Federal Register / Vol. 80, No. 28 / Wednesday, February 11, 2015 / Notices 7665 

25See Letter from Bruce Goodhue, Chief 

Regulatory Officer, BOX, to David Hsu, Assistant 

Director, Commission, dated February 4, 2015. 

26BOX Rule 8050(e). 

27See supra note 22. 

28See, e.g., Newton v. Merrill, Lynch, Pierce, 

Fenner & Smith, Inc., 135 F.3d 266, 269–70, 274 (3d 

Cir.), cert. denied, 525 U.S. 811 (1998); Certain 

Market Making Activities on Nasdaq, Securities 

Exchange Act Release No. 40900 (Jan. 11, 1999) 

(settled case) (citing Sinclair v. SEC, 444 F.2d 399 

(2d Cir. 1971); Arleen Hughes, 27 SEC 629, 636 

(1948), aff’d sub nom. Hughes v. SEC, 174 F.2d 969 

(D.C. Cir. 1949)). See also Order Execution 

Obligations, Securities Exchange Act Release No. 

37619A (Sept. 6, 1996), 61 FR 48290 (Sept. 12, 

1996) (‘‘Order Handling Rules Release’’); 51808 

(June 9, 2005), 70 FR 37496, 37537–8 (June 29, 

2005). 

29Order Handling Rules Release, supra note 28 at 

48322. See also Newton, 135 F.3d at 270. Failure 

to satisfy the duty of best execution can constitute 

fraud because a broker-dealer, in agreeing to 

execute a customer’s order, makes an implied 

representation that it will execute it in a manner 

that maximizes the customer’s economic gain in the 

transaction. See Newton, 135 F.3d at 273 (‘‘[T]he 

basis for the duty of best execution is the mutual 

understanding that the client is engaging in the 

trade—and retaining the services of the broker as 

his agent—solely for the purpose of maximizing his 

own economic benefit, and that the broker receives 

her compensation because she assists the client in 

reaching that goal.’’); Marc N. Geman, Securities 

Exchange Act Release No. 43963 (Feb. 14, 2001) 

(citing Newton, but concluding that respondent 

fulfilled his duty of best execution). See also 

Payment for Order Flow, Securities Exchange Act 

Release No. 34902 (Oct. 27, 1994), 59 FR 55006, 

55009 (Nov. 2, 1994) (‘‘Payment for Order Flow 

Final Rules’’). If the broker-dealer intends not to act 

in a manner that maximizes the customer’s benefit 

when he accepts the order and does not disclose 

this to the customer, the broker-dealer’s implied 

representation is false. See Newton, 135 F.3d at 

273–274. 

30Newton, 135 F.3d at 270. Newton also noted 

certain factors relevant to best execution—order 

size, trading characteristics of the security, speed of 

execution, clearing costs, and the cost and difficulty 

of executing an order in a particular market. Id. at 

270 n. 2 (citing Payment for Order Flow, Securities 

Exchange Act Release No. 33026 (Oct. 6, 1993), 58 

FR 52934, 52937–38 (Oct. 13, 1993) (Proposed 

Rules)). See In re E.F. Hutton & Co., Securities 

Exchange Act Release No. 25887 (July 6, 1988). See 

also Payment for Order Flow Final Rules, 59 FR at 

55008–55009. 

31Order Handling Rules Release, supra note 28 

48322–48333 (‘‘In conducting the requisite 

evaluation of its internal order handling 

procedures, a broker-dealer must regularly and 

rigorously examine execution quality likely to be 

obtained from different markets or market makers 

trading a security.’’). See also Newton, 135 F.3d at 

271; Market 2000: An Examination of Current 

Equity Market Developments V–4 (SEC Division of 

Market Regulation January 1994) (‘‘Without specific 

instructions from a customer, however, a brokerdealer should periodically assess the quality of 

competing markets to ensure that its order flow is 

directed to markets providing the most 

advantageous terms for the customer’s order.’’); 

Payment for Order Flow Final Rules, 59 FR at 

55009. 

32Order Handling Rules, supra note 28 at 48323. 

33Order Handling Rules, supra note 28 at 48323. 

For example, in connection with orders that are to 

be executed at a market opening price, ‘‘[b]rokerdealers are subject to a best execution duty in 

executing customer orders at the opening, and 

should take into account the alternative methods in 

determining how to obtain best execution for their 

customer orders.’’ Disclosure of Order Execution 

and Routing Practices, Securities Exchange Act 

Release No. 43590 (Nov.17, 2000), 65 FR 75414, 

75422 (Dec. 1, 2000) (adopting new Exchange Act 

Rules 11Ac1–5 and 11Ac1–6 and noting that 

alternative methods offered by some Nasdaq market 

centers for pre-open orders included the mid-point 

of the spread or at the bid or offer). 

34 15 U.S.C. 78f(b)(5). 

35 15 U.S.C. 78s(b)(2). 

36 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(2). 

believes that it is critical that a Preferred 

Market Maker must not be permitted to 

step up and match the NBBO after it 

receives a directed order in order to 

receive the Preferred Allocation. In this 

regard, BOX’s proposal prohibits 

notifying a DMM of an intention to 

submit a Directed Order so that such 

DMM could change its quotation to 

match the NBBO immediately prior to 

submission of the Directed Order, and 

then fade its quote. BOX submitted a 

letter to the Commission representing 

that it will provide the necessary 

protections against that type of conduct, 

and will proactively conduct 

surveillance for, and enforce against, 

such violations.25

BOX’s proposed rules will require 

Preferred Market Makers to quote at a 

higher level than other marker makers 

who are not Preferred Market Makers. 

Currently, market makers on BOX are 

required to quote 60% of the trading 

day.26 In order to receive the 

participation entitlement, Preferred 

Market Makers will be required to quote 

99% of the trading day. The 

Commission believes that requiring 

heightened quoting by a market maker 

in order to be eligible to receive a 

Preferred Allocation is consistent with 

what other exchanges have required as 

part of their directed order programs.27

The Commission emphasizes that 

approval of this proposal does not affect 

a broker-dealer’s duty of best execution. 

A broker-dealer has a legal duty to seek 

to obtain best execution of customer 

orders, and any decision to preference a 

particular Preferred Market Maker must 

be consistent with this duty.28 A brokerdealer’s duty of best execution derives 

from common law agency principles 

and fiduciary obligations, and is 

incorporated in SRO rules and, through 

judicial and Commission decisions, the 

antifraud provisions of the federal 

securities laws.29 The duty of best 

execution requires broker-dealers to 

execute customers’ trades at the most 

favorable terms reasonably available 

under the circumstances, i.e., at the best 

reasonably available price.30 The duty 

of best execution requires broker-dealers 

to periodically assess the quality of 

competing markets to assure that order 

flow is directed to the markets 

providing the most beneficial terms for 

their customer orders.31 Broker-dealers 

must examine their procedures for 

seeking to obtain best execution in light 

of market and technology changes and 

modify those practices if necessary to 

enable their customers to obtain the best 

reasonably available prices.32 In doing 

so, broker-dealers must take into 

account price improvement 

opportunities, and whether different 

markets may be more suitable for 

different types of orders or particular 

securities.33

For these reasons, the Commission 

believes that the proposal is consistent 

with the requirements of Section 6(b)(5) 

of the Act.34

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,35 that the 

proposed rule change (SR–BOX–2014– 

28) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.36

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–02748 Filed 2–10–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74214; File No. SR–BATS– 

2015–08] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Adopt an Options 

Regulatory Fee 

February 5, 2015. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on January 

30, 2015, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) 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 Exchange. The 

Exchange has designated the proposed 

rule change as one establishing or 

changing a member due, fee or other 

charge imposed by the Exchange under 

Section 19(b)(3)(A)(ii) of the Act,3 and 

Rule 19b–4(f)(2) thereunder,4 which 

renders the proposal effective upon 

filing with the Commission. The 

Commission is publishing this notice to 


tkelley on DSK3SPTVN1PROD with NOTICES
7666 Federal Register / Vol. 80, No. 28 / Wednesday, February 11, 2015 / Notices 

5The 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). 

6The Exchange announced its intent to charge an 

ORF on October 7, 2014. See BATS Global Markets 

Access Services Fee Changes for 2015 available at 

http://cdn.batstrading.com/resources/fee_schedule/

2015/BATS-Global-Markets-Access-Services-FeeChanges-for-2015.pdf. The semi-annual review and 

notice provisions are similar to those adopted by 

NYSE Arca, Inc. (‘‘NYSE Arca’’). See Securities 

Exchange Act Release No. 70500 (September 25, 

2013), 78 FR 60361 (October 1, 2013) (SR– 

NYSEArca–2013–91). 

7COATS effectively enhances intermarket 

options surveillance by enabling the options 

exchanges to reconstruct the market promptly to 

effectively surveil certain rules. 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange filed a proposal to 

amend the fee schedule applicable to 

Members 5 and non-members of the 

Exchange pursuant to BATS Rules 

15.1(a) and (c) to adopt an Options 

Regulatory Fee (‘‘ORF’’) in the amount 

of $0.0010 per contract side. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at www.batstrading.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to modify the 

‘‘Options Pricing’’ section of its fee 

schedule to adopt an ORF in the amount 

of $0.0010 per contract side. The percontract ORF will be assessed by the 

Exchange to each Member for all 

options transactions executed and 

cleared, or simply cleared, by the 

Member, that are cleared by OCC in the 

‘‘customer’’ range, regardless of the 

exchange on which the transaction 

occurs. The ORF will be collected 

indirectly from Members through their 

clearing firms by OCC on behalf of the 

Exchange. 

The ORF also will be charged for 

transactions that are not executed by a 

Member but are ultimately cleared by a 

Member. In the case where a nonMember executes a transaction and a 

Member clears the transaction, the ORF 

will be assessed to the Member who 

clears the transaction. In the case where 

a Member executes a transaction and 

another Member clears the transaction, 

the ORF will be assessed to the Member 

who clears the transaction. As a 

practical matter, it is not feasible or 

reasonable for the Exchange (or any 

SRO) to identify each executing member 

that submits an order on a trade-bytrade basis. There are countless 

executing market participants, and each 

day such participants can and often do 

drop their connection to one market 

center and establish themselves as 

participants on another. It is virtually 

impossible for any exchange to identify, 

and thus assess fees such as an ORF on, 

each executing participant on a given 

trading day. 

Clearing members, however, are 

distinguished from executing 

participants because they remain 

identified to the Exchange regardless of 

the identity of the initiating executing 

participant, their location, and the 

market center on which they execute 

transactions. Therefore, the Exchange 

believes it is more efficient for the 

operation of the Exchange and for the 

marketplace as a whole to assess the 

ORF to clearing members. 

The Exchange believes it is 

appropriate to charge the ORF only to 

transactions that clear as customer at the 

OCC. The Exchange believes that its 

broad regulatory responsibilities with 

respect to a Member’s activities 

supports applying the ORF to 

transactions cleared but not executed by 

a Member. The Exchange’s regulatory 

responsibilities are the same regardless 

of whether a Member executes a 

transaction or clears a transaction 

executed on its behalf. The Exchange 

regularly reviews all such activities, 

including performing surveillance for 

position limit violations, manipulation, 

front-running, contrary exercise advice 

violations and insider trading. These 

activities span across multiple 

exchanges. 

The ORF is designed to recover a 

material portion of the costs to the 

Exchange of the supervision and 

regulation of Members’ customer 

options business, including performing 

routine surveillances and investigations, 

as well as policy, rulemaking, 

interpretive and enforcement activities. 

The Exchange believes that revenue 

generated from the ORF, when 

combined with all of the Exchange’s 

other regulatory fees and fines, will 

cover a material portion, but not all, of 

the Exchange’s regulatory costs. The 

Exchange notes that its regulatory 

responsibilities with respect to Member 

compliance with options sales practice 

rules have been allocated to the 

Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) under a 17d– 

2 Agreement. The ORF is not designed 

to cover the cost of options sales 

practice regulation. 

The Exchange will continue to 

monitor the amount of revenue 

collected from the ORF to ensure that it, 

in combination with its other regulatory 

fees and fines, does not exceed the 

Exchange’s total regulatory costs. The 

Exchange expects to monitor its 

regulatory costs and revenues at a 

minimum on a semi-annual basis. If the 

Exchange determines regulatory 

revenues exceed or are insufficient to 

cover a material portion of its regulatory 

costs, the Exchange will adjust the ORF 

by submitting a fee change filing to the 

Commission. The Exchange will notify 

Members of adjustments to the ORF at 

least 30 calendar days prior to the 

effective date of the change.6

The Exchange believes it is reasonable 

and appropriate for the Exchange to 

charge the ORF for options transactions 

regardless of the exchange on which the 

transactions occur. The Exchange has a 

statutory obligation to enforce 

compliance by Members and their 

associated persons under the Act and 

the rules of the Exchange and to surveil 

for other manipulative conduct by 

market participants (including nonMembers) trading on the Exchange. The 

Exchange cannot effectively surveil for 

such conduct without looking at and 

evaluating activity across all options 

markets. Many of the Exchange’s market 

surveillance programs require the 

Exchange to look at and evaluate 

activity across all options markets, such 

as surveillance for position limit 

violations, manipulation, front-running 

and contrary exercise advice violations/ 

expiring exercise declarations. Also, the 

Exchange and the other options 

exchanges are required to populate a 

consolidated options audit trail 

(‘‘COATS’’) 7 system in order to surveil 

a Member’s activities across markets. 

In addition to its own surveillance 

programs, the Exchange works with 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 28 / Wednesday, February 11, 2015 / Notices 7667 

8 ISG is an industry organization formed in 1983 

to coordinate intermarket surveillance among the 

SROs by co-operatively sharing regulatory 

information pursuant to a written agreement 

between the parties. The goal of the ISG’s 

information sharing is to coordinate regulatory 

efforts to address potential intermarket trading 

abuses and manipulations. 

9See Section 6(h)(3)(I) of the Act. 

10 Similar regulatory fees have been instituted by 

PHLX, ISE, and MIAX. See Securities Exchange Act 

Release Nos. 61133 (December 9, 2009), 74 FR 

66715 (December 16, 2009) (SR–Phlx–2009–100); 

61154 (December 11, 2009), 74 FR 67278 (December 

18, 2009) (SR–ISE–2009–105); and 68711 (January 

23, 2013), 78 FR 6155 (January 29, 2013) (SR– 

MIAX–2013–01). 

11See Securities Exchange Act Release No. 47946 

(May 30, 2003), 68 FR 3402 (June 6, 2003). 

12 15 U.S.C. 78f. 

13 15 U.S.C. 78f(b)(4). 

14See MIAX fee schedule available at http://

www.miaxoptions.com/sites/default/files/MIAX_

Options_Fee_Schedule_02012015.pdf (last visited 

January 30, 2015). 

15See NYSE Arca Options fee schedule available 

at https://www.nyse.com/publicdocs/nyse/markets/

arca-options/NYSE_Arca_Options_Fee_

Schedule.pdf (last visited January 30, 2015); and 

NYSE Amex fee schedule available at https://

www.nyse.com/publicdocs/nyse/markets/amexoptions/NYSE_Amex_Options_Fee_Schedule.pdf 

(last visited January 30, 2015). 

other SROs and exchanges on 

intermarket surveillance related issues. 

Through its participation in the 

Intermarket Surveillance Group 

(‘‘ISG’’),8 the Exchange shares 

information and coordinates inquiries 

and investigations with other exchanges 

designed to address potential 

intermarket manipulation and trading 

abuses. The Exchange’s participation in 

ISG helps it to satisfy the requirement 

that it has coordinated surveillance with 

markets on which security futures are 

traded and markets on which any 

security underlying security futures are 

traded to detect manipulation and 

insider trading.9

The Exchange believes that charging 

the ORF across markets will avoid 

having Members direct their trades to 

other markets in order to avoid the fee 

and to thereby avoid paying for their fair 

share for regulation. If the ORF did not 

apply to activity across markets then a 

Member would send their orders to the 

least cost, least regulated exchange. 

Other exchanges do impose a similar fee 

on their member’s activity, including 

the activity of those members on 

BATS.10

The Exchange notes that there is 

established precedent for an SRO 

charging a fee across markets, namely, 

FINRAs Trading Activity Fee 11 and the 

MIAX, NYSE Amex, NYSE Arca, CBOE, 

PHLX, ISE and BOX ORFs. While the 

Exchange does not have all of the same 

regulatory responsibilities as FINRA, the 

Exchange believes that, like other 

exchanges that have adopted an ORF, its 

broad regulatory responsibilities with 

respect to a Member’s activities, 

irrespective of where their transactions 

take place, support a regulatory fee 

applicable to transactions on other 

markets. Unlike FINRA’s Trading 

Activity Fee, the ORF would apply only 

to a Member’s customer options 

transactions. 

Implementation Date 

The Exchange proposes to implement 

the ORF on February 2, 2015. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change 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 of the Act.12

Specifically, the Exchange believes that 

the proposed rule change is consistent 

with Section 6(b)(4) of the Act,13 in that 

it provides for the equitable allocation 

of reasonable dues, fees and other 

charges among members and other 

persons using any facility or system 

which the Exchange operates or 

controls. The Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues or providers of routing services 

if they deem fee levels to be excessive. 

The Exchange believes the ORF is 

equitable and not unfairly 

discriminatory because it would be 

objectively allocated to Members in that 

it would be charged to all Members on 

all their transactions that clear as 

customer transactions at the OCC. 

Moreover, the Exchange believes the 

ORF ensures fairness by assessing fees 

to those Members that are directly based 

on the amount of customer options 

business they conduct. Regulating 

customer trading activity is much more 

labor intensive and requires greater 

expenditure of human and technical 

resources than regulating non-customer 

trading activity, which tends to be more 

automated and less labor-intensive. As a 

result, the costs associated with 

administering the customer component 

of the Exchange’s overall regulatory 

program are materially higher than the 

costs associated with administering the 

non-customer component (e.g., Member 

proprietary transactions) of its 

regulatory program. In addition, the 

Exchange believes the amount of the 

ORF is reasonable as it is lower than 

ORFs charged by other exchanges. By 

way of comparison, MIAX charges an 

ORF of $0.0045 per contract side,14 and 

both NYSE Arca and NYSE Amex 

charge an ORF of $0.0055 per contract 

side.15

The ORF is designed to recover a 

material portion of the costs of 

supervising and regulating Members’ 

customer options business including 

performing routine surveillances, 

investigations, examinations, financial 

monitoring, and policy, rulemaking, 

interpretive, and enforcement activities. 

The Exchange will monitor, on at least 

a semi-annual basis the amount of 

revenue collected from the ORF to 

ensure that it, in combination with its 

other regulatory fees and fines, does not 

exceed the Exchange’s total regulatory 

costs. If the Exchange determines 

regulatory revenues exceed or are 

insufficient to cover a material portion 

of its regulatory costs, the Exchange will 

adjust the ORF by submitting a fee 

change filing to the Commission. The 

Exchange will notify Members of 

adjustments to the ORF via regulatory 

circular. 

The Exchange has designed the ORF 

to generate revenues that, when 

combined with all of the Exchange’s 

other regulatory fees, will be less than 

or equal to the Exchange’s regulatory 

costs, which is consistent with the 

Commission’s view that regulatory fees 

be used for regulatory purposes and not 

to support the Exchange’s business side. 

In this regard, the Exchange believes 

that the initial level of the fee is 

reasonable. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. The ORF is 

not intended to have any impact on 

competition. Rather, it is designed to 

enable the Exchange to recover a 

material portion of the Exchange’s cost 

related to its regulatory activities. The 

proposed ORF is also comparable to fees 

charged by other options exchanges for 

the same or similar service. As stated 

above, the Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues if the deem fee structures to be 

unreasonable or excessive. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received from 

Members, Participants, or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 


tkelley on DSK3SPTVN1PROD with NOTICES
7668 Federal Register / Vol. 80, No. 28 / Wednesday, February 11, 2015 / Notices 

16 15 U.S.C. 78s(b)(3)(A)(ii). 

17 17 CFR 240.19b–4(f)(2). 

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3For example, OCC Rule 1106(a) provides OCC 

with significant flexibility with respect actions it 

may take in order to close out a defaulting clearing 

member’s open long positions. 

this proposed rule change. The 

Exchange has not received any written 

comments from members or other 

interested parties. 

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) 

of the Act 16 and paragraph (f) of Rule 

19b–4 thereunder.17 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. 

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– 

BATS–2015–08 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–BATS–2015–08. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of 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 

available publicly. All submissions 

should refer to File Number SR–BATS– 

2015–08, and should be submitted on or 

before March 4, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Brent J. Fields 

Secretary. 

[FR Doc. 2015–02752 Filed 2–10–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74212; File No. SR–OCC– 

2015–04] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of a Proposed Rule Change, 

and Amendment 1 Thereto, To Expand 

the Officers Who May Declare That a 

Clearing Member Is Summarily 

Suspended 

February 5, 2015. 

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 January 

23, 2015, The Options Clearing 

Corporation (‘‘OCC’’) 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 OCC. On February 3, 2015, 

OCC filed Amendment No. 1 to the 

proposed rule change, which corrects an 

inadvertent grammatical error. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

OCC proposes to amend its Rules to 

permit OCC to expand the officers who 

may declare that a clearing member is 

summarily suspended from OCC. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

OCC 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. OCC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

The purpose of this proposed rule 

change is to expand the number of OCC 

officers with the authority to summarily 

suspend a clearing member. Currently, 

OCC Rule 1102 provides that only 

OCC’s Board of Directors (‘‘Board’’) and 

its Executive Chairman may summarily 

suspend a clearing member. OCC 

believes that, given the time sensitive 

nature of managing a clearing member 

default, it is prudent risk management 

to expand the number of officers with 

the authority to summarily suspend a 

clearing member so that OCC may begin 

its default management process and, in 

turn, take protective action as soon as 

possible. 

Pursuant to OCC Rule 1102, OCC’s 

Board and Executive Chairman have the 

authority to summarily suspend a 

clearing member. As set forth in 

Interpretation and Policy .01 of Rule 

1102, such action constitutes a 

‘‘default’’ with respect to the clearing 

member. OCC’s ability to timely and 

effectively begin its clearing member 

default management process serves a 

key role in protecting OCC, nondefaulting clearing members and the 

public from potential consequential 

damage(s) that may be caused by the 

default of a clearing member. In order to 

provide OCC with the necessary tools to 

manage a clearing member default, 

Chapter XI of OCC’s Rules provides 

OCC with the authority to take certain 

protective action(s) once a clearing 

member has been summarily suspended 

(and declared to be in default).3 While 

OCC believes that the authority 

provided to it in Chapter XI of its Rules 

is sufficiently robust to manage a 

clearing member default, OCC may not 

exercise such authority unless and until 

a clearing member has been summarily 


tkelley on DSK3SPTVN1PROD with NOTICES