Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 15153 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 62716 

(August 13, 2010), 75 FR 51295 (August 19, 2010) 

(Order Approving Application of BATS Y– 

Exchange, Inc. for Registration as a National 

Securities Exchange). 

4See Securities Exchange Act Release Nos. 62901 

(September 13, 2010), 75 FR 57097 (September 17, 

2010) (SR–BATS–2010–024) (Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change 

to Adopt BATS Rule 2.12, Entitled ‘‘BATS Trading, 

Inc. as Inbound Router’’ and To Make Related 

Changes); 65516 (October 7, 2011), 76 FR 63977 

(October 14, 2011) (SR–BATS–2011–040) (Notice of 

Filing and Immediate Effectiveness of Proposed 

Rule Change to Extend the Pilot Period of the 

Inbound Router, as Described in Rule 2.12). 

regulatory responsibility with respect to 

BATS Trading, as well as demonstrates 

that BATS Trading cannot use any 

information that it may have because of 

its affiliation with the Exchange to its 

advantage. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change imposes any 

burden on competition. 

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 Changes 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 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 rulecomments@sec.gov. Please include File 

Number SR–BYX–2012–006 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–BYX–2012–006. 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 

a.m. and 3 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 

publicly available. All submissions 

should refer to File Number SR–BYX– 

2012–006 and should be submitted on 

or before April 4, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6293 Filed 3–12–12; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66571; File No. SR–BATS– 

2012–013] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing of 

Proposed Rule Change by BATS 

Exchange, Inc. to Amend BATS Rule 

2.12, Entitled ‘‘BATS Trading, Inc. as 

Inbound Router’’ 

March 12, 2012. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 8, 

2012, 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 2.12, to make permanent the 

existing pilot program that permits the 

Exchange to receive inbound routes of 

equities orders through BATS Trading, 

Inc. (‘‘BATS Trading’’), the Exchange’s 

routing broker-dealer, from BATS Y– 

Exchange, Inc. (‘‘BYX’’). 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://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 

Currently, BATS Trading is the 

approved outbound order routing 

facility of BYX.3 The Exchange has been 

authorized to receive inbound routes of 

equities orders by BATS Trading from 

BYX.4 The Exchange’s authority to 

receive inbound routes of equities 

orders by BATS Trading from BYX is 

currently subject to a pilot period of 

twelve months, ending April 15, 2012. 


srobinson on DSK4SPTVN1PROD with NOTICES
15154 Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 

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

6 15 U.S.C. 78f(b)(5). 

The Exchange hereby seeks permanent 

approval to permit the Exchange to 

accept inbound orders that BATS 

Trading routes in its capacity as a 

facility of BYX. This is reflected in the 

proposed amendment to BATS Rule 

2.12(b). 

Under the pilot, the Exchange is 

committed to the following obligations 

and conditions: 

• The Exchange shall enter into a 

plan pursuant to Rule 17d–2 under the 

Exchange Act with a non-affiliated selfregulatory organization (‘‘SRO’’) to 

relieve the Exchange of regulatory 

responsibilities for BATS Trading with 

respect to rules that are common rules 

between the Exchange and the nonaffiliated SRO, and enter into a 

regulatory contract (‘‘Regulatory 

Contract’’) with a non-affiliated SRO to 

perform regulatory responsibilities for 

BATS Trading for unique Exchange 

rules. 

• The Regulatory Contract shall 

require the Exchange to provide the 

non-affiliated SRO with information, in 

an easily accessible manner, regarding 

all exception reports, alerts, complaints, 

trading errors, cancellations, 

investigations, and enforcement matters 

(collectively ‘‘Exceptions’’) in which 

BATS Trading is identified as a 

participant that has potentially violated 

Exchange or SEC Rules, and shall 

require that the non-affiliated SRO 

provide a report, at least quarterly, to 

the Exchange quantifying all Exceptions 

in which BATS Trading is identified as 

a participant that has potentially 

violated Exchange or SEC Rules. 

• The Exchange, on behalf of BATS 

Global Markets, Inc., shall establish and 

maintain procedures and internal 

controls reasonably designed to ensure 

that BATS Trading does not develop or 

implement changes to its system on the 

basis of non-public information 

regarding planned changes to Exchange 

systems, obtained as a result of its 

affiliation with the Exchange, until such 

information is available generally to 

similarly situated member organizations 

of the Exchange in connection with the 

provision of inbound order routing to 

the Exchange. 

• The Exchange may furnish to BATS 

Trading the same information on the 

same terms that the Exchange makes 

available in the normal course of 

business to any other member 

organization. 

The Exchange is in compliance with 

the above-listed obligations and 

conditions. In meeting them, the 

Exchange has set up mechanisms that 

protect the independence of the 

Exchange’s regulatory responsibility 

with respect to BATS Trading, as well 

as demonstrate that BATS Trading 

cannot use any information that it may 

have because of its affiliation with the 

Exchange to its advantage. Since the 

Exchange has met all the above-listed 

obligations and conditions, it now seeks 

permanent approval of the Exchange 

and BATS Trading’s inbound routing 

relationship. Upon approval of the 

proposed rule change, the Exchange will 

continue to comply with the obligations 

and conditions as set forth in proposed 

BATS Rule 2.12. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with the 

requirements of the Act and the rules 

and regulations thereunder that are 

applicable to a national securities 

exchange, and, in particular, with the 

requirements of Section 6(b) of the Act.5

In particular, the proposal is consistent 

with Section 6(b)(5) of the Act,6 because 

it would promote just and equitable 

principles of trade, remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system. 

Specifically, the proposed rule change 

will allow the Exchange to continue 

receiving inbound routes of equities 

orders from BATS Trading acting in its 

capacity as a facility of BYX, in a 

manner consistent with prior approvals 

and established protections. The 

Exchange believes that meeting the 

commitments established during the 

pilot program demonstrates that the 

Exchange has mechanisms that protect 

the independence of the Exchange’s 

regulatory responsibility with respect to 

BATS Trading, as well as demonstrates 

that BATS Trading cannot use any 

information that it may have because of 

its affiliation with the Exchange to its 

advantage. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change imposes any 

burden on competition. 

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 Changes 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 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 rulecomments@sec.gov. Please include File 

Number SR–BATS–2012–013 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–BATS–2012–013. 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 

a.m. and 3 p.m. Copies of such filing 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 15155 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 65899 (Dec. 

6, 2011), 76 FR 77287 (Dec. 12, 2011). A nonsubstantive correction to the notice of the proposed 

rule change was published on December 14, 2011. 

See Securities Exchange Act Release No. 65899A 

(Dec. 12, 2011), 76 FR 77865 (Dec. 14, 2011). 

4Securities Exchange Act Release No. 66124 (Jan. 

10, 2012), 77 FR 2103 (Jan. 13, 2012). 

5Letter from Christopher Killian, Managing 

Director, Securities Industry and Financial Markets 

Association (Dec. 19, 2011). 

6Certain provisions in the current MBSD 

rulebook that reflect processes that will continue 

unchanged after introduction of the CCP services 

are retained in the proposed MBSD rulebook. In 

order to promote uniformity between FICC’s two 

divisions and to increase transparency for common 

members, the new MBSD rulebook follows the 

structure of the Government Securities Division 

rulebook and, where appropriate, the language of 

equivalent provisions mirror each other. 

7The term ‘‘Banks’’ includes Federal Savings 

Associations. 

8The MBSD does not currently have any 

insurance company Clearing Members. Financial 

and other membership requirements for this 

category may be established in a future rule filing. 

9The MBSD currently has two members that do 

not fit into any of the new listed membership types. 

These entities remain members of the MBSD under 

Article III, Rule 1, Section (1)(f) of the MBSD rules 

and remain subject to the MBSD rulebook and all 

ongoing membership requirements. 

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 

publicly available. All submissions 

should refer to File Number SR–BATS– 

2012–013 and should be submitted on 

or before April 4, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6289 Filed 3–12–12; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66550; File No. SR–FICC– 

2008–01] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Approving Amended Proposed Rule 

Change to Allow the Mortgage-Backed 

Securities Division To Provide 

Guaranteed Settlement and Central 

Counterparty Services 

March 9, 2012. 

I. Introduction 

On March 12, 2008, the Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change (SR–FICC–2008– 

01) pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and Rule 19b–4 2

thereunder. On November 21, 2011, 

FICC amended the proposed rule 

change. The amended proposed rule 

change was published for comment in 

the Federal Register on December 12, 

2011.3 On January 10, 2012, the 

Commission extended the time within 

which to take action on the proposed 

rule change to March 9, 2012.4 The 

Commission received one comment on 

the proposed rule change.5 This order 

approves the proposal. 

II. Description 

The proposed rule changes consist of 

modifications to the rules of FICC’s 

MBSD to allow MBSD to provide 

guaranteed settlement and central 

counterparty (‘‘CCP’’) services. These 

modifications necessitated the MBSD to 

draft a new rulebook, which is also part 

of this rule filing.6

A. MBSD Rulebook Changes 

As noted above, the current MBSD 

rulebook will be replaced in its entirety 

by a new proposed rulebook that 

incorporates parts of the current MBSD 

rulebook where appropriate. Set forth 

below is an overview of the significant 

substantive and structural changes to 

the rules. 

1. Definitions 

The MBSD rules will have a revised 

Rule 1, ‘‘Definitions,’’ which will 

include terminology applicable to new 

MBSD processing and procedures. For 

example, terms relevant to pool netting 

have been included (such as ‘‘pool 

deliver obligation’’ and ‘‘pool receive 

obligation’’). Where practical and/or 

applicable, the MBSD rulebook uses 

terms from the current GSD rules, in 

order to harmonize language between 

the Divisions. 

2. Membership 

Rule 2, ‘‘Members’’, Rule 2A, ‘‘Initial 

Membership Requirements,’’ Rule 3, 

‘‘Ongoing Membership Requirements,’’ 

and Rule 3A, ‘‘Cash Settling Bank 

Members,’’ govern membership types, 

member application requirements, and 

ongoing reporting requirements. 

i. Membership Categories 

The new MBSD rules will provide for 

two membership types (as set forth in 

Rule 2): Clearing Members and Cash 

Settling Bank Members. Those entities 

qualifying for clearing membership will 

be guaranteed service members of the 

MBSD—trades submitted by these 

members will be guaranteed at the point 

of comparison, and eligible, as 

applicable, for pool comparison, netting, 

and settlement. Clearing membership 

categories include: (i) Registered brokers 

or dealers; (ii) other registered clearing 

agencies; (iii) registered investment 

companies; (iv) banks 7; (v) government 

securities issuers/government sponsored 

enterprises; (vi) insurance companies; 8

and (vii) unregistered investment pools 

(‘‘UIPs’’).9 In addition, the MBSD will 

have the discretion to make its services 

available to other entity types which it 

deems appropriate subject to the 

approval of the Commission. 

Membership requirements for Cash 

Settling Bank Members are set forth in 

Rule 3A, ‘‘Cash Settling Bank 

Members.’’ These requirements remain 

unchanged from the current MBSD 

rulebook and they mirror the 

requirements of the GSD-equivalent 

members. 

ii. Initial Membership Requirements 

The initial membership requirement 

for the MBSD members mirrors the 

current requirements for the GSD 

netting membership where there is an 

existing identical membership type in 

the GSD rules. The two membership 

categories where there are no GSD 

equivalents are registered investment 

companies and UIPs. In addition to 

standard requirements regarding 

financial and operational responsibility 

applicable to all Clearing Members, 

registered investment companies must 

be registered under the Investment 

Company Act of 1940 and have 

minimum net assets of $100 million. In 

addition to standard requirements 

regarding financial and operational 

responsibility applicable to all Clearing 

Members, UIPs must: 

• Have an investment advisor 

domiciled in the United States and 

registered with the Commission under 

the Investment Advisors Act of 1940; 

and 

• the UIP must have (i) $250 million 

in net assets, or (ii) $100 million in net 

assets and the UIP’s investment advisor 

must advise an existing UIP Clearing 

Member that has assets under 

management of $1.5 billion. 

iii. Ongoing Membership Requirements 

Required membership levels must be 

maintained by all members on an 

ongoing basis as a condition of 


srobinson on DSK4SPTVN1PROD with NOTICES