[Federal Register Volume 80, Number 32 (Wednesday, February 18, 2015)]
[Notices]
[Pages 8731-8733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-03227]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74254; File No. SR-EDGA-2015-06]


Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rules 
1.5, 2.3, 2.5, and 2.6 Related to the Registration Requirements for 
Members of EDGA Exchange, Inc.

February 11, 2015.
    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 January 30, 2015, EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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 filed a proposal to amend Rules 1.5, 2.3, 2.5, and 2.6 
related to the registration requirements for Members of the Exchange.
    The text of the proposed rule change is available at the Exchange's 
Web site at 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 the various Exchange rules related 
to the registration requirements on the Exchange in order to make the 
Exchange's registration requirements substantively identical to the 
corresponding rules on BATS Exchange, Inc. (``BZX'') and BATS Y-
Exchange, Inc. (``BYX''), as further described below. Earlier this 
year, the Exchange and its affiliate, EDGX Exchange, Inc. (``EDGX''), 
received approval to effect a merger (the ``Merger'') of the Exchange's 
parent company, Direct Edge Holdings LLC, with BATS Global Markets, 
Inc., the parent of BZX and BYX (together with BZX, EDGA, and EDGX, the 
``BGM Affiliated Exchanges'').\5\ In the context of the Merger, the BGM 
Affiliated Exchanges are working to align certain system and regulatory 
functionality, retaining only intended differences between the BGM 
Affiliated Exchanges. Thus, the proposal set forth below is intended to 
amend Rules 1.5, 2.3, 2.5, and 2.6 to make such Rules substantively 
identical to corresponding rules on BZX and BYX \6\ related to 
registration requirements in order to provide a consistent regulatory 
approach across each of the BGM Affiliated Exchanges.\7\
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    \5\ See Securities Exchange Act Release No. 71449 (January 30, 
2014), 79 FR 6961 (February 5, 2014) (SR-EDGX-2013-043; SR-EDGA-
2013-034).
    \6\ See BZX and BYX Rules 1.5, 2.3, 2.5, and 2.6.
    \7\ The Exchange notes that EDGX intends to file a proposal very 
similar to this proposal that will align the rules related to 
registration requirements across each of the BGM Affiliated 
Exchanges.
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    Currently, Rule 1.5(n) defines the term ``Member'' as meaning any 
registered broker or dealer, or any person associated with a registered 
broker or dealer, that has been admitted to membership in the Exchange. 
A Member will have the status of a ``member'' of the Exchange as that 
term is defined in Section 3(a)(3) of the Act. The Exchange is 
proposing, however, to delete ``or any person associated with a 
registered broker or dealer'' from the rule text, as such phrase is not 
contained in corresponding BZX and BYX rules (i.e., Rule 1.5(n)) and 
because the Exchange no longer believes that this language is 
necessary. The Exchange is also proposing to amend the rule text such 
that Membership may be granted to a sole proprietor, partnership, 
corporation, limited liability company or other organization which is a 
registered broker or dealer pursuant to Section 15 of the Act, and 
which has been approved by the Exchange, language which is currently 
included in Rule 2.3(a), which, as described below, the Exchange is 
proposing to delete in order to further align Exchange rules with BZX 
and BYX 1.5(n).
    The Exchange is also proposing to delete the definition of 
``Principal'' from Rule 1.5(t), which will instead be defined in the 
proposed changes to paragraph (d) of Interpretation and Policy .01 to 
Rule 2.5, which are further described below. Currently, the term 
principal means persons associated with a member who are actively 
engaged in the management of the member's securities business, 
including supervision, solicitation, conduct of business or the 
training of persons associated with a Member for any of these 
functions. Such persons shall include sole proprietors, officers, 
partners, managers of business offices engaged in such functions, and 
directors of corporations. The Exchange is proposing to add the text 
``(Reserved)'' to the rule text in order to maintain the current 
paragraph numbering within Rule 1.5. The proposed new definition for 
principal will be discussed below.
    The Exchange intends to consolidate its registration requirements 
in Rule 2.5

[[Page 8732]]

in order to align the rule with BZX and BYX Rule 2.5. Accordingly, the 
Exchange is also proposing to make several changes to Rule 2.3, 
currently titled ``Member Eligibility & Registration'', which will also 
make the Rule consistent with BZX and BYX Rule 2.3. First, consistent 
with this consolidation, the Exchange is proposing to delete ``& 
Registration'' from the title of Rule 2.3, which is also consistent 
with BZX and BYX Rule 2.3. The Exchange is also proposing to amend Rule 
2.3(a), which currently states that ``Except as hereinafter provided, 
any broker or dealer registered pursuant to Section 15 of the Act, that 
is and remains a member of another registered national securities 
exchange or association (other than or in addition to the Exchange's 
affiliates--BATS Exchange, Inc., BATS Y-Exchange, Inc., or EDGX 
Exchange, Inc.), or any person associated with such a registered broker 
or dealer, shall be eligible to be and to remain a Member. Membership 
may be granted to a sole proprietor, partnership, corporation, limited 
liability company or other organization or individual that has been 
approved by the Exchange.'' The Exchange is proposing to amend Rule 
2.3(a) to read: ``Except as hereinafter provided, any registered broker 
or dealer that is and remains a member of another registered national 
securities exchange or association (other than or in addition to the 
Exchange's affiliates--BATS Exchange, Inc., BATS Y-Exchange, Inc., or 
EDGX Exchange, Inc.), or any person associated with such a registered 
broker or dealer, shall be eligible to be and to remain a Member,'' 
which will make such Rule substantively identical to that of both BZX 
and BYX Rule 2.3(a). As described above, the Exchange has proposed to 
add substantially similar language to Exchange Rule 1.5(n) to conform 
such Rule with BZX and BYX Rule 1.5(n).
    The Exchange is also proposing to delete Rules 2.3(b), (c), and 
(d), entitled ``Registration Requirements,'' ``Registration of 
Principals,'' and ``Persons Exempt from Registration'' and replace them 
with proposed new Rule 2.5 Interpretation and Policy .01 (d) through 
(i) and Rule 2.6(g), effectively moving the requirements from Rule 2.3 
to Rules 2.5 and 2.6, making the Exchange Rules consistent with those 
of BZX and BYX. The Exchange notes that, except as stated below, there 
are no substantive differences between the language that the Exchange 
is proposing to delete in Rules 2.3(b), (c), and (d) that is not 
otherwise being proposed to be added back in the amendments to Rule 2.5 
Interpretation and Policy .01 (d) through (i) and Rule 2.6(g). The only 
material differences between the Exchange's current rules and the 
proposed rules are as follows: (i) As proposed, the Exchange would 
accept the New York Stock Exchange Series 14 Compliance Official 
Examination in lieu of the Series 24 to satisfy the requirement for any 
person designated as a Chief Compliance Officer, which it currently 
does not; and (ii) as proposed, the Exchange would permit the Series 56 
as a prerequisite to the Series 24 or Series 14 for those Principals 
whose supervisory responsibilities are limited to overseeing the 
activities of proprietary traders instead of requiring the Series 7 for 
all principals. The Exchange also notes that, as proposed, Rule 2.5 
Interpretation and Policy .01(e) would allow the Exchange to waive the 
Financial/Operations Principal requirements where a Member has 
satisfied the financial and operational requirements of the Member's 
designated examining authority applicable to registration, a provision 
which the Exchange has proposed to include because the Exchange is not 
the designated examining authority for any of its Members and requires 
all of its Members to be a member of at least one other national 
securities association or national securities exchange (excluding other 
BGM Affiliated Exchanges).\8\ The Exchange does not believe that not 
including certain exemptions currently existing within Rules 2.3(b) and 
(c) are substantive differences because the Exchange believes that, 
while not necessarily presented as exemptions to Exchange Rules, such 
language is otherwise covered by proposed Rule 2.5 Interpretation and 
Policy .01. For instance, the Exchange does not believe it needs to 
exempt clerical or administrative personnel from Exchange registration 
requirements because Exchange Rules, either in their current form or as 
amended, do not state or imply that such personnel are required to 
register with the Exchange. The Exchange's registration rules instead 
require registration with the Exchange of Authorized Traders as well as 
those personnel responsible for supervision of such personnel and the 
supervision of a Member firm more generally (i.e., a firm's Chief 
Compliance Officer and Financial/Operations Principal).
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    \8\ See Exchange Rule 2.3.
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    The Exchange is also proposing to make certain amendments to Rule 
2.5 in order to conform with BZX and BYX Rule 2.5. Specifically, the 
Exchange is proposing to amend Interpretation and Policy .03 to Rule 
2.5, to conform the numbering of such Interpretation and Policy to BZX 
and BYX Rule 2.5, Interpretation and Policy .01(c). As such, the 
Exchange is proposing that such paragraph state that the Exchange 
requires the General Securities Representative Examination or an 
equivalent foreign examination module approved by the Exchange in 
qualifying persons seeking registration as general securities 
representatives, including as Authorized Traders on behalf of Members. 
For those persons seeking limited registration as Proprietary Traders 
as described in proposed paragraph (f), the Exchange requires the 
Proprietary Traders Qualification Examination. The Exchange uses the 
Uniform Application for Securities Industry Registration or Transfer as 
part of its procedure for registration and oversight of Member 
personnel. The changes do not substantively modify the operation of 
Interpretation and Policy .03, but rather, serve to modify the 
numbering of the provision (renumbering it as paragraph (c) of 
Interpretation and Policy .01), update internal cross-references, and 
modify the language of the provision to align with that contained 
within BZX and BYX Rule 2.5, Interpretation and Policy .01(c).
    Finally, the Exchange is proposing to make certain non-substantive 
changes including the deletion of paragraphs (1) through (4) of 
Interpretation and Policy .03 to Rule 2.5, along with the entirety of 
Interpretation and Policy .04, .05, and .06 to Rule 2.5 and replacing 
them with the language from the corresponding BZX and BYX rules 
contained within proposed Interpretation and Policy .02 (``Continuing 
Education Requirements''), .03 (``Registration Procedures''), and .04 
(``Termination of Employment'') to Rule 2.5. Such proposed language is 
substantively identical to the existing Exchange rules and constitutes 
a reorganization of rule text designed to harmonize the structure of 
the rules across each of the BGM Affiliated Exchanges rather than to 
materially amend any Exchange Rules. The Exchange is also proposing to 
change the numbering and adding [sic] titles in several of the 
Interpretations and Policies to Rule 2.5 to increase clarity in the 
proposed rules.
    The Exchange notes that there are certain additional differences 
between the rules proposed herein and those of BZX that relate to 
registration for options trading because BZX has an options trading 
platform and thus has certain registration requirements that do not 
apply to the Exchange. Similar to the proposed rules proposed for the 
Exchange, BYX has no such registration

[[Page 8733]]

requirements because it also does not have an options trading platform.
    The Exchange is proposing to implement the proposed changes on 
March 2, 2015.
2. Statutory Basis
    The Exchange believes that 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.\9\ Specifically, the proposed change is consistent with 
Section 6(b)(5) of the Act,\10\ because 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. 
As mentioned above, the proposed rule changes, combined with the 
planned filing for EDGA [sic],\11\ would allow the BGM Affiliated 
Exchanges to provide a consistent set of rules as it relates to the 
registration requirements across each of the exchanges. Consistent 
rules, in turn, will simplify the regulatory requirements for Members 
of the Exchange that are also participants on EDGA [sic], BZX and/or 
BYX. The proposed rule change would provide greater harmonization 
between rules of similar purpose on the BGM Affiliated Exchanges, 
resulting in greater uniformity and less burdensome and more efficient 
regulatory compliance. As such, the proposed rule change would foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities and would remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ See supra note 7.
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    Similarly, the Exchange also believes that, by harmonizing the 
rules and registration requirements across each BGM Affiliated 
Exchange, the proposal will enhance the Exchange's ability to fairly 
and efficiently regulate its Members, meaning that the proposed rule 
change is equitable and will promote fairness in the market place.
    Finally, the Exchange believes that the non-substantive changes 
discussed above will contribute to the protection of investors and the 
public interest by helping to avoid confusion with respect to Exchange 
rules.

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, allowing the 
Exchange to implement substantively identical registration rules across 
each of the BGM Affiliated Exchanges does not present any competitive 
issues, but rather is designed to provide greater harmonization among 
Exchange [sic], BYX, EDGA, and EDGX rules of similar purpose, resulting 
in less burdensome and more efficient regulatory compliance for common 
members of the BGM Affiliated Exchanges and an enhanced ability of the 
BGM Affiliated Exchanges to fairly and efficiently regulate members, 
which will further enhance 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

    The Exchange has designated this rule filing as non-controversial 
under Section 19(b)(3)(A) of the Act \12\ and paragraph (f)(6) of Rule 
19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4.
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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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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-EDGA-2015-06 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-EDGA-2015-06. 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., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. 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 Number SR-EDGA-2015-06 and should be 
submitted on or before March 11, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-03227 Filed 2-17-15; 8:45 am]
BILLING CODE 8011-01-P