
[Federal Register Volume 78, Number 185 (Tuesday, September 24, 2013)]
[Notices]
[Pages 58578-58580]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-23125]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70440; File No. SR-BYX-2013-032]


Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate 
References to Obsolete Functionality

September 18, 2013.
    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 12, 2013, 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 the 
Substance of the Proposed Rule Change

    The Exchange filed a proposal to eliminate reference to a Market 
Maker order functionality in Rule 11.8(e) that has now been retired by 
the Exchange.
    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
    Background
    On August 29, 2012, the Commission approved BYX's proposed rule 
change to adopt a new Market Maker Peg Order functionality that was 
designed to replace the automated functionality (commonly referred to 
as the Market Maker Quoter) provided to Market Makers in Rule 
11.8(e).\5\ The Exchange originally adopted Rule 11.8(e) as part of an 
effort to address issues uncovered by the aberrant trading that 
occurred on

[[Page 58579]]

May 6, 2010.\6\ The Market Maker Quoter functionality was designed to 
help Market Makers meet the enhanced obligations imposed on them post 
May 6, 2010 \7\ and avoid execution of Market Maker ``stub quotes'' in 
instances of aberrant trading.\8\ Although the Market Maker Quoter was 
successful in allowing Exchange Market Makers to meet their enhanced 
obligations and in avoiding the deleterious effect on the markets 
caused by ``stub quote'' executions, the functionality presented 
difficulties to Market Makers in meeting their obligations under Rule 
15c3-5 under the Act (the ``Market Access Rule'') \9\ and Regulation 
SHO.\10\
---------------------------------------------------------------------------

    \5\ Securities Exchange Act Release No. 67755 (Aug. 29, 2012), 
77 FR 54630 (Sept. 5, 2012) (SR-BYX-2012-012).
    \6\ Securities Exchange Act Release No. 63342 (Nov. 18, 2010), 
75 FR 71768 (Nov. 24, 2010) (SR-BYX-2010-001).
    \7\ Id.
    \8\ For each issue in which a market maker was registered, the 
Market Maker Quoter functionality optionally created a quotation for 
display to comply with market making obligations. Compliant 
displayed quotations were thereafter allowed to rest and were not 
adjusted unless the relationship between the quotation and its 
related national best bid or national best offer, as appropriate, 
either: (a) shrank to a specified number of percentage points away 
from the Designated Percentage towards the then current national 
best bid or national best offer, which number of percentage points 
was determined and published in a circular distributed to Members 
from time to time; or (b) expanded to within 0.5% of the applicable 
percentage necessary to trigger an individual stock trading pause, 
whereupon such bid or offer was cancelled and re-entered at the 
Designated Percentage away from the then current national best bid 
and national best offer, or if no national best bid or national best 
offer, at the Designated Percentage away from the last reported sale 
from the responsible single plan processor. Quotations independently 
entered by market makers were allowed to move freely towards the 
national best bid or national best offer, as appropriate, for 
potential execution. In the event of an execution against a quote 
generated pursuant to the Market Maker Quoter functionality, the 
Market Maker's quote was refreshed on the executed side of the 
market at the applicable Designated Percentage away from the then 
national best bid (offer), or if no national best bid (offer), the 
last reported sale. See Rule 11.8(e).
    \9\ 17 CFR 240.15c3-5.
    \10\ 17 CFR 242.200-242.204.
---------------------------------------------------------------------------

    The Exchange introduced the Market Maker Peg Order to simplify 
Market Maker compliance with the requirements of the Market Access Rule 
and Regulation SHO. The Market Maker Peg Order allows Market Makers to 
control the origination of their orders, as required by the Market 
Access Rule, while also allowing Market Makers to make marking and 
locate determinations prior to order entry, as required by Regulation 
SHO. As such, Market Makers are fully able to comply with the 
requirements of the Market Access Rule and Regulation SHO, as they 
would when placing any order, while also meeting their Exchange market 
making obligations.
Retirement of the Market Maker Quoter
    At the time of Market Maker Peg Order rule filing and in the 
subsequent filing to amend the Market Maker Peg Order, the Exchange 
noted its intention to continue offering the Market Maker Quoter 
functionality for a three-month period after the implementation of the 
Market Maker Peg Order to afford Market Makers the opportunity to 
gradually transition away from the previous functionality.\11\ 
Accordingly, the Exchange did not believe it appropriate to eliminate 
the language authorizing the Market Maker Quoter functionality 
immediately upon the Market Maker Peg Order's effectiveness. However, 
as of June 24, 2013, the Exchange decommissioned the Market Maker 
Quoter functionality pursuant to its transition plan. Thus, the 
Exchange is now proposing to delete Rule 11.8(e), which authorizes the 
functionality, and hold the rule number in reserve.>
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 67382 (July 10, 
2012), 77 FR 41842, 41843 (July 16, 2012) (SR-BYX-2012-012); 
Securities Exchange Act Release No. 69309 (Apr. 4, 2013), 78 FR 
21455 (Apr. 10, 2013) (SR-BYX-2013-011).
---------------------------------------------------------------------------

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.\12\ Specifically, the 
proposal is consistent with Section 6(b)(5) of the Act,\13\ which 
requires exchange rules to 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. The Exchange believes that the 
proposed rule change fulfills these requirements because it deletes 
reference to a functionality that is now retired, thereby eliminating 
any investor uncertainty related to the status of this functionality. 
As noted in the Exchange's Market Maker Peg Order filing, the 
transition period during which both the Market Maker Quoter 
functionality and the Market Maker Peg Order were operational was 
designed to minimize the potential market impact caused by the 
implementation of the new order type.\14\ The Exchange believes that 
deleting reference to the Market Maker Quoter functionality is now 
appropriate and in furtherance of the public interest given the passage 
of time since the Market Maker Peg Order became effective and the 
Market Maker Quoter was decommissioned.\15\


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

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ See Securities Exchange Act Release No. 67382 (July 10, 
2012), 77 FR 41842 (July 16, 2012) (SR-BYX-2012-012).
    \15\ See id.; see also Securities Exchange Act Release No. 69309 
(Apr. 4, 2013), 78 FR 21455 (Apr. 10, 2013) (SR-BYX-2013-011).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    BYX believes the proposal is consistent with Section 6(b)(8) of the 
Act \16\ in that it does not impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act. 
The proposed rule change will remove reference to a functionality that 
has already been retired. Moreover, given the fact that the Market 
Maker Quoter's replacement, the Market Maker Peg Order, has been 
effective and operational for many months, the Exchange does not 
believe removing reference to the retired functionality will have any 
impact on the current competitive environment.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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 \17\ and Rule 19b-4(f)(6) thereunder.\18\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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 requirement.
---------------------------------------------------------------------------

    The Exchange has requested that the Commission waive the 30-day 
operative delay so that the proposal may become operative immediately 
upon filing. The Exchange states that waiver of the operative delay 
will allow the Exchange to quickly remove language in its rules that is 
not supported by any

[[Page 58580]]

functionality on the Exchange. The Commission believes that waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest, as doing so will allow the Exchange's rule 
text to reflect the its existing functionality, thereby helping to 
avoid any potential investor confusion. For this reason, the Commission 
designates the proposed rule change to be operative upon filing.\19\
---------------------------------------------------------------------------

    \19\ 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).
---------------------------------------------------------------------------

    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-2013-032 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-2013-032. 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 on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
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-2013-032, and should be submitted on or before 
October 15, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-23125 Filed 9-23-13; 8:45 am]
BILLING CODE 8011-01-P


