[Federal Register Volume 82, Number 165 (Monday, August 28, 2017)]
[Notices]
[Pages 40812-40816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18127]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81457; File No. SR-BatsEDGX-2017-34]


Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change to 
Rules 11.6, Definitions, 11.8, Order Types, and 11.10, Order Execution

August 22, 2017.
    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 August 11, 2017, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Exchange has designated this proposal as a ``non-controversial'' 
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.
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    \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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to: (i) Add new optional 
functionality to orders that include the Minimum Execution Quantity 
instruction by amending paragraph (h) of Exchange Rule 11.6, 
Definitions; (ii) amend paragraph (b)(3) of Exchange Rule 11.8 to 
specify that a Minimum Execution Quantity instruction may be included 
on a Limit Order with a TIF of IOC; and (iii) amend paragraph (e)(3) of 
Exchange Rule 11.10, Order Execution, to specify that a change to the 
minimum quantity of an order with a Minimum Execution Quantity 
instruction may be included in a Replace message. The proposed 
amendments are substantially similar to the rules of the Nasdaq Stock 
Market LLC (``Nasdaq'') and the Investors Exchange LLC (``IEX'').\5\
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    \5\ See Nasdaq Rule 4703(e) (defining Minimum Quantity). See 
also Securities Exchange Act Release No. 73959 (December 30, 2014), 
80 FR 582 (January 6, 2015) (order approving new optional 
functionality for Minimum Quantity Orders). See IEX Rule 
11.190(b)(11) and Supplementary Material .03 (defining Minimum 
Quantity Orders and MinExec with Cancel Remaining and MinExec with 
AON Remaining). See also Securities Exchange Act Release No. 78101 
(June 17, 2016), 81 FR 41141 (June 23, 2016) (order approving the 
IEX exchange application, which included IEX's Minimum Quantity 
Orders). See also IEX Rule 11.190(d)(3) (allowing the minimum 
quantity size of an order to be changed via a replace message).
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.bats.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: (i) Add new optional functionality to 
orders that include the Minimum Execution Quantity instruction by 
amending paragraph (h) of Exchange Rule 11.6, Definitions; (ii) amend 
paragraph (b)(3) of Exchange Rule 11.8 to specify that a Minimum 
Execution Quantity instruction may be included on a Limit Order with a 
TIF of IOC; and (iii) amend paragraph (e)(3) of Exchange Rule 11.10, 
Order Execution, to specify that a change to the minimum quantity of an 
order with a Minimum Execution Quantity instruction may be included in 
a Replace message. These proposed amendments are substantially similar 
to the rules of Nasdaq and IEX.\6\
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    \6\ See id.
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Exchange Rule 11.6(h), Proposed Individual Minimum Size
    The Exchange proposes to add new optional functionality that would 
enhance the utility of the Minimum Execution Quantity instruction by 
amending paragraph (h) of Exchange Rule 11.6, Definitions. In sum, the 
proposal would permit an incoming order with a Minimum Execution 
Quantity to forego executions where multiple resting orders could 
otherwise be aggregated to satisfy the order's minimum quantity.
    A Minimum Execution Quantity enables a User \7\ to specify a 
minimum share amount at which the order will execute. An order with a 
Minimum Execution Quantity will not execute unless the volume of 
contra-side liquidity available to execute against the order meets or 
exceeds the designated minimum. Specifically, Minimum Execution 
Quantity is an instruction a User may attach to an order with a Non-
Displayed \8\ instruction or a TIF of IOC \9\ requiring the System \10\ 
to execute the order only to the extent that a minimum quantity can be 
satisfied by execution against a single order or multiple aggregated 
orders simultaneously.\11\ Today, an order with a Minimum Execution 
Quantity will execute upon entry against a single order or multiple 
orders if the sum of those orders is equal to or greater than its 
minimum quantity. An order with a Minimum Execution Quantity 
instruction may be partially executed upon entry so long as the 
execution size is equal to or exceeds the minimum quantity provided in 
the instruction. Any shares remaining after a partial execution will 
continue to be executed at a size that is equal to or exceeds the 
quantity provided in the instruction. Where the number of shares

[[Page 40813]]

remaining after a partial execution are less than the quantity provided 
in the instruction, the Minimum Execution Quantity shall be equal to 
the number of shares remaining. The Minimum Execution Quantity 
instruction may be coupled with Market Orders with a TIF of IOC,\12\ 
Limit Orders with a Non-Displayed instruction \13\ or TIF of IOC (as 
discussed below), Intermarket Sweep Orders (``ISO'') with a TIF of 
IOC,\14\ MidPoint Peg Orders,\15\ and Supplemental Peg Orders.\16\
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    \7\ The term ``User'' is defined as ``any Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3.'' See Exchange Rule 1.5(ee).
    \8\ The term ``Non-Displayed'' is defined as ``[a]n instruction 
the User may attach to an order stating that the order is not to be 
displayed by the System on the EDGX Book.'' See Exchange Rule 
11.6(e)(2).
    \9\ As discussed below, the Exchange also proposes to clarify 
within Rule 11.6(h) that a Minimum Quantity instruction may also be 
added to an order with a TIF of IOC. See e.g., Exchange Rules 
11.8(a)(3) and (c)(2) (specifying that the Minimum Quantity 
instruction may be included on Market Orders and ISOs with a TIF of 
IOC).
    \10\ The term ``System'' is defined 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.'' See Exchange Rule 
1.5(cc).
    \11\ Today, the System will aggregate multiple resting orders to 
satisfy the incoming order's minimum quantity and a User cannot 
elect the incoming order to execute against a single resting contra-
side order.
    \12\ See Exchange Rule 11.8(a)(3).
    \13\ See Exchange Rule 11.8(b)(3).
    \14\ See Exchange Rule 11.8(c)(2).
    \15\ See Exchange Rule 11.8(d)(2).
    \16\ See Exchange Rule 11.8(f)(2).
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    The Exchange has observed that some market participants avoid 
sending large orders with a Minimum Execution Quantity instruction to 
the Exchange out of concern that such orders may interact with small 
orders entered by professional traders, possibly adversely impacting 
the execution of their larger order. Institutional orders are often 
much larger in size than the average order in the marketplace. To 
facilitate the liquidation or acquisition of a large position, market 
participants tend to submit multiple orders into the market that may 
only represent a fraction of the overall institutional position to be 
executed. Various strategies used by institutional market participants 
to execute large orders are intended to limit price movement of the 
security at issue. Executing in small sizes, even if in the aggregate 
it meets the order's minimum quantity, may impact the market for that 
security such that the additional orders the market participant has yet 
to enter into the market may be more costly to execute. If an 
institution is able to execute in larger sizes, the contra-party to the 
execution is less likely to be a participant that reacts to short term 
changes in the stock price, and as such, the price impact to the stock 
may be less acute when larger individual executions are obtained.\17\ 
As a result, these orders are often executed away from the Exchange in 
dark pools or other exchanges that offer the same functionality as 
proposed herein,\18\ or via broker-dealer internalization.
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    \17\ The Commission has long recognized this concern: 
``[a]nother type of implicit transaction cost reflected in the price 
of a security is short-term price volatility caused by temporary 
imbalances in trading interest. For example, a significant implicit 
cost for large investors (who often represent the consolidated 
investments of many individuals) is the price impact that their 
large trades can have on the market. Indeed, disclosure of these 
large orders can reduce the likelihood of their being filled.'' See 
Securities Exchange Act Release No. 42450 (February 23, 2000), 65 FR 
10577, 10581 (February 28, 2000) (SR-NYSE-99-48).
    \18\ See supra note 5.
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    To attract larger orders with a Minimum Execution Quantity, the 
Exchange proposes to add new optional functionality that would enhance 
the utility of the Minimum Execution Quantity instruction. In sum, the 
proposal would permit a User to elect that its incoming order with a 
Minimum Execution Quantity execute solely against one or more resting 
individual orders, each of which must satisfy the order's minimum 
quantity condition. In such case, the order would forego executions 
where multiple resting orders could otherwise be aggregated to satisfy 
the order's minimum quantity, but do not individually satisfy the 
minimum quantity condition.\19\ As discussed above, under the current 
rule an order with a Minimum Execution Quantity will execute upon entry 
against any number of smaller contra-side orders that, in aggregate, 
meet the minimum quantity set by the User. This default behavior will 
remain. For example, assume there are two orders to sell resting on the 
EDGX Book \20\--the first for 300 shares and a second for 400 shares, 
with the 300 share order having time priority ahead of the 400 share 
order. If a User entered an order with a Minimum Execution Quantity to 
buy 1,000 shares at $10.00 with a minimum quantity of 500 shares, and 
the order was marketable against the two resting sell orders for 300 
and 400 shares, the System would aggregate both sell orders for 
purposes of meeting the minimum quantity, thus resulting in executions 
of 300 shares and then 400 shares respectively with the remaining 300 
shares of the an order with a Minimum Execution Quantity being posted 
to the EDGX Book with a minimum quantity restriction of 300 shares.
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    \19\ If no election is made, the System will aggregate multiple 
resting orders to satisfy the incoming order's minimum quantity.
    \20\ The term ``EDGX Book'' is defined as ``the System's 
electronic file of orders.'' See Exchange Rule 1.5(d).
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    The proposed new optional functionality will not allow aggregation 
of smaller executions to satisfy the minimum quantity of an incoming 
order with a Minimum Execution Quantity. Using the same scenario as 
above, but with the proposed new functionality and a Minimum Execution 
Quantity requirement of 400 shares selected by the User, the order with 
a Minimum Execution Quantity would not execute against the two sell 
orders because the 300 share order with time priority at the top of the 
EDGX Book is less than the incoming order's 400 share Minimum Execution 
Quantity. The new functionality will cause the order with a Minimum 
Execution Quantity to be cancelled or posted to the EDGX Book, Non-
Displayed, in accordance with the characteristics of the underlying 
order type \21\ when encountering an order with time priority that is 
of insufficient size to satisfy the minimum execution requirement. If 
posted, the order with a Minimum Execution Quantity will operate as it 
does currently and will only execute against individual orders that 
satisfy its minimum quantity as proposed herein. The Exchange notes 
that the User entering the order with a Minimum Execution Quantity has 
expressed its intention not to execute against liquidity below a 
certain minimum size, and therefore, cedes execution priority when it 
would lock an order against which it would otherwise execute if it were 
not for the minimum execution size restriction. The Exchange proposes 
to add language to paragraph (h) of Rule 11.6 to make clear that the 
order would cede execution priority in such in scenario.
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    \21\ See supra notes 11 through 16 for a description of the 
functionality associated with orders that may include a Minimum 
Execution Quantity.
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    As amended, the description of Minimum Execution Quantity under 
paragraph (h) of Exchange Rule 11.6 would set forth the default 
behavior of the Minimum Quantity instruction of executing upon entry 
against a single order or multiple aggregated orders simultaneously. 
Amended Rule 11.6(h) would set forth the proposed optional 
functionality where a User may alternatively specify that the incoming 
order's minimum quantity condition be satisfied by each order resting 
on the EDGX Book that would execute against the order with the Minimum 
Execution Quantity instruction. If there are such orders, but there are 
also orders that do not satisfy the minimum quantity condition, the 
incoming order with the Minimum Execution Quantity instruction will 
execute against orders resting on the EDGX Book in accordance with Rule 
11.9, Order Priority, until it reaches an order that does not satisfy 
the minimum quantity condition at which point it would be posted to the 
EDGX Book or cancelled in accordance with the terms of the order. If, 
upon entry, there are no orders that satisfy the minimum quantity 
condition resting on the EDGX Book, the order will either be posted to 
the EDGX Book or cancelled in accordance with the terms of the order.
    The Exchange also proposes to re-price incoming orders with a 
Minimum Execution Quantity instruction where that order may cross an 
order posted on the EDGX Book. Specifically, where there is 
insufficient size to satisfy an

[[Page 40814]]

incoming order's minimum quantity condition and that incoming order, if 
posted at its limit price, would cross an order(s) resting on the EDGX 
Book, the order with the minimum quantity condition will be re-priced 
to and ranked at the Locking Price.\22\ For example, an order to buy at 
$11.00 with a minimum quantity condition of 500 shares is entered and 
there is an order resting on the EDGX Book to sell 200 shares at 
$10.99. The resting order to sell does not contain sufficient size to 
satisfy the incoming order's minimum quantity condition of 500 shares. 
The price of the incoming buy order, if posted to the EDGX Book, would 
cross the price of the resting sell order. In such case, to avoid an 
internally crossed book, the System will re-price the incoming buy 
order to $10.99, the Locking Price. This behavior is similar to how the 
Exchange currently reprices Non-Displayed orders that cross the 
Protected Quotation of an external market.\23\ In addition, both IEX 
and Nasdaq also re-price similar orders to avoid an internally crossed 
book.\24\
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    \22\ ``Locking Price'' is defined as ``[t]he price at which an 
order to buy (sell), that if displayed by the System on the EDGX 
Book, either upon entry into the System, or upon return to the 
System after being routed away, would be a Locking Quotation.'' See 
Exchange Rule 11.6(f).
    \23\ See Exchange Rule 11.6(l)(3).
    \24\ See Nasdaq Rule 4703(e). See IEX Rule 11.190(h)(2).
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    The rule would further be amended to account for the partial 
execution against an individual order in accordance with the proposed 
rule change. Specifically, paragraph (h) of Exchange Rule 11.6 would 
further be amended to state that that an order with a Minimum Execution 
Quantity instruction may be partially executed so long as the execution 
size of the individual order or aggregate size of multiple orders, as 
applicable, are equal to or exceed the minimum quantity provided in the 
instruction.
    The Exchange also proposes to amend the description of the Minimum 
Execution Quantity instruction to clarify its operation upon order 
entry and when the order is posted to the EDGX Book. The Exchange 
proposes to clarify that upon entry, and by default, an order with a 
Minimum Execution Quantity will execute against a single order or 
multiple aggregated orders simultaneously or only against orders that 
individually satisfy the order's minimum quantity condition, as 
proposed herein. Once posted to the EDGX Book,\25\ the order may only 
execute against individual incoming orders with a size that satisfies 
the minimum quantity condition. The Exchange also proposed to clarify 
that an order that includes a Minimum Execution Quantity instruction is 
not eligible to be routed to another Trading Center in accordance with 
Exchange Rule 11.11, Routing to Away Trading Centers. These proposed 
changes would add additional specificity to the operation of the 
Minimum Execution Quantity instruction and are consistent with similar 
functionality offered by IEX and Nasdaq.\26\
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    \25\ Orders will only post to the EDGX Book if they are 
designated with a TIF instruction that allows for posting. For 
example, an order a TIF of IOC or FOK will never post to the EDGX 
Book.
    \26\ See supra note 5.
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Exchange Rule 11.8(b)(3), Limit Order Clarification
    The Exchange also proposes to amend paragraph (b)(3) of Exchange 
Rule 11.8 to specify that a Minimum Execution Quantity instruction may 
be included on a Limit Order with a TIF of IOC. Currently, paragraph 
(b)(3) of Exchange Rule 11.8 states that Minimum Execution Quantity 
instruction may be placed on a Limit Order with a Non-Displayed 
instruction. As stated above, the Minimum Execution Quantity 
instruction may be coupled with, among other order types, Market Orders 
with a TIF of IOC and ISOs with a TIF of IOC. A Limit Order with a TIF 
of IOC will never be displayed or posted on the EDGX Book because, by 
instruction, it is to only execute upon entry, route or cancel back to 
the User and will never be posted to the EDGX Book.\27\ Therefore, 
current functionality allows a Minimum Execution Quantity instruction 
to be included on a Limit Order with a TIF of IOC, as that order would 
not be displayed on the EDGX Book. The Exchange now seeks to add 
additional specificity to paragraph (b)(3) of Exchange Rule 11.6 to 
expressly state that a Minimum Execution Quantity instruction may be 
included on a Limit Order with a TIF of IOC. The Exchange notes that 
this is also consistent with the treatment of Minimum Quantity Orders 
on Bats BZX Exchange, Inc. (``BZX'').\28\
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    \27\ See Exchange Rule 11.6(q)(1).
    \28\ See BZX Rule 11.9(c)(5) (stating that BZX will only honor a 
specified minimum quantity on BZX Only Orders that are non-displayed 
or IOCs).
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Exchange Rule 11.10(e)(3), Replace Messages
    The Exchange also proposes to amend paragraph (e)(3) of Rule 11.10, 
Order Execution, to specify that a change to the minimum quantity of an 
order with a Minimum Execution Quantity instruction may be included in 
a Replace message. The rule currently states that other than changing a 
Limit Order to a Market Order, only the price, Stop Price,\29\ the sell 
long indicator, Short Sale instruction,\30\ Max Floor \31\ and quantity 
terms of the order may be changed with a Replace message.\32\ As 
amended, paragraph (e)(3) of Rule 11.10 would also provide for a change 
to the minimum quantity of an order to be included in a Replace 
message.\33\ If a User desires to change any other terms of an existing 
order, the existing order must be cancelled and a new order must be 
entered. The Exchange notes that specifying within Rule 11.10(e)(3) 
that a change to the minimum quantity of an order may be included in a 
Replace message is consistent with current functionality offered by 
IEX.\34\
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    \29\ See Exchange Rules 11.8(a)(1) and (b)(1).
    \30\ See Exchange Rule 11.6(o).
    \31\ See Exchange Rule 11.6(m)(1).
    \32\ The Exchange also proposes to amend this paragraph to 
specify that the Max Floor is associated with an order with a 
Reserve Quantity and to replace the phrase ``and quantity terms'' 
with the word ``size''. The Exchange believes these changes will add 
additional specificity to the rule and ensure the rule uses 
terminology consistent with the description of Replace messages and 
their impact on an order's priority under Exchange Rule 11.9(a)(4).
    \33\ A change to the minimum quantity of an order via a Replace 
message will result in such order losing time priority as compared 
to other orders in the EDGX Book and the time stamp for such order 
being revised to reflect the time of the modification.
    \34\ See IEX Rule 11.190(d)(3) (allowing a replace message to 
change the minimum quantity of a Minimum Quantity Order).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \35\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \36\ in particular, in that it is designed 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 mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \35\ 15 U.S.C. 78f(b).
    \36\ 15 U.S.C. 78f(b)(5).
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Exchange Rule 11.6(h), Proposed Individual Minimum Size
    The proposed rule change would remove impediments to and promote 
just and equitable principles of trade because it would provide Users 
with optional functionality that enhances the use of the Minimum 
Execution Quantity instruction. The proposed change to the functioning 
of the Minimum Execution Quantity instruction will provide market 
participants, including institutional firms who ultimately represent 
individual retail investors in

[[Page 40815]]

many cases, with better control over their orders, thereby providing 
them with greater potential to improve the quality of their order 
executions. Currently, the rule allows Users to designate a minimum 
acceptable quantity on an order that may aggregate multiple executions 
to meet the minimum quantity requirement. Once posted to the book, 
however, the minimum quantity requirement is equivalent to a minimum 
execution size requirement. The Exchange is now proposing to provide 
Users with control over the execution of their orders with a Minimum 
Execution Quantity instruction by allowing them an option to designate 
the minimum individual execution size upon entry. The control offered 
by the proposed change is consistent with the various types of control 
currently provided by exchange order types. For example, the Exchange 
and other exchanges offer limit orders, which allow a market 
participant control over the price it will pay or receive for a 
stock.\37\ Similarly, exchanges offer order types that allow market 
participants to structure their trading activity in a manner that is 
more likely to avoid certain transaction cost related economic 
outcomes.\38\
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    \37\ See Exchange Rule 11.8(b).
    \38\ For example, the Exchange's Post Only instruction. See 
Exchange Rule 11.6(n)(4).
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    As discussed above, the functionality proposed herein would enable 
Users to avoid transacting with smaller orders that they believe 
ultimately increases the cost of the transaction. Because the Exchange 
does not have this functionality, market participants, such as large 
institutions that transact a large number of orders on behalf of retail 
investors, have avoided sending large orders to the Exchange to avoid 
potentially more expensive transactions.\39\ In this regard, the 
Exchange notes that the proposed new optional functionality may improve 
the Exchange's market by attracting more order flow. Such new order 
flow will further enhance the depth and liquidity on the Exchange, 
which supports just and equitable principals of trade. Furthermore, the 
proposed modification to the Minimum Execution Quantity instruction is 
consistent with providing market participants with greater control over 
the nature of their executions so that they may achieve their trading 
goals and improve the quality of their executions.
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    \39\ As noted, the proposal is designed to attract liquidity to 
the Exchange by allowing market participants to designate a minimum 
size of a contra-side order to interact with, thus providing them 
with functionality available to them on dark markets.
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    The Exchange also believes that re-pricing incoming orders with a 
Minimum Execution Quantity instruction where that order may cross an 
order posted on the EDGX Book promotes just and equitable principles of 
trade because it enables the Exchange to avoid an internally crossed 
book. The proposed re-pricing is also similar to how the Exchange 
currently reprices Non-Displayed orders that cross the Protected 
Quotation of an external market.\40\ In addition, both IEX and Nasdaq 
also re-price minimum quantity orders to avoid an internally crossed 
book. In certain circumstances, Nasdaq re-prices buy (sell) orders to 
one minimum price increment below (above) the lowest (highest) price of 
such orders.\41\ IEX re-prices non-displayed orders, such as minimum 
quantity orders, that include a limit price more aggressive than the 
midpoint of the NBBO to the midpoint of the NBBO.\42\
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    \40\ See Exchange Rule 11.6(l)(3).
    \41\ See Nasdaq Rule 4703(e).
    \42\ See IEX Rule 11.190(h)(2).
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    Moreover, the proposed optional functionality for the Minimum 
Execution Quantity instruction is substantially similar to that offered 
by Nasdaq and IEX, both of which have been recently approved by the 
Commission.\43\ Lastly, the proposed clarifications of the handing 
[sic] of orders with a Minimum Execution Quantity upon entry and once 
posted to the EDGX Book would add additional specificity to the 
operation of the Minimum Execution Quantity instruction and are 
consistent with similar functionality offered by Nasdaq.\44\
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    \43\ See supra note 5. The Exchange also notes that a letter was 
submitted in strong support of Nasdaq at the time they proposed 
similar changes to the operation of their Minimum Quantity order 
attribute under Nasdaq Rule 4703(e). See letter to the Commission 
from James J. Angel, Associate Professor of Finance, Georgetown 
University, dated November 26, 2014.
    \44\ See supra note 5.
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Clarification to Exchange Rules 11.8(b)(3) and 11.10(e)(3)
    The Exchange believes the proposed amendments to paragraph (b)(3) 
of Rule 11.8 and paragraph (e)(3) of Rule 11.10 are also consistent 
with the Act in that they will add additional specificity to the rules. 
In particular, the proposed amendments to paragraph (b)(3) to Rule 11.8 
would add additional specificity regarding the order type instructions 
that may be coupled with a Limit Order. The Exchange notes that this is 
also consistent with the treatment of Minimum Quantity Orders on 
BZX,\45\ thereby making the rule clearer and avoiding potential 
investor confusion. Also, the amendments to paragraph (e)(3) of Rule 
11.10 will ensure the rule uses terminology consistent with the 
description of Replace messages and their impact on an order's priority 
under Exchange Rule 11.9(a)(4). Also, the Exchange notes that 
specifying within Rule 11.10(e)(3) that a change to the minimum 
quantity of an order with a Minimum Execution Quantity instruction may 
be included in a Replace message is consistent with current 
functionality offered by IEX.\46\
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    \45\ See BZX Rule 11.9(c)(5) (stating that BZX will only honor a 
specified minimum quantity on BZX Only Orders that are non-displayed 
or IOCs).
    \46\ See IEX Rule 11.190(d)(3).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. On 
the contrary, the Exchange believes the proposed rule change promotes 
competition because it will enable the Exchange to offer functionality 
substantially similar to that offered by Nasdaq and IEX.\47\ In 
addition, the proposed amendments to paragraph (b)(3) of Rule 11.8 and 
paragraph (e)(3) of Rule 11.10 would not have any impact on competition 
as they simply add additional details to each rule and do not alter 
current System functionality. Therefore, the Exchange does not believe 
the proposed rule change will result in any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \47\ See supra note 5.
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(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    No comments were solicited or received on the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (A) 
Significantly affect the protection of investors or the public 
interest; (B) impose any significant burden on competition; and (C) by 
its terms, become operative for 30 days from the date on which it was 
filed or such shorter time as the Commission may designate it has 
become effective pursuant to Section 19(b)(3)(A) of the

[[Page 40816]]

Act \48\ and paragraph (f)(6) of Rule 19b-4 thereunder,\49\ the 
Exchange has designated this rule filing as non-controversial. The 
Exchange has given the Commission written notice of its 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.
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    \48\ 15 U.S.C. 78s(b)(3)(A).
    \49\ 17 CFR 240.19b-4.
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    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: (1) 
Necessary or appropriate in the public interest; (2) for the protection 
of investors; or (3) 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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#0d7f786168206e6260606863797e4d7e686e236a627b"><span class="__cf_email__" data-cfemail="afdddac3ca82ccc0c2c2cac1dbdcefdccacc81c8c0d9">[email protected]</span></a>. Please include 
File Number SR-BatsEDGX-2017-34 on the subject line.

Paper Comments

    <bullet> 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-BatsEDGX-2017-34. 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-BatsEDGX-2017-34 and should 
be submitted on or before September 18, 2017.
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    \50\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\50\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18127 Filed 8-25-17; 8:45 am]
BILLING CODE 8011-01-P


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