[Federal Register Volume 81, Number 224 (Monday, November 21, 2016)]
[Notices]
[Pages 83320-83322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27892]



[[Page 83320]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79312; File No. SR-BatsBZX-2016-75]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend 
the Pilot Period for the Supplemental Competitive Liquidity Provider 
Program

November 15, 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 November 7, 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 
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.
---------------------------------------------------------------------------

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

    The Exchange filed a proposal to extend the pilot period for the 
Exchange's Supplemental Competitive Liquidity Provider Program (the 
``Program''), which is currently set to expire on November 4, 2016 to 
expire on July 31, 2017.
    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Background
    On August 30, 2011, the Exchange received approval of rules 
applicable to the qualification, listing and delisting of securities of 
issuers on the Exchange.\3\ More recently, the Exchange received 
approval to operate a pilot program that is designed to incentivize 
certain Market Makers \4\ registered with the Exchange as ETP CLPs, as 
defined in Interpretation and Policy .03 to Rule 11.8, to enhance 
liquidity on the Exchange in certain ETPs \5\ listed on the Exchange 
and thereby qualify to receive part of a daily rebate as part of the 
Program under Interpretation and Policy .03 to Rule 11.8.\6\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 65225 (August 30, 
2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018).
    \4\ As defined in BZX Rules, the term ``Market Maker'' means a 
Member that acts a as a market maker pursuant to Chapter XI of BZX 
Rules.
    \5\ ETP is defined in Interpretation and Policy .03(b)(4) to 
Rule 11.8.
    \6\ See Securities Exchange Act Release No. 72692 (July 28, 
2014), 79 FR 44908 (August 1, 2014) (SR-BATS-2014-022) (``CLP 
Approval Order'').
---------------------------------------------------------------------------

    The Program was approved by the Commission on a pilot basis running 
one-year from the date of implementation.\7\ The Commission approved 
the Program on July 28, 2014.\8\ The Exchange implemented the Program 
on July 28, 2014 and the pilot period for the Program was originally 
scheduled to end on July 28, 2015 until it was extended to end on 
October 28, 2015,\9\ later extended to January 28, 2016,\10\ again 
extended to April 28, 2016,\11\ then again to July 28, 2016,\12\ again 
to October 28, 2016,\13\ and most recently to November 4, 2016.\14\
---------------------------------------------------------------------------

    \7\ See id at 44909.
    \8\ Id.
    \9\ See Securities Exchange Act Release No. 75518 (July 24, 
2015), 80 FR 45566 (July 30, 2015 (SR-BATS-2015-55).
    \10\ See Securities Exchange Act Release No. 76293 (October 28, 
2015), 80 FR 67808 (November 3, 2015) (SR-BATS-2015-96).
    \11\ See Securities Exchange Act Release No. 77033 (February 2, 
2016), 81 FR 6558 (February 8, 2016) (SR-BATS-2016-12).
    \12\ See Securities Exchange Act Release No. 77721 (April 27, 
2016), 81 FR 26591 (May 3, 2016) (SR-BatsBZX-2016-11).
    \13\ See Securities Exchange Act Release No. 78454 (August 2, 
2016), 81 FR 52494 (August 8, 2016) (SR-BatsBZX-2016-46).
    \14\ See Securities Exchange Act Release No. 79222 (November 2, 
2016) (SR-BatsBZX-2016-71).
---------------------------------------------------------------------------

Proposal To Extend the Operation of the Program
    The Exchange established the Program in order to enhance liquidity 
on the Exchange in certain ETPs listed on the Exchange (and thereby 
enhance the Exchange's ability to compete as a listing venue) by 
providing a mechanism by which ETP CLPs compete for part of a daily 
quoting incentive on the basis of providing the most aggressive quotes 
with the greatest amount of size. Such competition has the ability to 
reduce spreads, facilitate the price discovery process, and reduce 
costs for investors trading in such securities, thereby promoting 
capital formation and helping the Exchange to compete as a listing 
venue. The Exchange is proposing to extend the current pilot period for 
the Program from November 4, 2016 to July 31, 2017 in order to allow 
the Exchange to gather additional data related to the Program as the 
Program continues to operate.
    Prior to the end of the pilot period ending July 31, 2017, the 
Exchange will post a report relating to the Program (the ``Assessment 
Report'') on its Web site three months before the end of the pilot 
period or at the time it files to terminate the pilot, whichever comes 
first. The proposed Assessment Report would list the program objectives 
that are the focus of the pilot and, for each, provide (a) a 
statistical analysis that includes evidence that is sufficient to 
inform a reader about whether the program has met those objectives 
during the pilot period, along with (b) a narrative explanation of 
whether and how the evidence indicates the pilot has met the objective, 
including both strengths and weaknesses of the evidence in this regard. 
The Assessment Report also would include a discussion of (a) the 
procedures used in selecting any samples that are used in constructing 
tables or statistics for inclusion in the Assessment Report, (b) the 
definitions of any variables and statistics reported in the tables, 
including test statistics, (c) the statistical significance levels of 
any test statistics and (d) other statistical or qualitative 
information that may enhance the usefulness of the Assessment Report as 
a basis for evaluating the performance of the program. The Assessment 
Report would present statistics on product performance relative to the 
performance of comparable or other suitable benchmark products 
(including test statistics that permit the reader to evaluate the 
statistical significance of any differences reported or discussed in 
the report), along with information on the procedures that were used to 
identify those comparable or benchmark products, the characteristics of 
each comparable or benchmark products, the characteristics of each 
product that is

[[Page 83321]]

the focus of the pilot, the procedures used in selecting the time 
horizon of the sample and the sensitivity of reported statistics to 
changes in the time horizon of the sample.
    As such, the Exchange believes that it is appropriate to extend the 
current operation of the Program in order to allow the Exchange to 
gather additional data related to the Program as the Program continues 
to operate and the Exchange prepares the Assessment Report. Through 
this filing, the Exchange seeks to extend the current pilot period of 
the Program until July 31, 2017.
2. Statutory Basis
    The Exchange believes that its proposal 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.\15\ In particular, 
the Exchange believes the proposed change furthers the objectives of 
Section 6(b)(5) of the Act,\16\ in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. The Exchange believes that 
extending the pilot period for the Program is consistent with these 
principles because the Program is reasonably designed to enhance quote 
competition, improve liquidity in securities listed on the Exchange, 
support the quality of price discovery, promote market transparency, 
and increase competition for listings and trade executions, while 
reducing spreads and transaction costs in such securities. Maintaining 
and increasing liquidity in Exchange-listed securities will help raise 
investors' confidence in the fairness of the market and their 
transactions. Further, the Exchange believes that extending the pilot 
period will allow the Exchange to gather additional data related to the 
Program as the Program continues to operate in order to better assess 
the effect of the Program on the public price discovery process and 
market structure generally as part of its preparation of the Assessment 
Report.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 proposed rule change 
extends an established pilot period until July 31, 2017, thus allowing 
the Program to enhance competition in both the listings market and in 
competition for market makers. The Program will continue to promote 
competition in the listings market by providing issuers with a vehicle 
for paying the Exchange additional fees in exchange for incentivizing 
tighter spreads and deeper liquidity in listed securities and allow the 
Exchange to continue to compete with similar programs at Nasdaq Stock 
Market LLC \17\ and NYSE Arca Equities, Inc.\18\
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 69195 (March 20, 
2013), 78 FR 18393 (March 26, 2013) (SR-NASDAQ-2012-137).
    \18\ See Securities Exchange Act Release No. 69335 (April 5, 
2013), 78 FR 35340 (June 12, 2013) (SR-NYSEARCA-2013-34).
---------------------------------------------------------------------------

    The Exchange also believes that extending the pilot period will 
allow the Program to continue to enhance competition among market 
participants by creating incentives for market makers to compete to 
make better quality markets. By continuing to require that market 
makers both meet the quoting requirements and also compete for the 
daily financial incentives, the quality of quotes on the Exchange will 
continue to improve. This, in turn, will attract more liquidity to the 
Exchange and further improve the quality of trading in exchange-listed 
securities participating in the Program, which will also act to bolster 
the Exchange's listing business.

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 foregoing proposed rule change does not: (A) 
Significantly affect the protection of investors or the public 
interest; (B) impose any significant burden on competition; and (C) by 
its terms, 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 \19\ and 
paragraph (f)(6) of Rule 19b-4 thereunder.\20\ The Exchange 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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative before 30 days from the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\21\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
---------------------------------------------------------------------------

    \21\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Exchange has asked the Commission to waive the 30-day operative 
delay. The Exchange asserts that waiver of the operative delay will 
allow the Exchange to extend the Program prior to its expiration on 
November 4, 2016, which will ensure that the Program continues to 
operate uninterrupted while the Exchange and the Commission continue to 
analyze data regarding the Program.\22\ The Exchange represents that 
extending the pilot period will allow the Exchange to gather additional 
data related to the Program to better assess the effect of the Program 
on the public price discovery process and market structure, generally, 
as part of its preparation of the Assessment Report. According to the 
Exchange, prior to the end of the pilot period ending July 31, 2017, 
the Exchange will post the Assessment Report on its Web site three 
months before the end of the pilot period or at the time it files to 
terminate the pilot, whichever comes first. Based on these 
representations, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission hereby waives the 30-day 
operative delay and designates the proposed rule change to be operative 
upon filing with the Commission.\23\
---------------------------------------------------------------------------

    \22\ The Commission notes that, on November 4, 2016, the 
Exchange filed a similar rule filing (SR-BatsBZX-2016-74) proposing 
to extend the Program to July 31, 2017. The Exchange withdrew that 
filing on November 7, 2016, and filed this proposed rule filing on 
the same day.
    \23\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

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

[[Page 83322]]

    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: (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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal 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-2016-75 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-2016-75. 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 such 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 No. SR-BatsBZX-2016-75 and should be 
submitted on or before December 12, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-27892 Filed 11-18-16; 8:45 am]
 BILLING CODE 8011-01-P