11.13(a)(1) 
and 11.13(a)(2). Rule 11.13(a)(1) describes the process by which an 
incoming order would execute against the BATS Book.\4\ To the extent an 
order has not been executed in its entirety against the BATS Book, Rule 
11.13(a)(2)(A) and (B) then describe the process of routing orders \5\ 
to one or more Trading Centers. The Exchange proposes to offer the 
display process to Users as an additional option for processing the 
unfilled balance of an order that remains after an initial attempt to 
execute against the BATS Book.
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    \4\ As defined in BATS Rule 1.5(d).
    \5\ Market orders are routed away pursuant to Rule 
11.13(a)(2)(A) and marketable limit orders are routed away pursuant 
to Rule 11.13(a)(2)(B).
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    Under the proposal, after first executing a market or marketable 
limit order against the BATS Book, any remaining shares will be 
displayed at the NBB for a sell order or the NBO for a buy order to 
Users of the Exchange and Exchange market data recipients for potential 
execution for a variable time period not to exceed 500 milliseconds,

[[Page 27578]]

such time period to be designated by the Exchange. The BOLT routing 
display process will be the default processing preference, and thus, 
Users that do not wish to have their orders displayed pursuant to this 
process prior to routing will be required to opt-out of the BOLT 
routing display period.
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 allowing Users to select another method of 
processing for routable and non-routable marketable orders that may 
result in the efficient execution of such orders. Specifically, the 
Exchange believes that Users may receive more efficient order 
executions by briefly displaying their marketable orders to BATS Users 
for potential execution. BATS notes that similar brief marketable order 
display functionality has already been found to be consistent with the 
Act by the Commission.\8\
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Securities Exchange Act Release No. 54422 (September 11, 
2006), 71 FR 54537 (September 15, 2006) (SR-CBOE-2004-21); 
Securities Exchange Act Release No. 59359 (February 4, 2009), 74 FR 
6927 (February 11, 2009) (SR-CBOE-2008-123). NASDAQ also recently 
adopted a similar rule pursuant to an immediately effective rule 
filing. See Securities Exchange Act Release No. 59875 (May 6, 2009), 
74 FR 22794 (May 14, 2009) (SR-NASDAQ-2009-043) (notice of filing 
and immediate effectiveness of NASDAQ proposal to incorporate an 
optional pre-routing display period for all orders using NASDAQ 
routing strategies).
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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 \9\ and Rule 19b-
4(f)(6) 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) 
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. 
BATS has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) \12\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. BATS requests that the 
Commission waive the 30-day operative delay because the Exchange 
expects to have technologies in place to support the proposed rule 
change, as amended, on or about June 5, 2009, and believes that the 
expected benefits to Exchange Users from the proposed rule change, as 
amended, should not be delayed. The Commission believes that waiving 
the 30-day operative delay \13\ is consistent with the protection of 
investors and the public interest and designates the proposal operative 
on June 5, 2009.
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 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 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.\14\
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    \14\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on May 29, 2009, the date on which BATS submitted 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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 Number SR-BATS-2009-014 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-2009-014. 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 inspection and 
copying 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 publicly available. All 
submissions should refer to File Number SR-BATS-2009-014 and should be 
submitted on or before July 1, 2009.

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. E9-13552 Filed 6-9-09; 8:45 am]
BILLING CODE 8010-01-P