[Federal Register Volume 81, Number 105 (Wednesday, June 1, 2016)]
[Notices]
[Pages 35099-35101]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12790]



[[Page 35099]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77905; File No. SR-BatsEDGX-2016-19]


Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
11.7, Opening Process

May 25, 2016.
    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 13, 2016, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend Rule 11.7, Opening Process, 
to await a two-sided quotation from the listing exchange prior to 
opening a security for trading during Regular Trading Hours.\5\
---------------------------------------------------------------------------

    \5\ See Exchange Rule 1.5(y).
---------------------------------------------------------------------------

    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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 11.7, Opening Process, to await 
a two-sided quotation from the listing exchange prior to opening a 
security for trading during Regular Trading Hours.
    Exchange Rule 11.7 describes the Exchange's current opening 
process. Subparagraph (a) to Rule 11.7 states that prior to the 
beginning of the Regular Session,\6\ Users \7\ who wish to participate 
in the Opening Process may enter orders to buy or sell.\8\ Subparagraph 
(a)(2) to Rule 11.7 provides that, with certain exceptions,\9\ all 
orders with a time-in-force instruction of Regular Hours Only may 
participate in the Opening Process. Subparagraph (b) to Rule 11.7 
states that the Exchange will open by performing the Opening Process in 
which the System will attempt to match buy and sell orders that are 
executable at the midpoint of the National Best Bid and Offer 
(``NBBO''). Subparagraph (c) to Exchange Rule 11.7 sets forth the 
process by which the System sets the opening price of the Opening 
Process. Currently, the System \10\ sets the price of the Opening 
Process at the midpoint of the first NBBO after 9:30:00 a.m. Eastern 
Time. However, for securities listed on either the New York Stock 
Exchange, Inc. (``NYSE'') or NYSE MKT LLC (``NYSE MKT''), the System 
currently sets the price of the Opening Process at the midpoint of the 
first NBBO subsequent to the first reported trade on the listing 
exchange after 9:30:00 a.m. Eastern Time. The Exchange may 
alternatively set the price of the Opening Process for securities 
listed on either the NYSE or NYSE MKT at the midpoint of the then 
prevailing NBBO when the first two-sided quotation published by the 
relevant listing exchange after 9:30:00 a.m. Eastern Time, but before 
9:45:00 a.m. Eastern Time if no first trade is reported by the listing 
exchange within one second of publication of the first two-sided 
quotation by the listing exchange. The System waits to set the price at 
the midpoint of the first NBBO as set forth above because securities 
listed on the NYSE or NYSE MKT may not open at precisely 9:30:00 a.m. 
Eastern Time.
---------------------------------------------------------------------------

    \6\ See Exchange Rule 1.5(hh).
    \7\ See Exchange Rule 1.5(ee).
    \8\ Orders cancelled prior to the Opening Process will not 
participate in the Opening Process.
    \9\ The following order types and instruction may not 
participate in the opening process: (i) Limit Orders with a Post 
Only instruction, (ii) the Discretionary Range of Limit Orders, and 
(iv) Intermarket Sweep Orders (``ISOs'') not modified by Rule 
11.7(a)(1), and (iii) orders with a Minimum Execution Quantity 
instruction. See Exchange Rule 11.7(a)(2). Orders that are 
designated for the Regular Session that cannot participate in the 
Opening Process will not be accepted by the System until the Opening 
Process is completed or a Contingent Opening. Id. Limit Orders with 
a Reserve Quantity may participate to the full extent of their 
displayed size and Reserve Quantity. Id. Limit Orders with a 
Discretionary Range may participate up to their ranked limit price 
for buy orders and down to their ranked limit price for sell orders. 
Id. All Limit Orders with a Pegged instruction will be eligible for 
execution in the Opening Process based on their pegged prices at the 
time the Opening Process is conducted. Id.
    \10\ See Exchange Rule 1.5(cc).
---------------------------------------------------------------------------

    Pursuant to subparagraph (b) of Rule 11.7, all orders executable at 
the midpoint of the NBBO will continue to be processed in time 
sequence, beginning with the order with the oldest time stamp and not 
in accordance with Exchange Rule 11.9(a)(2)(B), which outlines priority 
at the midpoint of the NBBO. Matches occur until there are no remaining 
contra-side orders or there is an imbalance of orders. An imbalance of 
orders may result in orders that cannot be executed in whole or in 
part. Any unexecuted orders may then be placed by the System on the 
EDGX Book,\11\ cancelled, executed, or routed to away Trading Centers 
in accordance with the Users' instructions pursuant to Exchange Rule 
11.11.
---------------------------------------------------------------------------

    \11\ The term ``EDGX Book'' is defined as ``the System's 
electronic file of orders.'' See Exchange Rule 1.5(d).
---------------------------------------------------------------------------

    The Exchange proposes to amend subparagraph (c) to Rule 11.7 to now 
await a two-sided quotation from the listing exchange prior to opening 
a security for trading during Regular Trading Hours. As amended, 
subparagraph (c)(2) to Rule 11.7 would state that the System would set 
the price of the Opening Process at the midpoint of the first NBBO 
subsequent to the first two-sided quotation published by the listing 
exchange after 9:30:00 a.m. Eastern Time. For securities listed on 
either the NYSE or NYSE MKT, subparagraph (c)(1)(i) to Rule 11.7 would 
state that the System would set the price of the Opening Process at the 
midpoint of the first NBBO subsequent to the first reported trade and 
first reported quotation on the listing exchange after 9:30:00 a.m. 
Eastern Time. Pursuant to subparagraph (c)(1)(i) to Rule 11.7, the 
Exchange will utilize the existing NBBO to calculate each securities' 
[sic] opening price once a trade and two-sided quotation are received 
from the listing exchange, regardless of the order in which the

[[Page 35100]]

trade or quotation are received. The Exchange believes the proposed 
rule change will enable the listing market's quotation to be 
incorporated into the NBBO, which the Exchange would, in turn, utilize 
in its calculation of the midpoint of the NBBO. The Exchange believes 
doing so would result in an opening price that more closely reflect the 
opening market prices and conditions for that security. Under 
subparagraph (c)(1)(ii) to Rule 11.7, the Exchange will continue to 
alternatively set the price of the Opening Process for securities 
listed on either the NYSE or NYSE MKT at the midpoint of the then 
prevailing NBBO when the first two-sided quotation published by the 
relevant listing exchange after 9:30:00 a.m. Eastern Time, but before 
9:45:00 a.m. Eastern Time if no first trade is reported by the listing 
exchange within one second of publication of the first two-sided 
quotation by the listing exchange.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \12\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \13\ in particular, in that it is designed to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, 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 Exchange believes the 
proposed rule change will promote just and equitable principles of 
trade, removes impediments to, and perfect the mechanism of, a free and 
open market and a national market system because it enables the System 
to execute the Opening Process at a price that is objectively 
established by the market for the security. The proposal would enable 
the listing market's quotation to be incorporated into the NBBO, which 
the Exchange would, in turn, utilize in its calculation of the midpoint 
of the NBBO. The Exchange believes doing so would result in an opening 
price that more closely reflect the opening market prices and 
conditions for that security. Therefore, the Exchange believes the 
proposed rule change promotes just and equitable principles of trade 
because it ensures a midpoint price that the Exchange believes would 
accurately reflect the market for the security.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposal will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. The proposed rule change will enable the 
Exchange to incorporate the listing market's quotation into its 
calculation of the midpoint of the NBBO, resulting in an opening price 
that would more closely reflect the opening market prices and 
conditions for that security. Therefore, the Exchange believes the 
proposed rule change will promote competition by enhancing the quality 
of the Exchange's opening process.

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 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 \14\ and Rule 19b-4(f)(6) thereunder.\15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \16\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ 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. The Exchange 
states that waiver of the 30-day operative delay would allow market 
participants to immediately realize the benefits of what may be more 
accurate opening prices. Based on the foregoing, the Commission 
believes the waiver of the operative delay is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\18\
---------------------------------------------------------------------------

    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ 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).
---------------------------------------------------------------------------

    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 change 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 No. SR-BatsEDGX-2016-19 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 No. SR-BatsEDGX-2016-19. 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

[[Page 35101]]

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 No. SR-BatsEDGX-2016-19, and should be submitted on or before June 
22, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-12790 Filed 5-31-16; 8:45 am]
 BILLING CODE 8011-01-P