[Federal Register Volume 80, Number 193 (Tuesday, October 6, 2015)]
[Notices]
[Pages 60419-60421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-25327]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76054; File No. SR-BATS-2015-78]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Delete 
Rule 2.13, Fidelity Bonds

September 30, 2015.
    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 September 24, 2015, BATS Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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\ See 15 U.S.C. 78s(b)(1).
    \2\ See 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 delete Rule 2.13, Fidelity Bonds, in 
order to conform to the rules of EDGA Exchange, Inc. (``EDGA'') and 
EDGX Exchange, Inc. (``EDGX'').
    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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In early 2014, the Exchange and its affiliate, BATS Y-Exchange, 
Inc. (``BYX''), received approval to effect a merger (the ``Merger'') 
of the Exchange's parent company, BATS Global Markets, Inc., with 
Direct Edge Holdings LLC, the indirect parent of EDGX and EDGA 
(together with BZX, BYX and EDGX, the ``BGM Affiliated Exchanges'').\5\ 
In the context of the Merger, the BGM Affiliated Exchanges are working 
to align its [sic] rules, retaining only intended differences between 
the BGM Affiliated Exchanges. Thus, the proposal set forth below is 
intended to delete Rule 2.13, Fidelity Bonds, in order to conform to 
the rules of EDGA and EDGX in order to provide a consistent rule set 
across each of the BGM Affiliated Exchanges.\6\
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    \5\ See Securities Exchange Act Release No. 71375 (January 23, 
2014), 79 FR 4771 (January 29, 2014) (SR-BATS-2013-059; SR-BYX-2013-
039).
    \6\ The Exchange notes that BYX intends to file a proposal to 
delete its identical Rule 2.13, Fidelity Bonds.
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    In sum, Exchange Rule 2.13(a) states that each Member \7\ required 
to join the Securities Investor Protection Corporation (``SIPC'') who 
has employees and who is a member in good standing of another self-
regulatory organization shall follow the applicable fidelity bond rule 
of the self-regulatory organization to which it is designated by the 
Commission for financial responsibility pursuant to Section 17 of the 
Act and SEC Rule 17d-1 thereunder (i.e., its Designated Examining 
Authority or ``DEA''). Subparagraph (b) to Rule 2.13 simply 
incorporates by reference NASD Rule 3020 (now FINRA Rule 4360) in to 
Exchange Rule 2.13. Subparagraph (c) of Rule 2.13 states that 
references to: (i) An ``Association member'' shall be construed as 
references to a ``Member''; and (ii) Article I, paragraph (q) of the 
By-Laws shall be construed as references to Exchange Rule 1.5(q). 
Lastly, subparagraph (d) to Rule 2.13 states that pursuant to Exchange 
Rule 1.6, any Member subject to paragraph (c) of NASD Rule 3020 (now 
FINRA Rule 4360), through the application of paragraph (b) of Rule 
2.13, may apply to the Exchange for an exemption from such 
requirements. The exemption may be granted upon a showing of good 
cause, including a substantial change in

[[Page 60420]]

the circumstances or nature of the Member's business that results in a 
lower net capital requirement. The Exchange may issue an exemption 
subject to any condition or limitation upon a Member's bonding coverage 
that is deemed necessary to protect the public and serve the purposes 
of Rule 2.13.
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    \7\ A Member is defined as ``any registered broker or dealer 
that has been admitted to membership in the Exchange.'' See Exchange 
Rule 1.5(n).
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    The Exchange does not, nor does it currently intend to, act in the 
capacity of a DEA. Therefore, Rule 2.13 is obsolete as it does not 
apply to any of the Exchange's Members.\8\ The Exchange believes that 
eliminating Rule 2.13 would avoid unnecessary confusion with respect to 
the Exchange's rules because it does not have a direct nexus to the 
trading on the Exchange or the relationship between the Exchange and 
its Members. Deleting Rule 2.13 would not ease any of the requirements 
on its Members that are required to join SIPC as the Financial Industry 
Regulatory Authority (``FINRA'') and the New York Stock Exchange, Inc. 
(``NYSE'') serve as a DEA for those Members and include rules with 
similar requirements as current Exchange Rule 2.13.\9\ In addition, the 
Exchange notes that EDGA and EDGX do not contain a similar rule. As a 
result, eliminating Rule 2.13 would also provide for a consistent rule 
set across each of the BGM Affiliated Exchanges.
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    \8\ The Exchange will submit a rule filing to the Commission to 
adopt requirements similar or identical to current Rule 2.13 should 
it become a DEA for any of its Members in the future.
    \9\ See FINRA Rule 4360 and NYSE Rule 4360.
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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(b) of the Act.\10\ 
Specifically, the proposed change is consistent with Section 6(b)(5) of 
the Act,\11\ 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. The proposed 
rule change is designed to provide a consistent rule set across each of 
the BGM Affiliated Exchanges. As mentioned above, the proposed rule 
changes, combined with the planned filing for BYX, would provide for a 
consistent set of rules across each of the BGM Affiliated Exchanges. 
Consistent rules, in turn, will simplify the regulatory requirements 
for Members of the Exchange that are also participants on EDGA, EDGX 
and/or BYX as well as result in greater uniformity, less burdensome and 
more efficient regulatory compliance and understanding of Exchange 
Rules. 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    In addition, the proposed rule change would eliminate unnecessary 
confusion with respect to the Exchange's rules by removing a rule that 
has never had a direct nexus to the trading on the Exchange or the 
relationship between the Exchange and its Members. The Exchange 
believes that Rule 2.13 is obsolete as the Exchange does not, nor does 
it currently intend to, act in the capacity of a DEA. Deleting Rule 
2.13 would not ease any of the requirements on its Members that are 
required to join SIPC as FINRA and the NYSE serve as a DEA for those 
Members and include rules containing similar requirements as current 
Exchange Rule 2.13.\12\ The Exchange believes that eliminating these 
rules will reduce any investor confusion regarding a rule the Exchange 
has never applied, nor intends to apply. Further, eliminating 
unnecessary and obsolete rules removes impediments to the perfection of 
the mechanisms for a free and open market system consistent with the 
requirements of Section 6(b)(5) of the Act.\13\
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    \12\ See FINRA Rule 4360 and NYSE Rule 4360.
    \13\ 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 will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
notes that deleting Rule 2.13 will align Exchange rules with those of 
the BGM Affiliated Exchanges. The Exchange has never utilized this 
rule, nor does the Exchange intend to utilize it in the future. 
Therefore, the Exchange does not believe that eliminating Rule 2.13 
will impose 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

    The Exchange has designated this rule filing as non-controversial 
under Section 19(b)(3)(A) of the Act \14\ and paragraph (f)(6) of Rule 
19b-4 thereunder.\15\ The proposed rule change effects a change that 
(A) does not significantly affect the protection of investors or the 
public interest; (B) does not impose any significant burden on 
competition; and (C) by its terms, does not become operative for 30 
days after the date of the filing, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest; provided that the self-regulatory organization 
has given 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.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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 may summarily temporarily suspend such rule 
change if it appears to the Commission that such action is: (1) 
Necessary or appropriate in the public interest; (2) for the protection 
of investors; or (3) 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-2015-78 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-BATS-2015-78. This file 
number should be included on the

[[Page 60421]]

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 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-2015-78 and 
should be submitted on or before October 27, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ See 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-25327 Filed 10-5-15; 8:45 am]
 BILLING CODE 8011-01-P