
[Federal Register Volume 80, Number 175 (Thursday, September 10, 2015)]
[Notices]
[Pages 54614-54617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-22745]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75832; File No. SR-BATS-2015-69]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing of Proposed Rule Change To Amend Rules 1.5(r), 11.1(a), 11.23, 
14.6, 14.11, and 14.12 and Adopt Rule 11.1(a)(1)

September 3, 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 September 1, 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 
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.
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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 the definition of Pre-
Opening Session under Rule 1.5(r) to state that the Pre-Opening Session 
will start at 7:00 a.m. rather than 8:00 a.m. Eastern Time, Rule 
11.1(a) to account for the Pre-Opening Session starting at 7:00 a.m. 
Eastern Time, and to make related changes to Rules 11.23, 14.6, 14.11, 
and 14.12. The Exchange also proposes to adopt new Rule 11.1(a)(1) to 
define Effective Start Time, which would be an order instruction 
enabling Members \3\ [sic] indicate a time upon which their order may 
become eligible for execution.
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    \3\ 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).
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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 the definition of Pre-Opening 
Session under Rule 1.5(r) to state that the Pre-Opening Session will 
start at 7:00 a.m. rather than 8:00 a.m. Eastern Time, Rule 11.1(a) to 
account for the Pre-Opening Session starting at 7:00 a.m. Eastern Time, 
and to make related changes to Rules 11.23, 14.6, 14.11, and 14.12. The 
Exchange also proposes to adopt new Rule 11.1(a)(1) to define Effective 
Start Time, which would be an order instruction enabling Members 
indicate a time upon which their order may become eligible for 
execution.
Pre-Opening Session 7:00 a.m. Start
    The Exchange trading day is currently divided into two sessions: 
(i) The Pre-Opening Session which starts at 8:00 a.m. and ends at 9:30 
a.m. Eastern Time; and (ii) the Regular Trading Hours which runs from 
9:30 a.m. to 4:00 p.m. Eastern Time. The Exchange proposes to amend the 
definition of ``Pre-Opening Session'' under Rule 1.5(r) to state that 
the Pre-Opening Session will start at 7:00 a.m. rather than 8:00 a.m. 
Eastern Time.\4\
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    \4\ The Exchange notes that NYSE Arca, Inc. (``NYSE Arca'') 
operates an Opening Session that starts at 4:00 a.m. Eastern Time 
(1:00 a.m. Pacific Time) and ends at 9:30 a.m. Eastern Time (6:30 
a.m. Pacific Time). See NYSE Arca Rule 7.34(a)(1). The Nasdaq Stock 
Market LLC (``Nasdaq'') operates a pre-market session that also 
opens at 4:00 a.m. and ends at 9:30 a.m. Eastern Time. See Nasdaq 
Rule 4701(g). See also Securities Exchange Act Release No. 69151 
(March 15, 2013), 78 FR 17464 (March 21, 2013) (SR-Nasdaq-2013-033) 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change to Extend the Pre-Market Hours of the Exchange to 4:00 a.m. 
EST).
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    The Exchange also proposes to amend Rule 11.1(a) to account for the 
Pre-Opening Session starting at 7:00 a.m. Eastern Time. Other than the 
proposal to change the start of the Pre-Opening Session from 8:00 a.m. 
to 7:00 a.m. Eastern Time discussed above, the Exchange does not 
propose to amend the substance or operation of Rule 11.1(a).
    As amended, orders entered between 6:00 a.m. and 7:00 a.m. Eastern 
Time, rather than 6:00 a.m. and 8:00 a.m. Eastern Time, would not 
eligible for execution until the start of the Pre-Opening Session or 
Regular Trading Hours,\5\ depending on the Time-in-Force (``TIF'') \6\ 
selected by the User.\7\ Rule 11.1(a) will also be amended to state 
that the Exchange will not accept the following orders prior to 7:00 
a.m. Eastern Time, rather than 8:00 a.m.: BATS Post Only Orders,\8\ 
Partial Post Only at Limit Orders,\9\ Intermarket Sweep Orders 
(``ISOs''),\10\ BATS Market Orders \11\ with a TIF other than Regular 
Hours Only,\12\ Minimum Quantity Orders \13\ that also include a TIF of 
Regular Hours Only, and all orders with a TIF instruction of Immediate-
or-Cancel (``IOC'') \14\ or Fill-or-Kill (``FOK'').\15\ At the 
commencement of the Pre-Opening Session, orders entered between 6:00 
a.m. and 7:00 a.m. Eastern Time, rather than 6:00 a.m. and 8:00 a.m. 
Eastern Time, will be handled in time sequence, beginning with the 
order with the oldest time stamp, and will be placed on the BATS 
Book,\16\ routed,

[[Page 54615]]

cancelled, or executed in accordance with the terms of the order.
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    \5\ ``Regular Trading Hours'' is defined as ``the time between 
9:30 a.m. and 4:00 p.m. Eastern Time.'' See Exchange Rule 1.5(w).
    \6\ The Times-In-Force instructions available on the Exchange 
are set forth under Exchange Rule 11.9(b).
    \7\ ``User'' is defined as ``any Member or Sponsored Participant 
who is authorized to obtain access to the System pursuant to Rule 
11.3.'' See Exchange Rule 1.5(cc).
    \8\ See Exchange Rule 11.9(c)(6).
    \9\ See Exchange Rule 11.9(c)(7).
    \10\ See Exchange Rule 11.9(d).
    \11\ See Exchange Rule 11.9(a)(2).
    \12\ See Exchange Rule 11.9(b)(7).
    \13\ See Exchange Rule 11.9(c)(5).
    \14\ See Exchange Rule 11.9(b)(1).
    \15\ See Exchange Rule 11.9(b)(6).
    \16\ See Exchange Rule 1.5(e).
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    Operations. From the Members' operational perspective, the 
Exchange's goal is to permit trading for those that choose to trade, 
without imposing burdens on those that do not. Thus, for example, the 
Exchange will not require any Member to participate in the extended 
session, including not requiring registered market makers to make two-
sided markets between 7:00 a.m. and 8:00 a.m. The Exchange will 
minimize Members' preparation efforts to the greatest extent possible 
by allowing Members to trade beginning at 7:00 a.m. with the same 
equipment, connectivity, order types, and data feeds they currently use 
from 8:00 a.m. onwards.
    Opening Process. The Exchange will offer no opening process at 7:00 
a.m., just as it offers no opening process at 8:00 a.m. today. Instead, 
at 7:00 a.m., the System will ``wake up'' by loading in price/time 
priority all open trading interest entered after 6:00 a.m. Also at 7:00 
a.m., the Exchange will open the execution system and accept new 
eligible orders, just as it currently does at 8:00 a.m. Members will be 
permitted to enter orders beginning at 6:00 a.m. Market Makers will be 
permitted but not required to open their quotes beginning at 7:00 a.m. 
in the same manner they open their quotes today beginning at 8:00 a.m.
    Order Types. Every order type that is currently available beginning 
at 8:00 a.m. will be available beginning at 7:00 a.m. All other order 
types, and all order type behaviors, will otherwise remain unchanged. 
The Exchange will not extend the expiration times of any orders. For 
example, an order that is currently available from 8:00 a.m. to 4:00 
p.m. will be modified to be available from 7:00 a.m. to 4:00 p.m. An 
order that is available from 8:00 a.m. to 9:30 a.m. will be modified to 
be available from 7:00 a.m. to 9:30 a.m.
    Routing Services. The Exchange will route orders to away markets 
between 7:00 a.m. and 8:00 a.m., just as it does today between 8:00 
a.m. and 9:30 a.m. All routing strategies set forth in Exchange Rule 
11.11 will remain otherwise unchanged, performing the same instructions 
they perform between 7:00 a.m. and 8:00 a.m. today.
    Order Processing. Order processing will operate beginning at 7:00 
a.m. just as it does today beginning at 8:00 a.m. There will be no 
changes to the ranking, display, and execution algorithms processes or 
rules.
    Data Feeds. The Exchange will report the best bid and offer on the 
Exchange to the appropriate network processor, as it currently does 
beginning 8:00 a.m. The Exchange's proprietary data feeds will be 
disseminated beginning at 7:00 a.m. using the same formats and delivery 
mechanisms with which the Exchange currently disseminates them 
beginning at 8:00 a.m.
    Trade Reporting. Trades executed between 7:00 a.m. and 8:00 a.m. 
will be reported to the appropriate network processor with the ``.T'' 
modifier, just as they are reported today between at 8:00 a.m. and 9:30 
a.m.
    Fees. The Exchange is not changing any fees in connection with this 
proposal.
    Market Surveillance. The Exchange's commitment to high quality 
regulation at all times will extend to 7:00 a.m. The Exchange will 
offer all surveillance coverage currently performed by the Exchange's 
surveillance systems, which will launch by the time trading starts at 
7:00 a.m.
    Clearly Erroneous Trade Processing. The Exchange will process trade 
breaks beginning at 7:00 a.m. pursuant to Exchange Rule 11.13 just as 
it does today beginning at 8:00 a.m.
    Related changes to Rules 11.23, 14.6, 14.11, and 14.12. The 
Exchange proposes to also make the follow changes to Rules 11.23, 14.6, 
14.11, and 14.12 to reflect the extension of the Pre-Opening Session to 
7:00 a.m.:
     Rule 11.23, Auctions. The Exchange proposes to amend Rules 
11.23(b)(1)(A) and (c)(1)(A) to reflect that Users may submit orders at 
start of the Pre-Opening Session at 7:00 a.m., rather than 8:00 a.m.
     Rule 14.6, Obligations of Companies Listed on the 
Exchange. The Exchange proposes to amend Rules 14.6(b)(1), (b)(2), and 
Interpretation and Policies .01(a), (c), and .02 to require an 
Exchange-Listed Company that public releases material information 
outside of the Exchange market hours to inform the Exchange's 
Surveillance Department of that material information prior to 6:50 a.m. 
rather than 7:50 a.m. Eastern Time. The Exchange proposes to amend Rule 
14.6, Interpretation and Policies .01(b), (c), and .02 to reflect the 
extension of the Pre-Opening Session to 7:00 a.m. Eastern Time. The 
amended provisions of Rule 14.6, Interpretation and Policies .01(b), 
(c), and .02 require companies to notify the Exchange's Surveillance 
Department of the release of certain material information at least ten 
minutes prior to the release of such information to the public when the 
public release of the information is made during Exchange market hours.
     Rule 14.11, Other Securities. The Exchange proposes to 
amend Rule 14.11(b)(7) and (c)(7) to reflect the extension of the Pre-
Opening Session to 7:00 a.m. Eastern Time.
     Rule 14.12, Failure to Meet Listing Standards. The 
Exchange proposes to amend Rule 14.12(e) and (m)(11) to require that 
companies that publicly announce the receipt of a notification of 
deficiency, Staff Delisting Determination, Public Reprimand Letter or 
Adjudicatory Body Decision that serves as a Public Reprimand outside of 
Exchange market hours inform the Exchange's Surveillance Department of 
the material information prior to 6:50 a.m. rather than 7:50 a.m. 
Eastern Time.
Effective Start Time
    The Exchange propose to adopt a new defined term, Effective Start 
Time, under proposed paragraph (a)(1) to Rule 11.1. Effective Start 
Time would be defined as an instruction a User may attach to an order 
to buy or sell which indicates the time upon which the order is to 
become eligible for execution. Like orders placed on the BATS Book at 
the start of the Pre-Opening Session under Rule 11.1(a), at the 
Effective Start Time, the order will be placed on the BATS Book, 
routed, cancelled, or executed in accordance with the terms of the 
order. Once received, orders with an Effective Start Time are placed in 
a suspended state and not placed on the BATS Book until the Effective 
Start Time selected by the User. Orders with an Effective Start Time 
are treated like all other orders once placed on the BATS Book and will 
receive a time stamp at the time the order becomes eligible for 
execution. Pursuant to Rule 11.12, orders entered with identical 
Effective Start Times will retain their priority as compared to each 
other based upon the time such orders were initially received by the 
System.
    In general, a User may specify a time between 7:00 a.m. and 4:00 
p.m. Eastern Time as the order's Effective Start Time, subject to the 
trading sessions that the particular order type is eligible for 
execution. A Member would not be able to combine an Effective Start 
Time with BATS Post Only Orders, BATS Market Orders, Minimum Quantity 
Orders, ISOs, or orders that include a TIF of IOC or FOK. The Effective 
Start Time instruction would be available for all other order types 
that include a TIF other than IOC or FOK. This is also consistent with 
current Rule 11.1(a), under which the Exchange does not accept the 
following orders prior to the start of the Pre-Opening Session: BATS 
Post Only Orders, Partial Post Only at Limit Orders, ISO, BATS Market 
Orders with a TIF other than Regular Hours Only, Minimum Quantity 
Orders that also include a TIF of Regular Hours

[[Page 54616]]

Only, and all orders with a TIF instruction of IOC or FOK.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\17\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\18\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, and to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(5).
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Pre-Opening Session 7:00 a.m. Start
    The Exchange believes its proposal to amend Rule 1.5(r) to state 
that the Pre-Opening Session will start at 7:00 a.m. rather than 8:00 
a.m. Eastern Time, Rule 11.1(a) to account for the Pre-Opening Session 
starting at 7:00 a.m. Eastern Time, and the related changes to Rules 
11.23, 14.6, 14.11, and 14.12 promote just and equitable principles of 
trade, and to remove impediments to and perfect the mechanism of a free 
and open market and a national market system. The Exchange believes 
that opening its system at 7:00 a.m. will benefit investors, the 
national market system, Members and the Exchange market. Opening at 
7:00 a.m. will benefit investors and the national market system by 
increasing competition for order flow and executions, and thereby 
spurring product enhancements and lowering prices. Opening at 7:00 a.m. 
will benefit Members and the Exchange market by increasing trading 
opportunities between 7:00 a.m. and 8:00 a.m. without increasing 
ancillary trading costs (telecommunications, data, connectivity, etc.) 
and, thereby, decreasing average trading costs per share. Opening the 
Exchange at 7:00 a.m. will also benefit Members that choose not to 
participate in the early hours but nonetheless gain the opportunity to 
interact with liquidity entered by other members during the early 
session.
    The proposed rule change promotes just and equitable principles of 
trade by offering additional trading opportunities to Members that 
desire them, without imposing burdens on Members that do not. The 
proposal will facilitate a well-regulated, orderly, and efficient 
market during a period of time that is currently underserved. The 
Exchange notes that the proposed trading period has been available on 
NYSE Arca and Nasdaq.\19\ The Exchange believes that the availability 
of trading between 7:00 a.m. and 8:00 a.m. has been beneficial to 
market participants including investors and issuers on other markets. 
The Exchange believes that offering a competing trading session will 
further benefit investors by promoting competition and order 
interaction, while imposing no added costs on investors or other market 
participants that choose not avail themselves of these benefits.
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    \19\ See supra note 4.
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Effective Start Time
    The Exchange believes its proposed Effective Start Time instruction 
also promotes just and equitable principles of trade, and removes 
impediments to and perfects the mechanism of a free and open market and 
a national market system. The Exchange believes that the proposed 
Effective Start Time instruction will provide Users with greater 
control over their orders by electing a specific time upon which their 
order may become eligible for execution. The concept of selecting 
conditions during which an order it [sic] to be eligible for execution 
is not novel. The operation of the Effective Start Time instruction is 
similar to functionality available on the Exchange and elsewhere that 
permits members to elect when their orders are to become eligible for 
executions. Specifically, on the Exchange, a User may elect a buy 
(sell) Stop Order or Stop Limit Order indicating that the order become 
eligible for execution when the consolidated last sale (purchase) in a 
security occurs at or above (below) a specified Stop Price.\20\ In 
addition, a User may elect the trading session(s) during which their 
order would be eligible for execution. In such case, the User may enter 
an order during the Pre-Opening Session and select that such order not 
be eligible for execution until 9:30 a.m., the start of Regular Trading 
Hours. Conversely, Members also maintain the ability to elect when 
their order should expire or be cancelled. For example, a User may 
elect a TIF instruction of Day, GTD, or GTX, all which state that the 
order cancelled if not executed by a certain time.\21\ Lastly, similar 
functionality is currently available on NYSE Arca.\22\
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    \20\ See Exchange Rules 11.9(c)(17) and (c)(18). See also New 
York Stock Exchange, Inc. (``NYSE'') Rule 13(e)(7).
    \21\ See Exchange Rules 11.9(b)(2), (4), and (5). See also 
Nasdaq Rule 4703(a), and NYSE Rule 13(b).
    \22\ NYSE Arca permits the selection of an Effective Time (Tag 
168), like the Exchange proposes herein, and Expire Time (Tag 126). 
See NYSE Arca FIX Specifications, available at https://www.nyse.com/publicdocs/nyse/markets/nyse/FIX_Specification_and_API.pdf (dated 
June 8, 2015).
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    The Exchange believes it has appropriately limited the availability 
of the Effective Start Time instruction to exclude its use with order 
types and order instructions that it may be deemed inconsistent with. 
Specifically, the Effective Time instruction is not available for ISOs 
and the use of such an instruction may be considered inconsistent with 
a Member's responsibility to comply with the requirements of Regulation 
NMS relating to ISOs. In addition, the Effective Start Time instruction 
is not available for BATS Market Orders or orders with a TIF 
instruction of IOC or FOK as well as orders with BATS Post Only Order 
or Minimum Quantity Orders. BATS Market Orders and orders with a TIF 
instruction of IOC and FOK are immediately executable once placed on 
the BATS Book. Permitting the use of an Effective Start time with such 
orders appears inconsistent as a User will not know at the time of 
order entry what the market for such a security would be at the 
selected Effective Start Time.

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

    The Exchange believes its proposed rule change would not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes the 
proposal to start the Pre-Opening Session at 7:00 a.m. Eastern Time 
would enhance competition by enabling the Exchange to directly compete 
with NYSE Arca and Nasdaq for order flow and executions starting at 
7:00 a.m., rather than 8:00 a.m. In addition, the proposed Effective 
Start Time instruction will enable the Exchange to provide similar 
functionality as NYSE Arca. The fact that the extending the Pre-Opening 
Session and Effective Start Time are themselves a response to the 
competition provided by other markets is evidence of its pro-
competitive nature.

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 this proposed rule change. The Exchange has not received 
any unsolicited written comments from Members or other interested 
parties.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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-2015-69 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-2015-69. 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 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-2015-69, and should be 
submitted on or before October 1, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-22745 Filed 9-9-15; 8:45 am]
 BILLING CODE 8011-01-P


