3282 Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices 

26 Id. 27 15 U.S.C. 78s(b)(3)(A)(ii). 

28 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

transaction fees when they transact 

$500,000 versus $550,000 of qualifying 

transactions. Other market participants 

will continue to benefit from the order 

interaction and liquidity that Specialists 

and Market Markers provide to the 

marketplace. 

The Exchange does not believe that 

amending the types of trades that 

qualify for the Monthly Market Maker 

Cap by excluding certain transaction 

fees related to an order or quote that is 

contra to a PIXL Order or assessing 

Specialists and Market Makers the PIXL 

pricing located in Section IV, A of the 

Pricing Schedule will impose an undue 

burden on competition because the 

Exchange’s proposal results in all 

market participants on Phlx being 

assessed the same PIXL pricing. 

The Exchange’s proposal for 

Specialists and Market Makers to pay no 

fees after they have satisfied the 

obligations related to the Monthly 

Market Maker Cap, in all Penny Pilot 

Options, provided they have added 

liquidity, and to pay lower fees for all 

other types of transactions, including 

those transacted in auctions and during 

the opening process, also does not 

provide an undue burden on 

competition. As noted above Specialists 

and Market Makers have burdensome 

quoting obligations to the market that do 

not apply to Customers, Professionals, 

Firms and Broker-Dealers.26 Specialists 

and Market Makers serve an important 

role on the Exchange with regard to 

order interaction and they provide 

liquidity in the marketplace. The 

proposed differentiation as between 

Specialists and Market Makers as 

compared to other market participants 

recognizes the differing contributions 

made to the trading environment on the 

Exchange by these market participants. 

Customer liquidity benefits all market 

participants by providing more trading 

opportunities, which attract Specialists 

and Market Makers. An increase in the 

activity of these market participants in 

turn facilitates tighter spreads, which 

may cause an additional corresponding 

increase in order flow from other market 

participants. For these reasons noted 

above, the Exchange does not believe 

that offering Specialists and Market 

Makers the opportunity to cap fees in 

certain symbols imposes an undue 

burden on competition. 

The Exchange operates in a highly 

competitive market, comprised of 

twelve exchanges, in which market 

participants can easily and readily 

direct order flow to competing venues if 

they deem fee levels at a particular 

venue to be excessive or rebates to be 

inadequate. Accordingly, the fees that 

are assessed and the rebates paid by the 

Exchange, as described in the proposal, 

are influenced by these robust market 

forces and therefore must remain 

competitive with fees charged and 

rebates paid by other venues and 

therefore must continue to be reasonable 

and equitably allocated to those 

members that opt to direct orders to the 

Exchange rather than competing venues. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.27 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 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 Number SR– 

Phlx–2015–06 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 

Number SR–Phlx–2015–06. 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 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 Number SR–Phlx– 

2015–06 and should be submitted on or 

before February 12, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–00971 Filed 1–21–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74072; File No. SR–EDGX– 

2015–02] 

Self-Regulatory Organizations; EDGX 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Clarify the Use of 

Certain Data Feeds 

January 15, 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 January 

7, 2015, EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) 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 self-regulatory organization. The 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices 3283 

3The 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). 

4See Securities Exchange Act Release No. 72683 

(July 28, 2014), 79 FR 44950 (August 1, 2014) (SR– 

EDGX–2014–20). Other national securities exchange 

filed similar proposals. See e.g., Securities 

Exchange Act Release Nos. 72710 (July 29, 2014), 

79 FR 45511 (August 5, 2014) (SR–NYSE–2014–38), 

and 72684 (July 28, 2014), 79 FR44956 (August 1, 

2014) (SR–NASDAQ–2014–072). 

5The Exchange understands that other national 

security exchanges will file similar proposed rule 

changes with the Commission to further describe 

their use of data feeds for order handling and 

execution, order routing, and regulatory 

compliance. 

6See Mary Jo White, Chair, Securities and 

Exchange Commission, Speech at Sandler O’Neill & 

Partners L.P. Global Exchange and Brokerage 

Conference (June 5, 2014). 

7See letter from Stephen Luparello, Director, 

Division of Trading and Markets, Securities and 

Exchange Commission, to Joe Ratterman, Chief 

Executive Officer, BATS Global Markets, Inc., dated 

June 20, 2014. 

8See supra note 6. 

9See supra note 7. 

10See Securities Exchange Act Release No. 71449 

(January 30, 2014), 79 FR 6961 (February 5, 2014) 

(SR–EDGX–2013–43; SR–EDGA–2013–34). 

11The term ‘‘User’’ is defined as ‘‘any Member or 

Sponsored Participant who is authorized to obtain 

access to the System pursuant to Rule 11.3.’’ See 

Exchange Rule 1.5(ee). 

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 filed a proposal to 

amend certain rules to adopt or align 

system functionality with that currently 

offered by BATS Exchange, Inc. (‘‘BZX’’) 

and BATS Y-Exchange, Inc. (‘‘BYX’’, 

and collectively with BZX, ‘‘BATS’’) in 

order to provide a consistent technology 

offering amongst the Exchange and its 

affiliates. These changes, which are 

described in detail below, propose to 

clarify for Members 3 and non-Members 

the Exchange’s use of certain data feeds 

for order handling and execution, order 

routing, and regulatory compliance. 

On July 15, 2014, the Exchange filed 

a proposed rule change that described 

its use of data feeds for order handling 

and execution, order routing, and 

regulatory compliance (the ‘‘Initial 

Proposal’’) with the Commission.4 The 

Exchange submits this supplemental 

filing in order to specify for Members 

and non-Members the Exchange’s use of 

certain data feeds in connection with 

the technology migration described in 

further detail below.5

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.directedge.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 

Background 

On June 5, 2014, Chair White 

requested that all national securities 

exchanges develop proposed rule 

changes to disclose their use of data 

feeds to execute and route orders and 

comply with regulatory requirements.6

In addition, on June 20, 2014, the 

Commission’s Division of Trading and 

Markets requested that the Exchange file 

proposed rule changes that disclose its 

usage of particular market data feeds, 

among other things.7 In response to 

these requests, the Exchange filed the 

Initial Proposal with the Commission on 

July 15, 2014.8 The Exchange submits 

this supplemental filing to describe the 

Exchange’s use of certain data feeds for 

order handling and execution, order 

routing, and regulatory compliance in 

connection with the technology 

migration described in further detail 

below.9

Technology Migration 

Earlier this year, the Exchange and its 

affiliate EDGA Exchange, Inc. (‘‘EDGA’’) 

received approval to effect a merger (the 

‘‘Merger’’) of the Exchange’s parent 

company, Direct Edge Holdings LLC, 

with BATS Global Markets, Inc., the 

parent company of BATS (the Exchange, 

together with BZX, BYX and EDGA, the 

‘‘BGM Affiliated Exchanges’’).10 In the 

context of the Merger, the BGM 

Affiliated Exchanges are working to 

migrate EDGA and EDGX onto the BATS 

technology platform, and align certain 

system functionality, retaining only 

intended differences between the BGM 

Affiliated Exchanges. 

The proposed amendments are 

intended to align certain system 

functionality with that currently offered 

by BATS in order to provide a 

consistent technology offering for 

Users11 of the BGM Affiliated 

Exchanges. The Exchange notes that the 

proposed rule text is based on 

corresponding proposals being 

submitted by all of the BGM Affiliated 

Exchanges. The proposed amendments 

do not propose to implement new or 

unique functionality that has not been 

previously filed with the Commission or 

is not available on BATS or BYX. 

To ensure proper context and a 

complete filing describing the 

Exchange’s procedures in this area both 

prior to and after the technology 

migration, the Exchange has repeated 

relevant information from the Initial 

Proposal and supplemented such 

information as necessary. In each 

section below the Exchange first 

describes its pre-integration 

functionality, which will be in place 

until the technology migration is 

complete, followed by a description of 

post-integration functionality. The 

Exchange anticipates completing the 

technology migration on or about 

January 12, 2015. 

Order Handling and Execution 

Pre-Integration Functionality. The 

Exchange’s Matching Engine (the ‘‘ME’’) 

determines whether an order should be 

displayed, executed internally, or 

routed to another market center. In 

making this determination, the ME 

continually receives and maintains 

quote data that is delivered from an 

internal processor (the ‘‘Feed Handler’’). 

The market data processed by the Feed 

Handler is sourced directly from the 

Securities Information Processors 

(‘‘SIP’’) feeds. Specifically, the 

Exchange’s ME uses the Consolidated 

Tape Association (CTA) market data 

operated by the Securities Industry 

Automation Corp. in Tapes A and B and 

Unlisted Trading Privileges (UTP) 

market data operated by NASDAQ OMX 

Group, Inc. in Tape C securities. 

These SIP feeds contain the best (topof-book) prices in round lot quotations 

of each protected venue. The Exchange’s 

ME consumes the SIP feeds to obtain the 

top-of-book quotes from each protected 

venue, including the Exchange’s 

affiliates, EDGX, BZX, and BYX, and the 

Financial Industry Regulatory 

Authority’s (‘‘FINRA’’) Alternative 

Display Facility (‘‘ADF’’). The SIP feeds 

do not display odd lot quotations; 

therefore, the ME does not use odd lot 

quotations to calculate the national best 


tkelley on DSK3SPTVN1PROD with NOTICES
3284 Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices 

12The term ‘‘EDGX Book’’ is defined as ‘‘the 

System’s electronic file of orders.’’ See Exchange 

Rule 1.5(d). 

13Pursuant to Regulation NMS, a broker-dealer 

routing a Day ISO is required to simultaneously 

route one or more additional ISOs, as necessary, to 

execute against the full displayed size of any 

protected quote priced equal to or better than the 

Day ISO. See also Question 5.02 in the ‘‘Division 

of Trading and Markets, Responses to Frequently 

Asked Questions Concerning Rule 611 and Rule 610 

of Regulation NMS’’ (last updated April 4, 2008) 

available at http://www.sec.gov/divisions/

marketreg/nmsfaq610–11.htm. 

14See Exchange Rule 11.6(j). 

15See Exchange Rule 11.8(d). 

16See Exchange Rule 11.8(e). 

17See Exchange Rule 11.8(f). 

18See Exchange Rule 11.8(g). 

19The Exchange notes that it recently filed a 

separate proposal reflecting a change from its 

current routing broker-dealer, Direct Edge ECN LLC 

(d/b/a DE Route), to the use of BATS Trading, Inc. 

as the Exchange’s routing broker-dealer in 

connection with the technology migration. See 

Securities Exchange Act Release No. 73940 

(December 24, 2014), 80 FR 63 (January 2, 2015) 

(SR–EDGX–2014–35). 

20Pursuant to Regulation NMS, a broker-dealer 

routing a Day ISO is required to simultaneously 

route one or more additional ISOs, as necessary, to 

execute against the full displayed size of any 

protected quote priced equal to or better than the 

Day ISO. See also Question 5.02 in the ‘‘Division 

of Trading and Markets, Responses to Frequently 

Asked Questions Concerning Rule 611 and Rule 610 

of Regulation NMS’’ (last updated April 4, 2008) 

available at http://www.sec.gov/divisions/

marketreg/nmsfaq610–11.htm. 

21As set forth in Rule 11.11(g), the term ‘‘System 

routing table’’ refers to the proprietary process for 

determining the specific trading venues to which 

the System routes orders and the order in which it 

routes them. 

22See Exchange Rule 11.6(j). 

23See Exchange Rule 11.8(d). 

24See Exchange Rule 11.8(e). 

25See Exchange Rule 11.8(f). 

26See Exchange Rule 11.8(g). 

27See supra note 21. 

bid and offer (‘‘NBBO’’). However, a 

protected venue may aggregate odd lot 

quotations to create round lot quotations 

and publish those round lot quotations 

to the SIPs feeds. Based on the SIP feeds 

and the EDGX Book,12 the ME 

constructs the NBBO. 

The ME will also update the NBBO 

upon receipt of an Intermarket Sweep 

Order (‘‘ISO’’) with a time-in-force of 

Day (‘‘Day ISO’’). When a Day ISO is 

posted on the EDGX Book, the ME uses 

the receipt of a Day ISO as evidence that 

the protected quotes have been cleared, 

and the ME does not check away 

markets for equal or better-priced 

protected quotes.13 The ME will then 

display and execute non-ISO orders at 

the same price as the Day ISO. 

The NBBO is utilized for order 

handling and execution. The Exchange 

looks to its calculation of the NBBO, 

based on the SIP feeds and the EDGX 

Book, when determining the price at 

which an order with a Pegged 

instruction,14 MidPoint Peg Order,15

MidPoint Discretionary Order,16 Market 

Maker Peg Order,17 or Supplemental 

Peg Order18 is to be pegged. 

Post-Integration Functionality. As 

proposed, following the technology 

migration, in order to calculate the 

NBBO in its Matching Engine (the 

‘‘ME’’), the Exchange will use quotes 

disseminated by market centers through 

proprietary data feeds (generally 

referred to as ‘‘Direct Feeds’’) as well as 

by the SIP. The ME will use quotes 

disseminated from SIP feeds for the 

Chicago Stock Exchange, Inc., NYSE 

MKT LLC and FINRA’s ADF. The ME 

will consume the Direct Feeds from 

every other protected venue, including 

the Exchange’s affiliates, BZX, BYX and 

EDGA. 

The ME will include odd lot 

quotations in its calculation of the 

NBBO depending on the source of the 

quotation. Where a protected market 

center aggregates odd lot quotations at a 

single price level into round lot 

quotations and publishes such 

aggregated quotations to the SIPs, then 

the ME will include those odd lot 

quotations in its calculation of the 

NBBO. In addition, where a protected 

market center aggregates odd lot 

quotations across more than one price 

level and publishes such aggregated 

quotations to the SIPs, then the ME will 

include those odd lot quotations in its 

calculation of the NBBO. 

In addition to receiving Direct Feeds 

and SIP feeds, the ME’s calculation of 

the NBBO may be adjusted based on 

orders sent to other venues with 

protected quotations, execution reports 

received from those venues, and certain 

orders received by the Exchange 

(collectively ‘‘Feedback’’). The 

Exchange does not include its quotes in 

the calculation of the Exchange’s NBBO 

because the system is designed such 

that all incoming orders are separately 

compared to the Exchange’s Best Bid or 

Offer and the Exchange calculated 

NBBO, which together create a complete 

view of the NBBO, prior to display, 

execution, or routing. 

Feedback from the receipt of ISOs 

with a time-in-force of Day (‘‘Day ISOs’’) 

and feedback from the Exchange’s 

routing broker/dealer, BATS Trading, 

Inc., (‘‘BATS Trading’’),19 defined 

respectively as ‘‘Day ISO Feedback and 

‘‘Router Feedback,’’ will be used to 

augment the market data received by 

Direct Feeds and the SIP feeds as further 

described below. The Exchange’s ME 

will update the NBBO upon receipt of 

a Day ISO. When a Day ISO is posted 

on the EDGX Book, the ME uses the 

receipt of a Day ISO as evidence that the 

protected quotes have been cleared, and 

the ME does not check away markets for 

equal or better-priced protected 

quotes.20 The ME will then display and 

execute non-ISO orders at the same 

price as the Day ISO. 

All Feedback expires as soon as: (i) 

one (1) second passes; (ii) the Exchange 

receives new quote information; or (iii) 

the Exchange receives updated 

Feedback information. With the 

exception of Day ISO Feedback, the 

Exchange currently generates Feedback 

where an order was routed using a 

routing strategy offered by the Exchange 

that accesses protected quotes of trading 

venues on the System Routing Table 

(‘‘Smart Order Routing’’).21

As described above, the NBBO is 

utilized for order handling and 

execution. In determining the price 

where an order with a Pegged 

instruction, 22 MidPoint Peg Order, 23

MidPoint Discretionary Order, 24 Market 

Maker Peg Order25 or Supplemental Peg 

Order26 is to be pegged, the Exchange 

uses the Pegged NBBO (‘‘PBBO’’). The 

Exchange will calculate the PBBO using 

information regarding orders displayed 

on the EDGX Book in addition to the 

quotes disseminated by market centers 

through Direct Feeds, SIP feeds, and 

Feedback used by the ME for its NBBO 

calculation. 

Order Routing 

Pre-Integration Functionality. When 

the Exchange has a marketable order 

with instructions from the sender that 

the order is eligible to be routed, and the 

ME identifies that there is no matching 

price available on the Exchange, but 

there is a matching price represented at 

another venue that displays protected 

quotes, then the ME will send the order 

to the Routing Engine (‘‘RE’’) of Direct 

Edge ECN LLC (d/b/a DE Route).27

In determining whether to route an 

order and to which venue(s) it should be 

routed, the RE uses quotes disseminated 

from Direct Feeds, including EDGA, 

EDGX, BZX and BYX, and the SIP feeds 

from those venues where the Exchange 

does not take the Direct Feeds, 

including FINRA’s ADF. 

The RE utilizes a third-party market 

data processor that consumes the Direct 

Feeds and the SIP feeds, aggregates the 

quantities of symbols by price level, and 

redistributes them to an internal quote 

processor (the ‘‘Quote Server’’). The RE 

will request from the Quote Server a 

market data snapshot which includes 

the top-of-book and/or depth-of-book of 

each market center offering depth-ofbook feeds. Depending on the source of 

the quotation, the Quote Server may 

include odd lot quotations if the market 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices 3285 

28Question 11 of the ‘‘Division of Market 

Regulation: Responses to Frequently Asked 

Questions Concerning Rule 611 and Rule 610 of 

Regulation NMS’’ describes routing practices in the 

context of stale quotes, available at http://

www.sec.gov/divisions/marketreg/rule611faq.pdf. 

29The ME and RE consume the same Direct Feeds 

and SIP feeds. 

30See Exchange Rule 11.6(l). 

31See supra note 22. 

32See supra note 22. 

33See also Question 5.03 in the ‘‘Division of 

Trading and Markets, Responses to Frequently 

Asked Questions Concerning Rule 611 and Rule 610 

of Regulation NMS’’ (last updated April 4, 2008) 

available at http://www.sec.gov/divisions/

marketreg/nmsfaq610-11.htm. 

center publishes odd lot quotations in 

its Direct Feed. 

Based on this snapshot, the RE 

determines where to route the order, 

allocating the shares to the venues at 

each price level up to the limit price of 

the order, starting with the best quotes 

subject to the Member’s instructions. If 

there are any shares remaining after the 

response to the initial route is received, 

the RE will take another snapshot from 

the Quote Server and send out orders 

based on the same logic. If the full 

quantity of the order is not executed 

after multiple route attempts, the order 

is returned to the ME. 

In addition, the RE utilizes in-flight 

order information in its routing 

methodology. The RE tracks the details 

of each in-flight order, including the 

quantity routed and the corresponding 

quote published by the routed venue. 

After the RE requests a market data 

snapshot from the Quote Server and the 

RE has already targeted this quote 

(identified by venue, symbol, price, 

quantity and time stamp), then the RE 

will subtract the routed quantity of inflight orders from the quote size 

displayed in the market data snapshot. 

The RE will route an order for the 

remaining quantity to the venue. If there 

are no residual shares, the RE will 

bypass the quote. 

The RE also utilizes responses from 

other venues displaying protected 

quotes in its routing methodology. 

When the RE receives a response from 

a venue that does not completely fill the 

order targeting a quote, and no 

subsequent quote update has been 

received from that venue at the same 

price level, the RE will mark that 

venue’s quote as stale at that price 

level.28 Absent additional quote updates 

from that venue, the RE will bypass the 

quote for one (1) second. After one 

second, if the quote is still included in 

the market data snapshot, the RE will 

target the quote again. 

Post Integration Functionality. As 

proposed, following the technology 

migration, when the Exchange has a 

marketable order with instructions from 

the sender that the order is eligible to be 

routed, and the ME identifies that there 

is no matching price available on the 

Exchange but there is a matching price 

represented at another venue that 

displays protected quotes, then the ME 

will send the order to the RE of BATS 

Trading. 

In determining whether to route an 

order and to which venue(s) it should be 

routed, the RE will make its own 

calculation of the NBBO using the 

Direct Feeds, SIP feeds, and Router 

Feedback, as described below.29 The RE 

will include odd lot quotations in its 

calculation of the NBBO depending on 

the source of the quotation. Where a 

protected market center aggregates odd 

lot quotations at a single price level into 

round lot quotations and publishes such 

aggregated quotations to the SIPs, then 

the RE will include those odd lot 

quotations in its calculation of the 

NBBO. 

The RE will not utilize Day ISO 

Feedback in constructing the NBBO; 

however, because all orders initially 

flow through the ME, to the extent Day 

ISO Feedback has updated the ME’s 

calculation of the NBBO, all orders 

processed by the RE will take Day ISO 

Feedback into account. The RE will 

receive Feedback from all Smart Order 

Routing strategies. 

There are three types of Router 

Feedback that contribute to the 

Exchange’s calculation of the NBBO: 

• Immediate Feedback. Where BATS 

Trading routes an order to a venue with 

a protected quotation using Smart Order 

Routing (a ‘‘Feedback Order’’), the 

number of shares available at that venue 

will be immediately decreased by the 

number of shares routed to the venue at 

the applicable price level. 

• Execution Feedback. Where BATS 

Trading receives an execution report 

associated with a Feedback Order that 

indicates that the order has fully 

executed with no remaining shares 

associated with the order, all opposite 

side quotes on the venue’s order book 

that are priced more aggressively than 

the price at which the order was 

executed will be ignored. 

• Cancellation Feedback. Where 

BATS Trading receives an execution 

report associated with a Feedback Order 

that indicates that the order has not 

fully executed (either a partial execution 

or a cancellation), all opposite side 

quotes on the venue’s order book that 

are priced equal to or more aggressively 

than the limit price for the order will be 

ignored. 

All Feedback expires as soon as: (i) 

one (1) second passes; (ii) the Exchange 

receives new quote information; or (iii) 

the Exchange receives updated 

Feedback information. 

Regulatory Compliance 

Locked or Crossed Markets. 

Pre-Integration Functionality. The ME 

determines whether the display of an 

order would lock or cross the market. At 

the time an order is entered into the ME, 

the ME will establish, based upon the 

prevailing top-of-book quotes of other 

exchanges displaying protected quotes 

received from the SIP feeds, whether the 

order will lock or cross the prevailing 

NBBO for a security. In the event that 

the order would produce a locking or 

crossing condition, the ME will cancel 

the order, re-price30 the order or route 

the order based on the Member’s 

instructions. Two exceptions to this 

logic are Day ISOs and declarations of 

self-help. 

Pursuant to Regulation NMS, when an 

Exchange receives a Day ISO, the sender 

of the ISO retains the responsibility to 

comply with applicable rules relating to 

locked and crossed markets.31 In such 

case, the Exchange will display a Day 

ISO order at the Member’s price, even 

if such price would lock or cross the 

market.32

Declarations of self-help occur when 

the RE detects that an exchange 

displaying protected quotes is slow, as 

defined in Regulation NMS, or nonresponsive to the Exchange’s routed 

orders. In this circumstance, according 

to Rule 611(b) of Regulation NMS, the 

Exchange may display a quotation that 

may lock or cross quotations from the 

market that the Exchange invoked selfhelp against.33 The ME and RE, when 

they process market data, maintain logic 

that ignores the quotes generated from 

the self-helped market in their 

calculations of the NBBO for execution 

and routing determinations in 

compliance with Regulation NMS. The 

Exchange also disables all routing to the 

self-helped market. The ME and Quote 

Server continue to consume the selfhelped market center’s quotes, however, 

in order to immediately include the 

quote in the NBBO calculation and 

enable routing once self-help is revoked. 

The Exchange excludes quotes from the 

self-helped market for re-pricing 

purposes and to price orders such as 

orders with a Pegged instruction and 

MidPoint Peg Orders. 

Post-Integration Functionality. The 

Exchange’s post-integration 


tkelley on DSK3SPTVN1PROD with NOTICES
3286 Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices 

34See Exchange Rule 11.6(l)(2). 

35 17 CFR 242.200(g); 17 CFR 242.201. On 

February 26, 2010, the Commission adopted 

amendments to Regulation SHO under the Act in 

the form of Rule 201, pursuant to which, among 

other things, short sale orders in covered securities 

generally cannot be executed or displayed by a 

trading center, such as the Exchange, at a price that 

is at or below the current NBB when a Short Sale 

Circuit Breaker is in effect for the covered security. 

See 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. See 

also Securities Exchange Act Release No. 63247 

(November 4, 2010), 75 FR 68702 (November 9, 

2010) (extending the compliance date for Rules 201 

and 200(g) to February 28, 2011). See also Division 

of Trading & Markets: Responses to Frequently 

Asked Questions Concerning Rule 201 of 

Regulation SHO, www.sec.gov/divisions/marketreg/ 

rule201faq.htm. 

36 15 U.S.C. 78f(b). 

37 15 U.S.C. 78f(b)(5). 

functionality is similar to the preintegration functionality. However, the 

Exchange notes that at the time an order 

is entered into the ME, the ME will 

establish, based upon its calculation of 

the NBBO from Direct Feeds, SIP feeds 

and Feedback, whether the order will 

lock or cross the prevailing NBBO for a 

security. 

Trade-Through Rule 

Pre-Integration Functionality. 

Pursuant to Rule 611 of Regulation 

NMS, the Exchange shall establish, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to prevent trade-throughs on 

trading centers of protected quotations 

in NMS stocks that do not fall within a 

valid exception and, if relying on such 

an exception, that are reasonably 

designed to ensure compliance with the 

terms of the exception. The ME does not 

permit an execution on the Exchange if 

there are better-priced protected 

quotations displayed in the market 

unless the order is an ISO. At the time 

an order is entered into the ME, the ME 

uses the view of the NBBO as described 

above. If the NBBO is priced better than 

what is resident on the Exchange, the 

Exchange will not match such order on 

the EDGX Book, and based on the 

Member’s instructions, the ME will 

cancel the order, re-price the order or 

route the order. 

Post-Integration Functionality. The 

Exchange’s post-integration 

functionality that describes compliance 

with the trade-through rule is the same 

as the Exchange’s pre-integration 

functionality. The Exchange again notes 

that following the technology migration, 

it will calculation the NBBO using 

Direct Feeds, SIP Feeds, and Feedback. 

Regulation SHO 

Pre-Integration Functionality. The 

Exchange cannot execute a short sale 

order 34 equal to or below the current 

National Best Bid (‘‘NBB’’) when a short 

sale price restriction is in effect 

pursuant to Rule 201 of Regulation SHO 

(‘‘Short Sale Circuit Breaker’’).35 When 

a Short Sale Circuit Breaker is in effect, 

the Exchange utilizes information 

received from the SIP feeds and a view 

of the EDGX Book to assess its 

compliance with Rule 201 of Regulation 

SHO. The NBBO used for compliance 

with Rule 201 of Regulation SHO 

includes quotes from market centers 

against which the Exchange has 

declared self-help. 

Post-Integration Functionality. The 

Exchange’s post-integration 

functionality is similar to the preintegration functionality, including that 

the NBBO used for compliance with 

Rule 201 of Regulation SHO will 

include quotes from market centers 

against which the Exchange has 

declared self-help. However, the 

Exchange notes that when a Short Sale 

Circuit Breaker is in effect, the Exchange 

will utilize information received from 

Direct Feeds, SIP feeds, Feedback and a 

view of the EDGX Book to assess its 

compliance with Rule 201 of Regulation 

SHO. 

Latent or Inaccurate Direct Feeds 

Pre-Integration Functionality. Where 

the Exchange’s systems detect problems 

with one or more Direct Feeds, the 

Quote Server can manually fail over to 

the SIP feed to calculate the NBBO for 

the market center(s) where the 

applicable Direct Feed is experiencing 

issues. In order to make this 

determination, the Quote Server 

continuously polls every Direct Feed 

line and generates an email alert if the 

difference between a quote’s sent time 

(as stamped by the sending market) and 

the time of receipt by the Exchange 

exceeds one (1) second. 

Post-Integration Functionality. As 

proposed, where the Exchange’s systems 

detect problems with one or more Direct 

Feeds, the Exchange will immediately 

fail over to the SIP feed to calculate the 

NBBO for the market center(s) where the 

applicable Direct Feed is experiencing 

issues. The Exchange can also manually 

fail over to the SIP feed in lieu of Direct 

Feed data upon identification by a 

market center of an issue with its Direct 

Feed(s). 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act36 in general, and furthers the 

objectives of Section 6(b)(5) of the Act37

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 does not 

believe that this proposal will permit 

unfair discrimination among customers, 

brokers, or dealers because it will be 

available to all Users. 

The Exchange believes that its 

proposal to describe the Exchange’s use 

of data feeds removes impediments to 

and perfects the mechanism of a free 

and open market and protects investors 

and the public interest because it 

provides additional specificity and 

transparency regarding both the current 

operation of the System and the 

operation of the System following the 

migration to BATS technology. The 

Exchange’s proposal will enable 

investors to better assess the quality of 

the Exchange’s execution and routing 

services. The Exchange believes the 

additional transparency into the 

operation of the Exchange as described 

in the proposal will remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, protect investors and the public 

interest. 

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. On the contrary, 

the Exchange believes the proposal 

would enhance competition because 

describing the Exchange’s use of data 

feeds enhances transparency and 

enables investors to better assess the 

quality of the Exchange’s execution and 

routing services. In addition, the 

Exchange believes the proposed rule 

change will benefit Exchange 

participants in that it is one of several 

changes necessary to achieve a 

consistent technology offering by the 

BGM Affiliated Exchanges [sic] 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange filed the Initial 

Proposal with the Commission on July 

15, 2014, and it was published for 

comment in the Federal Register on 

August 1, 2014. The Commission 

received one (1) written comment letter 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices 3287 

38See Letter from Suzanne Hamlet Shatto to the 

Commission, dated August 19, 2014 (SR–EDGX– 

2014–20) (discussing Dodd Frank principles). 

39See Letter from R.T. Leuchtkafer to the 

Commission, dated August 22, 2014 (SR–BATS– 

2014–029) (discussing the Exchange’s market data 

feed practices). See Letter from Eric Scott Hunsader, 

Nanex, LLC, to the Commission, dated August 22, 

2014 (SR–BATS–2014–029) (discussing the 

Exchange’s use of NBBO as a defined term). 

40See Letter from Donald Bollerman, Head of 

Market Operations, IEX ATS, to the Commission, 

dated September 25, 2014 (SR–BATS–2014–029) 

(SR–BYX–2014–012) (discussing the Exchange’s 

calculation of the PBBO). 

41 15 U.S.C. 78s(b)(3)(A). 

42 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. 

43 17 CFR 240.19b–4(f)(6). 

44 17 CFR 240.19b–4(f)(6)(iii). 

45For 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). 

46 17 CFR 200.30–3(a)(12). 

1 12 U.S.C. 5465(e)(1). 

2 17 CFR 240.19b–4(n)(1)(i). 

commenting on the Initial Proposal.38

The Commission also received three (3) 

letters commenting on companion 

filings: two (2) letters commented on 

SR–BATS–2014–029,39 and one (1) 

letter commented on SR–BATS–2014– 

029 and SR–BYX–2014–012.40 The 

Exchange believes that the comments 

raised in these letters are either not 

directly related to the Exchange’s 

proposal but instead raise larger market 

structure issues or are adequately 

addressed in this proposal, particularly 

as it relates to the Commission’s request 

to describe the Exchange’s use of data 

feeds for order handling and execution, 

order routing, and regulatory 

compliance. 

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, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act41 and Rule 19b–4(f)(6) 

thereunder.42

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act43 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6)(iii)44

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 stated that waiver 

of the operative delay will allow the 

Exchange to immediately adopt rule text 

consistent with the Initial Proposal and 

operate in the same manner as BATS 

with respect to the use of data feeds. In 

addition, the Exchange stated that 

waiver of the operative delay will allow 

it to continue to move towards a 

complete technology integration of the 

BGM Affiliated Exchanges to ensure 

stability of the System. For these 

reasons, the Commission believes that 

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.45

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 

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 Number SR– 

EDGX–2015–02 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 

Number SR–EDGX–2015–02. 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 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 Number SR–EDGX– 

2015–02 and should be submitted on or 

before February 12, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.46

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–00969 Filed 1–21–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74073; File No. SR–OCC– 

2014–812] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Advance Notice 

Concerning Extended and Overnight 

Trading Sessions 

January 15, 2015. 

Pursuant to Section 806(e)(1) of Title 

VIII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

entitled the Payment, Clearing, and 

Settlement Supervision Act of 2010 1

(‘‘Payment, Clearing and Settlement 

Supervision Act’’) and Rule 19b– 

4(n)(1)(i) under the Securities Exchange 

Act of 1934 2 notice is hereby given that 

on December 12, 2014, The Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 


tkelley on DSK3SPTVN1PROD with NOTICES