
[Federal Register Volume 80, Number 236 (Wednesday, December 9, 2015)]
[Notices]
[Pages 76591-76595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30943]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76552; File No. SR-BATS-2015-108]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To Adopt Rule 11.27 Regarding the 
Quoting and Trading Requirements of the Tick Size Pilot Program

December 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 November 30, 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, II 
and III 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 is proposing to adopt Exchange Rule 11.27 to implement 
the Regulation NMS Plan to Implement a Tick Size Pilot Program 
(``Plan'').\3\
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    \3\ The Exchange notes that proposed rule change is 
substantially similar to that proposed by FINRA under their proposed 
Rule 6191. See SR-FINRA-2015-047 (filed November 13, 2015).
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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
    On August 25, 2014, NYSE Group, Inc., on behalf of the Exchange, 
BATS Y-Exchange, Inc., Chicago Stock Exchange, Inc., EDGA Exchange, 
Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, 
Inc. (``FINRA''), NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, the Nasdaq 
Stock Market LLC, New York Stock Exchange LLC (``NYSE''), NYSE MKT LLC, 
and NYSE Arca, Inc. (collectively ``Participants''), filed with the 
Commission, pursuant to Section 11A of the Act \4\ and Rule 608 of 
Regulation NMS thereunder, the Plan to implement a tick size pilot 
program (``Pilot'').\5\ The Participants filed the Plan to comply with 
an order issued by the Commission on June 24, 2014.\6\ The Plan \7\ was 
published for comment in the Federal Register on November 7, 2014, and 
approved by the Commission, as modified, on May 6, 2015.\8\
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    \4\ 15 U.S.C. 78k-1.
    \5\ See Letter from Brendon J. Weiss, Vice President, 
Intercontinental Exchange, Inc., to Secretary, Commission, dated 
August 25, 2014.
    \6\ See Securities Exchange Act Release No. 72460 (June 24, 
2014), 79 FR 36840 (June 30, 2014).
    \7\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth in the Plan. The Exchange also 
proposes supplementary material as part of this proposed rule change 
to, among other things, provide that the terms used in proposed Rule 
11.27 shall have the same meaning as provided in the Plan, unless 
otherwise specified.
    \8\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 
80 FR 27514 (May 13, 2015) (``Approval Order'').

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[[Page 76592]]

    The Plan is designed to allow the Commission, market participants, 
and the public to study and assess the impact of increment conventions 
on the liquidity and trading of the common stocks of small-
capitalization companies. Each Participant is required to comply with, 
and to enforce compliance by its member organizations, as applicable, 
with the provisions of the Plan. As is described more fully below, the 
proposed rules would require Members \9\ to comply with the applicable 
quoting and trading increments for Pilot Securities.\10\
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    \9\ The term ``Member'' is defined as ``any registered broker or 
dealer, or any person associated with a 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.'' See Exchange Rule 1.5(n).
    \10\ The Exchange proposes to add Information and Policy .03 to 
Rule 11.27 to provide that the Rule shall be in effect during a 
pilot period to coincide with the pilot period for the Plan 
(including any extensions to the pilot period for the Plan).
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    The Pilot will include stocks of companies with $3 billion or less 
in market capitalization, an average daily trading volume of one 
million shares or less, and a volume weighted average price of at least 
$2.00 for every trading day. The Pilot will consist of a control group 
of approximately 1400 Pilot Securities and three test groups with 400 
Pilot Securities in each selected by a stratified sampling.\11\ During 
the pilot, Pilot securities in the control group will be quoted and 
traded at the currently permissible increments. Pilot Securities in the 
first test group (``Test Group One'') will be quoted in $0.05 minimum 
increments but will continue to trade at any price increment that is 
currently permitted.\12\ Pilot Securities in the second test group 
(``Test Group Two'') will be quoted in $0.05 minimum increments and 
will trade at $0.05 minimum increments subject to a midpoint exception, 
a retail investor order exception, and a negotiated trade 
exception.\13\ Pilot Securities in the third test group (``Test Group 
Three'') will be subject to the same restrictions as Test Group Two and 
also will be subject to the ``Trade-at'' requirement to prevent price 
matching by a market participant that is not displaying at a price of a 
Trading Center's \14\ ``Best Protected Bid'' or ``Best Protected 
Offer,'' unless an enumerated exception applies.\15\ In addition to the 
exceptions provided under Test Group Two, an exception for Block Size 
orders and exceptions that mirror those under Rule 611 of Regulation 
NMS \16\ will apply to the Trade-at requirement.
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    \11\ See Section V of the Plan for identification of Pilot 
Securities, including criteria for selection and grouping.
    \12\ See Section VI(B) of the Plan.
    \13\ See Section VI(C) of the Plan.
    \14\ The Plan incorporates the definition of ``Trading Center'' 
from Rule 600(b)(78) of Regulation NMS. Regulation NMS defines a 
Trading Center as ``a national securities exchange or national 
securities association that operates an SRO trading facility, an 
alternative trading system, an exchange market maker, an OTC market 
maker, or any other broker or dealer that executes orders internally 
by trading as principal or crossing orders as agent.''
    \15\ See Section VI(D) of the Plan.
    \16\ 17 CFR 242.611.
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Compliance With the Quoting and Trading Increments of the Plan
    The Plan requires the Exchange to establish, maintain, and enforce 
written policies and procedures that are reasonably designed to comply 
with applicable quoting and trading requirements specified in the 
Plan.\17\ Accordingly, the Exchange is proposing new Rule 11.27 
(Compliance with Regulation NMS Plan to Implement a Tick Size Pilot 
Program) to require Members to comply with the quoting and trading 
provisions of the Plan.
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    \17\ The Exchange is also required by the Plan to develop 
appropriate policies and procedures that provide for data collection 
and reporting to the Commission of data described in Appendixes B 
and C of the Plan. The Exchange intends to separately propose rules 
that would require compliance by its Members with the collection of 
data provisions of the Plan described in Section VII of the Plan, 
and has reserved Paragraph (b) for such rules.
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    Proposed Rule 11.27(a) (Compliance with Quoting and Trading 
Restrictions) sets forth the requirements for the Exchange and Members 
in meeting their obligations under the Plan. Rule 11.27(a)(1) will 
require Members to establish, maintain and enforce written policies and 
procedures that are reasonably designed to comply with the applicable 
quoting and trading requirements of the Plan. Rule 11.27(a)(2) provides 
that the Exchange Systems \18\ will not display, quote or trade in 
violation of the applicable quoting and trading requirements for a 
Pilot Security specified in the Plan and this Rule, unless such 
quotation or transaction is specifically exempted under the Plan.
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    \18\ The term ``System'' is defined as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.'' See Exchange Rule 
1.5(aa).
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    Proposed Rule 11.27(a)(3) clarifies the treatment of Pilot 
Securities that drop below $1.00 during the Pilot Period. In 
particular, Rule 11.27(a)(3) provides that, if the price of a Pilot 
Security drops below $1.00 during regular trading hours on any trading 
day, such Pilot Security will continue to be a Pilot Security subject 
to the Plan. However, if the Closing Price of a Pilot Security on any 
given trading day is below $1.00, such Pilot Security will be moved out 
of its Pilot Test Group into the Control Group, and may then be quoted 
and traded at any price increment that is currently permitted for the 
remainder of the Pilot Period. Rule 11.27(a)(3) also provides that, 
notwithstanding anything contained within these rules to the contrary, 
Pilot Securities (whether in the Control Group or any Pilot Test Group) 
will continue to be subject to the data collection requirements of the 
Plan at all times during the Pilot Period and for the six-month period 
following the end of the Pilot Period.
    In approving the Plan, the Commission noted that the Participants 
had proposed additional selection criteria to minimize the likelihood 
that securities that trade with a share price of $1.00 or less would be 
included in the Pilot, and stated that, once established, the universe 
of Pilot Securities should stay as consistent as possible so that the 
analysis and data can be accurate throughout the Pilot Period.\19\ The 
Exchange notes that a Pilot Security that drops below $1.00 during 
regular trading hours will remain in its applicable Test Group; a Pilot 
Security will only be moved to the Control Group if its Closing Price 
on any given trading day is below $1.00. The Exchange believes that 
this provision is appropriate because it will help ensure that Pilot 
Securities in Test Groups One, Two and Three continue to reflect the 
Pilot's selection criteria, helping ensure the accuracy of the 
resulting data. The Exchange also believes that this provision is 
appropriate because it responds to comments that the Plan address the 
treatment of securities that trade below $1.00 during the Pilot 
Period.\20\
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    \19\ See Approval Order, supra note 7, 80 FR at 27535.
    \20\ Id.
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    Proposed Rule 11.27(a)(4) sets forth the applicable limitations for 
securities in Test Group One. Consistent with the language of the Plan, 
Rule 11.27(a)(4) provides that no Member may display, rank, or accept 
from any person any displayable or non-displayable bids or offers, 
orders, or indications of interest in any Pilot Security in Test Group 
One in increments other than $0.05. However, orders priced to execute 
at the midpoint of the national best bid and national best offer 
(``NBBO'') or best protected bid and best protected offer (``PBBO'') 
\21\ and orders entered in a

[[Page 76593]]

Participant-operated retail liquidity program may be ranked and 
accepted in increments of less than $0.05. Pilot Securities in Test 
Group One may continue to trade at any price increment that is 
currently permitted by applicable Participant, SEC and Exchange rules.
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    \21\ Regulation NMS defines a protected bid or protected offer 
as a quotation in an NMS stock that (1) is displayed by an automated 
trading center; (2) is disseminated pursuant to an effective 
national market system plan; and (3) is an automated quotation that 
is the best bid or best offer of a national securities exchange, the 
best bid or best offer of The Nasdaq Stock Market, Inc., or the best 
bid or best offer of a national securities association other than 
the best bid or best offer of The Nasdaq Stock Market, Inc. See 17 
CFR 242.600(57). In the Approval Order, the Commission noted that 
the protected quotation standard encompasses the aggregate of the 
most aggressively priced displayed liquidity on all Trading Centers, 
whereas the NBBO standard is limited to the single best order in the 
market. See Approval Order, supra note 7, 80 FR at 27539.
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    Proposed Rule 11.27(a)(5) sets forth the applicable quoting and 
trading requirements for securities in Test Group Two. This provision 
states that no Member may display, rank, or accept from any person any 
displayable or non-displayable bids or offers, orders, or indications 
of interest in any Pilot Security in Test Group Two in increments other 
than $0.05. However, orders priced to execute at the midpoint of the 
NBBO or PBBO and orders entered in a Participant-operated retail 
liquidity program may be ranked and accepted in increments of less than 
$0.05.
    Proposed Rule 11.27(a)(5) also sets forth the applicable trading 
restrictions for Test Group Two securities. Absent any of the 
exceptions listed in the Rule, no Member may execute orders in any 
Pilot Security in Test Group Two in price increments other than $0.05. 
The $0.05 trading increment will apply to all trades, including 
Brokered Cross Trades.
    Consistent with the language of the Plan, the Rule provides that 
Pilot Securities in Test Group Two may trade in increments of less than 
$0.05 under the following circumstances: (1) Trading may occur at the 
midpoint between the NBBO or the PBBO; (2) Retail Investor Orders may 
be provided with price improvement that is at least $0.005 better than 
the PBBO; and (3) Negotiated Trades may trade in increments of less 
than $0.05.
    Proposed Rule 11.27(a)(6) sets forth the applicable quoting and 
trading restrictions for Pilot Securities in Test Group Three. The rule 
provides that no Member may display, rank, or accept from any person 
any displayable or non-displayable bids or offers, orders, or 
indications of interest in any Pilot Security in Test Group Three in 
increments other than $0.05. However, orders priced to execute at the 
midpoint of the NBBO or PBBO and orders entered in a Participant-
operated retail liquidity program may be ranked and accepted in 
increments of less than $0.05. The rule also states that, absent any of 
the applicable exceptions, no Member that operates a Trading Center may 
execute orders in any Pilot Security in Test Group Three in price 
increments other than $0.05. The $0.05 trading increment will apply to 
all trades, including Brokered Cross Trades.\22\
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    \22\ A brokered cross trade is a trade that a broker-dealer that 
is a member of a Participant executes directly by matching 
simultaneous buy and sell orders for a Pilot Security. See Section 
I(G) of the Plan.
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    Proposed Rule 11.27(a)(6)(C) sets forth the exceptions pursuant to 
which Pilot Securities in Test Group Three may trade in increments of 
less than $0.05. First, trading may occur at the midpoint between the 
NBBO or PBBO. Second, Retail Investor Orders may be provided with price 
improvement that is at least $0.005 better than the PBBO. Third, 
Negotiated Trades may trade in increments of less than $0.05.
    Proposed Rule 11.27(a)(6)(D) sets forth the ``Trade-at 
Prohibition,'' which is the prohibition against executions by a Member 
that operates a Trading Center of a sell order for a Pilot Security in 
Test Group Three at the price of a Protected Bid or the execution of a 
buy order for a Pilot Security in Test Group Three at the price of a 
Protected Offer during regular trading hours, absent any of the 
exceptions set forth in Rule 11.27(a)(6)(D). Consistent with the Plan, 
the rule reiterates that a member that operates a Trading Center that 
is displaying a quotation, via either a processor or an SRO quotation 
feed, that is a Protected Bid or Protected Offer is permitted to 
execute orders at that level, but only up to the amount of its 
displayed size. A Member that operates a Trading Center that was not 
displaying a quotation that is the same price as a Protected Quotation, 
via either a processor or an SRO quotation feed, is prohibited from 
price-matching protected quotations unless an exception applies.
    Consistent with the Plan, proposed Rule 11.27(a)(6)(D) also sets 
forth the exceptions to the Trade-at prohibition, pursuant to which a 
Member that operates a Trading Center may execute a sell order for a 
Pilot Security in Test Group Three at the price of a Protected Bid or 
execute a buy order for a Pilot Security in Test Group Three at the 
price of a Protected Offer. The first exception to the Trade-at 
Prohibition is the ``display exception,'' which allows a trade to occur 
at the price of the Protected Quotation, up to the Trading Center's 
full displayed size, if the order ``is executed by a trading center 
that is displaying a quotation.'' \23\
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    \23\ See Section VI(D)(1) of the Plan.
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    In Rule 11.27(a)(6)(D), the Exchange proposes that a Member that 
utilizes the independent aggregation unit concept may satisfy the 
display exception only if the same independent aggregation unit that 
displays interest via either a processor or an SRO Quotation Feed also 
executes an order in reliance upon this exception. The rule provides 
that ``independent aggregation unit'' has the same meaning as provided 
under Rule 200(f) of SEC Regulation SHO.\24\ This provision also 
recognizes that not all members may utilize the independent aggregation 
unit concept as part of their regulatory structure, and still permits 
such members to utilize the display exception if all the other 
requirements of that exception are met.
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    \24\ 17 CFR 242.200. Treatment as an independent aggregation 
unit is available if traders in an aggregation unit pursue only the 
particular trading objective(s) or strategy(ies) of that aggregation 
unit and do not coordinate that strategy with any other aggregation 
unit. Therefore, one independent aggregation unit within a Trading 
Center cannot execute trades pursuant to the display exception in 
reliance on quotations displayed by a different independent 
aggregation unit. As an example, an agency desk of a Trading Center 
cannot rely on the quotation of a proprietary desk in a separate 
independent aggregation unit at that same Trading Center.
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    As initially proposed by the Participants, the Plan contained an 
additional condition to the display exception, which would have 
required that, where the quotation is displayed through a national 
securities exchange, the execution at the size of the order must occur 
against the displayed size on that national securities exchange; and 
where the quotation is displayed through the Alternative Display 
Facility or another facility approved by the Commission that does not 
provide execution functionality, the execution at the size of the order 
must occur against the displayed size in accordance with the rules of 
the Alternative Display Facility of such approved facility (``venue 
limitation'').\25\ Some commenters stated that this provision was anti-
competitive, as it would have forced off-exchange Trading Centers to 
route orders to the venue on which the order was displayed.\26\
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    \25\ See Securities Exchange Act Release No. 73511 (November 3, 
2014), 79 FR 66423, 66437 (November 7, 2014).
    \26\ See Approval Order, supra note 7, 80 FR at 27540.
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    In approving the Plan, the Commission modified the Trade-At 
Prohibition to remove the venue limitation.\27\ The Commission noted 
that the venue limitation was not

[[Page 76594]]

prescribed in its Order mandating the filing of the Plan.\28\ The 
Commission also noted that the venue limitation would have 
unnecessarily restricted the ability of off-exchange market 
participants to execute orders in Test Group Three Securities, and that 
removing the venue limitation should mitigate concerns about the cost 
and complexity of the Pilot by reducing the need for off-exchange 
Trading Centers to route to the exchange.\29\ The Commission also 
stated that the venue limitation did not create any additional 
incentives to display liquidity in furtherance of the purposes of the 
Trade-At Prohibition, because the requirement that a Trading Center 
could only trade at a protected quotation up to its displayed size 
should be sufficient to incentivize displayed liquidity.\30\
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    \27\ Id.
    \28\ Id.
    \29\ Id.
    \30\ Id.
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    Consistent with Plan and the SEC's determination to remove the 
venue limitation, the Exchange is making clear that the display 
exception applies to trades done by a Trading Center otherwise than on 
an exchange where the Trading Center has previously displayed a 
quotation in either an agency or a principal capacity. As part of the 
display exception, the Exchange also proposes that a Trading Center 
that is displaying a quotation as agent or riskless principal may only 
execute as agent or riskless principal, while a Trading Center 
displaying a quotation as principal (excluding riskless principal) may 
execute either as principal or agent or riskless principal. The 
Exchange believes this is consistent with the Plan and the objective of 
the Trade-at Prohibition, which is to promote the display of liquidity 
and generally to prevent any Trading Center that is not quoting from 
price-matching Protected Quotations.\31\ Providing that a Trading 
Center may not execute on a proprietary basis in reliance on a 
quotation representing customer interest (whether agency or riskless 
principal) ensures that the Trading Center cannot avoid compliance with 
the Trade-at Prohibition by trading on a proprietary basis in reliance 
on a quotation that does not represent such Trading Center's own 
interest. Where a Trading Center is displaying a quotation at the same 
price as a Protected Quotation in a proprietary capacity, transactions 
in any capacity at the price and up to the size of such Trading 
Center's displayed quotation would be permissible. Transactions 
executed pursuant to the display exception may occur on the venue on 
which such quotation is displayed or over the counter.
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    \31\ The Exchange notes that proposed Rule 11.27(a)(6)(D)(ii) a. 
is identical to that proposed by FINRA under their proposed Rule 
6191(a)(6)(D)(ii) a. See SR-FINRA-2015-047 (filed November 13, 
2015). The Exchange also notes that the New York Stock Exchange, 
Inc. (``NYSE'') has recently proposed a rule that states the display 
exception would only apply to trades done by a Trading Center 
otherwise than on an exchange where the Trading Center has 
previously displayed a quotation in a principal capacity only. See 
Securities Exchange Act Release No. 76229 (October 22, 2015), 80 FR 
66065 (October 28, 2015) (SR-NYSE-2015-46) (proposing NYSE Rule 
67(e)(4)(C)(i)). The Exchange does not believe proposed NYSE Rule 
67(e)(4)(C)(i) is consistent with the SEC's modification of the 
Trade-At Prohibition to remove the venue limitation.
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    The proposal also excepts Block Size orders \32\ and permits 
Trading Centers to trade at the price of a Protected Quotation, 
provided that the order is of Block Size at the time of origin and is 
not an aggregation of non-block orders, broken into orders smaller than 
Block Size prior to submitting the order to a Trading Center for 
execution; or executed on multiple Trading Centers.\33\ The Plan only 
provides that Block Size orders shall be exempted from the Trade-At 
Prohibition. In requiring that the order be of Block Size at the time 
of origin and not an aggregation of non-block orders, or broken into 
orders smaller than Block Size prior to submitting the order to a 
Trading Center for execution; or executed on multiple Trading Centers, 
the Exchange believes that it is providing clarity as to the 
circumstances under which a Block Size order will be excepted from the 
Trade-At Prohibition.
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    \32\ ``Block Size'' is defined in the Plan as an order (1) of at 
least 5,000 shares or (2) for a quantity of stock having a market 
value of at least $100,000.
    \33\ Once a Block Size order or portion of such Block Size order 
is routed from one Trading Center to another Trading Center in 
compliance with Rule 611 of Regulation NMS, the Block Size order 
would lose the proposed Trade-at exemption, unless the Block Size 
remaining after the first route and execution meets the Block Size 
definition under the Plan.
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    Consistent with the Plan, the proposal also excepts an order that 
is a Retail Investor Order that is executed with at least $0.005 price 
improvement.
    The exceptions set forth in proposed Rule 11.27(a)(6)(D)(ii) d. 
through l. are based on the exceptions found in Rule 611 of Regulation 
NMS.\34\ The subparagraph d. exception applies when the order is 
executed when the Trading Center displaying the Protected Quotation 
that was traded at was experiencing a failure, material delay, or 
malfunction of its systems or equipment. The subparagraph e. exception 
applies to an order that is executed as part of a transaction that was 
not a ``regular way'' contract. The subparagraph f. exception applies 
to an order that is executed as part of a single-priced opening, 
reopening, or closing transaction by the Trading Center. The 
subparagraph g. exception applies to an order that is executed when a 
Protected Bid was priced higher than a Protected Offer in a Pilot 
Security. The subparagraph h. exception applies when the order is 
identified as a Trade-at Intermarket Sweep Order. The subparagraph i. 
exception applies when the order is executed by a Trading Center that 
simultaneously routed Trade-at Intermarket Sweep Orders to execute 
against the full displayed size of the Protected Quotation that was 
traded at. The subparagraph j. exception applies when the order is 
executed as part of a Negotiated Trade. The subparagraph k. exception 
applies when the order is executed when the Trading Center displaying 
the Protected Quotation that was traded at had displayed, within one 
second prior to execution of the transaction that constituted the 
Trade-at, a Best Protected Bid or Best Protected Offer, as applicable, 
for the Pilot Security with a price that was inferior to the price of 
the Trade-at transaction.
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    \34\ See 17 CFR 242.611.
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    The exception proposed in subparagraph l. applies to a ``stopped 
order.'' Both the Plan and Rule 11.27(a)(6) define a ``stopped order'' 
as an order that is executed by a Trading Center which, at the time of 
order receipt, the Trading Center had guaranteed an execution at no 
worse than a specified price, where (1) the stopped order was for the 
account of a customer; (2) the customer agreed to the specified price 
on an order-by-order basis; and (3) the price of the Trade-at 
transaction was, for a stopped buy order, equal to the National Best 
Bid in the Pilot Security at the time of execution or, for a stopped 
sell order, equal to the National Best Offer in the Pilot Security at 
the time of execution.
    Consistent with the Plan, the final exception to the Trade-At 
Prohibition and its accompanying supplementary material applies to an 
order that is for a fractional share of a Pilot Security. The 
supplementary material provides that such fractional share orders may 
not be the result of breaking an order for one or more whole shares of 
a Pilot Security into orders for fractional shares or that otherwise 
were effected to evade the requirements of the Trade-at Prohibition or 
any other provisions of the Plan. In approving the Plan, the Commission 
noted that this exception was appropriate, as there could be

[[Page 76595]]

potential difficulty in the routing and executing of fractional 
shares.\35\
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    \35\ See Approval Order, supra note 7, 80 FR at 27541.
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    If the Commission approves the proposed rule change, the proposed 
rule change will be effective upon Commission approval and shall become 
operative upon the commencement of the Pilot Period.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \36\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \37\ in particular, in that it is designed to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \36\ 15 U.S.C. 78f(b).
    \37\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that this proposal is consistent with the Act 
because it implements, interprets, and clarifies the provisions of the 
Plan, and is designed to assist the Exchange and Members in meeting 
regulatory obligations pursuant to the Plan. In approving the Plan, the 
SEC noted that the Pilot was an appropriate, data-driven test that was 
designed to evaluate the impact of a wider tick size on trading, 
liquidity, and the market quality of securities of smaller 
capitalization companies, and was therefore in furtherance of the 
purposes of the Act. To the extent that this proposal implements, 
interprets, and clarifies the Plan and applies specific requirements to 
Members, the Exchange believes that this proposal is in furtherance of 
the objectives of the Plan, as identified by the SEC, and is therefore 
consistent with the Act.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
notes that the proposed rule change implements the provisions of the 
Plan, and is designed to assist the Exchange in meeting its regulatory 
obligations pursuant to the Plan. The Exchange also notes that the 
quoting and trading requirements of the Plan will apply equally to all 
Members that trade Pilot Securities.

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

    Written comments were neither solicited nor received.

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 (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will: (a) By order approve 
or disapprove such 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 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-2015-108 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 No. SR-BATS-2015-108. 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-2015-108 and should be 
submitted on or before December 30, 2015.
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    \38\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-30943 Filed 12-8-15; 8:45 am]
BILLING CODE 8011-01-P


