
[Federal Register Volume 81, Number 116 (Thursday, June 16, 2016)]
[Notices]
[Pages 39296-39298]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14205]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78034; File No. SR-BatsBZX-2016-25]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
11.24, Opening Process for Non-BZX-Listed Securities

June 10, 2016.
    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 June 9, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend Rule 11.24, Opening Process for 
Non-BZX-Listed Securities, to await a two-sided quotation from the 
listing exchange prior to re-opening a security for trading following a 
halt, suspension, or pause in trading. The Exchange has designated this 
proposal as non-controversial and provided the Commission with the 
notice required by

[[Page 39297]]

Rule 19b-4(f)(6)(iii) under the Act.\5\ The Exchange requests that the 
Commission waive the 30-day pre-operative waiting period contained in 
Rule 19b-4(f)(6)(iii) under the Act.\6\
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    \5\ 17 CFR 240.19b-4(f)(6)(iii).
    \6\ Id.
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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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 11.24, Opening Process for Non-
BZX-Listed Securities, to await a two-sided quotation from the listing 
exchange prior to re-opening a security for trading following a halt, 
suspension, or pause in trading.\7\
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    \7\ The re-opening process for BZX-Listed Securities is set 
forth under Exchange Rule 11.23(d).
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    Exchange Rule 11.24 describes the Exchange's current Opening and 
Re-Opening Process for non-BZX-Listed securities. Subparagraph (e) to 
Rule 11.24 states that while a non-BZX-listed security is subject to a 
halt, suspension, or pause in trading, the Exchange will accept orders 
for queuing prior to the resumption of trading in the security for 
participation in the Re-Opening Process. Subparagraph (a) to Rule 11.24 
states that, prior to the beginning of the Regular Trading Hours, Users 
\8\ who wish to participate in the Opening Process may enter orders to 
buy or sell.\9\ Subparagraph (a)(2) to Rule 11.24 provides that, with 
certain exceptions,\10\ all orders with a time-in-force instruction of 
Regular Hours Only may participate in the Opening Process. Subparagraph 
(e)(1) to Rule 11.24 states that the Re-Opening Process will occur in 
the same manner described in Rule 11.24(a)(2) and (b) described 
above,\11\ also with certain exceptions.\12\
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    \8\ See Exchange Rule 1.5(cc).
    \9\ Orders cancelled prior to the Opening Process will not 
participate in the Opening Process.
    \10\ The following order types and instruction may not 
participate in the opening process: BZX Post Only Orders, Partial 
Post Only at Limit Orders, ISOs not modified by Rule 11.24(a)(1) 
above, and Minimum Quantity Orders. See Exchange Rule 11.24(a)(2). 
Limit orders with a Reserve Quantity may participate to the full 
extent of their displayed size and Reserve Quantity. Id. 
Discretionary Orders may participate only up to their ranked price 
for buy orders or down to their ranked price for sell orders. Id. 
The discretionary range of such orders will not be eligible for 
participation in the Opening Process. Id. All Pegged Orders and Mid-
Point Peg Orders, as defined in Rule 11.9(c)(8) and (9), will be 
eligible for execution in the Opening Process based on their pegged 
prices. Id.
    \11\ Subparagraph (b) to Rule 11.24 states that the Exchange 
will open by performing the Opening Process in which the System will 
attempt to match buy and sell orders that are executable at the 
midpoint of the National Best Bid and Offer (``NBBO''). Furthermore, 
subparagraph (b) of Rule 11.24 also states that all orders 
executable at the midpoint of the NBBO will continue to be processed 
in time sequence, beginning with the order with the oldest time 
stamp. Matches occur until there are no remaining contra-side orders 
or there is an imbalance of orders. An imbalance of orders may 
result in orders that cannot be executed in whole or in part. Any 
unexecuted orders may then be placed by the System on the BZX Book, 
cancelled, executed, or routed to away Trading Centers in accordance 
with the Users' instructions pursuant to Exchange Rule 11.13(a)(2).
    \12\ Orders without a time-in-force instruction of Regular Hours 
Only are eligible to participate in the Re-Opening Process, but IOC, 
FOK, BZX Post Only Orders, and Minimum Quantity Orders will be 
cancelled or rejected, as applicable, and any ISO that is not IOC or 
FOK will be converted into a non-ISO and be queued for participation 
in the Re-Opening Process. See Exchange Rule 11.24(e)(1).
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    Subparagraph (e)(1) to Exchange Rule 11.24 also sets forth the 
process by which the System sets the price of the Re-Opening Process. 
Currently, the System \13\ sets the price of the Re-Opening Process at 
the midpoint of the: (i) First NBBO subsequent to the first reported 
trade on the listing exchange following the resumption of trading after 
a halt, suspension, or pause; or (ii) NBBO when the first two-sided 
quotation is published by the listing exchange following the resumption 
of trading after a halt, suspension, or pause if no first trade is 
reported by the listing exchange within one second of publication of 
the first two-sided quotation by the listing exchange.
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    \13\ See Exchange Rule 1.5(aa).
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    The Exchange proposes to amend subparagraph (e)(1) to Rule 11.24 to 
now await a two-sided quotation from the listing exchange prior to 
opening a security for trading. As amended, subparagraph (e)(1) to Rule 
11.24 would state that the System would set the price of the Re-Opening 
Process at the midpoint of the first NBBO subsequent to the first 
reported trade and first two-sided quotation on the listing exchange 
following the resumption of trading after a halt, suspension, or pause. 
The Exchange will utilize the current NBBO to calculate the security's 
re-opening price once a trade and two-sided quotation are received from 
the listing exchange, regardless of the order in which the trade or 
quotation are received. The Exchange believes the proposed rule change 
will enable the listing market's quotation to be incorporated into the 
NBBO, which the Exchange would, in turn, utilize in its calculation of 
the midpoint of the NBBO. The Exchange believes doing so would result 
in a re-opening price that more closely reflects the market prices and 
conditions for that security. Under subparagraph (e)(1) to Rule 11.24, 
the Exchange will continue to alternatively set the price of the Re-
Opening Process at the midpoint of the NBBO when the first two-sided 
quotation is published by the listing exchange following the resumption 
of trading after a halt, suspension, or pause if no first trade is 
reported by the listing exchange within one second of publication of 
the first two-sided quotation by the listing exchange.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \15\ 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. The Exchange believes the 
proposed rule change will promote just and equitable principles of 
trade, removes impediments to, and perfect the mechanism of, a free and 
open market and a national market system because it enables the System 
to execute the Re-Opening Process at a price that is objectively 
established by the market for the security. The proposal would enable 
the listing market's quotation to be incorporated into the NBBO, which 
the Exchange would, in turn, utilize in its calculation of the midpoint 
of the NBBO. The Exchange believes doing so would result in a re-
opening price that more closely reflect the market prices and 
conditions for that security. Therefore, the Exchange believes the

[[Page 39298]]

proposed rule change promotes just and equitable principles of trade 
because it ensures a midpoint price that the Exchange believes would 
accurately reflect the market for the security.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposal will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. The proposed rule change will enable the 
Exchange to incorporate the listing market's quotation into its 
calculation of the midpoint of the NBBO, resulting in a re-opening 
price that would more closely reflect the opening market prices and 
conditions for that security. Therefore, the Exchange believes the 
proposed rule change will promote competition by enhancing the quality 
of the Exchange's opening process.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \18\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \19\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
states that waiver of the 30-day operative delay would allow market 
participants to immediately realize the benefits of what may be more 
accurate re-opening prices. Based on the foregoing, the Commission 
believes the waiver of the operative delay is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\20\
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    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
    \20\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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 change 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 No. SR-BatsBZX-2016-25 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-BatsBZX-2016-25. 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 the 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 No. SR-BatsBZX-2016-25, and should be 
submitted on or before July 7, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-14205 Filed 6-15-16; 8:45 am]
BILLING CODE 8011-01-P


