[Federal Register Volume 81, Number 192 (Tuesday, October 4, 2016)]
[Notices]
[Pages 68493-68495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23904]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78964; File No. SR-BatsBZX-2016-59]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Update 
BZX Rules 21.1, 21.7 and 21.9 To Align the Exchange's Rules and 
Functionality Applicable to the Exchange's Options Platform, BZX 
Options, With the Exchange's Affiliated Options Platform, EDGX Options, 
Which Is Operated by Bats EDGX Exchange, Inc.

September 28, 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 September 19, 2016, Bats BZX 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\ 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 update Rules 21.1, 21.7 and 21.9 
to align the Exchange's rules and functionality applicable to the 
Exchange's options platform (``BZX Options'') with the Exchange's 
affiliated options platform (``EDGX Options''), which is operated by 
Bats EDGX Exchange, Inc. (``EDGX''). The Exchange has designated this 
proposal as a non-controversial filing and requests that the Commission 
waive the 30-day operative delay contained in Rule 19b-4(f)(6)(iii) 
under the Act.\5\ If such waiver is granted by the Commission, the 
Exchange shall implement this rule proposal immediately.
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    \5\ 17 CFR 240.19b-4(f)(6)(iii).
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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 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 make two changes to the Exchange's rules 
and functionality applicable to the BZX Options as described below. The 
changes are being proposed in order to allow the Exchange to conform 
certain

[[Page 68494]]

functionality between BZX Options and EDGX Options.
    First, the Exchange proposes to eliminate ``WAIT'' orders, which 
are orders that that when entered into the System,\6\ the order is held 
for one second without processing for potential display and/or 
execution. After one second, an order designated as ``WAIT'' is 
processed for potential display and/or execution in accordance with all 
order entry instructions as determined by the entering party. WAIT 
orders were originally adopted by the Exchange based on similar 
functionality available on other options exchanges and were intended to 
enhance compliance with the order exposure requirement set forth in 
Rule 22.12 (Order Exposure Requirements). Rule 22.12 prohibits Options 
Members \7\ from executing as principal on BZX Options orders they 
represent as agent unless (i) agency orders are first exposed on BZX 
Options for at least one (1) second or (ii) the Options Member has been 
bidding or offering on BZX Options for at least one (1) second prior to 
receiving an agency order that is executable against such bid or offer 
(the ``Order Exposure Rule'').
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    \6\ Exchange Rule 16.1(a)(59) defines ``System'' as ``the 
automated trading system used by BZX Options for the trading of 
options contracts.''
    \7\ An Options Member is defined as ``a firm, or organization 
that is registered with the Exchange pursuant to Chapter XVII of 
these Rules for purposes of participating in options trading on BZX 
Options as an `Options Order Entry Firm' or `Options Market 
Maker.''' See Exchange Rule 16.1(a)(38).
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    Although the Order Exposure Rule still applies on BZX Options and 
the Exchange is not proposing any changes to such rule in connection 
with this proposal, Options Members have other means to comply with the 
Rule, including programming their own systems to comply, and very 
rarely use orders with a time-in-force of WAIT. Further, such orders 
are not offered by EDGX Options. Accordingly, the Exchange proposes to 
stop offering WAIT orders on BZX Options and to eliminate reference to 
such orders from Rule 21.1 (Definitions). In connection with this 
change, the Exchange proposes to remove reference to WAIT orders from 
the Exchange's rule regarding the opening procedures on the Exchange, 
Rule 21.7 (Market Opening Procedures).
    Second, the Exchange proposes to modify the ``Aggressive'' Re-Route 
instruction contained in Exchange Rule 21.9 (Order Routing) to align 
the operation of such functionality with that offered by EDGX Options. 
Under the current Aggressive Re-Route instruction on BZX Options, set 
forth in Rule 21.9(a)(3)(A), to the extent the unfilled balance of a 
routable order has been posted to the BZX Options Book pursuant to 
paragraph (a)(2), should the order subsequently be locked or crossed by 
another accessible options exchange, the System shall route the order 
to the locking or crossing options exchange if the User \8\ has 
selected the Aggressive Re-Route instruction. In contrast, on EDGX 
Options, the Aggressive Re-Route instruction routes an order posted to 
EDGX Options only if such order is subsequently crossed by another 
accessible options exchange. The Exchange proposes to modify the 
Aggressive Re-Route instruction to mirror the behavior offered on EDGX 
Options such that an order posted to BZX Options that has been flagged 
with the Aggressive Re-Route instruction will only be routed away to 
the extent such order is subsequently crossed by another accessible 
options exchange.
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    \8\ A User is defined as ``any Options Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3 (Access).'' See Exchange Rule 16.1(a)(63).
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    Although the Exchange intentionally offers certain features that 
differ from those offered by EDGX Options and will continue to do so, 
the Exchange believes that offering similar functionality on both EDGX 
Options and BZX Options to the extent practicable will reduce potential 
confusion for Users.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \10\ in particular, in that 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    Consistent rules and functionality between the Exchange and EDGX 
will reduce complexity and help avoid potential confusion by the Users 
of the Exchange that are also participants on EDGX. The Exchange again 
notes that WAIT orders are very rarely used by Users of BZX Options and 
that such orders are not offered by EDGX Options. Like WAIT orders, the 
Aggressive Re-Route instruction is very rarely used. The Exchange also 
notes that the proposed changes to the Aggressive Re-Route instruction 
are based on EDGX rules and will result in consistent functionality 
between BZX Options and EDGX Options.
    Also, with respect to the current implementation of Aggressive and 
Super Aggressive functionality, the Exchange notes that this 
implementation is due to a change previously made to the functionality 
that was primarily made by the Exchange in order to keep functionality 
consistent on BZX Options with the Exchange's equity securities 
platform (``BZX Equities'').\11\ Although as implemented on BZX 
Equities both Aggressive and Super Aggressive Re-Route functionality 
re-routes if an order is locked or crossed, there are other differences 
between the two features make the Super Aggressive option more 
aggressive. These differences, however, are not applicable to BZX 
Options and therefore Aggressive and Super Aggressive are redundant 
options. The proposed change will again make the Aggressive feature 
less aggressive than Super Aggressive, such that an order marked for 
Aggressive Re-Route will re-route an order only such order is crossed. 
A User who wishes to achieve the current Aggressive functionality to 
have the Exchange re-route an order if it is locked or crossed can 
instead select the Super Aggressive instruction.
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    \11\ See Securities Exchange Act Release No. 76623 (December 11, 
2015), 80 FR 78800 (December 17, 2015) (SR-BATS-2015-112) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to 
Rules 11.13(b)(4)(A) and 21.9(a)(3)(A), Amending Aggressive Re-Route 
Instruction).
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    The Exchange believes the proposed amendment will reduce complexity 
and increase the understanding of the Exchange's operations for all 
Users of the Exchange. 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. 
The proposed rule changes do not propose to implement new or unique 
functionality that has not been previously filed with the Commission or 
is not available on EDGX Options already.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange notes that the 
proposal will further promote consistency between the Exchange and 
EDGX, thereby reducing complexity and avoiding potential confusion by 
Users of the Exchange that are also participants on EDGX. The Exchange 
does not believe that either of the proposed changes will have any 
direct impact on competition.

[[Page 68495]]

Thus, the Exchange does not believe that the proposal creates any 
significant impact on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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 \12\ and Rule 19b-4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \14\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ 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 the 
Exchange to immediately provide functionality that is consistent with 
functionality provided by EDGX, thereby reducing complexity and 
avoiding potential confusion. 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.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ 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 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-BatsBZX-2016-59 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-BatsBZX-2016-59. 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-BatsBZX-2016-59, and should be 
submitted on or before October 25, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-23904 Filed 10-3-16; 8:45 am]
BILLING CODE 8011-01-P