Federal Register / Vol. 76, No. 40 / Tuesday, March 1, 2011 / Notices 11303 

16As defined in BYX Rule 1.5(e). 

17 17 CFR 242.200(g). Rule 200(g)(2) provides that 

a sale order shall be marked ‘‘short exempt’’ only if 

the provisions of paragraphs (c) or (d) of Rule 201 

of Regulation SHO are met. See also Division of 

Trading and Markets: Responses to Frequently 

Asked Questions Concerning Rule 201 of 

Regulation SHO, Q&A Nos. 5.4 and 5.5. 

18 17 CFR 242.201(b)(1)(iii)(B). 

19A ‘‘Member’’ is defined in BYX Rule 1.5(n) as 

any registered broker or dealer that has been 

admitted to membership in the Exchange. 

20 17 CFR 242.200(g)(2). See also 17 CFR 

242.201(c); 17 CFR 242.201(d). 

21 In approving the proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

22 15 U.S.C. 78f(b). 

23 15 U.S.C. 78f(b)(5). 

24 15 U.S.C. 78s(b)(2). 

25 15 U.S.C. 78s(b)(2). 

26 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 17 CFR 242.200(g); 17 CFR 242.201. 

4See Securities Exchange Act Release No. 63766 

(January 25, 2011), 76 FR 5418 (January 31, 2011). 

5See Securities Exchange Act Release No. 61595 

(February 26, 2010), 75 FR 11232 (March 10, 2010). 

In connection with the adoption of Rule 201, Rule 

200(g) of Regulation SHO was also amended to 

include a ‘‘short exempt’’ marking requirement. The 

amendments to Rule 201 and Rule 200(g) have a 

compliance date of February 28, 2011. See 

Securities Exchange Act Release No. 63247 (Nov. 4, 

2010), 75 FR 68702 (Nov. 9, 2010). See also Division 

of Trading & Markets, Responses to Frequently 

Asked Questions Concerning Rule 201 of 

Regulation SHO. 

6Rule 201(a)(1) defines the term ‘‘covered 

security’’ to mean any ‘‘NMS stock’’ as defined 

under Rule 600(b)(47) of Regulation NMS. Rule 

600(b)(47) of Regulation NMS defines an ‘‘NMS 

stock’’ as ‘‘any NMS security other than an option.’’ 

Rule 600(b)(46) of Regulation NMS defines an 

‘‘NMS security’’ as ‘‘any security or class of 

securities for which transaction reports are 

collected, processed, and made available pursuant 

to an effective transaction reporting plan, or an 

effective national market system plan for reporting 

transactions in listed options.’’ 17 CFR 

242.201(a)(1); 17 CFR 242.600(b)(46); and 17 CFR 

242.600(b)(47). 

consistent with Rule 201 of Regulation 

SHO, and that if it cannot do so, orders 

will be cancelled back to the applicable 

Exchange User. In addition, the 

Exchange proposes to make clear that it 

will not route orders away from the 

Exchange that are marked ‘‘short’’ if a 

short sale price test restriction is in 

effect. Instead, such orders, if 

immediate-or-cancel (‘‘IOC’’) or market 

orders, will be cancelled, and if limit 

orders, will be posted to the BATS 

Book,16 subject to the price sliding 

process. 

Finally, current Rule 11.19 requires 

Exchange Users to identify short sale 

orders as ‘‘short’’ when entered into the 

Exchange’s System. The Exchange 

proposes to add the term ‘‘short exempt’’ 

to Rule 11.19 because pursuant to 

amended Rule 200(g) of Regulation 

SHO, a broker-dealer can mark a short 

sale order as either ‘‘short’’ or ‘‘short 

exempt.’’ 17 The Exchange also proposes 

to make clear in Rule 11.19 that if an 

order it received is marked ‘‘short 

exempt,’’ the Exchange will execute, 

display and/or route the order without 

regard to the NBB or any short sale price 

test restriction in effect under 

Regulation SHO.18 The Exchange also 

proposes to make clear, as it does in 

Rule 11.9(d)(1) with respect to 

intermarket sweep orders, that it relies 

on a Member’s 19 marking of an order, in 

this case the ‘‘short exempt’’ marking, 

when handling such order. Accordingly, 

proposed Rule 11.19 states that it is the 

entering Member’s responsibility, not 

the Exchange’s responsibility, to comply 

with the requirements of Regulation 

SHO relating to marking of orders as 

‘‘short exempt.’’ 20

III. Commission Findings 

The Commission finds that the 

proposed rule change to amend BYX 

Rules 11.9, 11.13 and 11.19 to make 

certain changes consistent with the 

upcoming implementation of 

amendments to Regulation SHO is 

consistent with the Act and the rules 

and regulations thereunder applicable to 

national securities exchanges and 

national securities associations.21 In 

particular, the Commission finds that 

the proposal is consistent with the 

requirements of Section 6(b) of the 

Act 22 and with Section 6(b)(5) of the 

Act,23 which, among other things, 

requires that rules of national securities 

exchanges be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, and, in general, to 

protect investors and the public interest. 

The Commission believes that the 

proposed rule change will provide 

clarity on the short sale order handling 

procedures employed by the Exchange 

and certain obligations of its Members 

when sending short sale orders to the 

Exchange consistent with Regulation 

SHO, as amended. The Commission also 

believes that the proposed short sale 

price sliding functionality and 

amendments to the existing displayed 

price sliding process should assist Users 

in executing or displaying their orders 

consistent with Regulation SHO and 

Regulation NMS. 

The Commission also finds good 

cause, pursuant to Section 19(b)(2) of 

the Act,24 for approving the proposed 

rule change on an accelerated basis. The 

proposed rule change makes changes 

consistent with the amendments to 

Regulation SHO. The Commission 

believes that accelerating approval of 

the proposed rule change is appropriate 

as it will allow the proposed 

amendments to be implemented by the 

compliance date for the amendments to 

Regulation SHO. In addition, the 

Commission believes that the proposed 

rule change should further the goals of 

investor protection and fair and orderly 

markets. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,25 that the 

proposed rule change (File No. SR– 

BYX–2011–002) be and hereby is 

approved on an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.26

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4479 Filed 2–28–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63948; File No. SR–BATS– 

2011–002] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Order Granting 

Accelerated Approval of a Proposed 

Rule Change To Amend BATS Rules in 

Connection With the Implementation of 

Amendments to Regulation SHO 

February 23, 2011. 

I. Introduction 

On January 14, 2011, BATS Exchange, 

Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (the ‘‘Act’’),1 and 

Rule 19b–4 thereunder,2 a proposed rule 

change to amend BATS Rules 11.9, 

11.13 and 11.19 to make certain changes 

consistent with the upcoming 

implementation of amendments to 

Regulation SHO.3 The proposed rule 

change was published for comment in 

the Federal Register on January 31, 

2011.4 The Commission received no 

comments on the proposed rule change. 

This order approves the proposed rule 

change on an accelerated basis. 

II. Description of the Proposal 

On February 26, 2010, the 

Commission adopted amendments to 

Regulation SHO under the Act in the 

form of Rule 201,5 pursuant to which, 

among other things, short sale orders in 

covered securities 6 generally cannot be 

executed or displayed by a trading 


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11304 Federal Register / Vol. 76, No. 40 / Tuesday, March 1, 2011 / Notices 

7Rule 201(a)(9) states that the term ‘‘trading 

center’’ shall have the same meaning as in Rule 

600(b)(78) of Regulation NMS. Rule 600(b)(78) 

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.’’ 17 CFR 242.600(b)(78). 

8 17 CFR 242.201(b)(1). See also Division of 

Trading & Markets, Responses to Frequently Asked 

Questions Concerning Rule 201 of Regulation SHO, 

Q&A Nos. 2.1 and 2.2 (concerning the duration of 

a short sale price test restriction). 

9The ‘‘System’’ is defined in BATS Rule 1.5(aa) 

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.’’ 

10A ‘‘User’’ is defined in BATS Rule 1.5(cc) as any 

member or sponsored participant of the Exchange 

who is authorized to obtain access to the System. 

11Any execution or display will also need to be 

in compliance with applicable rules regarding 

minimum pricing increments. 17 CFR 242.612. 

12See Division of Trading & Markets, Responses 

to Frequently Asked Questions Concerning Rule 

201 of Regulation SHO, Q&A No. 4.1 (concerning 

un-displayed orders). 

13As defined in BATS Rule 1.5(t), the term 

‘‘Protected Quotation’’ means a quotation that is a 

Protected Bid or Protected Offer. In turn, a 

‘‘Protected Bid’’ or ‘‘Protected Offer’’ shall mean a 

bid or offer in a stock that is (i) displayed by an 

automated trading center; (ii) disseminated 

pursuant to an effective national market system 

plan; and (iii) an automated quotation that is the 

best bid or best offer of a national securities 

exchange or association. 

14 17 CFR 242.610(d). 

15The Exchange acknowledges that potential 

differences can exist between Protected Bids, as 

defined above (see supra note 13), and the NBB, 

upon which the requirements of Regulation SHO, 

as amended, are based. 16The rules of BATS Exchange Options Market 

(‘‘BATS Options’’) also contain references to the 

displayed price sliding process. The Exchange is 

not proposing to modify its displayed price sliding 

process for BATS Options at this time. 

17As defined in BATS Rule 1.5(e). 

center 7 such as BATS at a price that is 

at or below the current national best bid 

(‘‘NBB’’) when a short sale circuit 

breaker is in effect for the covered 

security (the ‘‘short sale price test 

restriction’’).8 In anticipation of the 

upcoming February 28, 2011 

compliance date for Rule 201, the 

Exchange proposes to amend certain 

BATS rules to describe the manner in 

which the System 9 will handle short 

sell orders when a short sale price test 

restriction is triggered under Rule 201 of 

Regulation SHO. These changes include 

establishing a definition for ‘‘short sale 

price sliding,’’ which is a new form of 

price sliding the Exchange proposes to 

offer when the amendments to 

Regulation SHO become operative, 

modifying certain BATS rules regarding 

order execution and routing when a 

short sale price test restriction is in 

effect, and modifying BATS rules 

related to order marking requirements. 

Additionally, the Exchange proposes to 

modify the definition of the current 

‘‘displayed price sliding process’’ offered 

by BATS. 

In order to comply with the short sale 

price test restriction of Regulation SHO, 

as amended, the Exchange proposes to 

offer short sale price sliding, which will 

be defined in BATS Rule 11.9(g). As a 

default, the Exchange will subject a 

User’s 10 orders to short sale price 

sliding unless they affirmatively choose 

to opt-out of the process. As proposed, 

when a User opts out of the price sliding 

process, any short sale order that could 

not be executed or displayed due to a 

short sale price test restriction would be 

rejected or cancelled by the Exchange 

upon entry or while resting on the order 

book, respectively. When a User’s order 

is subject to the price sliding process, as 

proposed, orders subject to short sale 

price sliding that, at the time of entry, 

could not be executed or displayed due 

to a short sale price test restriction will 

be repriced by the System at one 

minimum price variation above the 

current NBB to comply with Rule 

201(b)(1)(i).11 An order subject to short 

sale price sliding will not be readjusted 

downward even if it could be displayed 

at a lower price without violation of 

Rule 201 of Regulation SHO. In the 

event the NBB changes such that the 

price of a non-displayed order subject to 

short sale price sliding would lock or 

cross the NBB, the order will receive a 

new timestamp, and will be repriced by 

the System at one minimum price 

variation above the current NBB, again 

in compliance with Rule 201(b)(1)(i).12

As proposed, neither orders marked 

‘‘short exempt’’ nor orders displayed by 

the System at a price above the then 

current NBB at the time of initial 

display when a short sale price test 

restriction is in effect for a covered 

security will be subject to short sale 

price sliding. Certain displayed short 

sale orders will not be repriced by the 

System after entry because under Rule 

201(b)(1)(iii)(A) a trading center’s 

policies and procedures must be 

reasonably designed to permit the 

execution of short sale orders of covered 

securities that were displayed at a price 

above the current NBB at the time of 

initial display. ‘‘Short exempt’’ orders 

will not be repriced by the System, but 

instead, the Exchange will execute, 

display and/or route such orders 

without regard to the NBB or any short 

sale price test restriction in effect under 

Regulation SHO, as described below. 

The Exchange currently offers a 

process called ‘‘displayed price sliding 

process,’’ as defined in current Rule 

11.9(c)(4), which re-prices and/or 

displays orders at permissible prices 

when such orders would lock or cross 

Protected Quotations 13 in a manner 

inconsistent with Rule 610(d) of 

Regulation NMS.14 The Exchange 

proposes to rename the ‘‘displayed price 

sliding process’’ as ‘‘NMS price sliding,’’ 

to be included in new paragraph (g) of 

Rule 11.9, and to define the ‘‘price 

sliding process’’ as inclusive of both 

NMS price sliding and short sale price 

sliding.15 Also, consistent with the 

changes described above, the Exchange 

proposes to replace the term ‘‘displayed 

price sliding process’’ throughout its 

equity trading rules with the term ‘‘price 

sliding process.’’ 16 As is true for 

displayed price sliding today and short 

sale price sliding as proposed, if a User 

chooses to opt-out of the price sliding 

process, the order will not be subject to 

NMS price sliding, and thus, the 

Exchange will cancel back their orders 

when display or execution of such 

orders contradict the provisions of 

Regulation NMS. 

The Exchange also proposes a 

substantive change to NMS price sliding 

(today known as the displayed price 

sliding process). Under current System 

behavior, the Exchange cancels all nondisplayed orders when the national best 

bid or offer (‘‘NBBO’’) changes such that 

the non-displayed order would cross a 

Protected Quotation, regardless of 

whether the order is subject to the 

displayed price sliding process. Under 

the proposed amendment, instead of 

cancelling such orders, unless a User 

has opted out of the price sliding 

process, the Exchange proposes to allow 

a resting non-displayed order to receive 

a new timestamp and be repriced at the 

locking price in the event that the NBBO 

changes such that the order would cross 

a Protected Quotation. 

The Exchange also proposes to amend 

its Rule 11.13 to make clear that it will 

execute, display and route an order 

consistent with Rule 201 of Regulation 

SHO, and that if it cannot do so, orders 

will be cancelled back to the applicable 

Exchange User. In addition, the 

Exchange proposes to make clear that it 

will not route orders away from the 

Exchange that are marked ‘‘short’’ if a 

short sale price test restriction is in 

effect. Instead, such orders, if 

immediate-or-cancel (‘‘IOC’’) or market 

orders, will be cancelled, and if limit 

orders, will be posted to the BATS 

Book,17 subject to the price sliding 

process. 

Finally, current Rule 11.19 requires 

Exchange Users to identify short sale 

orders as ‘‘short’’ when entered into the 

Exchange’s System. The Exchange 

proposes to add the term ‘‘short exempt’’ 


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18 17 CFR 242.200(g). Rule 200(g)(2) provides that 

a sale order shall be marked ‘‘short exempt’’ only if 

the provisions of paragraphs (c) or (d) of Rule 201 

of Regulation SHO are met. See also Division of 

Trading and Markets: Responses to Frequently 

Asked Questions Concerning Rule 201 of 

Regulation SHO, Q&A Nos. 5.4 and 5.5. 

19 17 CFR 242.201(b)(1)(iii)(B). 

20A ‘‘Member’’ is defined in BATS Rule 1.5(n) as 

any registered broker or dealer that has been 

admitted to membership in the Exchange. 

21 17 CFR 242.200(g)(2). See also 17 CFR 

242.201(c); 17 CFR 242.201(d). 

22 In approving the proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

23 15 U.S.C. 78f(b). 

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

25 15 U.S.C. 78s(b)(2). 

26 15 U.S.C. 78s(b)(2). 

27 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4NYSE Amex, a Delaware limited liability 

company, is an indirect wholly-owned subsidiary of 

NYSE Euronext. 

5Securities Exchange Act Release No. 63792 

(January 28, 2011) (File No. SR–NYSE–2010–77). 

to Rule 11.19 because pursuant to 

amended Rule 200(g) of Regulation 

SHO, a broker-dealer can mark a short 

sale order as either ‘‘short’’ or ‘‘short 

exempt.’’ 18 The Exchange also proposes 

to make clear in Rule 11.19 that if an 

order it received is marked ‘‘short 

exempt,’’ the Exchange will execute, 

display and/or route the order without 

regard to the NBB or any short sale price 

test restriction in effect under 

Regulation SHO.19 The Exchange also 

proposes to make clear, as it does in 

Rule 11.9(d)(1) with respect to 

intermarket sweep orders, that it relies 

on a Member’s 20 marking of an order, in 

this case the ‘‘short exempt’’ marking, 

when handling such order. Accordingly, 

proposed Rule 11.19 states that it is the 

entering Member’s responsibility, not 

the Exchange’s responsibility, to comply 

with the requirements of Regulation 

SHO relating to marking of orders as 

‘‘short exempt.’’ 21

III. Commission Findings 

The Commission finds that the 

proposed rule change to amend BATS 

Rules 11.9, 11.13 and 11.19 to make 

certain changes consistent with the 

upcoming implementation of 

amendments to Regulation SHO is 

consistent with the Act and the rules 

and regulations thereunder applicable to 

national securities exchanges and 

national securities associations.22 In 

particular, the Commission finds that 

the proposal is consistent with the 

requirements of Section 6(b) of the 

Act 23 and with Section 6(b)(5) of the 

Act,24 which, among other things, 

requires that rules of national securities 

exchanges be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, and, in general, to 

protect investors and the public interest. 

The Commission believes that the 

proposed rule change will provide 

clarity on the short sale order handling 

procedures employed by the Exchange 

and certain obligations of its Members 

when sending short sale orders to the 

Exchange consistent with Regulation 

SHO, as amended. The Commission also 

believes that the proposed short sale 

price sliding functionality and 

amendments to the existing displayed 

price sliding process should assist Users 

in executing or displaying their orders 

consistent with Regulation SHO and 

Regulation NMS. 

The Commission also finds good 

cause, pursuant to Section 19(b)(2) of 

the Act,25 for approving the proposed 

rule change on an accelerated basis. The 

proposed rule change makes changes 

consistent with the amendments to 

Regulation SHO. The Commission 

believes that accelerating approval of 

the proposed rule change is appropriate 

as it will allow the proposed 

amendments to be implemented by the 

compliance date for the amendments to 

Regulation SHO. In addition, the 

Commission believes that the proposed 

rule change should further the goals of 

investor protection and fair and orderly 

markets. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,26 that the 

proposed rule change (File No. SR– 

BATS–2011–002) be and hereby is 

approved on an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4480 Filed 2–28–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63943; File No. SR– 

NYSEAMEX–2011–06] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change in Connection With the 

Proposal of NYSE Euronext To 

Eliminate the Requirement of an 80 

percent Supermajority Vote To Amend 

or Repeal Section 3.1 of Its Bylaws 

February 22, 2011. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on February 

11, 2011, NYSE Amex LLC (the 

‘‘Exchange’’ or ‘‘NYSE Amex’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is submitting this rule 

filing in connection with the proposal of 

its ultimate parent, NYSE Euronext (the 

‘‘Corporation’’),4 to amend its bylaws 

(the ‘‘Bylaws’’) to eliminate the 

requirement that the affirmative vote of 

the holders of not less than 80% of the 

votes entitled to be cast by the holders 

of the outstanding capital stock of the 

Corporation entitled to vote generally in 

the election of directors is necessary for 

the stockholders to amend or repeal 

Article III, Section 3.1 of the Bylaws. 

The proposed rule change is identical to 

a rule change filed by the New York 

Stock Exchange LLC (‘‘NYSE’’) that was 

recently approved by the Commission.5

The text of the proposed rule change is 

available at the Exchange, the 

Commission’s Public Reference Room, 

and the Exchange’s Web site at http:// 

www.nyse.com. 

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 

self-regulatory organization 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 those 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 is submitting this rule 

filing in connection with the proposal of 

the Corporation, which is the ultimate 


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