15046 Federal Register / Vol. 80, No. 54 / Friday, March 20, 2015 / Notices 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.17d–2. 

4See Securities Exchange Act Release Nos. 70625 

(October 8, 2013), 78 FR 62842 (October 22, 2013) 

(SR–EDGA–2013–29) (Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change 

to Amend EDGA Rules 3.22, 13.3, and Adopt Rule 

12.14, Front Running of Block Transactions to 

Conform With the Rules of Other Self-Regulatory 

Organizations); and 70626 (October 8, 2013), 78 FR 

62855 (October 22, 2013) (SR–EDGX–2013–36) 

(Notice of Filing and Immediate Effectiveness of 

Proposed Rule Change to Amend EDGA [sic] Rules 

3.22, 13.3, and Adopt Rule 12.14, Front Running of 

Block Transactions to Conform With the Rules of 

Other Self-Regulatory Organizations). 

5The proposed rule text is substantially the same 

as IM–2110–3 of the Nasdaq Stock Market LLC 

(‘‘Nasdaq’’), which has been approved by the 

Commission. See Securities Exchange Act Release 

No. 53128 (January 13, 2006), 71 FR 3550 (January 

23, 2006) (order approving Nasdaq’s application for 

registration as a national securities exchange). See 

also Securities Exchange Act Release No. 58069 

(June 30, 2008), 73 FR 39360 (July 9, 2008) (SR– 

Nasdaq–2008–054) (Notice of Filing and Immediate 

Effectiveness). Securities Exchange Act Release No. 

34–67774 (September 4, 2012), 77 FR 55519 

(September 12 [sic], 2012) (Approval Order). See 

also supra note 4. 

6FINRA Rule 5270 defines the term ‘‘related 

financial instrument’’ as ‘‘any option, derivative, 

security-based swap, or other financial instrument 

overlying a security, the value of which is 

materially related to, or otherwise acts as a 

substitute for, such security, as well as any contract 

that is the functional economic equivalent of a 

position in such security.’’ 

7Under FINRA Rule 5270, a transaction involving 

10,000 shares or more of a security, an underlying 

security, or a related financial instrument overlying 

such number of shares, is generally deemed to be 

a block transaction, although a transaction of fewer 

than 10,000 shares could be considered a block 

transaction. A block transaction that has been 

agreed upon does not lose its identity as such by 

arranging for partial executions of the full 

transaction in portions which themselves are not of 

block size if the execution of the full transaction 

may have a material impact on the market. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74513; File No. SR–BATS– 

2015–16] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Adopt Rule 12.14, 

Front Running of Block Transactions 

March 16, 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 March 3, 

2015, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) a 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 filed a proposal to 

adopt new Rule 12.14, Front Running of 

Block Transactions, to conform with the 

rules of the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

for purposes of an agreement between 

the Exchange and FINRA pursuant to 

Rule 17d–2 under the Act.3 The 

proposed rule change is identical to 

proposed rule changes submitted by the 

EDGX Exchange, Inc. (‘‘EDGX’’) and the 

EDGA Exchange, Inc. (‘‘EDGA’’) that 

were published by the Commission.4

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 adopt new 

Rule 12.14, Front Running of Block 

Transactions, which would require that 

Members and persons associated with a 

Member shall comply with FINRA Rule 

5270 as if such Rule were part of the 

Exchange’s Rules.5 FINRA Rule 5270 

states that no FINRA member or person 

associated with a member shall cause to 

be executed an order to buy or sell a 

security or a related financial 

instrument 6 when such member or 

person associated with a member has 

material, non-public market information 

concerning an imminent block 

transaction 7 in that security, a related 

financial instrument or a security 

underlying the related financial 

instrument. 

FINRA Rule 5270 includes exceptions 

to the general prohibitions of the rule 

where a member can demonstrate that a 

transaction is unrelated to the material, 

non-public market information received 

in connection with the customer order. 

The Supplementary Material to FINRA 

Rule 5270 includes an illustrative list of 

potentially permitted transactions as 

examples of transactions that, 

depending upon the circumstances, may 

be unrelated to the customer block 

order. These types of transactions may 

include: Where the member has 

information barriers established to 

prevent internal disclosure of such 

information; actions [sic] in the same 

security related to a prior customer 

order in that security; transactions to 

correct bona fide errors; or transactions 

to offset odd-lot orders. 

In addition, Rule 5270 does not 

preclude transactions undertaken for the 

purpose of fulfilling, or facilitating the 

execution of, the customer block order. 

However, when engaging in trading 

activity that could affect the market for 

the security that is the subject of the 

customer block order, the member must 

minimize any potential disadvantage or 

harm in the execution of the customer’s 

order, must not place the member’s 

financial interests ahead of those of its 

customer, and must obtain the 

customer’s consent to such trading 

activity. A member may obtain its 

customers’ consent through affirmative 

written consent or through the use of a 

negative consent letter. The negative 

consent letter must clearly disclose to 

the customer the terms and conditions 

for handling the customer’s orders; if 

the customer does not object, then the 

member may reasonably conclude that 

the customer has consented and the 

member may rely on such letter for all 

or a portion of the customer’s orders. In 

addition, a member may provide clear 

and comprehensive oral disclosure to 

and obtain consent from the customer 

on an order-by-order basis, provided 

that the member documents who 

provided such consent and such 

consent evidences the customer’s 

understanding of the terms and 

conditions for handling the customer’s 

order. 

The Exchange also proposes to state 

in new Rule 12.14 that although the 

prohibitions in Rule 5270 are limited to 

imminent block transactions, the front 

running of other types of orders that 

place the financial interests of the 

Member or persons associated with a 

Member ahead of those of its customer 

or the misuse of knowledge of an 

imminent customer order may violate 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 54 / Friday, March 20, 2015 / Notices 15047 

8 15 U.S.C. 78f(b)(5). 

9See Securities Exchange Act Release No. 53128 

(January 13, 2006), 71 FR 3550 (January 23, 2006) 

(order approving Nasdaq’s application for 

registration as a national securities exchange). See 

also Securities Exchange Act Release No. 58069 

(June 30, 2008), 73 FR 39360 (July 9, 2008) (SR– 

Nasdaq–2008–054) (Notice of Filing and Immediate 

Effectiveness). Securities Exchange Act Release No. 

34–67774 (September 4, 2012), 77 FR 55519 

(September 12, 2012) (Approval Order). 

10See supra note 4. 

11 15 U.S.C. 78s(b)(3)(A)(iii). 

12 17 CFR 240.19b–4(f)(6). 

13 15 U.S.C. 78s(b)(3)(A). 

14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s intent 

to file the proposed rule change, along with a brief 

description and 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. The Exchange 

has satisfied this requirement. 

15 17 CFR 240.19b–4(f)(6). 

16 17 CFR 240.19b–4(f)(6)(iii). 

17The Exchange also represents that it has 

already informed its Members that it will 

implement the proposed rule change on March 23, 

2015, a date that was determined based upon the 

effective date of a prior version of this filing. See 

BZX and BYX Regulatory Circular 15–003, Front 

Running of Block Transactions, dated February 24, 

2015. 

18For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

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

other Exchange rules, including Rule 3.1 

and Rule 12.6, or provisions of the 

federal securities laws. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b)(5) of the Act,8 which 

requires, among other things, that the 

Exchange’s rules 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 facilitating transactions in securities, 

and to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system. By incorporating FINRA Rule 

5270, new Rule 12.14 prohibits front 

running trading activity that the 

Exchange believes is inconsistent with 

just and equitable principles of trade 

while also ensuring that Members may 

continue to engage in transactions that 

do not present the risk of abusive 

trading practices that the rule is 

intended to prevent. The Exchange 

believes that Rule 12.14 would enhance 

the protection of customer orders by 

addressing various types of abusive 

trading that may be intended to take 

advantage of customer orders. As 

previously noted, the proposed rule text 

is substantially similar to Nasdaq’s IM– 

2110–3, which has been approved by 

the Commission,9 as well as EDGA Rule 

12.14 and EDGX Rule 12.14, which have 

been previously published by the 

Commission.10 By adopting Rule 12.14, 

the Exchange believes that imminent 

customer block orders would be better 

protected and that the proposed rule 

change will prevent fraudulent and 

manipulative acts and practices, 

promote just and equitable principles of 

trade, and better protect investors and 

the public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change would impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed rule change is not designed to 

address any competitive issues but 

rather is designed to enable the 

Exchange to better protect imminent 

customer block orders, as well as to 

provide greater harmonization among 

Exchange and FINRA rules, resulting in 

less burdensome and more efficient 

regulatory compliance for common 

members. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 11 and Rule 

19b–4(f)(6) thereunder.12 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, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

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

of the Act 13 and Rule 19b–4(f)(6)(iii) 

thereunder.14

A proposed rule change filed under 

Rule 19b–4(f)(6) 15 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),16 the 

Commission may 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 proposed 

rule change may become operative 

immediately upon filing. The Exchange 

argues that waiver of the operative delay 

would enable it to enhance its rules 

protecting customer orders in a timely 

manner by explicitly prohibiting 

Members from trading ahead of block 

transaction in violation of proposed 

Rule 12.14 during what would be the 

operative delay period.17 The Exchange 

also represents that waiver of the 

operative delay would allow it to 

promptly incorporate Rule 12.14 into 

the 17d–2 Agreement, further reducing 

duplicative regulation of Exchange 

Members that are also members of 

FINRA. In addition, the Exchange states 

that waiving the operative delay would 

provide greater harmonization among 

Exchange, EDGA, EDGX, and FINRA 

rules, resulting in less burdensome and 

more efficient regulatory compliance for 

Members and facilitating FINRA’s 

performance of its regulatory functions 

under the 17d–2 Agreement in a 

timelier manner. Based on the foregoing, 

the Commission believes that waiver of 

the operative delay is consistent with 

the protection of investors and the 

public interest. Accordingly, the 

Commission hereby waives the 30-day 

operative delay and designates the 

proposal operative upon filing.18

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– 

BATS–2015–16 on the subject line. 

mstockstill on DSK4VPTVN1PROD with NOTICES

15048 Federal Register / Vol. 80, No. 54 / Friday, March 20, 2015 / Notices 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.17d–2. 

4See Securities Exchange Act Release Nos. 70625 

(October 8, 2013), 78 FR 62842 (October 22, 2013) 

(SR–EDGA–2013–29) (Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change 

to Amend EDGA Rules 3.22, 13.3, and Adopt Rule 

12.14, Front Running of Block Transactions to 

Conform With the Rules of Other Self-Regulatory 

Organizations); and 70626 (October 8, 2013), 78 FR 

62855 (October 22, 2013) (SR–EDGX–2013–36) 

(Notice of Filing and Immediate Effectiveness of 

Proposed Rule Change to Amend EDGA [sic] Rules 

3.22, 13.3, and Adopt Rule 12.14, Front Running of 

Block Transactions to Conform With the Rules of 

Other Self-Regulatory Organizations). 

5The proposed rule text is substantially the same 

as IM–2110–3 of the Nasdaq Stock Market LLC 

(‘‘Nasdaq’’), which has been approved by the 

Commission. See Securities Exchange Act Release 

No. 53128 (January 13, 2006), 71 FR 3550 (January 

23, 2006) (order approving Nasdaq’s application for 

registration as a national securities exchange). See 

also Securities Exchange Act Release No. 58069 

(June 30, 2008), 73 FR 39360 (July 9, 2008) (SR– 

Nasdaq–2008–054) (Notice of Filing and Immediate 

Effectiveness). Securities Exchange Act Release No. 

34–67774 (September 4, 2012), 77 FR 55519 

(September 12 [sic], 2012) (Approval Order). See 

also supra note 4. 

6FINRA Rule 5270 defines the term ‘‘related 

financial instrument’’ as ‘‘any option, derivative, 

security-based swap, or other financial instrument 

overlying a security, the value of which is 

materially related to, or otherwise acts as a 

substitute for, such security, as well as any contract 

that is the functional economic equivalent of a 

position in such security.’’ 

7Under FINRA Rule 5270, a transaction involving 

10,000 shares or more of a security, an underlying 

security, or a related financial instrument overlying 

such number of shares, is generally deemed to be 

a block transaction, although a transaction of fewer 

than 10,000 shares could be considered a block 

transaction. A block transaction that has been 

agreed upon does not lose its identity as such by 

arranging for partial executions of the full 

transaction in portions which themselves are not of 

block size if the execution of the full transaction 

may have a material impact on the market. 

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–2015–16. 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 

offices 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– 

2015–16, and should be submitted on or 

before April 10, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–06361 Filed 3–19–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74514; File No. SR–BYX– 

2015–13] 

Self-Regulatory Organizations; BATS 

Y-Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Adopt Rule 12.14, 

Front Running of Block Transactions 

March 16, 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 March 3, 

2015, BATS Y-Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BYX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) a 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 filed a proposal to 

adopt new Rule 12.14, Front Running of 

Block Transactions, to conform with the 

rules of the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

for purposes of an agreement between 

the Exchange and FINRA pursuant to 

Rule 17d–2 under the Act.3 The 

proposed rule change is identical to 

proposed rule changes submitted by the 

EDGX Exchange, Inc. (‘‘EDGX’’) and the 

EDGA Exchange, Inc. (‘‘EDGA’’) that 

were published by the Commission.4

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 adopt new 

Rule 12.14, Front Running of Block 

Transactions, which would require that 

Members and persons associated with a 

Member shall comply with FINRA Rule 

5270 as if such Rule were part of the 

Exchange’s Rules.5 FINRA Rule 5270 

states that no FINRA member or person 

associated with a member shall cause to 

be executed an order to buy or sell a 

security or a related financial 

instrument 6 when such member or 

person associated with a member has 

material, non-public market information 

concerning an imminent block 

transaction 7 in that security, a related 

financial instrument or a security 

mstockstill on DSK4VPTVN1PROD with NOTICES