
[Federal Register Volume 80, Number 73 (Thursday, April 16, 2015)]
[Notices]
[Pages 20544-20548]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-08696]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74702; File No. SR-BATS-2015-31]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Amend 
Rule 11.23, ``Auctions''

April 10, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 1, 2015, BATS Exchange, Inc. (the ``Exchange'' or ``BATS'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``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) 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 filed a proposal to amend Rule 11.23, entitled 
``Auctions.''
    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 make several changes to Rule 11.23 in 
order to improve the Exchange auction process. Specifically, the 
Exchange is proposing to make several minor changes to Rule 11.23, 
which include: (i) To eliminate from each of the Opening Auction, 
Closing Auction, IPO and Halt Auction, and Volatility Closing Auction 
the language stating that an auction will occur at the price of the 
Volume Based Tie Breaker (or ``VBTB''),\5\ Final Last Sale Eligible 
Trade,\6\ or issuing price, as applicable, where no limit orders from 
one or both sides would participate in the auction; (ii) to amend the 
definition of Volume Based Tie Breaker; (iii) to amend the definition 
of Reference Price Range; \7\ (iv) to amend the definition of Late-
Limit-On-Close \8\ (``LLOC'') and Late-Limit-On-Open \9\ (``LLOO''); 
and (v) to make a non-substantive change to delete the definitions of 
ZBB,\10\ ZBO,\11\ and ZBBO.\12\
---------------------------------------------------------------------------

    \5\ As defined in BATS Rule 11.23(a)(23).
    \6\ As defined in BATS Rule 11.23(a)(9).
    \7\ As defined in BATS Rule 11.23(a)(20).
    \8\ As defined in BATS Rule 11.23(a)(11).
    \9\ As defined in BATS Rule 11.23(a)(12).
    \10\ As defined in BATS Rule 11.23(a)(24).
    \11\ Id.
    \12\ Id.
---------------------------------------------------------------------------

Limit Order Participation
    Currently, each of Rules 11.23(b)(2)(B), (c)(2)(B), (d)(2)(C), and 
(e)(2)(B) contain language that provides an alternate price at which an 
auction will occur where no limit orders from one or both sides (the 
buy side, the sell side, or both the buy and sell side) would otherwise 
participate in an auction (an ``Alternate Price''). For Opening and 
Closing Auctions the Alternate Price is the Volume Based Tie Breaker; 
for Halt and Volatility Closing Auctions the Alternate Price is the 
Final Last Sale Eligible Trade; and for IPO Auctions the Alternate 
Price is the issuing price. While the Exchange added the Alternate 
Price requirement in order to ensure that, for auctions with minimal 
liquidity, either limit orders were participating in the auction and 
would aid in price discovery or that the auction would occur at a pre-
determined price, this protection has,

[[Page 20545]]

based on analysis by the Exchange and feedback from issuers and market 
participants, resulted in orders not receiving executions in auctions 
that would have otherwise occurred at prices that would have been 
acceptable to both parties to the execution that did not occur. To 
illustrate this point, the Exchange presents the following example: At 
the time that an Opening Auction is occurring, there is no ZBBO and the 
NBBO is $9.90 x $10.10. In this situation, the Volume Based Tie Breaker 
would be the midpoint of the NBBO,\13\ which would be $10.00.\14\ Based 
on a Volume Based Tie Breaker of $10.00, the Collar Price Range \15\ 
would be $9.00 to $11.00 (the range from 0.90*VBTB to 1.10*VBTB). In 
this example, there are only two orders on the Auction Book \16\ for 
the security: A Limit-On-Open\17\ buy order for 100 shares with a limit 
price of $9.99 and a Market-On-Open \18\ sell order for 100 shares. 
Without the requirement that the auction occur at the Alternate Price 
where a limit order from both sides does not participate in the 
auction, there would have been an execution of 100 shares in the 
Opening Auction at $9.99.\19\ However, because there would be no limit 
orders on the sell side that would participate in the Opening Auction, 
under current functionality the Opening Auction would be forced to 
occur at the Volume Based Tie Breaker, which is $10.00. However, 
because the limit price of the Limit-On-Open buy order is $9.99, no 
execution will occur, both orders will be cancelled, and trading will 
transition into Regular Trading Hours.\20\ This example is identical to 
how a Closing Auction would occur and is nearly identical to examples 
of how the Alternate Price could affect other auctions.
---------------------------------------------------------------------------

    \13\ See supra note 4 [sic]. By definition, where there is no 
ZBBO, the Volume Based Tie Breaker will be the midpoint of the NBBO.
    \14\ The Exchange notes that it is proposing to amend the 
definition of Volume Based Tie Breaker, as further described below, 
but none of the proposed changes would affect the outcome of this 
example.
    \15\ See BATS Rule 11.23(a)(6). By definition, for Opening 
Auctions where the Volume Based Tie Breaker is $25.00 or less, the 
Collar Price Range shall be the range from 10% below the VBTB to 10% 
above the VBTB, which would be $9.00 to $11.00 in the example above.
    \16\ As defined in BATS Rule 11.23(a)(1).
    \17\ As defined in BATS Rule 11.23(a)(14).
    \18\ As defined in BATS Rule 11.23(a)(16).
    \19\ Absent the existing Alternate Price language, the price of 
the Opening Auction in the above described example would be 
determined by the first two sentences of BATS Rule 11.23(b)(2)(B), 
which provide the following: ``The Opening Auction price will be 
established by determining the price level within the Collar Price 
Range that maximizes the number of shares executed between the 
Continuous Book and Auction Book in the Opening Auction. In the 
event of a volume based tie at multiple price levels, the Opening 
Auction price will be the price closest to the Volume Based Tie 
Breaker.'' In the example described above, there would be an equal 
number of shares that could be executed at every price level from 
$9.00 to $9.99, however the price of the auction would be $9.99 
because that is the price level at which there is a volume based tie 
that is closest to the Volume Based Tie Breaker. Such language is 
currently the basis for determining the price of every auction that 
occurs on the exchange except in those instances that there is no 
limit interest participating in one or both sides or no auction 
occurs (noting that the Opening and Closing Auctions both use VBTB, 
while Halt and Volatility Closing Auctions use the Final Last Sale 
Eligible Trade and IPO Auctions use the issue price for resolving 
ties at multiple price levels). Further, in the event that there is 
no limit interest that would participate on either side of an 
auction (i.e. only market interest on both sides), such language 
would create the same auction price (the Alternate Price) as the 
language that the Exchange is proposing to delete because there 
would be a tie at every price level within the Collar Price Range, 
meaning that the price would default to the Alternate Price.
    \20\ As defined in BATS Rule 1.5(w).
---------------------------------------------------------------------------

    The Exchange is proposing to eliminate the language that provides 
an Alternate Price at which an auction will occur where no limit orders 
from one or both sides (the buy side, the sell side, or both the buy 
and sell side) would otherwise participate in an auction. As proposed, 
the example constructed above would result in an execution of 100 
shares at $9.99, which would represent a full execution for both 
orders. It's worth noting that the Limit-On-Open order could have been 
priced as low as $9.00 (the low end of the Collar Price Range) and the 
auction would have occurred at the price of the Limit-On-Open order. 
The Exchange originally added the language that it is proposing to 
delete as part of a proposal to eliminate the possibility that a 
single, non-marketable limit order could affect the price at which an 
auction occurred.\21,\ \22\ The resulting rule text, however, took the 
solution beyond merely preventing a single limit order from determining 
the price at which an auction would occur and instead provided that 
limit interest on both sides must participate in an auction or the 
auction would be forced to occur at an Alternate Price. The Exchange 
now believes, however, that the current rule text adopted the wrong 
approach to solving the problem described above, which has resulted in 
the unnecessary prevention of certain otherwise marketable limit 
orders, such as the $9.99 Limit On Open order from the example above, 
from executing in auctions on the Exchange. Further, the Exchange also 
believes that the current rule text creates an overly restrictive 
collar on market orders entered to participate in auctions under the 
conditions described above: where no limit orders participate on one or 
both sides of the market, a market order can never be priced more 
aggressively than the Alternate Price. The Exchange believes that the 
rule text results in the treatment of market orders that differs from 
the general understanding of how market orders are priced and, as 
mentioned above, the Exchange has received feedback from market 
participants and issuers indicating an agreement with this belief. The 
proposed amendments would result in market orders being treated in a 
manner similar to aggressively priced limit orders, which is more in 
line with the generally understood definition of a market order. This 
feedback from stakeholders along with an internal review of auctions 
occurring on the Exchange that arrived at similar conclusions have led 
the Exchange to believe that allowing market orders to execute at any 
point within the Collar Price Range regardless of whether any limit 
interest would participate in the auction will allow executions to 
occur in the auctions at prices that are more reflective of market 
conditions at the time of the auction by allowing marketable limit 
orders priced within the Collar Price Range to interact with contra-
side market orders. The Exchange notes that both market and limit 
orders will still have several protections in place as auctions can 
only occur within the Collar Price Range and the protections afforded 
under the Exchange's clearly erroneous rules in BATS Rule 11.17 also 
apply to executions that occur in an auction.
---------------------------------------------------------------------------

    \21\ See Securities Exchange Act Release No. 68788 (January 31, 
2013), 78 FR 8640 (February 6, 2013) (SR-BATS-2012-046) (the 
``Filing''). On pages 7 and 8 of the Filing, the Exchange provides: 
``Where no limit orders from either or both sides would participate 
in the auction, the Exchange is proposing that the auction will 
occur at the price of the Default Price. By providing that the 
auction price will be the Default Price where no limit orders from 
one or both sides would participate in an Exchange Auction, this 
proposed language [sic] would aid in price discovery and help to 
prevent erroneous executions by ensuring that a single limit order 
on one side of an auction that might not even participate in the 
Exchange Auction cannot on its own determine the auction price.''
    \22\ Prior to the changes implemented upon approval of the 
Filing, the language for Opening and Closing Auctions that preceded 
the current Alternate Price language read as follows: ``In the event 
that at the time of the [auction] there are no limit orders on both 
the Continuous Book and the Auction Book, the [auction] will occur 
at the price of the Final Last Sale Eligible Trade.'' For IPO and 
Halt Auctions, the language read as follows: ``In the event that 
there are no limit orders among the Eligible Auction Orders for a 
[auction], the [auction] will occur at the [Alternate Price].
---------------------------------------------------------------------------

Volume Based Tie Breaker
    Currently, the term ``Volume Based Tie Breaker'' shall mean the 
midpoint of the ZBBO for a particular security. In the event that there 
is either no ZBB or

[[Page 20546]]

ZBO for the security, the NBBO will be used if there is at least one 
limit order on either the Continuous Book \23\ or the Auction Book. In 
the event that there is also no NBB or NBO for the security or no limit 
orders on the Continuous Book and the Auction Book, the price of the 
Final Last Sale Eligible Trade will be used.
---------------------------------------------------------------------------

    \23\ As defined in BATS Rule 11.23(a)(7).
---------------------------------------------------------------------------

    The Exchange is proposing to eliminate the concept of ZBBO from the 
definition of Volume Based Tie Breaker. Specifically, the Exchange is 
proposing to amend the definition such that the Volume Based Tie 
Breaker will either be the midpoint of the NBBO or the price of the 
Final Last Sale Eligible Trade.
    The Exchange is also proposing to validate a NBBO prior to using 
the midpoint of that NBBO as the Volume Based Tie Breaker. 
Specifically, the Exchange is proposing to validate that a NBBO is 
sufficiently tight to use the NBBO as a basis for establishing the 
Volume Based Tie Breaker as follows: A NBBO is a valid NBBO where (i) 
there is both a NBB and NBO for the security; (ii) the NBBO is not 
crossed; and (iii) the midpoint of the NBBO is less than the Maximum 
Percentage away from both the NBB and the NBO. The Maximum Percentage 
will be determined by the Exchange and will be published in a circular 
distributed to Members with reasonable advance notice prior to initial 
implementation and any change thereto. The Exchange will retain 
discretion to set and adjust the Maximum Percentage as it deems 
appropriate, but notes that the Maximum Percentage will never exceed 
the clearly erroneous thresholds from BATS Rule 11.17 based on the 
price of the security and that it will communicate any changes to the 
Maximum Percentage via circular to Members. The Exchange has monitored 
its auction process historically and believes that the initial levels 
that it sets for the Maximum Percentage will be appropriate. The 
Exchange does not anticipate adjusting the Maximum Percentage on a 
regular basis, however it will continue to monitor its auction process 
going forward and believes that retaining the discretion to increase or 
decrease the Maximum Percentage in order to adjust the threshold for 
what it believes to be a sufficiently narrow NBBO to choose a 
reasonable Volume Based Tie Breaker will allow it the administrative 
flexibility to make adjustments that will ensure sufficient protections 
for all participants in auctions on the Exchange. The Exchange notes 
that it will not apply separate standards for the Maximum Percentage on 
a security by security basis. Further, this discretion applies to only 
one of three factors in determining whether a NBBO is a Valid NBBO and 
where the NBBO is determined not to be a Valid NBBO, the Volume Based 
Tie Breaker will still be based on market conditions: the Final Last 
Sale Eligible Trade will be used instead of the midpoint of the NBBO. 
As part of this proposal, the Exchange would also eliminate the rule 
text requiring that there be a limit order on either the Continuous 
Book or the Auction Book for the midpoint of the NBBO to be used as the 
Volume Based Tie Breaker.
Reference Price Range
    Currently, the term Reference Price Range means the range from the 
ZBB to the ZBO for a particular security. In the event that there is 
either no ZBB or ZBO for the security, the NBBO will be used if there 
is at least one limit order on either the Continuous Book or the 
Auction Book. In the event that there is also either no NBB or NBO for 
the security or no limit orders on the Continuous Book and the Auction 
Book, the price of the Final Last Sale Eligible Trade will be used.
    The Exchange is proposing to amend the definition of Reference 
Price Range in order to eliminate the concept of ZBBO from the 
calculation of the Reference Price Range. Specifically, the Exchange is 
proposing to amend the definition such that the Reference Price Range 
will either be the range from the NBB to the NBO for a particular 
security or the price of the Final Last Sale Eligible Trade. As part of 
this proposal, the Exchange would also eliminate the rule text 
requiring that there be a limit order on either the Continuous Book or 
the Auction Book for the Reference Price Range to be the range from the 
NBB to the NBO.
LLOC and LLOO
    The Exchange is proposing to amend the definition of LLOC and LLOO 
orders to eliminate the use of ZBBO in pricing the orders. Currently, 
the Exchange first looks to the ZBBO to determine the most aggressive 
price that LLOC and LLOO orders can be priced and, where there is no 
ZBB or ZBO, the Exchange instead looks to the NBB or NBO, respectively. 
Where there is no NBB or NBO, the Exchange allows the LLOC or LLOO bid 
or offer, respectively, to be priced at its entered limit price. The 
Exchange is proposing to eliminate the ZBBO component of the process 
and instead to either restrict an order's price based on the NBBO or, 
absent either a NBB or NBO, to allow a bid or offer, respectively, to 
be priced at its entered limit price. As part of these proposed 
changes, the Exchange is also proposing to add language to make clear 
that a LLOC or LLOO bid will only be priced as aggressively as the NBB, 
even if there is no NBO and that an offer will only be priced as 
aggressively as the NBO, even if there is no NBB. Currently, the rule 
states that if there is no NBBO, the LLOC or LLOO will assume its 
entered limit price. The Exchange is proposing to make clear that where 
there is no NBB, a LLOC or LLOO bid will assume its entered limit price 
and where there is no NBO, a LLOC or LLOO offer will assume its entered 
limit price. A LLOC or LLOO bid will not assume its entered price only 
because there is no NBO and a LLOC or LLOO offer will not assume its 
entered price only because there is no NBB. This is consistent with 
existing behavior and is merely intended to provide additional clarity 
about how LLOC and LLOO orders are priced.
ZBBO
    In conjunction with the changes proposed above, the Exchange is 
also proposing to delete Rule 11.23(a)(24) which defines the terms ZBB, 
ZBO, and ZBBO because the Exchange is also proposing to delete each 
reference to ZBB, ZBO, and ZBBO in its rules and the definition is no 
longer necessary.
2. Statutory Basis
    The Exchange believes that 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.\24\ Specifically, the proposed change is consistent with 
Section 6(b)(5) of the Act,\25\ 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. Generally, the 
Exchange believes that the proposed changes will improve the price 
discovery process for securities listed on the Exchange along with 
those additional benefits enumerated below.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Limit Order Participation
    The Exchange believes that the proposed amendments to each of the 
Opening Auction, Closing Auction, IPO and Halt Auction, and Volatility 
Closing Auction would promote just and equitable principles of trade, 
remove

[[Page 20547]]

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 that it would eliminate a protection from the 
auction process that, as described above, was more restrictive than 
anticipated. As stated above, the current implementation that provides 
that an auction must occur at an Alternate Price where there would not 
be limit order participation on both sides of an auction was intended 
to eliminate the possibility that a single, non-marketable limit order 
could affect the price at which an auction occurred.\26\ However, as 
illustrated by the examples above, the current rule text went beyond 
merely preventing a single limit order from determining the price at 
which an auction would occur and instead provided that limit interest 
on both sides must participate in an auction or the auction would be 
forced to occur at an Alternative Price. The Exchange now believes, 
however, that the current rule text adopted the wrong approach to 
solving the problem described above, which has resulted in the 
unnecessary prevention of certain otherwise marketable limit orders, 
such as the $9.99 Limit On Open order from the example above, from 
executing in auctions on the Exchange. Further, the Exchange also 
believes that the current rule text creates an overly restrictive 
collar on market orders entered to participate in auctions under the 
conditions described above: where no limit orders participate on one or 
both sides of the market, a market order can never be priced more 
aggressively than the Alternate Price. The Exchange believes that the 
rule text results in the treatment of market orders that differs from 
the general understanding of how market orders are priced and, as 
mentioned above, the Exchange has received feedback from market 
participants and issuers indicating an agreement with this belief. As 
such, the Exchange believes that the proposal 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 by allowing 
executions to occur in auctions at prices that are more reflective of 
market conditions at the time of the auction by allowing marketable 
limit orders priced within the Collar Price Range to interact with 
contra-side market orders. The Exchange emphasizes that it is not 
proposing to allow market orders to participate in its auctions without 
any price protections. Rather, the Exchange is proposing to treat 
market orders in its auctions in a manner broadly consistent with the 
rules of other exchanges.\27\ The Exchange believes that the Collar 
Price Range, which is based on the clearly erroneous standards in BATS 
Rule 11.17, and the clearly erroneous process in BATS Rule 11.17, which 
applies to executions in the auctions and could be used to cancel any 
executions to which it applies, provide sufficient protections against 
executions in the auctions occurring at extreme prices. As such, the 
Exchange believes that a better characterization is that the Exchange 
is proposing to treat market orders in a manner more similar to 
aggressively priced limit orders, which is more in line with the 
generally understood meaning of a market order. With this in mind, the 
Exchange believes that the proposed amendments to eliminate the 
Alternate Price where there would not be limit order participation on 
both sides of an auction 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.
---------------------------------------------------------------------------

    \26\ See supra notes 21 and 22.
    \27\ See NYSE Arca, Inc. (``Arca'') Rule 7.35 and NASDAQ Stock 
Market LLC (``Nasdaq'') Rules 4752, 4753, and 4754. While each of 
the exchanges have very diverse rules governing auctions/crosses on 
their respective venues, neither Arca nor Nasdaq have a comparable 
requirement that unless limit interest from both sides would 
participate in the auction, the auction will occur at a default 
price. As such, the Exchange believes that elimination of the 
requirement is broadly consistent with the rules of other exchanges.
---------------------------------------------------------------------------

Volume Based Tie Breaker
    The Exchange believes that the proposed amendments to the Volume 
Based Tie Breaker 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 that it would ensure that the Volume Based 
Tie Breaker would be calculated using a full picture of the market in a 
particular security by looking to the NBBO instead of the ZBBO, 
regardless of whether there are any limit orders on the Continuous Book 
or Auction Book. Because the NBBO by definition accounts for the ZBBO, 
the NBBO will always be equal to or tighter than the ZBBO, which the 
Exchange believes creates a Volume Based Tie Breaker that better 
reflects current market conditions. Further to this point, the Exchange 
believes that creating a process to validate the NBBO or, where the 
NBBO is not valid, to use the Final Last Sale Eligible Trade will 
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 that it will ensure that the NBBO is sufficiently tight to 
guarantee that the midpoint of the NBBO would be a meaningful and 
accurate Volume Based Tie Breaker.
Reference Price Range
    The Exchange believes that the proposed amendments to the 
definition of Reference Price Range 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 that it would ensure that 
the Reference Price Range would be calculated using a full picture of 
the market in a particular security by looking to the NBBO instead of 
the ZBBO, regardless of whether there are any limit orders on the 
Continuous Book or Auction Book. Because the NBBO by definition 
accounts for the ZBBO, the NBBO will always be equal to or tighter than 
the ZBBO, which the Exchange believes creates a Reference Price Range 
that better reflects current market conditions.
LLOC and LLOO
    The Exchange believes that the proposed amendments to the 
definition of LLOC and LLOO 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 that it would ensure that the LLOC 
and LLOO orders would be priced using a full picture of the market in a 
particular security by looking to the NBBO instead of the ZBBO. Because 
the NBBO by definition accounts for the ZBBO, the NBBO will always be 
equal to or tighter than the ZBBO, which the Exchange believes provides 
a better basis by which to price a LLOC or LLOO order because it better 
reflects current market conditions. The Exchange also believes that the 
clarifying changes to the definitions of LLOC and LLOO explained above 
will contribute to the protection of investors and the public interest 
by making the functionality of LLOC and LLOO orders as clear as 
possible.
ZBBO
    The Exchange believes that the non-substantive proposal to delete 
the

[[Page 20548]]

definitions of ZBB, ZBO, and ZBBO, as discussed above, will contribute 
to the protection of investors and the public interest by eliminating 
the definition of a term that is no longer used in the Exchange's Rules 
which will make the Exchange's Rules easier to understand and help to 
avoid confusion.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the act. To the contrary, allowing the 
Exchange to make the above proposed modifications to Rule 11.23 in 
order to allow an auction to occur at a price that is not the Alternate 
Price where there isn't limit interest on both sides (Limit Order 
Participation), to eliminate the use of ZBB, ZBO, and ZBBO from the 
auction process (Volume Based Tie Breaker, Reference Price Range, LLOC 
and LLOO, and ZBBO), to validate the NBBO before using it to establish 
the Volume Based Tie Breaker (Volume Based Tie Breaker), and to 
eliminate the requirement that there be at least one limit order on 
either the Continuous Book or the Auction Book in order to use the NBBO 
for the Volume Based Tie Breaker or the Reference Price (Volume Based 
Tie Breaker and Reference Price) will, in the aggregate, allow the 
Exchange to better compete with other exchanges as a listing venue by 
improving the Exchange's auction process by allowing more executions to 
occur at more reasonable prices that are based on market-wide pricing. 
As mentioned above, the Exchange has received feedback from market 
participants and issuers alike regarding these issues and the proposed 
amendments will both address this feedback and improve the Exchange's 
auction process, allowing it to better compete as both a listing and 
execution venue.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on the proposed rule change. The Exchange has, however, as 
described above, received unsolicited comments from both Members and 
issuers that helped lead to the changes proposed herein.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \28\ and Rule 19b-4(f)(6) thereunder.\29\ 
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 prior to 
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 \30\ and Rule 19b-
4(f)(6) thereunder.\31\
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \29\ 17 CFR 240.19b-4(f)(6).
    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 requirement.
---------------------------------------------------------------------------

    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. 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 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-2015-31 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BATS-2015-31. 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 also will be available 
for inspection and copying at the principal offices 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-2015-31, 
and should be submitted on or before May 7, 2015.
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
Brent J. Fields,
Secretary.
[FR Doc. 2015-08696 Filed 4-15-15; 8:45 am]
 BILLING CODE 8011-01-P


