[Federal Register Volume 76, Number 245 (Wednesday, December 21, 2011)]
[Notices]
[Pages 79244-79246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32660]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65965; File No. SR-BATS-2011-050]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Extend 
the Penny Pilot Program

December 15, 2011.
    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 December 2, 2011, 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 BATS. 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 filed a proposal for the BATS Options Market (``BATS 
Options'') to extend through June 30, 2012, the Penny Pilot Program 
(``Penny Pilot'') in options classes in certain issues (``Pilot 
Program'') previously approved by the Commission.\3\
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    \3\ The rules of BATS Options, including rules applicable to 
BATS Options' participation in the Penny Pilot, were approved on 
January 26, 2010. See Securities Exchange Act Release No. 61419 
(January 26, 2010), 75 FR 5157 (February 1, 2010) (SR-BATS-2009-
031). BATS Options commenced operations on February 26, 2010. The 
Penny Pilot was extended for BATS Options through December 31, 2011. 
See Securities Exchange Act Release No. 63385 (November 29, 2010), 
75 FR 75526 (December 3, 2010) (SR-BATS-2010-035).
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    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

[[Page 79245]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to extend through June 30, 2012, the 
Penny Pilot in options classes in the Pilot Program as previously 
approved by the Commission, and to provide a revised date for adding 
replacement issues to the Pilot Program. The Exchange proposes that any 
Pilot Program issues that have been delisted may be replaced on the 
second trading day following January 1, 2012. The replacement issues 
will be selected based on trading activity for the six month period 
beginning June 1, 2011, and ending November 30, 2011.
    In the Exchange's filing to propose the rules to govern BATS 
Options,\4\ the Exchange proposed commencing operations for BATS 
Options by trading all options classes that were, as of such date, 
traded by other options exchanges pursuant to the Penny Pilot and then 
expanding the Penny Pilot on a quarterly basis, 75 classes at a time, 
through August 2010. Consistent with this proposal, since it commenced 
operations the Exchange has twice expanded the options classes subject 
to the Penny Pilot.\5\ The Exchange represents that the Exchange has 
the necessary system capacity to continue to support operation of the 
Penny Pilot.
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    \4\ See Securities Exchange Act Release No. 61097 (December 2, 
2009), 74 FR 64788 (December 8, 2009) (SR-BATS-2009-031) (Notice of 
Filing of Proposed Rule Change to Establish Rules Governing the 
Trading of Options on the BATS Options Exchange).
    \5\ See Securities Exchange Act Release No. 62595 (July 29, 
2010), 75 FR 47043 (August 4, 2010) (SR-BATS-2010-019); Securities 
Exchange Act Release No. 62033 (May 4, 2010), 75 FR 26301 (May 11, 
2010) (SR-BATS-2010-009).
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    The Exchange agrees to provide reports that will analyze the impact 
of the Pilot Program on market quality and options capacity. These 
reports will include: (1) Data and analysis on the number of quotations 
generated for options included in the report; (2) an assessment of the 
quotation spreads for the options included in the report; (3) an 
assessment of the impact of the Pilot Program on the capacity of the 
Exchange's automated systems; (4) data reflecting the size and depth of 
markets, and (5) any capacity problems or other problems that arose 
related to the operation of the Pilot Program and how the Exchange 
addressed them.
    The Exchange believes the benefits to public customers and other 
market participants who will be able to express their true prices to 
buy and sell options have been demonstrated to outweigh the increase in 
quote traffic.
    In addition to the proposed extension of the Pilot Program, the 
Exchange proposes to modify Interpretation and Policy .01 to make clear 
the date on which the Pilot Program is set to expire and to specify 
that options subject to the Pilot Program will be identified in 
Exchange Information Circulars that are distributed to members of the 
Exchange and posted on the Exchange's Web site.
2. Statutory Basis
    The Exchange believes that its proposal 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\ In particular, the 
proposal 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. The Exchange believes that the Pilot 
Program promotes just and equitable principles of trade by enabling 
public customers and other market participants to express their true 
prices to buy and sell options.
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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 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 \8\ and Rule 19b-
4(f)(6)(iii) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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. 
The Commission notes that the Exchange has satisfied this 
requirement.
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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 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 email to [email protected]. Please include 
File No. SR-BATS-2011-050 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-2011-050. This file 
number should be included on the subject line if email 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.,

[[Page 79246]]

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 available publicly. All 
submissions should refer to File No. SR-BATS-2011-050 and should be 
submitted on or before January 11, 2012.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-32660 Filed 12-20-11; 8:45 am]
BILLING CODE 8011-01-P