[Federal Register Volume 75, Number 130 (Thursday, July 8, 2010)]
[Notices]
[Pages 39303-39305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16535]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62404; File No. SR-BATS-2010-017]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
BATS Rule 11.13, Entitled ``Order Execution''

June 30, 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 June 28, 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend BATS Rule 11.13, entitled ``Order 
Execution,'' 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.
    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 Exchange proposes to amend Rule 11.13, 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.
    In addition to the changes described below related to specific 
routing options, the Exchange proposes various modifications to its 
general routing standards, which modifications, the Exchange believes, 
will help to clarify the rule. For instance, the Exchange proposes 
consolidating the portions of the Rule related to routing of market 
orders with those portions related to routing of limit orders. Although 
market orders and limit orders might operate differently under 
different circumstances, the Exchange does not believe there is a 
meaningful reason to maintain separate rules related to such routing 
options any longer. The Exchange made a similar consolidation when 
adopting its rule for routing of options orders from BATS Options.\5\
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    \5\ See BATS Rule 21.9, which contains information regarding the 
routing functionality offered by the Exchange for equity options but 
does not differentiate between market orders and limit orders.
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    Also, subject to User instructions, the Exchange currently allows 
orders that have been routed and then posted to the Exchange's order 
book to be re-routed if the order is subsequently locked or crossed by 
another accessible Trading Center (``RECYCLE Option''). The Exchange 
proposes to add a reference to the ``RECYCLE Option'' in its Rule 
following the text describing this option, consistent with the general 
goal of the proposed changes to align the routing options offered by 
the Exchange with the rule text by providing additional specificity. 
The Exchange also wishes to make clear that, unless otherwise 
specified, the RECYCLE Option may be combined with any of the System 
routing options specified in Rule 11.13.
    The Exchange is also amending Rule 11.13 to include a definition of 
``System routing table,'' defined as the proprietary process for 
determining the specific trading venues to which the Exchange System 
routes orders and the order in which it routes them. The definition 
reflects 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. Such assessments consider factors such as a 
destination's latency, fill rates, reliability, and cost. Accordingly, 
the definition specifies that the Exchange reserves the right to 
maintain a different routing table for different routing options and to 
modify routing tables at any time without notice.
    Currently, routing options available through BATS are all 
variations of a routing option referred to by the Exchange as ``CYCLE'' 
routing. Although the rule language for Exchange routing options 
describes the available variations of options in general terms,

[[Page 39304]]

the Exchange believes that understanding of these options would be 
enhanced by describing the different versions as separately named 
routing options.
    Below is a description of the various routing options proposed 
pursuant to new paragraph (a)(3) of Rule 11.13.
     CYCLE. CYCLE is a routing option currently offered by the 
Exchange under which an order checks the System for available shares 
and then is sent sequentially to destinations on the System routing 
table for the full remaining size of such order.
     Parallel D. The Exchange is introducing the new Parallel D 
routing option, under which an order checks the System for available 
shares and then is sent to destinations on the System routing table. 
The System may route to multiple destinations at a single price level 
simultaneously through Parallel D routing.
     Parallel 2D. The Exchange is introducing the new Parallel 
2D routing option, under which an order checks the System for available 
shares and then is sent to destinations on the System routing table. 
The System may route to multiple destinations and at multiple price 
levels simultaneously through Parallel 2D routing.
     Parallel T. The Exchange is introducing the new Parallel T 
routing option, under which orders route only to Protected Quotations 
and only for displayed size. The System may route to multiple 
destinations and at multiple price levels simultaneously through 
Parallel T routing.
     DART. DART is a routing option currently offered by the 
Exchange in which the entering firm instructs the System to first route 
to alternative trading systems included in the System routing table. 
DART can be combined with and function consistent with either the 
CYCLE, Parallel D or Parallel 2D routing options.
     ``Destination Specific Orders,'' ``Modified Destination 
Specific Orders'' and ``Directed ISO'' orders are routed orders 
described in Rule 11.9.
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 is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to, and perfect 
the mechanism of, a free and open market and a national market system. 
The proposed change to provide additional clarity and specificity to 
the Exchange's Rules regarding routing strategies further enhances 
transparency with respect to Exchange routing offerings. Furthermore, 
the proposal to introduce the new routing options will provide market 
participants with greater flexibility in routing orders consistent with 
Regulation NMS without developing complicated order routing strategies 
on their own.
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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 rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days after the date of this filing, 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) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\10\ 
However, Rule 19b-4(f)(6)(iii) \11\ permits the Commission to 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. The Exchange expects to 
have technological changes for one or more of the new routing 
strategies in place to support the proposed rule change on or about 
July 6, 2010, and believes that benefits to Exchange Users expected 
from the proposed rule change should not be delayed.\12\ In addition, 
the Exchange notes that another national securities exchange currently 
offers similar routing functionalities.\13\ The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest and hereby designates 
the proposal operative upon filing.\14\
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    \10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization 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.
    \11\ Id.
    \12\ See SR-BATS-2010-017, Item7.
    \13\ See SR-BATS-2010-017, Item7 and 8. See also The NASDAQ 
Stock Market LLC Rule 4758.
    \14\ For the 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 such 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.

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-2010-017 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-2010-017. 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

[[Page 39305]]

submission,\15\ 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 am and 3 pm. 
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-2010-017 and should be submitted on or before July 29, 
2010.
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    \15\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov/rules/sro.shtml.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16535 Filed 7-7-10; 8:45 am]
BILLING CODE 8010-01-P