
[Federal Register Volume 80, Number 21 (Monday, February 2, 2015)]
[Notices]
[Pages 5593-5595]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01870]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74152; File No. SR-BATS-2015-07]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rules 2.5(c)(4) and 11.5 To Harmonize With EDGA and EDGX Rules, Its 
Membership Requirements Applicable to Clearing Agencies That Clear 
Transactions for Members

January 27, 2015.
    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 January 22, 2015, 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.
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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)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend Rules 2.5(c)(4) and 11.15 to 
harmonize its membership requirements applicable to clearing agencies 
that clear transactions for Members \5\ of the Exchange with those set 
forth under EDGX Exchange, Inc. (``EDGX'') and EDGA Exchange, Inc. 
(``EDGA'') rules.\6\
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange. A 
Member will have the status of a ``member'' of the Exchange as that 
term is defined in Section 3(a)(3) of the Act. Membership may be 
granted to a sole proprietor, partnership, corporation, limited 
liability company or other organization which is a registered broker 
or dealer pursuant to Section 15 of the Act, and which has been 
approved by the Exchange.'' See Exchange Rule 1.5(n).
    \6\ See EDGA Rules 2.5(c)(4) and 11.13; EDGX Rules 2.5(c)(4) and 
11.13.
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    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
    The Exchange proposes to amend Rules 2.5(c)(4) and 11.15 to 
harmonize its membership requirements applicable to clearing agencies 
that clear transactions for Members with those set forth under EDGX and 
EDGA rules.\7\

[[Page 5594]]

Earlier this year, the Exchange and its affiliate, BATS Y-Exchange, 
Inc. (``BYX''), received approval to effect a merger (the ``Merger'') 
of the Exchange's parent company, BATS Global Markets, Inc., with 
Direct Edge Holdings LLC, the indirect parent of EDGX and EDGA 
(together with BZX, BYX and EDGX, the ``BGM Affiliated Exchanges'').\8\ 
In the context of the Merger, the BGM Affiliated Exchanges are working 
to align certain rules, retaining only intended differences between the 
BGM Affiliated Exchanges. As part of this effort, the proposal set 
forth below harmonizes Exchange Rules 2.5 and 11.15 with EDGA and EDGX 
Rules 2.5 and 11.13 by no longer requiring that a Qualified Clearing 
Agency \9\ be a Member in order to clear other Member's transactions 
executed on the Exchange.\10\
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    \7\ See supra note 6.
    \8\ See Securities Exchange Act Release No. 71375 (January 23, 
2014), 79 FR 4771 (January 29, 2014) (SR-BATS-2013-059; SR-BYX-2013-
039).
    \9\ The term ``Qualified Clearing Agency'' is defined as ``a 
clearing agency registered with the Commission pursuant to Section 
17A of the Act that is deemed qualified by the Exchange.'' See 
Exchange Rule 1.5(u).
    \10\ The Exchange understands that BYX is to file a proposed 
rule change with the Commission to adopt similar changes.
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    In sum, Rule 2.5(a)(4) currently provides that a Member also be a 
member of a Qualified Clearing Agency or clear its transactions 
executed on the Exchange through another Member that is a member of a 
Qualified Clearing Agency. Rule 11.15(a) currently requires a Qualified 
Clearing Agency be a Member of the Exchange in order to clear 
transactions on behalf of another Member. EDGA and EDGX Rules 2.5(c)(4) 
and 11.13(a) do not require that: (i) A Qualified Clearing Agency be a 
member in order to clear other member's transactions executed on EDGA 
or EDGX; (ii) that a member be a member of a Qualified Clearing Agency; 
or (iii) that a member clear its transaction through a member of a 
Qualified Clearing Agency. Rather, EDGA and EDGX Rules simply require 
that a member clear transactions through a registered clearing agency 
using a continuous net settlement system. EDGA and EDGX Rules 11.13(a) 
further state that this requirement may be satisfied by direct 
participation, use of direct clearing services, or by entering into a 
correspondent clearing arrangement with another member that clears 
trades through such agency.
    As amended, Rules 2.5(a)(4) and 11.15(a) would be substantially 
similar to EDGA and EDGX rules 2.5(c)(4) and 11.3(a). Like EDGA and 
EDGX Rules 2.5(c)(4), Exchange Rules 2.5(a)(4) would require that a 
Member clear transactions through a Qualified Clearing Agency using a 
continuous net settlement system. Like EDGA and EDGX Rules 11.13(a), 
amended Exchange Rule 11.15(a) would state that this requirement may be 
satisfied by direct participation, use of direct clearing services, or 
by entering into a correspondent clearing arrangement with another 
member that clears trades through such agency. In addition, Exchange 
Rule 11.15(a) would no longer require a Qualified Clearing Agency be a 
Member in order to clear another Members' transactions executed on the 
Exchange.
    The Exchange also proposes to add new subparagraph (b) to Rule 
11.15 stating that notwithstanding subparagraph (a) of Rule 11.15, 
transactions may be settled ``ex-clearing,'' provided that both parties 
to the transaction agree. Proposed subparagraph (b) to Rule 11.15 would 
be identical to EDGA and EDGX Rules 11.13(b). The Exchange also 
proposes to renumber the remaining subparagraphs of Rule 11.13 
accordingly.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \11\ and furthers the objectives of 
Section 6(b)(5) of the Act,\12\ in that it is designed 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 is not designed to 
permit unfair discrimination between customers, issuers, brokers or 
dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change is identical to the existing rules of EDGA 
and EDGX.\13\ Requiring Qualified Clearing Agencies to be Members of 
the Exchange has unreasonably limited the ability of Members to clear 
trades through such agencies that are not Members when no such 
restriction is contained in the rules of EDGA or EDGX. The proposed 
rule change is, therefore, intended to align the Exchange's rules 
regarding Members clearing transaction through a Qualified Clearing 
Agency with that of EDGA and EDGX as well as BYX \14\ in order to 
provide consistent rules across the BGM Affiliated Exchanges. 
Consistent rules, in turn, will simplify the membership requirements 
for clearing agencies that are also clear transactions for members of 
the other BGM Affiliated Exchanges. The proposed rule change would 
provide greater harmonization between the rules of the BGM Affiliated 
Exchanges of similar purpose, resulting in greater uniformity and less 
burdensome and more efficient regulatory compliance. As such, the 
proposed rule change would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities and would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \13\ See supra note 6.
    \14\ See supra note 10.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change would not impose any burden on 
competition. The Exchange believes that the proposed rule changes will 
not burden intramarket competition because all Members would be subject 
to the same requirements with regard to clearing transactions through 
non-Member registered clearing agencies. The proposed rule change is 
not designed to address any competitive issues but rather is designed 
to provide greater harmonization among the Exchange, BYX, EDGA and EDGX 
rules of similar purpose, resulting in less burdensome and more 
efficient regulatory compliance for common members of the BGM 
Affiliated Exchanges.

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 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 \15\ and Rule 19b-
4(f)(6)(iii) thereunder.\16\ The Exchange provided the Commission with 
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 the proposed

[[Page 5595]]

rule change as required by Rule 19b-4(f)(6).\17\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 17 CFR 240.19b-(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily 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. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.

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 rule-comments@sec.gov. Please include 
File No. SR-BATS-2015-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

    All submissions should refer to File No. SR-BATS-2015-07. 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-BATS-2015-07 and 
should be submitted on or before February 23, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-01870 Filed 1-30-15; 8:45 am]
BILLING CODE 8011-01-P


