Federal Register / Vol. 79, No. 203 / Tuesday, October 21, 2014 / Notices 63003 

40 15 U.S.C. 78s(b)(2). 

41 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 72945 

(August 28, 2014), 79 FR 52790 (‘‘Notice’’). 

4See proposed Rule 11.9(g). 

5See proposed Rules 21.1(i) and (j). 

6As defined in Rule 1.5(cc), a User is ‘‘any 

Member or Sponsored Participant who is 

authorized to obtain access to the System pursuant 

to Rule 11.3.’’ 

7As defined in Rule 1.5(t), applicable to BATS 

Equities, a ‘‘Protected Quotation’’ is ‘‘a quotation 

that is a Protected Bid or Protected Offer.’’ In turn, 

the term ‘‘Protected Bid’’ or ‘‘Protected Offer’’ 

means ‘‘a bid or offer in a stock that is (i) displayed 

by an automated trading center; (ii) disseminated 

pursuant to an effective national market system 

plan; and (iii) an automated quotation that is the 

best bid or best offer of a national securities 

exchange or association.’’ As defined in BATS Rule 

27.1, applicable to BATS Options, a ‘‘Protected 

Quotation’’ is ‘‘a Protected Bid or Protected Offer.’’ 

In turn, the term ‘‘Protected Bid’’ or ‘‘Protected 

Offer’’ means ‘‘a Bid or Offer in an options series, 

respectively, that: (A) Is disseminated pursuant to 

the OPRA Plan; and (B) Is the Best Bid or Best Offer, 

respectively, displayed by an Eligible Exchange.’’ 

An ‘‘Eligible Exchange’’ is defined in Rule 27.1 as 

means ‘‘a national securities exchange registered 

with the SEC in accordance with Section 6(a) of the 

Exchange Act that: (a) is a Participant Exchange in 

OCC (as that term is defined in Section VII of the 

OCC by-laws); (b) is a party to the OPRA Plan (as 

that term is described in Section I of the OPRA 

Plan); and (c) if the national securities exchange 

chooses not to become a party to this Plan, is a 

participant in another plan approved by the 

Commission providing for comparable TradeThrough and Locked and Crossed Market 

protection.’’ 

8See Rule 11.9(g)(1). 

9The Exchange notes that BATS Post Only Orders 

are permitted to remove liquidity from the BATS 

Book if the value of price improvement associated 

with such execution equals or exceeds the sum of 

fees charged for such execution and the value of 

any rebate that would be provided if the order 

posted to the BATS Book and subsequently 

provided liquidity. See Rule 11.9(c)(6). Similarly, 

Partial Post Only at Limit Orders are permitted to 

remove price improving liquidity as well as a Userselected percentage of the remaining order at the 

limit price if, following such removal, the order can 

post at its limit price. See Rule 11.9(c)(7). 

10See proposed Rule 11.9(g)(2)(A). 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act since it would apply 

equally to all dealers who engage in 

municipal securities activities. The 

proposed rule change does nothing 

more than specify that, in developing an 

annual training plan based on the firm’s 

need analysis, the dealer must include 

municipal securities training for those 

individuals who are regularly engaged 

in municipal securities activities and 

supervisors who regularly supervise 

municipal securities activities. The 

proposed rule change does not set forth 

any quantitative or qualitative 

requirements regarding the training that 

must be provided and grants dealers 

flexibility to develop Firm Element 

training based on the nature of their 

business activities. In addition, the 

Commission believes, that the proposed 

rule change addresses the need to 

ensure adequate training for municipal 

securities professionals and would 

likely improve the municipal securities 

market and its efficient operation. 

Furthermore, the Commission believes 

that the potential burdens created by the 

proposed rule change are to be likely 

outweighed by the benefits. 

For the reasons noted above, the 

Commission believes that the proposed 

rule change is consistent with the Act. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,40 that the 

proposed rule change (SR–MSRB–2014– 

05) be, and hereby is, approved.41

For the Commission, pursuant to delegated 

authority. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–24954 Filed 10–20–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73363; File No. SR–BATS– 

2014–038] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Order Granting 

Approval of a Proposed Rule Change 

to Rules 11.9 and 21.1 of BATS 

Exchange, Inc. To Add Price Adjust 

Functionality 

October 15, 2014. 

I. Introduction 

On August 26, 2014, BATS Exchange, 

Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) pursuant 

to Section 19(b)(1) of the Securities 

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

19b–4 thereunder,2 a proposed rule 

change to amend Exchange Rules 11.9 

and 21.1 to add Price Adjust 

functionality to the Exchange’s equities 

and options trading platforms. The 

proposed rule change was published for 

comment in the Federal Register on 

September 4, 2014.3 The Commission 

did not receive any comments on the 

proposed rule change. This order 

approves the proposed rule change. 

II. Description of the Proposal 

The Exchange has proposed to amend 

BATS Rule (‘‘Rule’’) 11.9 to add a new, 

optional Price Adjust functionality to 

the Exchange’s cash equities trading 

platform (‘‘BATS Equities’’).4 Consistent 

with its practice of offering similar 

functionality for the Exchange’s equity 

options trading platform (‘‘BATS 

Options’’) as it does for BATS Equities, 

the Exchange also has proposed to 

amend Rule 21.1 to add Price Adjust 

functionality to BATS Options.5 On 

both BATS Equities and BATS Options, 

the Price Adjust functionality would 

have to be elected by a User 6 in order 

to be applied by the Exchange. 

BATS Equities 

Currently, the Exchange offers price 

sliding to ensure compliance with 

Regulation NMS and Regulation SHO 

for BATS Equities, as well as price 

sliding for BATS Options to ensure 

compliance with rules analogous to 

Regulation NMS adopted by the 

Exchange and other options exchanges. 

With respect to price sliding offered to 

ensure compliance with Regulation 

NMS (‘‘display-price sliding’’), under 

the Exchange’s current rules for BATS 

Equities, if, at the time of entry, a nonroutable order would lock or cross a 

Protected Quotation 7 displayed by 

another trading center, the Exchange 

ranks (and in the case of a cross, reprices) such order at the locking price, 

and displays such order at one 

minimum price variation below the 

NBO for bids and above the NBB for 

offers.8 The Exchange currently offers 

display-price sliding functionality to 

avoid locking or crossing other markets’ 

Protected Quotations, but does not price 

slide to avoid executions on the 

Exchange’s order book (‘‘BATS Book’’). 

Specifically, when the Exchange 

receives an incoming order that could 

execute against resting displayed 

liquidity but an execution does not 

occur because such incoming order is 

designated as an order that will not 

remove liquidity (e.g., a BATS Post Only 

Order), then the Exchange will cancel 

the incoming order unless it is 

permitted to remove liquidity upon 

entry.9

Under the proposed Price Adjust 

process, by contrast, an order eligible for 

display by the Exchange that, at the time 

of entry, would create a violation of 

Rule 610(d) of Regulation NMS by 

locking or crossing a Protected 

Quotation of an external market or the 

Exchange will be ranked and displayed 

at one minimum price variation below 

the current NBO (for bids) or to one 

minimum price variation above the 

current NBB (for offers).10 Thus, the 

proposed Price Adjust process differs 

from the Exchange’s current displayprice sliding process in two main ways. 

First, the Price Adjust process would 

both rank and display such an order at 

one minimum price variation below the 

current NBO or above the current NBB 

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63004 Federal Register / Vol. 79, No. 203 / Tuesday, October 21, 2014 / Notices 

11See proposed Rule 11.9(g)(2)(D). 

12See proposed Rule 11.9(g)(2)(B). 

13 Id. 

14 Id. 

15See proposed Rule 11.9(g)(2)(C). 

16See proposed Rule 11.9(g)(3). 

17See proposed Rule 11.9(g)(4). 

18 Id. 

19 Id. 

20See proposed Rule 11.9(g)(6). 

21 In approving the proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

22 15 U.S.C. 78f(b)(5). 

(rather than ranking the order at the 

locking price). Second, Price Adjust 

would be based on Protected Quotations 

at external markets and at the Exchange 

(rather than just Protected Quotations at 

external markets). 

Because the Exchange will route 

orders to external markets with locking 

or crossing quotations, the Exchange 

notes that the Price Adjust process 

would only be applicable to nonroutable orders, including BATS Only 

Orders, BATS Post Only Orders and 

Partial Post Only at Limit Orders. In 

turn, because BATS Only Orders will 

execute against locking or crossing 

interest on the Exchange (including both 

Protected Quotations as well as any 

non-displayed interest), the fact that 

Price Adjust would be based on 

Protected Quotations at the Exchange is 

only relevant for BATS Post Only 

Orders and Partial Post Only at Limit 

Orders. The Price Adjust process would 

adjust, as described above, the price of 

a display-eligible BATS Post Only Order 

or Partial Post Only at Limit Order that 

would lock or cross a Protected 

Quotation displayed by the Exchange 

unless such order is permitted to 

remove liquidity as described in Rules 

11.9(c)(6) and (c)(7), respectively,11

whereas the display-price sliding 

process would cancel such order back to 

the User unless it is permitted to remove 

liquidity under Rules 11.9(c)(6) or (c)(7). 

In addition, the Exchange has 

proposed that, in the event the NBBO 

changes such that an order subject to 

Price Adjust would not lock or cross a 

Protected Quotation, the order will 

receive a new timestamp, and will be 

displayed at the price that originally 

locked the NBO (for bids) or NBB (for 

offers) on entry.12 All orders that are reranked and re-displayed pursuant to 

Price Adjust would retain their priority 

as compared to other orders subject to 

Price Adjust based upon the time such 

orders were initially received by the 

Exchange.13 Further, as proposed, 

following the initial ranking and display 

of an order subject to Price Adjust, an 

order will only be re-ranked and redisplayed to the extent it achieves a 

more aggressive price.14 In order to offer 

multiple-price sliding to Exchange 

Users that select Price Adjust, the 

Exchange also has proposed that the 

ranked and displayed prices of an order 

subject to Price Adjust may be adjusted 

once or multiple times depending upon 

the instructions of a User and changes 

to the prevailing NBBO.15 Multipleprice sliding pursuant to Price Adjust 

would be optional and would have to be 

explicitly selected by a User before it 

will be applied (the same is true for 

display-price sliding). Orders subject to 

multiple price sliding for Price Adjust 

would be permitted to move all the way 

back to their most aggressive price, 

whereas orders subject to Price Adjust 

without an explicit selection of multiple 

price sliding may not be adjusted to 

their most aggressive price, depending 

upon market conditions and the limit 

price of the order upon entry. 

Further, the Exchange has proposed 

that in the event the NBBO changes 

such that display-eligible orders subject 

to display-price sliding and Price Adjust 

would not lock or cross a Protected 

Quotation and are eligible to be 

displayed at a more aggressive price, the 

System will first display all orders 

subject to display-price sliding at their 

ranked price followed by orders subject 

to Price Adjust, which will be re-ranked 

and re-displayed as set forth in 

proposed Rule 11.9(g)(2).16 The 

Exchange believes it is reasonable to unslide orders subject to display-price 

sliding before it un-slides orders subject 

to Price Adjust because Price Adjust is 

a less aggressive form of price sliding 

than display-price sliding, in that an 

order submitted by a User that elects 

Price Adjust will be displayed and 

ranked at the same price rather than 

ranked at the locking price and 

displayed at a less aggressive price. 

The Exchange currently applies 

display-price sliding to Non-Displayed 

Orders that cross Protected Quotations 

of external markets. The Exchange is not 

proposing to change its handling of 

Non-Displayed Orders other than by 

updating the language of its rule to 

reflect that it will handle Non-Displayed 

Orders for which a User has selected 

Price Adjust in the same way as it 

currently handles Non-Displayed Orders 

for which a User has selected displayprice sliding.17 As such, Non-Displayed 

Orders that are subject to Price Adjust 

(or display-price sliding) would be 

ranked at the locking price on entry.18

The proposed rule also would state that 

price sliding for Non-Displayed Orders 

is functionally equivalent to the 

handling of displayable orders except 

that such orders will not have a 

displayed price and will not be repriced again unless such orders cross a 

Protected Quotation of an external 

market (i.e., such orders are not unslid).19

Lastly, the Exchange does not propose 

to modify its current short sale price 

sliding functionality, which is designed 

to ensure compliance with Regulation 

SHO, and proposes to apply that 

functionality to orders for which Price 

Adjust is chosen. As a result, orders for 

which a User selects either display-price 

sliding or Price Adjust will be subject to 

the Exchange’s existing short sale price 

sliding functionality.20

BATS Options—Price Adjust 

In order to maintain consistency 

between analogous processes offered by 

BATS Equities and BATS Options, the 

Exchange has proposed to amend Rule 

21.1 to add Price Adjust functionality to 

BATS Options, largely in conformance 

with the changes described above 

related to the Price Adjust process on 

BATS Equities. BATS Options currently 

offers display-price sliding (including 

multiple display-price sliding) to ensure 

compliance with locked and crossed 

market rules relevant to participation on 

BATS Options. The proposed Price 

Adjust functionality for BATS Options, 

as described in proposed Rules 21.1(i) 

and (j), is similar to the proposed 

functionality for BATS Equities, with 

the exception that it omits language 

related to applying Price Adjust to nondisplayed orders because BATS Options 

does not have non-displayed orders. 

III. Discussion and Commission 

Findings 

After careful review of the proposal, 

the Commission finds 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.21 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,22 which requires, 

among other things, that the rules of an 

exchange be designed 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. 

The Exchange believes that its 

proposal to offer Price Adjust 

functionality is consistent with Section 

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Federal Register / Vol. 79, No. 203 / Tuesday, October 21, 2014 / Notices 63005 

23 Id. 

24 17 CFR 242.610. 

25 17 CFR 242.201. 

26See Notice, supra, note 3 at 52793. 

27 Id. 

28 Id. 

29 Id. 

30 Id. 31 Id. 32 Id. 33 17 CFR 242.610(d). 34 Id. 35See Notice, supra, note 3 at 52793. 36 17 CFR 242.201. 37See Notice, supra, note 3 at 52793. 

38 15 U.S.C. 78f(b)(5). 

39 15 U.S.C. 78s(b)(2). 

40 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

6(b)(5) of the Act,23 as well as Rule 610 

of Regulation NMS 24 and Rule 201 of 

Regulation SHO.25 The Exchange notes 

that it is not modifying the overall 

functionality of price sliding, which, to 

avoid locking or crossing quotations of 

other market centers or to comply with 

applicable short sale restrictions, 

displays orders at permissible prices 

while retaining a price at which the 

User is willing to buy or sell, in the 

event display at such price or an 

execution at such price becomes 

possible.26 Instead, the Exchange is 

making changes to adopt an optional 

form of price sliding, Price Adjust, 

which will rank orders at their 

displayed price rather than, as with the 

current display-price sliding process, at 

the locking price. The exchange notes 

that, as a result, while subject to Price 

Adjust sliding, an order is ranked at a 

less aggressive price than it would be 

under the display-price sliding process, 

which may be preferable to certain 

Users that wish to provide liquidity but 

do not wish to cross the spread (i.e., if 

buying, do not wish to trade at the NBO 

or if selling, do not wish to trade at the 

NBB).27

In addition, as noted above, in 

contrast to display-price sliding, which 

is based solely on Protected Quotations 

at equities markets and options 

exchanges other than the Exchange, the 

proposed Price Adjust process would be 

based on Protected Quotations at 

external markets and at the Exchange. 

According to the Exchange, applying the 

Price Adjust process to orders that, 

upon entry, cannot be executed or 

displayed at their limit price should 

contribute to more displayed liquidity 

on the Exchange than if such orders 

were cancelled back to the User.28

Therefore, the Exchange believes the 

proposal to apply the Price Adjust 

process to orders that cannot be 

displayed because they would lock or 

cross displayed contra-side interest on 

the Exchange (and not just external 

markets) will 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.29 The 

Exchange also states that the proposed 

Price Adjust process will enable the 

System to avoid displaying a locking or 

crossing quotation in order to ensure 

compliance with Rule 610(d) of 

Regulation NMS.30

Further, the Exchange believes it is 

reasonable to un-slide display-price 

sliding orders before it un-slides Price 

Adjust orders because Price Adjust is a 

less aggressive form of price sliding than 

display-price sliding, in that an order 

submitted by a User would be displayed 

and ranked at the same price rather than 

ranked at the locking price and 

displayed at a less aggressive price.31

Because orders subject to display-price 

sliding are ranked at and subject to 

execution at higher prices when buying 

and lower prices when selling, the 

Exchange believes that such orders 

should be re-displayed before orders 

subject to Price Adjust orders in 

response to changes to the NBBO.32

Rule 610(d) requires exchanges to 

establish, maintain, and enforce rules 

that require members reasonably to 

avoid ‘‘[d]isplaying quotations that lock 

or cross any protected quotation in an 

NMS stock.’’ 33 Such rules must be 

‘‘reasonably designed to assure the 

reconciliation of locked or crossed 

quotations in an NMS stock,’’ and must 

‘‘prohibit . . . members from engaging 

in a pattern or practice of displaying 

quotations that lock or cross any 

quotation in an NMS stock.’’ 34 The 

Exchange believes that the proposed 

Price Adjust functionality for BATS 

Equities as well as BATS Options will 

assist Users by displaying orders at 

permissible prices.35 Similarly, Rule 

201 of Regulation SHO 36 requires 

trading centers to establish, maintain, 

and enforce written policies and 

procedures reasonably designed to 

prevent the execution or display of a 

short sale order at a price at or below 

the current NBB under certain 

circumstances. The Exchange represents 

that its short sale price sliding will 

continue to operate the same for Users 

that select Price Adjust as it does for 

Users that select the display-price 

sliding process currently offered by the 

Exchange.37

For the reasons noted above, the 

Commission finds that the proposed 

rule change is consistent with the Act, 

including Section 6(b)(5) of the Act,38

which requires, among other things, that 

the rules of an exchange be designed to 

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. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,39 that the 

proposed rule change, SR–BATS–2014– 

038, be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.40

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–24949 Filed 10–20–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73352; File No. SR–NYSE– 

2014–50] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Amending Rule 

15 To Specify That Exchange Systems 

Can Publish Pre-Opening Indications 

and To Extend the Time Order 

Imbalance Information Is Disseminated 

When an Opening is Delayed 

October 15, 2014. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on October 

6, 2014, New York Stock Exchange LLC 

(‘‘NYSE’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

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 proposes to amend 

Rule 15 to specify that Exchange 

systems can publish pre-opening 

indications and to extend the time order 

imbalance information is disseminated 

when an opening is delayed. The text of 

the proposed rule change is available on 

the Exchange’s Web site at 

www.nyse.com, at the principal office of 

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