[Federal Register Volume 81, Number 166 (Friday, August 26, 2016)]
[Notices]
[Pages 59018-59020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20458]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78631; File No. SR-BatsBYX-2016-21]


Self-Regulatory Organizations; Bats BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 11.22, Data Products, To Adopt a New Market Data Product Known as 
BYX Summary Depth

August 22, 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 August 11, 2016, Bats BYX Exchange, Inc. (the ``Exchange'' or 
``BYX'') 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) 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).
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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 Rule 11.22 to adopt a new 
market data product known as BYX Summary Depth.
    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 11.22 to adopt a new market 
data product known as BYX Summary Depth.\5\ BYX Summary Depth would be 
a data feed that offers aggregated two-sided quotations for all 
displayed orders entered into the System \6\ for up to five (5) price 
levels for securities traded on the Exchange and for which the Exchange 
reports quotes under the Consolidated Tape Association (``CTA'') Plan 
or the Nasdaq/UTP Plan. BYX Summary Depth also contains the individual 
last sale information, Market Status, Retail Liquidity Identifier, 
Trading Status, and Trade Break messages. The individual last sale 
information will include the price, size, and time of execution. The 
last sale message will also include the cumulative number of shares 
executed on the Exchange for that trading day. The Exchange will 
disseminate the aggregate Best Bid and Offer (``BBO'') and last sale 
information through BYX Summary Depth no earlier than it provides its 
BBO and last sale information to the processors under the CTA Plan or 
the Nasdaq/UTP Plan.
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    \5\ Currently, the paragraphs within Rule 11.22 skip from 
paragraph (i) to paragraph (k). The Exchange now proposes to 
renumber current paragraph (k) to Rule 11.22 to as paragraph (j) to 
ensure the paragraphs within the rule are consecutively numbered.
    \6\ ``System'' is defined as the ``the electronic communications 
and trading facility designated by the Board through which 
securities orders of Users Are consolidated for ranking, execution 
and, when applicable, routing away.'' See Exchange Rule 1.5(aa).
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    The Market Status message will reflect a change in the status of 
the Exchange. For example, the Market Status message would indicate 
whether the Exchange is experiencing a systems issue or disruption 
resulting in quotation or trade information not currently being 
disseminated as part of the aggregated BBO. The Market Status message 
will also indicate when Exchange has resolved a systems issue or 
disruption and is properly reflecting the status of the aggregated BBO. 
The Retail Liquidity Identifier indicator message will be disseminated 
pursuant to the Exchange's Retail Price Improvement (``RPI'') 
Program.\7\ The

[[Page 59019]]

Retail Liquidity Identifier indicates when RPI interest priced at least 
$0.001 better than BYX's Protected Bid or Protected Offer for a 
particular security is available. The Exchange proposes to disseminate 
the Retail Liquidity Indicator via the BYX Summary Feed in the same 
manner as it is currently disseminated through consolidated data 
streams (i.e., pursuant to the Consolidated Tape Association Plan/
Consolidated Quotation Plan, or CTA/CQ, for Tape A and Tape B 
securities, and the Nasdaq UTP Plan for Tape C securities) as well as 
through other proprietary data feeds. The Retail Liquidity Identifier 
will reflect the symbol and the side (buy or sell) of the RPI interest, 
but does not include the price or size of the RPI interest. In 
particular, like CQ and UTP quoting outputs, the BYX Summary Feed will 
include a field for codes related to the Retail Price Improvement 
Identifier. The codes indicate RPI interest that is priced better than 
Exchange's Protected Bid or Protected Offer by at least the minimum 
level of price improvement required by the Program. The Trade Break 
message will indicate when an execution is broken in accordance with 
Exchange rules.\8\ The Trading Status message will indicate the current 
trading status of a security on the Exchange. For example, a Trading 
Status message will be sent when a short sale price restriction is in 
effect pursuant to Rule 201 of Regulation SHO (``Short Sale Circuit 
Breaker''),\9\ or when the security is subject to a trading halt, 
suspension or pause declared by the listing market. A Trading Status 
message will be sent whenever a security's trading status changes.
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    \7\ For a description of the RPI Program, see BYX Rule 11.24. 
See also Securities Exchange Act Release No. 68303 (November 27, 
2012), 77 FR 71652 (December 3, 2012) (SR-BYX-2012-019) (Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment 
No. 2, to Adopt a Retail Price Improvement Program); Securities 
Exchange Act Release No. 67734 (August 27, 2012), 77 FR 53242 
(August 31, 2012) (SR-BYX-2012-019) (Notice of Filing of Proposed 
Rule Change to Adopt a Retail Price Improvement Program).
    \8\ See, e.g., Exchange Rule 11.17, Clearly Erroneous 
Executions.
    \9\ 17 CFR 242.200(g); 17 CFR 242.201.
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    The Exchange intends to offer BYX Summary Depth as of January 3, 
2017. Prior to January 3, 2017, the Exchange will file a separate rule 
change with the Commission proposing fees to be charged for BYX Summary 
Depth.\10\
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    \10\ The Exchange understands that its affiliated exchanges 
intend to file identical proposed rule changes to adopt rules and 
fees for the Book Viewer data feed with the Commission. The 
Exchange's affiliates are Bats EDGA Exchange, Inc., (``EDGA''), Bats 
EDGX Exchange, Inc. (``EDGX''), and Bats BZX Exchange, Inc. 
(``BZX'') (collectively, the ``Bats Exchanges'').
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\11\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\12\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
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 to protect investors and the public 
interest, and that it is not designed to permit unfair discrimination 
among customers, brokers, or dealers. This proposal is in keeping with 
those principles in that it promotes increased transparency through the 
dissemination of BYX Summary Depth. The Exchange also believes this 
proposal is consistent with Section 6(b)(5) of the Act because it 
protects investors and the public interest and promotes just and 
equitable principles of trade by providing investors with an 
alternative for receiving market data as requested by market data 
vendors and purchasers that expressed an interest in exchange-only data 
for instances where consolidated data is no longer required to be 
purchased and displayed. The proposed rule change would benefit 
investors by facilitating their prompt access to real-time depth-of-
book information contained in BYX Summary Depth.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes that the proposed rule change is 
consistent with Section 11(A) of the Act \13\ in that it supports (i) 
fair competition among brokers and dealers, among exchange markets, and 
between exchange markets and markets other than exchange markets and 
(ii) the availability of information with respect to quotations for and 
transactions in securities to brokers, dealers, and investors. 
Furthermore, the proposed rule change is consistent with Rule 603 of 
Regulation NMS,\14\ which provides that any national securities 
exchange that distributes information with respect to quotations for or 
transactions in an NMS stock do so on terms that are not unreasonably 
discriminatory. BYX Summary Depth would be accessed and subscribed to 
on a voluntary basis, in that neither the Exchange nor market data 
distributors are required by any rule or regulation to make this data 
available. Accordingly, distributors and subscribers can discontinue 
their use at any time and for any reason.
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    \13\ 15 U.S.C. 78k-1.
    \14\ See 17 CFR 242.603.
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations and broker-dealers increased authority and flexibility to 
offer new and unique market data to consumers of such data. It was 
believed that this authority would expand the amount of data available 
to users and consumers of such data and also spur innovation and 
competition for the provision of market data. The Exchange believes 
that the data products proposed herein are precisely the sort of market 
data products that the Commission envisioned when it adopted Regulation 
NMS. The Commission concluded that Regulation NMS--by lessening 
regulation of the market in proprietary data--would itself further the 
Act's goals of facilitating efficiency and competition:

    [E]fficiency is promoted when broker-dealers who do not need the 
data beyond the prices, sizes, market center identifications of the 
NBBO and consolidated last sale information are not required to 
receive (and pay for) such data. The Commission also believes that 
efficiency is promoted when broker-dealers may choose to receive 
(and pay for) additional market data based on their own internal 
analysis of the need for such data.\15\

    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005) (File No. S7-10-04) (``Regulation 
NMS Adopting Release'').
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By removing ``unnecessary regulatory restrictions'' on the ability of 
exchanges to sell their own data, Regulation NMS advanced the goals of 
the Act and the principles reflected in its legislative history.
    In addition, BYX Summary Depth removes impediments to and perfects 
the mechanism of a free and open market and a national market system by 
providing investors with alternative market data and competing with 
similar market data products currently offered by the New York Stock 
Exchange, Inc. (``NYSE'') and the Nasdaq Stock Market LLC 
(``Nasdaq'').\16\ The provision of new options for investors to receive 
market

[[Page 59020]]

data was a primary goal of the market data amendments adopted by 
Regulation NMS.\17\
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    \16\ See Nasdaq Rule 7023(a)(1)(C) (describing Nasdaq TotalView 
as a depth-of-book data feed that includes all orders and quotes 
from all Nasdaq members displayed in the Nasdaq Market Center as 
well as the aggregate size of such orders and quotes at each price 
level in the execution functionality of the Nasdaq Market Center). 
See NYSE OpenBook available at http://www.nyxdata.com/openbook (last 
visited July 5, 2016) (providing real-time view of the NYSE limit 
order book including the aggregated size at each price level). See 
Securities Exchange Act Release Nos. 46843 (November 18, 2002), 67 
FR 70471 (November 22, 2002) (SR-NASD-2002-33) (order approving fees 
for Nasdaq TotalView); and 45138 (December 7, 2001), 66 FR 64895 
(December 14, 2001) (SR-NYSE-2001-42) (order approving fees for NYSE 
OpenBook).
    \17\ See Regulation NMS Adopting Release, supra note 14.
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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.\18\ The Exchange 
believes that the proposal will promote competition by enabling the 
Exchange to offer a market data product similar to that currently 
offered by the NYSE and Nasdaq.\19\ Thus, the Exchange believes this 
proposed rule change is necessary to permit fair competition among 
national securities exchanges.
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    \18\ The Bats One Feed is a data feed that disseminates, on a 
real-time basis, the aggregate BBO of all displayed orders for 
securities traded on each of the Bats Exchanges and for the Bats 
Exchanges report quotes under the CTA Plan or the Nasdaq/UTP Plan. 
The Bats One Feed also contains the individual last sale information 
for the Bats Exchanges (collectively with the aggregate BBO, the 
``Bats One Summary Feed''). In addition, the Bats One Feed contains 
optional functionality which enables recipients to receive 
aggregated two-sided quotations from the Bats Exchanges for up to 
five (5) price levels (``Bats One Premium Feed''). See Exchange Rule 
11.22(i). See also Securities Exchange Act Release No. 73918 
(December 23, 2014), 79 FR 78920 (December 31, 2014) (File Nos. SR-
EDGX-2014-25; SR-EDGA-2014-25; SR-BATS-2014-055; SR-BYX-2014-030) 
(Notice of Amendments No. 2 and Order Granting Accelerated Approval 
to Proposed Rule Changes, as Modified by Amendments Nos. 1 and 2, to 
Establish a New Market Data Product called the Bats One Feed) 
(``Bats One Approval Order''). The Exchange uses the following data 
feeds to create the Bats One Feed, each of which are available to 
vendors: EDGX Depth, EDGA Depth, BYX PITCH Feed, and the BZX PITCH 
Feed. The Exchange notes that a vendor could utilize the proposed 
BYX Summary Depth Feed, as well as the summarized depth feeds to be 
proposed by BZX, EDGA, and EDGX to create a competing product to the 
Bats One Feed. Supra note 10. The Exchange represents that a 
competing vendor could obtain these data feeds from each Bats 
Exchange on the same latency basis as the system that performs the 
aggregation and consolidation of the Bats One Feed. See Bats One 
Approval Order. While the proposed BYX Summary Depth Feed does not 
contain the symbol summary or consolidated volume data included in 
the Bats One Feed, a vendor could include this information in a 
competing product as this information is easily derivable from the 
proposed feeds or can be obtained from the securities information 
processors on the same terms as the Exchange.
    \19\ See supra note 16.
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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.

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 \20\ and Rule 19b-4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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.
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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 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-BatsBYX-2016-21 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-BatsBYX-2016-21. 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 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-BatsBYX-2016-21, and should be 
submitted on or before September 16, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-20458 Filed 8-25-16; 8:45 am]
 BILLING CODE 8011-01-P