23300 Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 

18 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. 66572 

(March 12, 2012), 77 FR 15152 (‘‘Notice’’). 

4BATS Trading operates as a facility of BATS 

that provides outbound routing from BATS to other 

market centers, subject to certain conditions. See 

Securities Exchange Act Release No. 62901 

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

2010) (SR–BATS–2010–024). 

5See Securities Exchange Act Release No. 62716 

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

(File No. 10–198) (order granting the exchange 

registration of BATS Y–Exchange, Inc.) (‘‘BYX 

Approval Order’’). 

6See Securities Exchange Act Release No. 58375 

(August 18, 2008), 73 FR 49498 (August 21, 2008) 

(File No. 10–182) (order granting the exchange 

registration of BATS Exchange, Inc.). 

7See generally BYX Approval Order, supra note 

5. 8See BYX Approval Order, 75 FR at 51304. 9See Securities Exchange Act Release No. 65515 

(October 7, 2011), 76 FR 63979 (October 14, 2011) 

(SR–BYX–2011–026). 

10See Notice, supra note 3. 

11 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition and capital 

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

12 15 U.S.C. 78f(b)(1). 

13 15 U.S.C. 78f(b)(5). 

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- NYSEAmex–2012–21. 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 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 New York Stock Exchange LLC’s 

principal office and on its Internet Web 

site at www.nyse.com. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SRNYSEAmex–2012–21, and should be 

submitted on or before May 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9287 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66807; File No. SR–BYX– 

2012–006] 

Self-Regulatory Organizations; BATS 

Y-Exchange, Inc.; Order Approving a 

Proposed Rule Change To Amend 

BATS Y-Exchange, Inc. Rule 2.12 to 

Make Permanent the Pilot Program 

That Permits BATS Y-Exchange, Inc. 

To Receive Inbound Routes of Equities 

Orders Through BATS Trading, Inc., 

BATS Y-Exchange’s Routing BrokerDealer, From BATS Exchange, Inc. 

April 13, 2012. 

I. Introduction 

On March 8, 2012, BATS Y-Exchange, 

Inc. (‘‘BYX’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change requesting permanent approval 

of the Exchange’s 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 Exchange, 

Inc. (‘‘BATS’’). The proposed rule 

change was published for comment in 

the Federal Register on March 14, 

2012.3 The Commission received no 

comment letters regarding the proposed 

rule change. This order approves the 

proposed rule change. 

II. Background 

BATS Trading is a broker-dealer that 

is a member of the Exchange and is 

permitted to provide members of BATS 

optional routing services to other market 

centers.4 BATS Trading is owned by 

BATS Global Markets (‘‘Corporation’’). 

The Corporation also owns two 

registered securities exchanges—the 

Exchange5 and BATS.6 Thus, BATS 

Trading is an affiliate of the Exchange 

and BATS. 

On August 13, 2010, the Commission 

approved the Exchange’s application for 

registration as a national securities 

exchange.7 As part of that approval, the 

Exchange was approved to receive 

inbound routes of orders by BATS 

Trading in its capacity as an order 

routing facility of BATS on a pilot 

period of twelve months.8 On 

September 29, 2011, the Exchange filed 

an immediately effective proposed rule 

change to extend the pilot period six 

months ending April 15, 2012.9 The 

Exchange now seeks permanent 

approval of this inbound routing pilot.10

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.11 Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(1) of the Act,12 which requires, 

among other things, that a national 

securities exchange be so organized and 

have the capacity to carry out the 

purposes of the Act, and to comply and 

enforce compliance by its members and 

persons associated with its members, 

with the provisions of the Act, the rules 

and regulation thereunder, and the rules 

of the Exchange. Further, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,13 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices; to 

promote just and equitable principles of 

trade; to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, and 

processing information with respect to, 

and 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. 

Section 6(b)(5) also requires that the 

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Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23301 

14See BYX Approval Order, 75 FR at 51304. 

15See Notice, 77 FR at 15154. 

16See id. 

17See, e.g., Securities Exchange Act Release Nos. 

54170 (July 18, 2006), 71 FR 42149 (July 25, 2006) 

(SR–NASDAQ–2006–006) (order approving 

Nasdaq’s proposal to adopt Nasdaq Rule 2140, 

restricting affiliations between Nasdaq and its 

members); 53382 (February 27, 2006), 71 FR 11251 

(March 6, 2006) (SR–NYSE–2005–77) (order 

approving the combination of the New York Stock 

Exchange, Inc. and Archipelago Holdings, Inc.); 

58673 (September 29, 2008), 73 FR 57707 (October 

8, 2008) (SR–Amex–2008–62) (order approving the 

combination of NYSE Euronext and the American 

Stock Exchange LLC); 59135 (December 22, 2008), 

73 FR 79954 (December 30, 2008) (SR–ISE–2009– 

85) (order approving the purchase by ISE Holdings 

of an ownership interest in DirectEdge Holdings 

LLC); and 59281 (January 22, 2009), 74 FR 5014 

(January 28, 2009) (SR–NYSE–2008–120) (order 

approving a joint venture between NYSE and BIDS 

Holdings L.P.). 

18This oversight will be accomplished through a 

17d–2 Agreement. See BYX Approval Order, 75 FR 

at 51304. 

19 15 U.S.C. 78s(b)(2). 

20 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

rules of an exchange not be designed to 

permit unfair discrimination among 

customers, issuers, brokers, or dealers. 

Recognizing that the Commission has 

previously expressed concern regarding 

the potential for conflicts of interest in 

instances where a member firm is 

affiliated with an exchange to which it 

is routing orders, the Exchange 

previously implemented limitations and 

conditions to BATS Trading’s affiliation 

with the Exchange to permit the 

Exchange to accept inbound orders that 

BATS Trading routes in its capacity as 

a facility of BATS, on a pilot basis.14

The Exchange now seeks to make this 

pilot permanent. Specifically, the 

Exchange states it is in compliance with 

the following limitations and 

conditions: 15

• 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 Commission 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 Commission 

Rules. 

• The Exchange, on behalf of the 

Corporation, 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 believes that by meeting 

the above-listed conditions it has set up 

mechanisms that protect the 

independence of the Exchange’s 

regulatory responsibility with respect to 

BATS Trading, and has demonstrated 

that BATS Trading cannot use any 

information that it may have because of 

its affiliation with the Exchange to its 

advantage.16

In the past, the Commission has 

expressed concern that the affiliation of 

an exchange with one of its members 

raises potential conflicts of interest, and 

the potential for unfair competitive 

advantage.17 Although the Commission 

continues to be concerned about 

potential unfair competition and 

conflicts of interest between an 

exchange’s self-regulatory obligations 

and its commercial interest when the 

exchange is affiliated with one of its 

members, for the reasons discussed 

below, the Commission believes that it 

is consistent with the Act to permit 

BATS Trading, in its capacity as a 

facility of BATS, to provide inbound 

routing to the Exchange on a permanent 

basis instead of a pilot basis, subject to 

the other conditions described above. 

The Exchange has proposed four 

ongoing conditions applicable to BATS 

Trading’s inbound routing activities in 

its capacity as a facility of BATS, which 

are enumerated above. The Commission 

believes that these conditions mitigate 

its concerns about potential conflicts of 

interest and unfair competitive 

advantage. In particular, the 

Commission believes that a nonaffiliated SRO’s oversight of BATS 

Trading,18 combined with a nonaffiliated SRO’s monitoring of BATS 

Trading’s compliance with the 

Exchange’s rules and quarterly reporting 

to the Exchange, will help to protect the 

independence of the Exchange’s 

regulatory responsibilities with respect 

to BATS Trading. 

V. Conclusion 

It is therefore ordered, pursuant to 

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

proposed rule change (SR–BYX–2012– 

006) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9341 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66799; File No. SR–Phlx– 

2012–38] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

FINRA Fees 

April 12, 2012. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on April 11, 

2012, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

Exchange’s Pricing Schedule at Section 

VII, C to update FINRA fees to mirror 

the text of The NASDAQ Stock Market 

LLC (‘‘NASDAQ Stock Market’’) and 

NASDAQ OMX BX, Inc. (‘‘BX’’). 

The text of the proposed rule change 

is available on the Exchange’s Web site 

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