
[Federal Register Volume 74, Number 102 (Friday, May 29, 2009)]
[Notices]
[Pages 25787-25789]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-12445]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59963; File No. SR-BATS-2009-012]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
BATS Rules To Offer an After Hours Trading Session

May 21, 2009.
    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 20, 2009, BATS Exchange, Inc. (``BATS'' or the 
``Exchange'') 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).

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[[Page 25788]]

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

    The Exchange is proposing to amend BATS Rules in order to begin 
offering a trading session after the close of Regular Trading Hours \5\ 
(the ``After Hours Trading Session'') that will last from 4 to 5 p.m. 
Eastern Time.
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    \5\ As defined in current BATS Rule 1.5(v), which the Exchange 
proposes to re-number as BATS Rule 1.5(w).
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    The text of the proposed rule change is available at the Exchange's 
Web site at http://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
    The Exchange currently allows trading during a Pre-Opening Session 
that lasts from 8 a.m. to 9:30 a.m. Eastern Time, with Regular Trading 
Hours lasting from 9:30 a.m. to 4 p.m. Eastern Time. The purpose of the 
proposed rule change is to amend BATS Rules in order to allow trading 
on the Exchange during an After Hours Trading Session that will last 
from 4 to 5 p.m. Eastern Time. Thus, in addition to adding a definition 
to BATS Rule 1.5 for the ``After Hours Trading Session,'' the Exchange 
has proposed to add a reference to the After Hours Trading Session to 
Exchange Rules that address trading outside of Regular Trading Hours 
(currently only through the Pre-Opening Session). The Exchange has also 
proposed modifications to the Time-in-Force section of BATS Rule 11.9 
to indicate that a Good 'til Day Order, for which a User must indicate 
an expiration time, can last until the close of the After Hours Trading 
Session, and to add a new Time-in-Force parameter called a Good 'til 
Extended Day Order (``GTX''). As defined in proposed BATS Rule 
11.9(c)(5), a limit order with a Time-in-Force of GTX will be cancelled 
by the close of the After Hours Trading Session, if not executed 
earlier.
    Market Makers registered with the Exchange are required to satisfy 
certain obligations, including the requirement to maintain continuous 
two-sided quotations in securities in which they are registered. 
Pursuant to BATS Rule 11.8(b), a Market Maker's obligations apply 
during Regular Trading Hours on days that the Exchange is open for 
business. The Exchange has proposed language to clarify that to the 
extent a Market Maker chooses to act as a Market Maker outside of 
Regular Trading Hours, such Market Maker must comply, while its quotes 
are open, with all applicable Exchange Rules.
    Trading outside of Regular Trading Hours involves potential risks, 
including the possibility of less information regarding indicative 
values, lower liquidity, higher volatility, changing prices, unlinked 
markets with the possibility of trade-throughs, and wider spreads. 
Moreover, trades executed during extended hours sessions may receive 
executions at inferior prices when compared to the high/low of the day. 
Exchange Rule 14.1(c)(2) presently requires the Exchange to distribute 
an information circular to its Members in connection with any UTP 
Derivative Security \6\ traded on the Exchange that includes a section 
advising the Member of the risks of trading such security during the 
Pre-Opening Session. The Exchange has proposed to amend BATS Rule 14.1 
to also include reference to the After Hours Trading Session in 
paragraph (c)(2), and thus, will provide information to its Members 
regarding trading of any UTP Derivative Security during the After Hours 
Trading Session in future information circulars.
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    \6\ As defined in BATS Rule 14.1(c).
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    In addition, and in light of the risks described above, the 
Exchange has proposed adding new BATS Rule 3.21 that will require 
Exchange Members that execute trades on behalf of customers during 
either extended hours session offered by the Exchange to provide such 
customers with notice regarding the risks of trading during extended 
hours. In order to reduce additional compliance burdens with respect to 
this disclosure requirement, the Exchange has based BATS Rule 3.21 on 
the rules of other self-regulatory organizations,\7\ and thus, believes 
that many or all Exchange Members to which proposed BATS Rule 3.21 will 
apply are already required to provide such disclosures to their 
customers.
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    \7\ See, e.g., NASDAQ Rule 4631, NYSE Arca Equities Rule 
7.34(e), and ISE Rule 2102, Interpretation and Policy .04 and .05.
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    The information circular requirement applicable to the Exchange and 
the customer disclosure requirement applicable to Members, along with 
all other equity rules and trading surveillance that currently apply to 
trading on the Exchange during the Pre-Opening Session and Regular 
Trading Hours will apply to the After Hours Trading Session. As it 
currently does with trades executed during the Pre-Opening Session, the 
Exchange will designate all trades executed during the After Hours 
Trading Session appropriately when reporting such trades through any 
consolidated transaction reporting system.
    The Exchange has also proposed adding new Interpretation and Policy 
.01 to BATS Rule 14.1, which explains the circumstances under which the 
Exchange will halt trading during the Pre-Opening and After Hours 
Trading Sessions. Specifically, as permitted pursuant to the rules of 
other national securities exchanges,\8\ the Exchange may continue 
trading of a UTP Derivative Security (as defined in BATS Rule 14.1(c)) 
during the Pre-Opening Session if that security commenced trading 
during that session notwithstanding an interruption in the calculation 
or wide dissemination of the Intraday Indicative Value (``IIV'') or 
value of the underlying index, as applicable. If the IIV or value of an 
underlying index for a UTP Derivative Security is not calculated or 
available after the close of Regular Trading Hours on the Exchange, the 
Exchange will only trade that UTP Derivative Security to the extent the 
listing market traded the security until the close of its regular 
trading session without a halt. If the IIV or value of an underlying 
index for a UTP Derivative Security is still unavailable or is not 
being calculated as of the beginning of the Pre-Opening Session on the 
next business day, the Exchange will not commence trading of that 
security during the Pre-Opening Session, and will resume trading of the 
UTP Derivative Security only if the IIV or value of an underlying index 
for that UTP Derivative Security is again being calculated or widely 
disseminated, or if the listing market resumes trading.
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    \8\ See, e.g., NYSE Arca Equities Rule 7.34(a)(4); ISE Rule 
2102(e).

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[[Page 25789]]

    In addition to the proposed changes described above, the Exchange 
is proposing to make certain non-substantive changes to Interpretation 
and Policy .01 of Exchange Rule 8.15 to update and correct cross-
references to other Exchange Rules.
2. Statutory Basis
    The rule change proposed in this submission 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.\9\ Specifically, the 
proposed change is consistent with Section 6(b)(5) of the Act,\10\ 
because it would promote just and equitable principles of trade, remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system, and, in general, protect investors and 
the public interest. In particular, the proposed rule change will allow 
the Exchange to provide a competitive marketplace for Exchange Users to 
trade securities until 5 p.m. Eastern Time.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement of Burden on Competition

    The Exchange does not believe that the proposed rule change imposes 
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

    Because the foregoing rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days after the date of this filing, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\13\ 
However, Rule 19b-4(f)(6)(iii) \14\ 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 requested that the 
Commission waive the 30-day operative delay. The Commission notes that 
BATS' proposal is substantially similar to the rules of other national 
securities exchanges and does not raise any new substantive issues.\15\ 
BATS expects to have operational and technological changes in place to 
support the proposed rule change on May 26, 2009.\16\ In addition, BATS 
states that the proposal does not require significant programming 
efforts by BATS Users or other market participants that would 
necessitate a delay.\17\ Based on the foregoing, the Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest and hereby designates 
the proposal operative upon filing.\18\
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    \13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
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. The Exchange has satisfied this notice requirement.
    \14\ Id.
    \15\ See supra note 7.
    \16\ See SR-BATS-2009-012, Item 7.
    \17\ Id.
    \18\ For the purposes only of waiving the 30-day operative 
delay, the Commission has 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 such proposed rule 
change the Commission may summarily abrogate 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.

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 e-mail to rule-comments@sec.gov. Please include 
File No. SR-BATS-2009-012 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-BATS-2009-012. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of BATS. 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-BATS-2009-012 and should be 
submitted on or before June 19, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Florence E. Harmon,
Deputy Secretary.
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    \19\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-12445 Filed 5-28-09; 8:45 am]
BILLING CODE 8010-01-P


