
[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60973-60975]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24004]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70513; File No. SR-BATS-2013-053]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to the 
Clearly Erroneous Execution Rule

September 26, 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 24, 2013, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') 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 extend a pilot program related to 
Rule 11.17, entitled ``Clearly Erroneous Executions.'' The Exchange 
also proposes to remove certain references to individual stock trading 
pauses contained in Rule 11.17(c)(4). The Exchange has designated this 
proposal as non-controversial and provided the Commission with the 
notice required by Rule 19b-4(f)(6)(iii) under the Act.\5\
---------------------------------------------------------------------------

    \5\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    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 purpose of this filing is to extend the effectiveness of the 
Exchange's current rule applicable to Clearly Erroneous Executions and 
to remove references to individual stock trading pauses described in 
Rule 11.17(c)(4).
    Portions of Rule 11.17, explained in further detail below, are 
currently operating as a pilot program set to expire on September 30, 
2013.\6\ The Exchange proposes to extend the pilot program to April 8, 
2014.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 68797 (Jan. 31, 
2013), 78 FR 8635 (Feb. 6, 2013) (SR-BATS-2013-008).
---------------------------------------------------------------------------

    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to BATS Rule 11.17 to provide for uniform treatment: (1) Of 
clearly erroneous execution reviews in multi-stock events involving 
twenty or more securities; and (2) in the event transactions occur that 
result in the issuance of an individual stock trading pause by the 
primary listing market and subsequent transactions that occur before 
the trading pause is in effect on the Exchange.\7\ The Exchange also 
adopted additional changes to Rule 11.17 that reduced the ability of 
the Exchange to deviate from the objective standards set forth in Rule 
11.17,\8\ and in 2013, adopted a provision designed to address the 
operation of the Plan to Address Extraordinary Market Volatility 
Pursuant to Rule 608 of Regulation NMS under the Act (the ``Limit Up-
Limit Down Plan'' or the ``Plan'').\9\ The Exchange believes the 
benefits to market participants from the more objective clearly 
erroneous executions rule should continue on a pilot basis through 
April 8, 2014, which is one year following the commencement of 
operations of the Plan. The Exchange believes that continuing the pilot 
during this time will protect against any unanticipated consequences. 
Thus, the Exchange believes that the protections of the Clearly 
Erroneous Rule should continue while the industry gains further 
experience operating the Limit Up-Limit Down Plan.
---------------------------------------------------------------------------

    \7\ Securities Exchange Act Release No. 62886 (Sept. 10, 2010), 
75 FR 56613 (Sept. 16, 2010) (SR-BATS-2010-016).
    \8\ Id.
    \9\ See Securities Exchange Act Release No. 68797 (Jan. 31, 
2013), 78 FR 8635 (Feb. 6, 2013) (SR-BATS-2013-008); Securities 
Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 
2012) (the ``Limit Up-Limit Down Release''); see also BATS Rule 
11.17(h).
---------------------------------------------------------------------------

    The Exchange also proposes to eliminate all references in Rule 
11.17 to individual stock trading pauses issued by a primary listing 
market. Specifically, Rule 11.17(c)(4) provides specific rules to 
follow with respect to review of an execution as potentially clearly 
erroneous when there was an individual stock trading pause issued for 
that security and the security is included in the S&P 500[supreg] 
Index, the Russell 1000[supreg] Index, or a pilot list of Exchange 
Traded Products (``Subject Securities''). The stock trading pauses 
described in Rule 11.17(c)(4) are being phased out as securities become 
subject

[[Page 60974]]

to the Plan pursuant to a phased implementation schedule. The Plan is 
already operational with respect to all Subject Securities, and thus, 
the Exchange believes that all references to individual stock trading 
pauses should be removed, including all cross-references to Rule 
11.17(c)(4) contained in other portions of Rule 11.17.\10\
---------------------------------------------------------------------------

    \10\ The Exchange notes that certain Exchange Traded Products 
(``ETPs'') are not yet subject to the Limit Up-Limit Down Plan. 
Because such ETPs are not on the pilot list of securities, such ETPs 
are not subject to Rule 11.17(c)(4). See Securities Exchange Act 
Release No. 65113 (August 11, 2011), 76 FR 51089 (August 17, 2011) 
(SR-BATS-2011-028) (notice of filing and immediate effectiveness to 
define Subject Securities and to limit application of Rule 
11.17(c)(4) to such securities). Accordingly, the proposed rule 
change does not change the status quo with respect to such ETPs. As 
amended, all securities, including ETPs not subject to the Limit Up-
Limit Down Plan, will continue to be subject to Rule 11.17(c)(1) 
through (3).
---------------------------------------------------------------------------

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.\11\ In particular, 
the proposal is consistent with Section 6(b)(5) of the Act, \12\ 
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. The Exchange believes that the pilot 
program promotes just and equitable principles of trade in that it 
promotes transparency and uniformity across markets concerning review 
of transactions as clearly erroneous. More specifically, the Exchange 
believes that the extension of the pilot would help assure that the 
determination of whether a clearly erroneous trade has occurred will be 
based on clear and objective criteria, and that the resolution of the 
incident will occur promptly through a transparent process. The 
proposed rule change would also help assure consistent results in 
handling erroneous trades across the U.S. markets, thus furthering fair 
and orderly markets, the protection of investors and the public 
interest. Although the Limit Up-Limit Down Plan will become fully 
operational during the same time period as the proposed extended pilot, 
the Exchange believes that maintaining the pilot will help to protect 
against unanticipated consequences. To that end, the extension will 
allow the Exchange to determine whether Rule 11.17 is necessary once 
the Plan is fully operational and, if so, whether improvements can be 
made. Finally, the elimination of references to individual stock 
trading pauses will help to avoid confusion amongst market 
participants, which is consistent with the protection of investors and 
the public interest and therefore consistent with the Act. As described 
above, individual stock trading pauses have been replaced by the Limit 
Up-Limit Down Plan with respect to all Subject Securities.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 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 
implicates any competitive issues. To the contrary, the Exchange 
believes that the Financial Industry Regulatory Authority (``FINRA'') 
and other national securities exchanges are also filing similar 
proposals, and thus, that the proposal will help to ensure consistency 
across market centers.

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 if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6)(iii). 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.
---------------------------------------------------------------------------

    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest, 
as it will allow the pilot program to continue uninterrupted, thereby 
avoiding investor confusion that could result from a temporary 
interruption in the pilot program. For this reason, the Commission 
designates the proposed rule change to be operative upon filing.\15\
---------------------------------------------------------------------------

    \15\ 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).
---------------------------------------------------------------------------

    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-BATS-2013-053 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-BATS-2013-053. 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 at 100 F Street, 
NE., Washington, DC 20549-1090 on official

[[Page 60975]]

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-BATS-2013-053, and should be submitted on or before 
October 23, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24004 Filed 10-1-13; 8:45 am]
BILLING CODE 8011-01-P


