[Federal Register Volume 80, Number 111 (Wednesday, June 10, 2015)]
[Notices]
[Pages 33001-33003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-14134]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75107; File No. SR-BATS-2015-40]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt 
Rule 13.8 Describing a Communication and Routing Service Known as BATS 
Connect

June 4, 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 May 27, 2015, 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)(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 adopt Rule 13.8 to describe a 
communication and routing service known as BATS Connect. The proposed 
rule change is based on an identical service offered by the Exchange's 
affiliate, EDGX Exchange, Inc. (``EDGX'').\5\
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    \5\ See EDGX Rule 13.9. See also Securities Exchange Act Release 
Nos. 73780 (December 8, 2014), 79 FR 73942 (December 12, 2014) (SR-
EDGX-2014-28); and 74935 (May 12, 2015), 80 FR 28335 (May 18, 2015) 
(SR-EDGX-2015-19).
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    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

[[Page 33002]]

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 adopt Rule 13.8 to describe a 
communication and routing service known as BATS Connect. The Exchange 
proposes to offer BATS Connect on a voluntary basis in a capacity 
similar to a vendor. BATS Connect would operate in the same fashion as 
an identical service, also called BATS Connect, offered by the 
Exchange's affiliate, EDGX.\6\ BATS Connect is a communication service 
that provides Members \7\ an additional means to receive market data 
from and route orders to any destination connected to Exchange's 
network. BATS Connect does not provide any advantage to subscribers for 
connecting to the Exchange's affiliates \8\ as compared to other method 
of connectivity available to subscribers. The servers of the Member 
need not be located in the same facilities as the Exchange in order to 
subscribe to BATS Connect. Members may also seek to utilize BATS 
Connect in the event of a market disruption where other alternative 
connection methods become unavailable.
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    \6\ See supra note 5.
    \7\ The term ``Member'' is defined as ``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.'' See Exchange Rule 1.5(n).
    \8\ The Exchange's affiliated exchanges are EDGX, EDGA Exchange, 
Inc., and BATS Y-Exchange, Inc. The Exchange understands that its 
affiliated Exchange's intend to file identical proposed rule changes 
to adopt the BATS Connect service with the Commission.
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    Specifically, this service would allow Members to route orders to 
other exchanges and market centers that are connected to the Exchange's 
network. This communications or routing service would not effect trade 
executions and would not report trades to the relevant Securities 
Information Processor. An order sent via the service does not pass 
through the Exchange's matching engine before going to a market center 
outside of the Exchange (i.e., a participant could choose to route an 
order directly to any market center on the Exchange's network). A 
participant would be responsible for identifying the appropriate 
destination for any orders sent through the service and for ensuring 
that it had authority to access the selected destination; the Exchange 
would merely provide the connectivity by which orders (and associated 
messages) could be routed by a participant to a destination and from 
the destination back to the participant.\9\
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    \9\ This service is an alternative to a service that the 
Exchange already provides to its Members--current order-sending 
Members route orders through access provided by the Exchange to the 
Exchange that either check the Exchange for available liquidity and 
then route to other destinations or, in certain circumstances, 
bypass the Exchange and route to other destinations. See Exchange 
Rule 11.13(b)(3) (setting forth routing options whereby Members may 
select their orders be routed to other market centers).
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    The Exchange will charge a monthly connectivity fee to Members 
utilizing BATS Connect to route orders to other exchanges and broker-
dealers that are connected to the Exchange's network. BATS Connect 
would also allow participants to receive market data feeds from the 
exchanges connected to the Exchange's network. The Exchange will file a 
separate proposed rule change with the Commission regarding the 
connectivity fees for order entry and market data to be charged for the 
BATS Connect service.\10\
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    \10\ The Exchange understands that its affiliated exchanges 
intend to file identical proposed rule changes to adopt fees for the 
BATS Connect service with the Commission.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of section 6(b) of the Act,\11\ in general, and section 
6(b)(5) of the Act,\12\ in particular, in that it promotes just and 
equitable principles of trade, removes impediments to, and perfect the 
mechanism of, a free and open market and a national market system, and, 
in general, protects investors and the public interest. Specifically, 
the proposal is consistent with section 6(b)(5) of the Act,\13\ in that 
it provides Members an alternative means to receive market data from 
and route orders to any destination connected to the Exchange's 
network, thereby removing impediments to and perfecting the mechanism 
of a free and open market and a national market system, and, in 
general, protecting investors and the public interest. In addition, 
BATS Connect removes impediments to and perfects the mechanism of a 
free and open market and a national market system because, in the event 
of a market disruption, Members would be able to utilize BATS Connect 
to connect to other market centers where other alternative connection 
methods become unavailable. BATS Connect would operate in the same 
fashion as an identical service, also called BATS Connect, offered by 
the Exchange's affiliate, EDGX.\14\ The proposed rule change is also 
similar to a communication and routing service implemented by the 
Chicago Stock Exchange, Inc. (``CHX'').\15\ The proposed rule change 
will also not permit unfair discrimination among customers, brokers, or 
dealers because BATS Connect will be available to all of the Exchange's 
customers on an equivalent basis regardless of whether the servers of 
the Member are located in the same facilities as the Exchange.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
    \14\ See supra note 5.
    \15\ See Securities Exchange Act Release No. 54846 (November 30, 
2006), 71 FR 71003 (December 7, 2006) (SR-CHX-2006-34) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Regarding 
the Implementation of a Communication and Routing Service).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange believes that the proposal will promote competition by the 
Exchange offering a service similar to those offered by the CHX and 
NYSE.\16\ Thus, the Exchange believes this proposed rule change is 
necessary to permit fair competition among national securities 
exchanges. In addition, the proposed rule change is designed to provide 
Members with an alternative means to access other market centers if 
they chose or in the event of a market disruption where other 
alternative connection methods become unavailable. Therefore, the 
Exchange does not believe the proposed rule change will have any effect 
on competition.
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    \16\ See NYSE's SFTI Americas Product and Service List available 
at http://www.nyxdata.com/docs/connectivity. See supra note 15.
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(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.

[[Page 33003]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the 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, the proposed rule change has become effective 
pursuant to section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) 
thereunder.\17\
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    \17\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) 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 asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. Waiver of the 30-day 
operative delay would permit the Exchange to provide Members with an 
alternative means to access other market centers, particularly in the 
event of a market disruption. In addition, the Exchange represents that 
BATS Connect does not provide any advantage to subscribers for 
connecting to the Exchange's affiliates as compared to other methods of 
connectivity available to subscribers.\18\ Based on the foregoing, the 
Commission believes the waiver of the operative delay is consistent 
with the protection of investors and the public interest.\19\ The 
Commission hereby grants the waiver and designates the proposal 
operative upon filing.
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    \18\ See supra note 8.
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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. 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-BATS-2015-40 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BATS-2015-40. 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 the 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-BATS-2015-40 and should be 
submitted on or before July 1, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14134 Filed 6-9-15; 8:45 am]
 BILLING CODE 8011-01-P