65744 Federal Register / Vol. 79, No. 214 / Wednesday, November 5, 2014 / Notices 

17 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. 73093 

(September 15, 2014), 79 FR 56421 (‘‘Notice’’). 

4Regular Trading Hours is defined in Rule 1.5(w). 

5Pre-Opening Session is defined in Rule 1.5(r). 

6BATS Book is defined in Rule 1.5(e). 

7Eligible Auction Order is defined in Rule 

11.23(a)(8). 

8Regular Hours Only is currently defined in Rule 

11.23(a)(22) but, as described infra, the Exchange 

has proposed to replace Rule 11.23(a)(22) with 

proposed Rule 11.9(b)(7). 

9NBBO is defined in BATS Rule 1.5(o). 

10Only orders designated RHO would be queued 

for Opening Process participation when submitted 

during the Pre-Opening Session; orders not so 

designated would continue to be executable 

immediately upon entry during the Pre-Opening 

Session. 

11See proposed Rule 11.9(b)(7). Proposed Rule 

11.9(b)(7) also would specify that any remaining 

portion of market RHO order will be cancelled 

immediately following any auction in which it is 

not executed. Id. The Exchange also has proposed 

to delete the word ‘‘limit’’ from Rule 11.9(b) 

because a RHO order can be either a limit order or 

a market order. See proposed Rule 11.9(b). 

12User is defined in Rule 1.5(cc). 

13See proposed Rule 11.24(a). 14See proposed Rule 11.24(a)(2). For the 

definitions of BATS’ order types, see Rule 11.9. 

15See proposed Rule 11.24(a)(2). 

16 Id. 

17 Id. 

18See proposed Rule 11.24(a). 

19See proposed Rule 11.24(a)(1). 

20 Id. 

21See proposed Rule 11.24(a)(3). 

22 Id. According to the Exchange, time priority is 

more appropriate for the Opening Process than 

price-time priority because the price of the order is 

not particularly important to the Opening Process, 

so long as the order is priced at or more aggressively 

than the midpoint of the NBBO. As such, the 

Exchange believes that there is no reason to reward 

a more aggressive order with priority in the 

Opening Process. See Notice, supra note 3, 79 FR 

at 56422. 

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–Phlx– 

2014–69 and should be submitted on or 

before November 26, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Brent J. Fields, 

Secretary. 

[FR Doc. 2014–26232 Filed 11–4–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73473; File No. SR–BATS– 

2014–037] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Order Granting 

Approval of a Proposed Rule Change 

To Establish an Opening Process for 

Non-BATS-Listed Securities 

October 30, 2014. 

I. Introduction 

On September 3, 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 add new BATS 

Rule (‘‘Rule’’) 11.24, entitled ‘‘Opening 

Process for Non-BATS-Listed 

Securities,’’ and to make several 

corresponding changes, in order to 

modify the manner in which the 

Exchange opens trading for non-BATSlisted securities at the beginning of the 

day and after trading halts. The 

proposed rule change was published for 

comment in the Federal Register on 

September 19, 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 

implement a process for opening trading 

in non-BATS-listed securities at the 

beginning of Regular Trading Hours 4

and re-opening trading in such 

securities following a trading halt. 

Currently, the Exchange accepts orders 

in non-BATS-listed securities during the 

Pre-Opening Session,5 and any such 

orders are immediately eligible for 

execution. Orders that are on the BATS 

Book 6 at the beginning of Regular 

Trading Hours remain on the BATS 

Book, subject to the User’s instructions, 

and trading continues into Regular 

Trading Hours without any transition 

period. Upon a halt, the Exchange 

currently cancels all orders on the BATS 

Book, except Eligible Auction Orders,7

and does not accept any orders until the 

halt is lifted. The time-in-force of 

Regular Hours Only (‘‘RHO’’) 8 that the 

Exchange currently offers is not 

available for non-BATS-listed securities 

(it is only available for BATS-listed 

securities). 

Under the proposal, the Exchange 

would amend its rules to allow orders 

in non-BATS-listed securities to be 

designated RHO, and would accept and 

queue any such orders during the PreOpening Session for execution at the 

midpoint of the NBBO 9 shortly after the 

beginning of Regular Trading Hours (the 

‘‘Opening Process’’).10 The Exchange 

also has proposed to implement a 

similar process for re-opening trading 

after a halt, suspension, or pause 

(collectively, a ‘‘Halt’’), under which a 

User’s orders would remain on the 

BATS Book unless the User has 

designated that they be cancelled upon 

a Halt (the ‘‘Re-Opening Process’’). 

Specifically, the Exchange has 

proposed to replace current Rule 

11.23(a)(22) with proposed new Rule 

11.9(b)(7), which would re-define RHO 

as a time-in-force modifier that applies 

to all securities, both BATS-listed and 

non-BATS-listed.11 Prior to the 

beginning of Regular Trading Hours, 

Users 12 that wish to participate in the 

Opening Process for a non-BATS-listed 

security may enter orders to buy or sell 

with a time in force of RHO.13 All orders 

that are marked as RHO may participate 

in the Opening Process except BATS 

Post Only Orders, Partial Post Only at 

Limit Orders, ISO orders not modified 

by Rule 11.24(a)(1) (as described below), 

and Minimum Quantity Orders.14 Limit 

orders with a Reserve Quantity could 

participate to the full extent of their 

displayed size and Reserve Quantity.15

Discretionary Orders could participate 

only up to their ranked price for buy 

orders or down to their ranked price for 

sell orders; the discretionary range of 

such orders would not be eligible for 

participation in the Opening Process.16

All Pegged Orders and Mid-Point Peg 

Orders would be eligible for execution 

in the Opening Process based on their 

pegged prices.17 Orders cancelled before 

the Opening Process and orders not 

designated RHO would not be eligible to 

participate in the Opening Process.18

Pursuant to proposed Rule 11.24(a)(1), 

during the period between 9:30 a.m. 

Eastern Time and the occurrence of the 

Opening Process, all non-RHO orders, 

subject to order instructions, and ISOs 

designated RHO may execute against 

eligible Pre-Opening Session contra-side 

interest resting in the BATS Book.19 The 

Exchange has proposed to convert any 

unexecuted portion of an ISO 

designated RHO entered during this 

period into a non-ISO and queue the 

order for participation in the Opening 

Process.20

The Exchange has proposed to 

implement the Opening Process shortly 

after the beginning of Regular Trading 

Hours, at which point the Exchange 

would attempt to execute all orders 

eligible for the Opening Process in a 

particular non-BATS-listed security at 

the midpoint of the NBBO.21 All such 

orders would be processed in time 

sequence beginning with the order with 

the oldest time stamp, and would be 

matched until there is no remaining 

volume or there is an order imbalance.22

All MTP modifiers would be ignored 

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Federal Register / Vol. 79, No. 214 / Wednesday, November 5, 2014 / Notices 65745 

23See proposed Rule 11.24(b). 

24Trading Center is defined in Rule 2.11(a). 

25See proposed Rule 11.24(b). 

26See Notice, supra note 3, 79 FR at 56423. 

27See proposed Rule 11.24(c). 

28See Notice, supra note 3, 79 FR at 56423. 

29See proposed Rule 11.24(d). 

30See Notice, supra note 3, 79 FR at 56423. 

31System is defined in Rule 1.5(aa). 

32See proposed Rule 11.18(f). 

33See proposed Rule 11.24(e). 

34See proposed Rule 11.24(e)(1). The Exchange 

has proposed to wait until the sooner of the first 

execution on the listing market or one second 

following the publication of the first two-sided 

quotation by the listing exchange because no 

continuous trading occurs on any exchange during 

a Halt and, according to the Exchange, waiting will 

provide time for the market to become more fully 

established before determining the price at which 

the Re-Opening Process will occur. 

35See proposed Rule 11.24(e)(2). 

36 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). 

37 15 U.S.C. 78f(b)(5). 

38See Notice, supra note 3, 79 FR at 56423–24. 

The Exchange further states that, because the 

Opening Process price will be the midpoint of the 

NBBO, the Opening Process will occur at a price 

that is based on the best available pricing under 

current market conditions, which also will help 

create a more orderly opening and facilitate the 

price formation process. Id. at 56424. 

39 Id. at 56424. 

during the matching process.23 If no 

matches can be made, or if orders are 

not executed in whole or part due to an 

imbalance, the Opening Process would 

conclude with all orders that 

participated in the Opening Process 

being placed in the BATS Book, 

cancelled, executed, or routed to away 

Trading Centers 24 in accordance with 

Rule 11.13(a)(2).25 The Exchange notes 

that because an RHO order is not 

executable until the Opening Process 

(rather than upon entry), to the extent 

that any RHO order is not executed 

during the Opening Process and is 

placed on the BATS Book, such order 

will receive a time stamp that reflects 

the time that the order was placed on 

the BATS Book during the Opening 

Process and not the time that the order 

was entered for queuing.26

Under proposed Rule 11.24(c), the 

NBBO that the Exchange would use for 

purposes of setting the Opening Process 

price would be: (a) When the listing 

exchange is either the NYSE or NYSE 

MKT, the first NBBO subsequent to the 

first reported trade on the listing 

exchange after 9:30:00 a.m. Eastern 

Time, or the then-prevailing NBBO 

when the first two-sided quotation is 

published by the listing exchange after 

9:30:00 a.m. Eastern Time, if no first 

trade is reported by the listing exchange 

within one second of publication of the 

first two-sided quotation by the listing 

exchange; or (b) for any other listing 

market except for the Exchange, the first 

NBBO disseminated after 9:30:00 a.m. 

Eastern Time.27 The Exchange has 

proposed to differentiate its calculation 

of the NBBO for NYSE and NYSE MKTlisted securities from its calculation of 

the NBBO for securities listed on other 

exchanges because NYSE and NYSE 

MKT do not offer continuous trading 

prior to 9:30:00 a.m. Eastern Time 

whereas the other listing exchanges do 

offer continuous trading prior to 9:30:00 

a.m. Eastern Time. Thus, according to 

the Exchange, the market for trading in 

NYSE and NYSE MKT-listed securities 

may take a moment to develop after 

9:30:00 a.m. Eastern Time whereas the 

market for securities listed on other 

exchanges is more fully developed 

immediately after 9:30:00 a.m. Eastern 

Time.28

If the conditions to establish the price 

of the Opening Process set forth under 

proposed Rule 11.24(c) do not occur by 

9:45:00 a.m. Eastern Time, the Exchange 

has proposed to implement a contingent 

opening process (the ‘‘Contingent Open 

Process’’) under which, instead of being 

matched at the midpoint of the NBBO, 

orders would be handled in time 

sequence, beginning with the order with 

the oldest time stamp, and placed on the 

BATS Book, routed, cancelled, or 

executed in accordance with the terms 

of the order.29 The Exchange notes that, 

because an RHO order is not executable 

until the Opening Process (rather than 

upon entry), any order subject to the 

Contingent Open Process that is placed 

on the BATS Book would receive a time 

stamp that reflects the time that the 

order was placed on the BATS Book 

during the Opening Process and not the 

time that the order was entered for 

queuing.30

In addition, the Exchange has 

proposed that, in the event of a Halt, all 

outstanding orders in the System 31 will 

remain on the BATS Book except where 

a User has designated that its orders be 

cancelled.32 While a non-BATS-listed 

security is subject to a Halt, the 

Exchange would accept and queue 

orders, prior to the resumption of 

trading in the security, for participation 

in the Re-Opening Process.33 The ReOpening Process would occur in the 

same manner as the Opening Process 

described above, with the following 

exceptions: (1) Non-RHO orders would 

be eligible for participation in the reopening, but IOC, FOK, BATS Post Only 

Orders, Partial Post Only at Limit 

Orders, and Minimum Quantity Orders 

would be cancelled or rejected, as 

applicable, and any ISO that is not IOC 

or FOK would be converted into a nonISO and be queued for participation in 

the re-opening; and (2) the re-opening 

would occur at the midpoint of: (i) The 

first NBBO subsequent to the first 

reported trade on the listing exchange 

following the resumption of trading 

after a Halt; or (ii) the NBBO when the 

first two-sided quotation is published by 

the listing exchange following the 

resumption of trading after a Halt if no 

first trade is reported by the listing 

exchange within one second of 

publication of the first two-sided 

quotation by the listing exchange.34 The 

Exchange has proposed that, where 

neither of the above conditions required 

to establish the price of the re-opening 

have occurred, the security may be reopened for trading at the discretion of 

the Exchange and orders will be 

handled in the same manner as they are 

in the Contingent Open Process.35

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 that are applicable to a 

national securities exchange.36 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,37 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 the 

proposal is consistent with the Act 

because it is designed to create a more 

orderly process for opening and reopening trading in non-BATS-listed 

securities, and to facilitate price 

formation. Specifically, the Exchange 

believes that the proposed Opening 

Process will create a more orderly 

opening for non-BATS-listed securities 

and help facilitate the price formation 

process at the beginning of Regular 

Trading Hours because allowing Users 

to enter orders during the Pre-Opening 

Session for queuing and participation in 

the Opening Process should help 

prevent the submission of a flood of 

orders immediately following the 

beginning of Regular Trading Hours.38

For similar reasons, the Exchange 

believes that the proposed Re-Opening 

Process will create a more orderly reopening in non-BATS-listed securities 

following a Halt and help facilitate price 

formation.39 In addition, the Exchange 

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65746 Federal Register / Vol. 79, No. 214 / Wednesday, November 5, 2014 / Notices 

40 Id. 

41 Id. 

42 Id.; see also 17 CFR 242.600. 

43See Notice, supra note 3, 79 FR at 56424. 

44 Id. 

45 Id. 

46 Id. 

47 Id. 

48 Id. 

49 15 U.S.C. 78f(b)(5). 

50 15 U.S.C. 78s(b)(2). 

51 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). 

4 17 CFR 240.19b–4(f)(6)(iii). 

5See BATS Rule 11.16(d)(1)–(3); BYX Rule 

11.16(d)(1)–(3). 

states that allowing certain RHO orders 

(ISOs designated RHO) and all non-RHO 

orders to interact (and, in the case of 

non-RHO orders, to be added to the 

BATS Book where there is no contraside interest) during the period between 

9:30 a.m. Eastern Time and the 

occurrence of the Opening Process will 

create a more orderly opening and 

facilitate the price formation process 

because Users will have the option to 

enter orders that will either participate 

in the Opening Process or immediately 

interact with liquidity from the PreOpening Session, allowing trading to 

continue while the Exchange is waiting 

for the conditions necessary to complete 

the Opening Process.40

The Exchange also believes that 

certain features of the Opening Process 

and Re-Opening Process are consistent 

with the Act. The Exchange states that 

the proposed exclusion of BATS Post 

Only Orders, Partial Post Only at Limit 

Orders, ISOs, and Minimum Quantity 

Orders from participation in the 

Opening Process is consistent with 

Section 6(b)(5) of the Act because such 

order types do not make sense in the 

context of queuing orders for the 

Opening Process.41 Moreover, according 

to the Exchange, its proposal to allow an 

ISO marked RHO to execute against 

eligible Pre-Opening Session interest 

during the period between 9:30 a.m. 

Eastern Time and the occurrence of the 

Opening Process, and then convert the 

unexecuted portion of the order into a 

non-ISO for queuing for participation in 

the Opening Process, is consistent with 

the requirements of Regulation NMS.42

According to the Exchange, after 9:30 

a.m. Eastern Time, there may be a 

protected bid or offer displayed by the 

Exchange that a User who has submitted 

an ISO designated RHO would like to 

execute against, and this aspect of the 

proposal would permit such an 

execution to occur prior to the ISO 

being converted into a non-ISO and 

queued for participation in the Opening 

Process.43

In addition, the Exchange states that 

the proposed Contingent Opening 

Process is designed 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 because it will help to 

ensure that the Exchange opens trading 

in a fair and orderly manner by 

providing a means for opening trading 

in a non-BATS-listed security when 

there is no two-sided NBBO in the 

security for fifteen minutes after the 

beginning of Regular Trading Hours.44

The Exchange believes that fifteen 

minutes is a reasonable amount of time 

to wait for the establishment of a twosided NBBO because it marks a point at 

which the market in a security has had 

a sufficient amount of time to develop 

while simultaneously providing a 

reasonable cut-off point at which the 

Exchange may open the security for 

Regular Trading Hours trading.45 The 

Exchange also believes that handling all 

orders queued for participation in the 

Opening Process in time sequence after 

fifteen minutes will help to ensure that 

trading opens in as fair and orderly a 

manner as possible.46

Lastly, the Exchange states that the 

proposed Opening Process will provide 

Users with greater control and flexibility 

when entering orders in non-BATSlisted securities by allowing them to 

enter orders for participation in Regular 

Hours Trading during the Pre-Opening 

Session, rather than permitting them to 

enter such orders only after Regular 

Trading Hours have begun.47 According 

to the Exchange, allowing Users that do 

not want to participate in the PreOpening Session to enter RHO orders 

prior to Regular Trading Hours will 

simplify the order entry process for such 

Users and remove impediments to a free 

and open market.48

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,49

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. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,50 that the 

proposed rule change, SR–BATS–2014– 

037, be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.51

Brent J. Fields, 

Secretary. 

[FR Doc. 2014–26231 Filed 11–4–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73476; File No. SR–EDGX– 

2014–24] 

Self-Regulatory Organizations; EDGX 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change to Rule 11.12, Limitation 

of Liability 

October 30, 2014. 

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 October 

27, 2014, EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) 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 Exchange has 

designated this proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6)(iii) 

thereunder,4 which renders it effective 

upon filing with the Commission. 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 

amend Rule 11.12, Limitation of 

Liability, to harmonize its liability caps 

with those set forth under BATS 

Exchange, Inc. (‘‘BATS’’) Rule 11.16 and 

BATS Y-Exchange, Inc. (‘‘BYX’’) Rule 

11.16.5

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.directedge.com/, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

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