[Federal Register Volume 78, Number 128 (Wednesday, July 3, 2013)]
[Notices]
[Pages 40241-40243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15929]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69877; File No. SR-BATS-2013-036]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To Introduce a Connectivity Option 
Through Points of Presence

June 27, 2013.
    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 19, 2013, 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 filed a proposed rule change to offer a new means of 
connecting to the Exchange via physical connections in a data center 
other than the data centers where the Exchange's servers are located.
    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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to offer new physical 
connections to Members and non-Members of the Exchange.
    The Exchange currently maintains a presence in two third-party data 
centers: (i) The primary data center where the Exchange's business is 
primarily conducted on a daily basis, and (ii) a secondary data center, 
which is predominantly maintained for business continuity purposes. 
Exchange participants, including participants trading on the Exchange 
and market data recipients, are required to connect directly to the 
Exchange at the data centers where the Exchange maintains servers. If 
an Exchange participant does not have a presence within the same data 
centers as the Exchange then such connection necessarily involves 
acquiring connectivity from a participant's location or data center to 
the data centers where the Exchange's servers are located. The Exchange 
is proposing to provide market participants with the ability to access 
the Exchange's network through data center entry points at one or more 
data centers other than the Exchange's primary or secondary data center 
(``Remote Data Centers''), or Points of Presence (``PoPs'').
    PoP ports will be located at Remote Data Centers in order to 
provide participants that may not have a presence at the Exchange's 
primary or secondary data center with connectivity to such data 
centers. Connectivity established via PoP ports at any data center 
where the Exchange offers them will allow market participants to 
perform all operations that they would typically perform when 
connecting directly to the Exchange at the Exchange's primary or 
secondary data

[[Page 40242]]

center, including order entry and receipt of market data. In providing 
this service, participants will establish a physical connection to the 
PoP ports in the Remote Data Center, from which point the Exchange will 
provide the requisite connectivity for the participants to access the 
Exchange's primary and/or secondary data centers through one or more 
third party telecommunications carriers.
    PoP access will not provide any market participant a connectivity 
option from the PoP data center to the Exchange's primary or secondary 
data center that the Exchange can guarantee is any faster or more 
reliable than can be achieved through independently established 
connections to the Exchange's primary or secondary data center. 
However, the Exchange does believe that some participants may choose to 
connect to the Exchange at a PoP to the extent the Exchange's service 
offering makes connecting to the Exchange in this way more easily 
established (i.e., rather than separately establishing relationships 
with one or more connectivity providers) or more cost effective. While 
PoP access will be available to all participants, the Exchange believes 
it will be most attractive to smaller market participants that 
otherwise may not connect to the Exchange at all.
    As noted above, participants that do not maintain a presence in 
either of the Exchange's data centers must establish connectivity to 
such data centers and currently must do so through third party 
telecommunications providers. By making PoP entry points available, the 
Exchange is adding additional entry points to the Exchange's network 
and reducing the need for such connectivity for participants located in 
the same data center as such PoPs. Thus, the optional means of access 
to the Exchange via PoPs at other data centers will provide market 
participants with another means of accessing the Exchange.
    The Exchange proposes to provide the option to connect to the 
Exchange via physical ports at data centers where the Exchange 
maintains PoPs to any Member or non-member that has been approved to 
connect to the Exchange. Specifically, a PoP connection could be used 
by any Member, non-member service bureau that acts as a conduit for 
orders entered by Exchange Members, Sponsored Participant, or market 
data recipient. This new access option is in response to industry 
demand. Clients opting not to access the Exchange at a PoP point of 
entry will still be able to access the Exchange in the existing data 
centers in the same way as they do currently. The Exchange does not 
anticipate that demand will exceed the capacity planned for PoP access. 
In the event that demand does exceed the capacity planned for PoP 
access, the Exchange will expand its infrastructure as necessary in 
order to meet demand.
2. Statutory Basis
    The Exchange believes that the proposed rule change 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 of the Act.\3\ 
Specifically, the Exchange believes the proposal furthers the 
objectives of Section 6(b)(5) \4\ of the Act in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest and is not designed to permit unfair discrimination between 
customer, issuers, brokers and dealers.
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    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(5).
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    Competition for customers and order flow amongst exchanges and 
other non-exchange market participants is considerable and the Exchange 
believes that the proposal to offer PoP connectivity clearly evidences 
such competition. The Exchange is offering this new connectivity option 
to keep pace with changes in the industry and evolving customer needs. 
PoP connectivity will be available to all Exchange constituents to whom 
such connectivity will be useful and cost-effective. The offering is 
entirely optional, and is geared towards attracting new customers, as 
well as retaining existing customers.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, this proposal 
will promote competition through the offering of an optional, 
additional mechanism to connect to the Exchange. The proposed rule 
change will enhance competition among service providers offering 
connections between market participants and the data centers. The 
offering will expand the multiple means of connectivity available, 
allowing customers to compare the benefits and costs connectivity with 
reference to numerous variables. The Exchange, and presumably its 
competitors, selects service providers on a competitive basis in order 
to pass along price advantages to their customers, and to win and 
maintain their business. The offering is consistent with the Exchange's 
own incentives to facilitate as many market participants as possible in 
connecting to its market.

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 45 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 or disapprove the 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 email to [email protected]. Please 
include File Number SR-BATS-2013-036 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-2013-036. 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/

[[Page 40243]]

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 10:00 a.m. and 3:00 p.m. Copies of the 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 Number SR-
BATS-2013-036 and should be submitted on or before July 24, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-15929 Filed 7-2-13; 8:45 am]
BILLING CODE 8011-01-P