
[Federal Register Volume 77, Number 161 (Monday, August 20, 2012)]
[Notices]
[Pages 50193-50198]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-20319]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67656; File No. SR-BYX-2012-018]


Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change by BATS Y-
Exchange, Inc. To Amend BYX Rules Related to Price Sliding 
Functionality

August 14, 2012.
    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 3, 2012, BATS Y-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)(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 proposes to amend Rule 11.9, entitled ``Orders and 
Modifiers'' to modify the operation of the Exchange's price sliding 
functionality described in Rule 11.9. The Exchange also proposes other 
minor changes, including changes to the terms used to describe price 
sliding and a cross-reference contained in Rule 11.13.

[[Page 50194]]

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
    The Exchange currently offers various forms of sliding which, in 
all cases, result in the re-pricing of an order to, or ranking and/or 
display of an order at, a price other than an order's limit price in 
order to comply with applicable securities laws and/or Exchange rules. 
Specifically, the Exchange currently offers price sliding to ensure 
compliance with Regulation NMS and Regulation SHO. Price sliding 
currently offered by the Exchange re-prices and displays an order upon 
entry and in certain cases again re-prices and re-displays an order at 
a more aggressive price one time if and when permissible, but does not 
continually re-price an order based on changes in the national best bid 
(``NBB'') or national best offer (``NBO'', and together with the NBB, 
the ``NBBO''). The Exchange proposes to modify both forms of price 
sliding in order to create an optional order handling behavior 
functionality that will continue to re-price, re-rank and/or re-display 
an order based on changes to the NBBO (``multiple price sliding''), as 
further described below. Multiple price sliding in the contexts for 
which it is being proposed will have to be elected by a User \5\ in 
order to be applied by the Exchange. If a User elects to apply multiple 
price sliding to an order submitted to the Exchange, multiple price 
sliding will apply with respect to both display-price sliding and short 
sale price sliding in connection with the handling of the order by the 
Exchange. The Exchange also proposes to add language to make clear that 
display-price sliding is based on Protected Quotations \6\ at equities 
exchanges other than the Exchange. If the Exchange has a Protected 
Quotation that an incoming order to the Exchange locks or crosses then 
such order either executes against the resting order, or, if the 
incoming order is a BATS Post Only Order or Partial Post Only at Limit 
Order, such order is executed in accordance with Rules 11.9(c)(6) and 
(c)(7), respectively, or cancelled back to the entering User, as 
described in further detail below.
---------------------------------------------------------------------------

    \5\ As defined in BYX Rule 1.5(cc), a User is ``any Member or 
Sponsored Participant who is authorized to obtain access to the 
System pursuant to Rule 11.3.''
    \6\ As defined in BYX Rule 1.5(t), a ``Protected Quotation'' is 
``a quotation that is a Protected Bid or Protected Offer.'' In turn, 
the term ``Protected Bid'' or ``Protected Offer'' means ``a bid or 
offer in a stock that is (i) displayed by an automated trading 
center; (ii) disseminated pursuant to an effective national market 
system plan; and (iii) an automated quotation that is the best bid 
or best offer of a national securities exchange or association.''
---------------------------------------------------------------------------

Display-Price Sliding
    With respect to price sliding offered to ensure compliance with 
Regulation NMS (``display-price sliding''),\7\ under the Exchange's 
current rules, if, at the time of entry, a non-routable order would 
cross a Protected Quotation displayed by another trading center the 
Exchange re-prices and ranks such order at the locking price, and 
displays such order at one minimum price variation below the NBO for 
bids and above the NBB for offers. Similarly, in the event a non-
routable order that, at the time of entry, would lock a Protected 
Quotation displayed by another trading center, the Exchange displays 
such order at one minimum price variation below the NBO for bids and 
above the NBB for offers.
---------------------------------------------------------------------------

    \7\ The Exchange's Rules currently describe this functionality 
as ``NMS price sliding'' but the Exchange proposes to rename such 
functionality ``display-price sliding.''
---------------------------------------------------------------------------

    As an example of display-price sliding, assume the Exchange has a 
posted and displayed bid to buy 100 shares of a security priced at 
$10.10 per share and a posted and displayed offer to sell 100 shares at 
$10.13 per share. Assume the NBBO is $10.10 by $10.12. If the Exchange 
receives a non-routable bid to buy 100 shares at $10.12 per share the 
Exchange will rank the order to buy at $10.12 and display the order at 
$10.11 because displaying the bid at $10.12 would lock an external 
market's Protected Offer to sell for $10.12. If the NBO then moved to 
$10.13, the Exchange would un-slide the bid to buy and display it at 
its ranked price (and limit price) of $10.12.
    The Exchange proposes to modify the description of price sliding to 
make clear that price sliding is generally applied to orders that are 
eligible for display, as such orders would violate Rule 610(d) of 
Regulation NMS if they were displayed by the Exchange at a price that 
locked or crossed a Protected Quotation. As described in further detail 
below, certain price sliding is also applied to Non-Displayed Orders, 
and the Exchange has proposed certain changes intended to clarify the 
application of such price sliding.
    The Exchange currently permits Users to instruct the Exchange not 
to apply price sliding functionality to their orders. As one variation 
of this instruction, the Exchange currently allows Users to elect to 
apply display-price sliding only to the extent a display-eligible order 
at the time of entry would create a violation of Rule 610(d) of 
Regulation NMS by locking a Protected Quotation of an external market 
(``lock-only display-price sliding''). For Users that select this order 
handling, price sliding is not applied and any display-eligible order 
is instead cancelled if, upon entry, such order would create a 
violation of Rule 610(d) of Regulation NMS by crossing a Protected 
Quotation of an external market. The lock-only display-price sliding 
option is a variation of display-price sliding that is intended to 
allow Users to re-evaluate their orders and/or strategies in the event 
they are submitting orders to the Exchange that are crossing the 
market. Consistent with the goal of increasing the clarity of its price 
sliding rule, the Exchange proposes to modify its description of 
display-price sliding to clearly define the lock-only display-price 
sliding option.
    As an example of lock-only display-price sliding, assume the 
Exchange has a posted and displayed bid to buy 100 shares of a security 
priced at $10.10 per share and a posted and displayed offer to sell 100 
shares at $10.14 per share. Assume the NBBO is $10.10 by $10.12. If the 
Exchange receives a non-routable bid to buy 100 shares at $10.13 per 
share and the User has elected lock-only display-price sliding, the 
Exchange will cancel the order back to the User. To reiterate a basic 
example of display-price sliding, if instead the User applied display-
price sliding (and not lock-only display-price sliding), the Exchange 
would rank the order to buy at $10.12 and display the order at $10.11 
because displaying the bid at $10.13 would cross an external market's 
Protected Offer to sell for $10.12. If the NBO then moved to $10.13, 
the Exchange would un-slide the bid to buy and display it at $10.12.
    The Exchange proposes to modify the description of display-price 
sliding so that any order subject to display-price sliding will retain 
its original limit price irrespective of the prices at which such

[[Page 50195]]

order is ranked and displayed. Accordingly, the Exchange also proposes 
to clarify language throughout its descriptions of display-price 
sliding to refer to the ranking and display of an order rather than 
using the term re-price. In order to ensure compliance with Regulation 
NMS, as it does today, the Exchange will rank orders subject to 
display-price sliding at the locking price and will display such orders 
at one minimum price variation below the current NBO (for bids) or to 
one minimum price variation above the current NBB (for offers).
    The Exchange also proposes to amend its existing description of 
display-price sliding to state that when an order is displayed by the 
Exchange through the display-price sliding process the Exchange will 
display such order at the most aggressive permissible price. The 
Exchange's current description of display-price sliding states that 
orders that are re-displayed by the Exchange receive new timestamps 
when this new display price is established. The Exchange proposes to 
retain this language but also to make clear that all orders that are 
re-ranked and re-displayed pursuant to display-price sliding will 
retain their priority as compared to other orders subject to display-
price sliding based upon the time such orders were initially received 
by the Exchange. Finally, the proposed description of price sliding 
also states that following the initial ranking and display of an order 
subject to display-price sliding, an order will only be re-ranked and 
re-displayed to the extent it achieves a more aggressive price.
    In order to offer multiple price sliding to Exchange Users, the 
Exchange proposes to make clear that the ranked and displayed prices of 
an order subject to display-price sliding may be adjusted once or 
multiple times depending upon the instructions of a User and changes to 
the prevailing NBBO. As noted above, multiple price sliding is optional 
and must be explicitly selected by a User before it will be applied. 
The Exchange proposes to make clear that the default display-price 
sliding process will only adjust the ranked and displayed prices of an 
order upon entry and then the displayed price one time following a 
change to the prevailing NBBO. As explained throughout this filing, 
orders subject to multiple price sliding will be permitted to move all 
the way back to their most aggressive price, whereas orders subject to 
the current handling may not be adjusted to their most aggressive 
price, depending upon market conditions.
    As an example of multiple price sliding, assume the Exchange has a 
posted and displayed bid to buy 100 shares of a security priced at 
$10.10 per share and a posted and displayed offer to sell 100 shares at 
$10.14 per share. Assume the NBBO is $10.10 by $10.12. If the Exchange 
receives a non-routable bid to buy 100 shares at $10.13 per share, the 
Exchange would rank the order to buy at $10.12 and display the order at 
$10.11 because displaying the bid at $10.13 would cross an external 
market's Protected Offer to sell for $10.12. If the NBO then moved to 
$10.13, the Exchange would un-slide the bid to buy, rank it at $10.13 
and display it at $10.12. Under current price sliding functionality, 
the Exchange would not further adjust the ranked or displayed price 
following this un-slide. However, under multiple price sliding, if the 
NBO then moved to $10.14, the Exchange would un-slide the bid to buy 
and display it at its full limit price of $10.13.
    The Exchange offers display-price sliding functionality to avoid 
locking or crossing other markets' Protected Quotations, but does not 
price slide to avoid executions on the Exchange's order book (``BATS 
Book'').\8\ Specifically, when the Exchange receives an incoming order 
that could execute against resting displayed liquidity but an execution 
does not occur because such incoming order is designated as an order 
that will not remove liquidity (i.e., a BATS Post Only Order),\9\ then 
the Exchange will cancel the incoming order. The Exchange proposes to 
make clear in the description of display-price sliding that any 
display-eligible BATS Post Only Order that locks or crosses a Protected 
Quotation displayed by the Exchange upon entry will not be price slid 
upon entry but will be executed as set forth in Rule 11.9(c)(6) or 
cancelled. Similarly, the Exchange proposes to make clear that any 
display-eligible Partial Post Only at Limit Order that locks or crosses 
a Protected Quotation displayed by the Exchange upon entry will be 
executed as set forth in Rule 11.9(c)(7) or cancelled. The Exchange 
also proposes to make clear that any display-eligible BATS Post Only 
Order or Partial Post Only at Limit Order that locks or crosses a 
Protected Quotation displayed by an external market upon entry will be 
subject to the display-price sliding process. Consistent with the 
principal of not price sliding to avoid executions, in the event the 
NBBO changes such that a BATS Post Only Order subject to display-price 
sliding would un-slide and would be ranked at a price at which it could 
remove displayed liquidity from the BATS Book (i.e., when the Exchange 
is at the NBB or NBO) the Exchange proposes to execute \10\ or cancel 
such order.
---------------------------------------------------------------------------

    \8\ The Exchange notes that it inadvertently constructed an 
example in a previous rule filing that contradicts this statement. 
Specifically, in Example 5 of SR-BYX-2011-009, in order to establish 
the possibility of an order that has been price slid and has a 
working price ranked at the same price as an order displayed by the 
Exchange on the opposite side of the market, the Exchange explained 
that an incoming BATS Post Only bid at $10.11 would price slide if 
it locked an offer displayed by the Exchange at $10.11. See 
Securities Exchange Act Release No. 64476 (May 12, 2011), 76 FR 
28826, 28828 (May 18, 2011) (SR-BYX-2011-009) (the ``Order Handling 
Filing''). However, at the time of the Order Handling Filing, under 
the current behavior, and as proposed, the Exchange would not price 
slide a BATS Post Only order to avoid an execution against an order 
displayed by the Exchange. The Exchange notes that Example 5 from 
the Order Handling Filing would be accurate if instead the incoming 
bid at $10.11 locked a protected offer displayed by an external 
market and not also displayed by the Exchange, was price slid and 
displayed at $10.10, ranked at $10.11, and BATS subsequently 
received a BATS Post Only offer at $10.11. In other words, the 
outcome would be the same as set forth in Example 5, insofar as the 
price slid order could ultimately have a ranked price that locks the 
contra-side, however the sequence leading up to that outcome neither 
is nor was possible as described because the Exchange does not price 
slide to avoid executions against the BATS Book.
    \9\ The Exchange notes that it recently proposed and implemented 
a change to Rule 11.9(c)(6) regarding the Exchange's handling of 
BATS Post Only Orders to permit such orders to remove liquidity from 
the BATS Book if the value of price improvement associated with such 
execution equals or exceeds the sum of fees charged for such 
execution and the value of any rebate that would be provided if the 
order posted to the BATS Book and subsequently provided liquidity. 
See Securities Exchange Act Release No. 67092 (June 1, 2012), 77 FR 
33800 (June 7, 2012) (SR-BYX-2012-009).
    \10\ As noted above, the Exchange will execute a BATS Post Only 
Order in certain circumstances where it would receive price 
improvement. See id.
---------------------------------------------------------------------------

    The Exchange previously proposed changes to its existing order 
handling procedures to permit BATS Post Only Orders to be posted to the 
BATS Book to join the NBB or NBO, as applicable, even when such orders 
would be posted at prices equal to opposite-side orders ranked at the 
same price.\11\ Consistent with this previously adopted change, the 
Exchange proposes to add language stating that BATS Post Only Orders 
will be permitted to post and be displayed opposite the ranked price of 
orders subject to display-price sliding. As is the case today, in the 
event an order subject to display-price sliding is ranked on the BATS 
Book with a price equal to an opposite side order displayed by the 
Exchange, it will be subject to processing as set forth in Rule 
11.13(a)(1).
---------------------------------------------------------------------------

    \11\ See Order Handling Filing, supra note 8.
---------------------------------------------------------------------------

    As an example of the Exchange's handling of BATS Post Only Orders 
in the context of price sliding, assume the Exchange has a posted and 
displayed

[[Page 50196]]

bid to buy 100 shares of a security priced at $10.10 per share and a 
posted and displayed offer to sell 100 shares at $10.12 per share. 
Assume the NBBO (including Protected Quotations of other external 
markets) is also $10.10 by $10.12. If the Exchange receives a BATS Post 
Only Order bid to buy 100 shares at $10.12 per share, unless executed 
pursuant to Rule 11.9(c)(6),\12\ the Exchange would cancel the order 
back to the User because absent the BATS Post Only designation the 
$10.12 bid would be able to remove the $10.12 offer, and, as explained 
above, the Exchange does not offer price sliding to avoid executions 
against orders displayed by the Exchange.
---------------------------------------------------------------------------

    \12\ See supra note 9.
---------------------------------------------------------------------------

    If the Exchange did not have a displayed offer to sell at $10.12 in 
the example above, but instead the best offer on the Exchange's book 
was $10.13, the Exchange would apply price sliding to the incoming bid 
by ranking such order at $10.12 and displaying the order at $10.11. The 
Exchange's order book would now be displayed as $10.11 by $10.13. 
Assume, however, that after price sliding the incoming bid from $10.12 
to a display price of $10.11, the Exchange received a BATS Post Only 
offer to sell for $10.12, thus joining the NBO. As noted above, 
pursuant to previously adopted changes, BATS Post Only Orders are 
permitted to post and be displayed opposite the ranked price of orders 
subject to display-price sliding. Accordingly, the Exchange would allow 
such the incoming BATS Post Only offer at $10.12 to post and display on 
the Exchange's order book, as described above, with an opposite side 
price slid order ranked at $10.12 but displayed at $10.11. Assume that 
next the Protected Offers displayed by all external markets other than 
the Exchange moved to $10.13. In this situation the Exchange would un-
slide but then cancel the bid at $10.12 because, as proposed, in the 
event the NBBO changes such that a BATS Post Only Order subject to 
display-price sliding would un-slide and would be ranked at a price at 
which it could remove displayed liquidity from the BATS Book (i.e., 
when the Exchange is at the NBB or NBO) the Exchange proposes to 
execute \13\ or cancel such order.
---------------------------------------------------------------------------

    \13\ As noted above, the Exchange will execute a BATS Post Only 
Order in certain circumstances where it would receive price 
improvement. See supra note 9.
---------------------------------------------------------------------------

    The Exchange currently applies display-price sliding to Non-
Displayed Orders that cross Protected Quotations of external markets as 
well. The Exchange proposes language that makes clear that this 
functionality is offered both upon entry and once an order has been 
posted to the Exchange's order book in order to avoid potentially 
trading through Protected Quotations of external markets. The proposed 
rule states that Non-Displayed Orders that are subject to display-price 
sliding are ranked at the locking price on entry. The proposed 
description also makes clear that display-price sliding for Non-
Displayed Orders is functionally equivalent to the handling of 
displayable orders except that such orders will not have a displayed 
price and will not be re-priced again unless such orders cross a 
Protected Quotation of an external market (i.e., such orders are not 
unslid).
    As an example of the Exchange's handling of Non-Displayed Orders in 
the context of price sliding, assume the Exchange has a posted and 
displayed bid to buy 100 shares of a security priced at $10.10 per 
share and a posted and displayed offer to sell 100 shares at $10.13 per 
share. Assume the NBBO is $10.10 by $10.11. If the Exchange receives a 
Non-Displayed Order bid to buy 100 shares at $10.12 per share, the 
Exchange would re-price the order to a $10.11 bid to buy to avoid 
potentially trading through the $10.11 offer displayed as the NBO 
(i.e., to ensure the Exchange will not allow the bid to trade at $10.12 
per share). In the event the NBBO moved to $10.09 by $10.10, the 
Exchange would again re-price the Non-Displayed bid to buy 100 shares 
to $10.10 per share. If the NBBO then moved to $10.10 by $10.11, the 
Non-Displayed bid would not be re-priced to $10.11, but would remain on 
the Exchange's order book at $10.10.
    As described above, the Exchange has proposed to offer multiple 
price sliding to Exchange Users that opt-in to the functionality. The 
remaining changes described above are intended to clarify and expand 
upon the written description of display-price sliding, but do not 
represent changes to the existing functionality offered by the 
Exchange. Consistent with achieving better clarity, the Exchange has 
proposed structural changes to the description of display-price sliding 
by separating the description into several sub-paragraphs.
Short Sale Price Sliding
    With respect to price sliding offered to ensure compliance with 
Regulation SHO (``short sale price sliding''), when an order cannot be 
executed or displayed in compliance with Rule 201 of Regulation 
SHO,\14\ the Exchange currently re-prices short sale orders to one 
minimum price variation above the current NBB (``Permitted Price''). In 
order to describe this re-pricing, the Exchange proposes to add the 
term ``Permitted Price'' to its description of short sale price 
sliding. In order to offer multiple price sliding in the short sale 
price sliding context, the Exchange proposes to amend its rules to 
state that depending upon the instructions of a User, to reflect 
declines in the NBB the System will continue to re-price a short sale 
order at the Permitted Price down to the order's original limit price. 
Accordingly, short sale orders subject to multiple price sliding that 
are adjusted to lower price levels due to a decline to the NBB will be 
priced at one minimum price variation above the current NBB. As is true 
for display-price sliding, multiple price sliding is optional and must 
be explicitly selected by a User before it will be applied. The 
Exchange's default short sale sliding process will only re-price an 
order upon entry. Accordingly, there will be no change to existing 
Users of short sale price sliding due to the proposed introduction of 
multiple price sliding unless such Users opt-in to the functionality.
---------------------------------------------------------------------------

    \14\ 17 CFR 242.201.
---------------------------------------------------------------------------

    As an example of the Exchange's current short sale price sliding, 
which adjusts the price of an order only upon entry, assume the 
Exchange has a posted and displayed bid to buy 100 shares of a security 
priced at $10.10 per share and a posted and displayed offer to sell 100 
shares at $10.13 per share.\15\ Assume the NBBO is $10.10 by $10.12. If 
the Exchange receives a non-routable offer to sell 100 shares at $10.10 
per share and the order is marked ``short'' the Exchange will rank and 
display the order to sell at $10.11 because executing the short sale at 
$10.10, the NBB, would be in contravention of Regulation SHO. The 
result would be the same if the Exchange had no bids at $10.10 because 
the Exchange cannot display an order marked ``short'' at the current 
NBB (such display would also lock the protected quote of an external 
market). If the NBB then moved to $10.09, under existing handling, the 
Exchange would not re-price or re-display the order, but instead would 
leave it as a displayed offer to sell 100 shares at $10.11. Under 
multiple price sliding, however, the Exchange would re-price and 
display the offer at $10.10 if the NBB moved to $10.09. If, in the 
example above, the NBB instead moved upwards to $10.11, the Exchange 
would not re-price or

[[Page 50197]]

restrict execution of the resting $10.11 offer under either type of 
short sale price sliding. The Exchange notes that if this were the 
case, its quotation would be locked.
---------------------------------------------------------------------------

    \15\ For purposes of these examples, Rule 201's short sale price 
test is assumed to be in effect for the security at the time.
---------------------------------------------------------------------------

    In addition to changes to the description of short sale price 
sliding to add the option of multiple price sliding, the Exchange 
proposes various changes to improve the accuracy and the clarity of the 
description of short sale price sliding. For instance, the Exchange 
proposes to make clear that when a short sale price test restriction 
under Rule 201 of Regulation SHO is in effect, the System may execute a 
displayed short sale order at a price below the Permitted Price if, at 
the time of initial display of the short sale order, the order was at a 
price above the then current NBB. The Exchange also proposes to make 
clear that orders marked ``short exempt'' will not be subject to short 
sale price sliding.
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.\16\ Specifically, the 
proposed change is consistent with Section 6(b)(5) of the Act,\17\ 
because 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes to price sliding 
are consistent with Section 6(b)(5) of the Act,\18\ as well as Rule 610 
of Regulation NMS \19\ and Rule 201 of Regulation SHO.\20\ The Exchange 
is not modifying the overall functionality of price sliding, which, to 
avoid locking or crossing quotations of other market centers or to 
comply with applicable short sale restrictions, displays orders at 
permissible prices while retaining a price at which the User is willing 
to buy or sell, in the event display at such price or an execution at 
such price becomes possible. Instead, the Exchange is making changes to 
adopt an optional form of price sliding, multiple price sliding, and to 
clarify portions of its Rules that describe price sliding.
---------------------------------------------------------------------------

    \18\ Id.
    \19\ 17 CFR 242.610.
    \20\ 17 CFR 242.201.
---------------------------------------------------------------------------

    Rule 610(d) requires exchanges to establish, maintain, and enforce 
rules that require members reasonably to avoid ``[d]isplaying 
quotations that lock or cross any protected quotation in an NMS 
stock.'' \21\ Such rules must be ``reasonably designed to assure the 
reconciliation of locked or crossed quotations in an NMS stock,'' and 
must ``prohibit * * * members from engaging in a pattern or practice of 
displaying quotations that lock or cross any quotation in an NMS 
stock.'' \22\ Thus, display-price sliding offered by the Exchange, 
assists Users by displaying orders at permissible prices. Similarly, 
Rule 201 of Regulation SHO \23\ requires trading centers to establish, 
maintain, and enforce written policies and procedures reasonably 
designed to prevent the execution or display of a short sale order at a 
price at or below the current NBB under certain circumstances. The 
Exchange's short sale price sliding will continue to operate consistent 
with this rule, however, if a User opts-in to multiple price sliding, 
the Exchange will re-price a short sale order based on declines to the 
NBB. If, instead, a User maintains the default form of price sliding, 
the Exchange will only re-price and display an order subject to short 
sale price sliding upon entry but will not update the order to reflect 
declines to the NBB. The Exchange notes that the proposed descriptions 
of price sliding will also more closely mirror the description used by 
at least one of its competitors, the Nasdaq Stock Market LLC 
(``Nasdaq''), and thus will help to avoid confusion amongst Exchange 
Users that also utilize analogous functionality at Nasdaq.
---------------------------------------------------------------------------

    \21\ 17 CFR 242.610(d).
    \22\ Id.
    \23\ 17 CFR 242.201.
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on 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 Changes and Timing for 
Commission Action

    Because the foregoing 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 \24\ and Rule 19b-
4(f)(6)(iii) thereunder.\25\
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 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.
---------------------------------------------------------------------------

    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.

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 rule-comments@sec.gov. Please include 
File Number SR-BYX-2012-018 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 Number SR-BYX-2012-018. 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

[[Page 50198]]

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 Number SR-BYX-2012-018 and should be 
submitted on or before September 10, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-20319 Filed 8-17-12; 8:45 am]
BILLING CODE 8011-01-P


