[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