6556 Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Notices 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The term ‘‘Member’’ means an individual or 

organization approved to exercise trading rights 

associated with a Trading Permit. Members are 

deemed ‘‘members’’ under the Exchange Act. See 

Exchange Rule 100. 

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– 

FINRA–2016–003 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2016–003. 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 FINRA. 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–FINRA– 

2016–003, and should be submitted on 

or before February 29, 2016. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–02331 Filed 2–5–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–77035; File No. SR–MIAX– 

2016–02] 

Self-Regulatory Organizations; Miami 

International Securities Exchange LLC; 

Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change To Amend Exchange Rule 301 

February 2, 2016. 

Pursuant to the provisions of 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 20, 2016, Miami 

International Securities Exchange LLC 

(‘‘MIAX’’ or ‘‘Exchange’’) 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 is filing a proposal to 

amend Exchange Rule 301, Just and 

Equitable Principles of Trade, to add 

Interpretations and Policies .03 to Rule 

301 to state in the Exchange’s rules that 

the practice of unbundling an order is 

considered conduct inconsistent with 

just and equitable principles of trade. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.miaxoptions.com/filter/

wotitle/rule_filing, at MIAX’s principal 

office, 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 aspects 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 amend 

Exchange Rule 301, Just and Equitable 

Principles of Trade, to add 

Interpretations and Policies .03 to Rule 

301 that states that the practice of 

unbundling an order is considered 

conduct inconsistent with just and 

equitable principles of trade. The 

proposal codifies existing Exchange 

procedures when dealing with the 

unlawful bundling of orders. 

The purpose of the proposed rule 

change is to amend Exchange Rule 301 

by adding a new Interpretations and 

Policies .03 to Rule 301 which will 

expressly prohibit the splitting-up of an 

order into smaller orders; a practice also 

known as unbundling, or trade 

shredding. More specifically, the 

Exchange is proposing to add language 

to its existing rules to prohibit 

Members 3 from splitting orders into 

multiple smaller orders for any purpose 

other than best execution. 

Unbundling, or trade shredding, is the 

practice of breaking up an order into 

multiple smaller orders for some 

purpose other than best execution of the 

order. The practice of unbundling has in 

the past been used for such purposes as 

improperly maximizing commissions 

and fees charged to customers, 

distorting trade data, or circumventing 

rules pertaining to maximum order size. 

In addition, the unbundling of a large 

order into several smaller orders could 

be done so as to affect the allocation of 

a trade among market participants 

pursuant to the allocation methodology 


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Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Notices 6557 

4For example, pursuant to Exchange Rule 

514(g)(2), small size orders, or orders of five 

contracts or less, are allocated to the Primary Lead 

Market Maker (‘‘PLMM’’) if the PLMM has a priority 

quote at the NBBO. If a Member was to break up 

a large order into several smaller orders of five 

contracts or less, the PLMM could unfairly garner 

a greater trade allocation than it was otherwise 

entitled to. 

5Specifically, it shall be considered conduct 

inconsistent with just and equitable principles of 

trade, in accordance with Rule 301, for any Member 

to enter orders, quotes, Agency Orders, or other 

responses for the purpose of disrupting or 

manipulating the Auction. Such conduct includes, 

but is not limited to, engaging in a pattern or 

practice of submitting unrelated orders that cause 

an Auction to conclude before the end of the RFR 

period and engaging in a pattern of conduct where 

the Member submitting the Agency Order into the 

PRIME breaks up the Agency Order into separate 

orders for two (2) or fewer contracts for the purpose 

of gaining a higher allocation percentage than the 

Member would have otherwise received in 

accordance with the allocation procedures 

contained in paragraph (a)(2)(iii) or (b)(2)(iii) above. 

See Exchange Rule 515A, Interpretations and 

Policies .01. 

6See Securities Exchange Act Release Nos. 62667 

(August 9, 2010), 75 FR 50013 (August 16, 2010) 

(SR–NYSEAmex–2010–77) (adopting NYSE Amex 

Rule 995NY(d)); and 52872 (December 1, 2005), 70 

FR 73043 (December 8, 2005), (SR–CBOE–2005–92) 

(adopting CBOE Rule 4.23). See also International 

Securities Exchange LLC Rule 723 Supplementary 

Material .01 (prohibiting the entering of orders, 

quotes, Agency Orders, Counter-Side Orders or 

Improvement Orders for the purpose of disrupting 

or manipulating the Price Improvement Mechanism 

Auction), CBOE Rule 6.74A Interpretations and 

Policies .02 (prohibiting the submission of 

unrelated orders that cause an Automated 

Improvement Mechanism Auction to conclude 

before the end of the RFR period) and NASDAQ 

OMX PHLX LLC Rule 1080(b)(iii). 

7 15 U.S.C. 78f(b). 

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

9 15 U.S.C. 78s(b)(3)(A). 

10 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. 

11 17 CFR 240.19b–4(f)(6). 

12 17 CFR 240.19b–4(f)(6)(iii). 

13For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

Continued 

used by the Exchange.4 Finally, the 

Exchange believes that the unbundling 

of orders generally serves no purpose to 

the customer that entered the order and 

may cause unnecessary delays in the 

execution of said orders. 

Pursuant to Exchange Rule 301, 

Members must observe high standards 

of commercial honor and just and 

equitable principles of trade. The 

Exchange would consider a Member to 

have engaged in conduct inconsistent 

with just and equitable principles of 

trade were they to unbundle an order 

which (1) distorts fees and/or 

commissions to the detriment of a 

customer or the Exchange, (2) causes an 

unnecessary delay in the execution of 

an order, or (3) circumvents an 

Exchange rule or federal securities law, 

including those rules pertaining to order 

size and trade allocation. Members 

engaging in conduct inconsistent with 

just and equitable principles of trade are 

subject to formal disciplinary action by 

the Exchange. 

The Exchange now proposes to adopt 

Interpretations and Policies .03 to Rule 

301, which will expressly state that the 

Exchange considers it to be conduct 

inconsistent with just and equitable 

principles of trade for a Member to split 

an order into multiple smaller orders for 

any purpose other than seeking the best 

execution of the entire order. 

The Exchange believes that, by 

adopting this proposed language which 

serves to codify existing Exchange 

procedures when dealing with the 

unlawful unbundling of orders, it will 

deter and help to prevent this distortive 

practice, and therefore promote just and 

equitable principles of trade. 

The Exchange notes that it considers 

unbundling, among other things, to be 

conduct inconsistent with just and 

equitable principles of trade in the rules 

governing its price improvement 

mechanism, MIAX PRIME.5 The 

Exchange notes further that other US 

options exchanges have rules 

prohibiting the unbundling of orders for 

a variety of reasons, including the early 

termination of any price improvement 

mechanism auction conducted by an 

exchange, and violations of these rules 

may be considered conduct inconsistent 

with just and equitable principles of 

trade.6

2. Statutory Basis 

MIAX believes that its proposed rule 

change is consistent with Section 6(b) of 

the Act 7 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 8

in particular, in that it is 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, to remove 

impediments to and perfect the 

mechanisms of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. 

The proposed rule change is designed 

to protect investors and the public 

interest and to promote just and 

equitable principles of trade by 

preventing the distortive practice of 

unbundling, or trade shredding, which 

conduct is considered inconsistent with 

the just and equitable principles of 

trade. 

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 that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. Specifically, 

the Exchange believes the proposed 

changes will not impose any burden on 

intra-market competition because it 

applies to all MIAX participants 

equally. In addition, the Exchange does 

not believe the proposal will impose 

any burden on inter-market competition 

as the proposal is intended to protect 

investors by preventing the distortive 

practice of unbundling, or trade 

shredding. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing 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 after the date of 

the filing, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 9 and Rule 19b– 

4(f)(6) 10 thereunder. 

A proposed rule change filed 

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

Act 11 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6)(iii) 12

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. The Exchange states 

that waiver of the operative delay would 

enable market participants to benefit 

from the proposed language codifying 

existing Exchange procedures when 

dealing with the unlawful unbundling 

of orders and would help to prevent this 

distortive practice. For this reason, the 

Commission believes that waiver of the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest. Therefore, the 

Commission hereby waives the 

operative delay and designates the 

proposed rule change operative upon 

filing.13


asabaliauskas on DSK5VPTVN1PROD with NOTICES
6558 Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Notices 

proposed rule’s impact on efficiency, competition, 

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

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6)(iii). 

4See Securities Exchange Act Release No. 65225 

(August 30, 2011), 76 FR 55148 (September 6, 2011) 

(SR–BATS–2011–018). 5As defined in BATS Rules, the term ‘‘Market 

Maker’’ means a Member that acts a as a market 

maker pursuant to Chapter XI of BATS Rules. 6ETP is defined in Interpretation and Policy 

.03(b)(4) to Rule 11.8. 7See Securities Exchange Act Release No. 72692 

(July 28, 2014), 79 FR 44908 (August 1, 2014) (SR– 

BATS–2014–022) (‘‘CLP Approval Order’’). 8See id at 44909. 9 Id. 

10See Securities Exchange Act Release No. 75518 

(July 24, 2015), 80 FR 45566 (July 30, 2015 (SR– 

BATS–2015–55). 

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– 

MIAX–2016–02 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–MIAX–2016–02. 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 

10:00 a.m. and 3:00 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–MIAX– 

2016–02 and should be submitted on or 

before February 29, 2016. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–02335 Filed 2–5–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–77033; File No. SR–BATS– 

2016–12] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Extend the Pilot 

Period for the Exchange’s 

Supplemental Competitive Liquidity 

Provider Program 

February 2, 2016. 

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 

28, 2016, BATS Exchange, Inc. 

(‘‘Exchange’’ or ‘‘BATS’’) 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 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 

extend the pilot period for the 

Exchange’s Supplemental Competitive 

Liquidity Provider Program (the 

‘‘Program’’), which is currently set to 

expire on January 28, 2016, for three 

months, to expire on April 28, 2016. 

The Exchange has designated this 

proposal as non-controversial and 

provided the Commission with the 

notice required by Rule 19b–4(f)(6)(iii) 

under the Act.3

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 

Background 

On August 30, 2011, the Exchange 

received approval of rules applicable to 

the qualification, listing and delisting of 

securities of issuers on the Exchange.4

More recently, the Exchange received 

approval to operate a pilot program that 

is designed to incentivize certain Market 

Makers 5 registered with the Exchange 

as ETP CLPs, as defined in 

Interpretation and Policy .03 to Rule 

11.8, to enhance liquidity on the 

Exchange in certain ETPs 6 listed on the 

Exchange and thereby qualify to receive 

part of a daily rebate as part of the 

Program under Interpretation and Policy 

.03 to Rule 11.8.7

The Program was approved by the 

Commission on a pilot basis running 

one-year from the date of 

implementation.8 The Commission 

approved the Program on July 28, 2014.9

The Exchange implemented the Program 

on July 28, 2014 and the pilot period for 

the Program was originally scheduled to 

end on July 28, 2015 until it was 

extended to end on October 28, 2015 10


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