Federal Register / Vol. 80, No. 77 / Wednesday, April 22, 2015 / Notices 22567 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 74250 

(February 11, 2015), 80 FR 8734 (‘‘Notice’’). 

4On June 5, 2014, Chair Mary Jo White asked all 

national securities exchanges to conduct a 

comprehensive review of each order type offered to 

members and how it operates in practice. See Mary 

Jo White, Chair, Commission, Speech at the Sandler 

O’Neill & Partners, L.P. Global Exchange and 

Brokerage Conference, (June 5, 2014) (available at 

http://www.sec.gov/News/Speech/Detail/Speech/

1370542004312#.VD2HW610w6Y). 

5Exchange Rule 1.5(aa) defines ‘‘System’’ as ‘‘the 

electronic communications and trading facility 

designated by the Board through which securities 

orders of Users are consolidated for ranking, 

execution and, when applicable, routing away.’’ 

6See Rule 11.9(c)(6). 

7As defined in Rule 1.5(e). 

8For additional detail regarding the specific 

proposed revisions for each order type and 

modifier, see Notice, supra note 3 at 8734–36, and 

proposed Rule 11.9. 

9See proposed Rule 11.9(b)(1). In connection 

with this proposed change the Exchange also 

proposes to specify that the cancellation of an 

unfilled balance of an order is one possible outcome 

after an order has been routed away. See proposed 

Rule 11.13(b)(2). This is what would occur with the 

unfilled balance of a routed IOC order. See Notice, 

supra note 3 at 8734. 

10See proposed Rule 11.9(b)(6). 

11See proposed Rule 11.9(c)(6). Due to the 

Exchange’s inverted fee structure, incoming BATS 

Post Only Orders always execute upon entry (and 

hence remove liquidity) when marketable against 

resting contra-side liquidity because it is always 

economically advantageous for them to do so. The 

Exchange nevertheless maintains this order type so 

that the post-only functionality remains available in 

the event the Exchange’s fee structure changes, and 

proposes the clarifying changes reflected in 

proposed Rule 11.9(c)(6) so as to reflect the actual 

functionality of the System, which still performs 

the economic best interest specified in the rule 

despite the outcome being pre-determined by the 

Exchange’s fee structure. See Notice, supra note 3 

at 8735. 

12See proposed Rule 11.9(c)(8). 

13See proposed Rule 11.9(c)(9). 

14See proposed Rule 11.9(c)(10). In addition, the 

Exchange proposes to update cross references to 

rules that would be re-numbered as a result of the 

proposal. See proposed Rules 11.9(c), 11.9(d) and 

11.9(g). 

15See Notice, supra note 3 at 8736–37. See also 

proposed Rule 11.12(a). 

16See Notice, supra note 3 at 8737. See also 

proposed Rule 11.12(a)(2). 

17See Notice, supra note 3 at 8737. See also 

proposed Rule 11.12(a)(2)(C). 

attendance, the general public should 

email nwbcouncil@nwbc.gov with 

subject line—‘‘RSVP for Austin.’’ 

Participants will receive confirmation 

information with the logistical details 

closer to the date of the meeting. 

Anyone wishing to make a presentation 

to the NWBC at this meeting must either 

email their interest to chair@nwbc.gov 

or call the main office number at 202– 

205–3850. For more information, please 

visit the National Women’s Business 

Council Web site at www.nwbc.gov. 

Miguel J. L’Heureux, 

SBA Committee Management Officer. 

[FR Doc. 2015–09293 Filed 4–21–15; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74739; File No. SR–BYX– 

2015–07] 

Self-Regulatory Organizations; BATS 

Y-Exchange, Inc.; Order Granting 

Approval of a Proposed Rule Change 

To Amend Rules 11.9, 11.12, and 11.13 

of BATS Y-Exchange, Inc. 

April 16, 2015. 

I. Introduction 

On January 30, 2015, BATS YExchange, Inc. (‘‘BYX’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

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

Rule 19b–4 thereunder,2 a proposed rule 

change to amend Exchange Rules 11.9, 

11.12, and 11.13. The proposed rule 

change was published for comment in 

the Federal Register on February 18, 

2015.3 The Commission received no 

comments on the proposal. This order 

grants approval of the proposed rule 

change. 

II. Description of the Proposed Rule 

Change 

The Exchange conducted a 

comprehensive review of its system 

functionality.4 The proposal adds 

additional clarity and specificity 

regarding the current functionality of 

the Exchange’s System,5 including the 

operation of its order types and order 

instructions. The Exchange proposes no 

substantive modifications to the System. 

The changes include: (i) Making clear 

that orders with a Time-in-Force (‘‘TIF’’) 

of Immediate-or-Cancel (‘‘IOC’’) can be 

routed away from the Exchange; (ii) 

specifying the methodology used by the 

Exchange to determine whether BATS 

Post Only Orders 6 will remove liquidity 

from the BATS Book; 7 (iii) adding 

additional detail to and re-structuring 

the description of Pegged Orders; (iv) 

adding additional detail to the 

description of Mid-Point Peg Orders; (v) 

adding additional detail to the 

description of Discretionary Orders; (vi) 

amending Rule 11.12, Priority of Orders, 

and Rule 11.13, Order Execution, to 

provide additional specificity and 

enhance the structure of Exchange rules 

describing the process for ranking, 

executing and routing orders; (vii) 

adding additional detail to the 

description of orders subject to Re-Route 

functionality; and (viii) making a series 

of conforming changes to Rules 11.9, 

11.12 and 11.13 to update crossreferences. 

Rule 11.9. The Exchange proposes 

revisions to Rule 11.9 to provide greater 

detail as to the existing functionality of 

certain order types and modifiers.8

Among other things, the Exchange 

proposes to make clear that orders with 

an IOC TIF are routable but do not post 

to the Exchange’s book,9 whereas orders 

with a Fill-or-Kill (‘‘FOK’’) TIF are not 

routable.10 The Exchange also proposes 

to clarify the Exchange’s methodology 

for determining whether BATS Post 

Only orders will remove liquidity from 

the Exchange’s order book upon entry.11

In addition, the Exchange proposes to 

reformat the rule describing the Primary 

Pegged and Market Pegged orders,12 and 

to make clear that Mid-Point Peg Orders 

are not eligible to execute when the 

NBBO is crossed but Users may elect 

whether such orders will be eligible to 

execute when the NBBO is locked.13

Further, the Exchange proposes to add 

additional detail to the rule describing 

Discretionary Orders so that it specifies: 

(i) That Discretionary Orders may be 

fully non-displayed, with a nondisplayed ranked price (and 

discretionary price); (ii) how resting 

Discretionary Orders interact with 

incoming contra-side orders, including 

how the order type, TIF and price of the 

incoming order affects whether the 

resting Discretionary Order removes 

liquidity against the incoming order or 

the incoming order removes liquidity 

against the resting Discretionary Order; 

and (iii) that Discretionary Orders are 

routed away from the Exchange at their 

full discretionary price.14

Rule 11.12. The Exchange proposes 

several modifications to Rule 11.12 that 

are intended to clarify existing 

functionality relating to order priority. 

Some of these modifications would 

revise the structure of Rule 11.12 or add 

cross references to other rules.15 In 

addition, the Exchange proposes to 

revise Rule 11.12(a)(2) to refer to 

ranking, rather than executing, equallypriced trading interest because, 

according to the Exchange, the rule is 

intended to describe the manner in 

which resting orders are ranked and 

maintained.16 The Exchange also 

proposes to revise the reference to 

Pegged Orders in the priority hierarchy 

set forth in Rule 11.12(a)(2) to make 

clear that the reference is specifically to 

non-displayed Pegged Orders.17 The 

Exchange notes that the purpose of this 

revision is to distinguish non-displayed 

Pegged Orders from Primary Pegged 


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22568 Federal Register / Vol. 80, No. 77 / Wednesday, April 22, 2015 / Notices 

18See Notice, supra note 3 at 8737. 

19See Notice, supra note 3 at 8737. See also 

proposed Rule 11.12(a)(3). The Exchange notes that 

proposed Rule 11.12(a)(3) is based on EDGX Rule 

11.9(a)(3). See Notice, supra note 3 at 8737. 

20See Notice, supra note 3 at 8737. See also 

proposed Rules 11.12(a)(4) and (a)(5). In addition, 

the Exchange proposes to renumber current Rules 

11.12(a)(5) and (a)(6) as Rules 11.12(a)(6) and (a)(7), 

respectively. 

21The Exchange proposes to move language 

contained within Rule 11.13 to the beginning of 

new paragraph (a) such that the language is more 

generally applicable to the rules governing 

execution. Specifically, the Exchange proposes to 

relocate language stating that any order falling 

within the parameters of the paragraph shall be 

referred to as ‘‘executable’’ and that an order will 

be cancelled back to the User if, based on market 

conditions, User instructions, applicable Exchange 

Rules and/or the Act and the rules and regulations 

thereunder, such order is not executable, cannot be 

routed to another Trading Center pursuant to Rule 

11.13(b) (as proposed to be re-numbered) or cannot 

be posted to the BATS Book. See Notice, supra note 

3 at 8737. See also proposed Rule 11.13(a). 

22See Notice, supra note 3 at 8737. See also 

proposed Rule 11.13. 

23See Notice, supra note 3 at 8738. See also 

proposed Rules 11.13(a)(4)(C) and (D). 

24See Notice, supra note 3 at 8738–40. See also 

proposed Rule 11.13(b)(4)(A). 

25See Notice, supra note 3 at 8738–40. See also 

proposed Rule 11.13(b)(4)(C). 

26See Notice, supra note 3 at 8738. See also 

proposed Rule 11.13(b)(5). For additional detail 

regarding the Exchange’s proposed rule changes, 

including examples of the operation of functionality 

addressed by this rule filing, see Notice, supra note 

3 at 8734–40. 

27 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

28 15 U.S.C. 78f(b)(5). 

29See Notice, supra note 3 at 8726. 

30 15 U.S.C. 78s(b)(2). 

31 17 CFR 200.30–3(a)(12). 

Orders that, if displayed, are ranked 

with other displayed orders.18 Further, 

the Exchange proposes to adopt new 

Rule 11.12(a)(3), which would codify 

existing match trade prevention rules 

that optionally prevent the execution of 

orders from the same User.19 Lastly, the 

Exchange proposes to renumber current 

Rules 11.12(a)(3) and (a)(4) as Rules 

11.12(a)(4) and (a)(5), respectively, and 

to revise them to clarify that time 

priority in particular can be retained or 

lost in certain circumstances, as 

opposed to both price and time 

priority.20

Rule 11.13. The Exchange proposes 

several revisions to Rule 11.13, which 

currently governs the execution and 

routing logic on the Exchange. The 

Exchange proposes to restructure and 

reformat the rule in certain ways, 

including by more clearly delineating 

between execution (to be contained in 

new paragraph (a)) 21 and routing (to be 

contained in new paragraph (b)), adding 

sub-headings and descriptive titles, 

adding a cross reference to the 

Exchange’s rules related to the Limit 

Up-Limit Down Plan, and revising 

existing cross references in the rule.22 In 

addition, the Exchange proposes to add 

Rules 11.13(a)(4)(C) and (D), which 

would replace and amend existing text 

set forth in Rule 11.13(a)(1) and are 

intended to provide further clarity 

regarding how incoming orders are 

handled in certain situations when there 

is undisplayed locking interest on the 

Exchange.23

The Exchange also proposes revisions 

to Rule 11.13 as it relates to the 

Exchange’s routing process, including 

its re-route functionality. In particular, 

the Exchange proposes to add language 

to the rule’s description of the 

Aggressive Re-Route instruction (to be 

renumbered as Rule 11.13(b)(4)(A)) that 

states that any routable non-displayed 

limit order posted to the BATS Book 

that is crossed by another accessible 

Trading Center will be automatically 

routed to that Trading Center.24 The 

Exchange also proposes to adopt new 

Rule 11.13(b)(4)(C), which would 

specify when an order with a Super 

Aggressive Re-Route instruction will 

remove liquidity against an incoming 

order.25 Further, the Exchange proposes 

to revise Rule 11.13(b) (to be 

renumbered as Rule 11.13(b)(5)) to make 

clear that orders that have been routed 

pursuant to Rule 11.12(a) are not ranked 

and maintained by the BATS Book, and 

therefore are not available to execute 

against incoming orders pursuant to 

new Rule 11.13(a).26

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.27 In particular, the 

Commission finds that the proposed 

rule change is consistent with the 

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

Act,28 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 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; and 

are not designed to permit unfair 

discrimination between customers, 

issuers, brokers or dealers. 

The Exchange believes that the 

proposed rule change will provide 

additional clarity and specificity 

regarding the functionality of the 

System, thus promoting just and 

equitable principals of trade and 

promoting a fair and open market. In 

addition, the Exchange believes the 

proposed rule change will contribute to 

the protection of investors and the 

public interest by making the 

Exchange’s rules easier to understand. 

The Exchange states that the proposed 

rule changes add clarity and 

transparency to the Exchange’s rulebook 

regarding existing Exchange 

functionality.29 For example, among 

other things, the Exchange’s proposal 

would amend Rule 11.9 to clarify that 

IOC orders are routable and FOK orders 

are not routable, specify the 

methodology used by the Exchange to 

determine whether BATS Post Only 

Orders will remove liquidity from the 

BATS Book, and add additional detail 

describing the operation of Mid-Point 

Peg Orders and Discretionary Orders. 

The Exchange also has proposed to 

amend Rules 11.12 and 11.13 to provide 

additional transparency as to, but not 

substantively modify, the Exchange’s 

process for ranking, executing and 

routing orders, including orders subject 

to the Exchange’s re-route functionality. 

The Commission believes that these 

proposed changes should provide 

greater specificity, clarity and 

transparency with respect to certain 

order type and modifier functionality 

available on the Exchange, as well as the 

Exchange’s methodologies for ranking, 

executing and routing orders. Therefore, 

the proposal should help to prevent 

fraudulent and manipulative acts and 

practices, promote just and equitable 

principles of trade, remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, protect investors and the public 

interest. 

IV. Conclusion 

IT IS THEREFORE ORDERED, 

pursuant to Section 19(b)(2) of the 

Act,30 that the proposed rule change 

(SR–BYX–2015–07) be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–09268 Filed 4–21–15; 8:45 am] 

BILLING CODE 8011–01–P 


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