Document ID: SEC-2015-1605-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2015-10-05T04:00Z

[Federal Register Volume 80, Number 192 (Monday, October 5, 2015)]
[Notices]
[Pages 60216-60219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-25180]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76018; File No. SR-EDGX-2015-42]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 11.15, Clearly Erroneous Executions

September 29, 2015.
    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 September 21, 2015, 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 
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.
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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 amend Rule 11.15, Clearly 
Erroneous Executions, in order to conform to the rules of BATS 
Exchange, Inc. (``BZX'') and BATS Y-Exchange, Inc. (``BYX'').\3\
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    \3\ See BYX and BZX Rule 11.17.
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    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
    In early 2014, the Exchange and its affiliate, EDGA Exchange, Inc. 
(``EDGA'') received approval to effect a merger (the ``Merger'') of the 
Exchange's parent company, Direct Edge Holdings LLC, with BATS Global 
Markets, Inc., the parent of BZX and the BATS Y-Exchange, Inc. 
(``BYX'', together with BZX, EDGA and EDGX, the ``BGM Affiliated 
Exchanges'').\4\ In the context of the Merger, the BGM Affiliated 
Exchanges are working to align their rules, retaining only intended 
differences between the BGM Affiliated Exchanges. Thus, the Exchange 
proposes to restructure and amend Rule 11.15, Clearly Erroneous 
Executions, in order to conform to the corresponding rules of BYX and 
BZX and provide a consistent rule set across each of the BGM Affiliated 
Exchanges.\5\
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    \4\ See Securities Exchange Act Release No. 71449 (January 30, 
2014), 79 FR 6961 (February 5, 2014) (SR-EDGX-2013-43; SR-EDGA-2013-
34).
    \5\ The Exchange notes that EDGA intends to file an identical 
proposal with the Commission to restructure and amend its Rule 
11.15, Clearly Erroneous Executions, to conform to BYX and BZX Rules 
11.17.
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Background
    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to Exchange Rule 11.15 to provide for uniform treatment: (1) Of 
clearly erroneous \6\ execution reviews in multi-stock events involving 
twenty or

[[Page 60217]]

more securities; and (2) in the event transactions occur that result in 
the issuance of an individual stock trading pause by the primary 
listing market and subsequent transactions that occur before the 
trading pause is in effect on the Exchange.\7\ The Exchange also 
adopted additional changes to Rule 11.15 that reduced the ability of 
the Exchange to deviate from the objective standards set forth in Rule 
11.15,\8\ and in 2013, adopted a provision designed to address the 
operation of the Plan to Address Extraordinary Market Volatility 
Pursuant to Rule 608 of Regulation NMS under the Act (the ``Limit Up-
Limit Down Plan'' or the ``Plan'').\9\ In 2014, the Exchange adopted 
two additional provisions providing that: (i) A series of transactions 
in a particular security on one or more trading days may be viewed as 
one event if all such transactions were effected based on the same 
fundamentally incorrect or grossly misinterpreted issuance information 
resulting in a severe valuation error for all such transactions (the 
``Multi-Day Event''); and (ii) in the event of any disruption or 
malfunction in the operation of the electronic communications and 
trading facilities of an Exchange, another SRO, or responsible single 
plan processor in connection with the transmittal or receipt of a 
trading halt, an Officer, acting on his or her own motion, shall 
nullify any transaction that occurs after a trading halt has been 
declared by the primary listing market for a security and before such 
trading halt has officially ended according to the primary listing 
market.\10\
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    \6\ The terms of a transaction executed on the Exchange are 
``clearly erroneous'' when there is an obvious error in any term, 
such as price, number of shares or other unit of trading, or 
identification of the security. A transaction made in clearly 
erroneous error and cancelled by both parties or determined by the 
Exchange to be clearly erroneous will be removed from the 
Consolidated Tape. See Exchange Rule 11.15(a).
    \7\ Securities Exchange Act Release No. 62886 (Sept. 10, 2010), 
75 FR 56613 (Sept. 16, 2010) (SR-EDGX-2010-03).
    \8\ Id.
    \9\ See Securities Exchange Act Release No. 68814 (Feb. 1, 
2013), 78 FR 9086 (Feb. 7, 2013) (SR-EDGX-2013-06); see also 
Exchange Rule 11.15(i).
    \10\ See Securities Exchange Act Release No. 72434 (June 19, 
2014), 79 FR 36110 (June 25, 2014) (SR-EDGX-2014-12).
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    The Exchange proposes the below changes to conform Rule 11.15 to 
BYX and BZX Rules 11.17. None of these changes are designed to amend 
the Exchange's current review process for clearly erroneous executions. 
Rather, they are proposed in order to implement identical rules with 
regard to clearly erroneous executions across each of the BGM 
Affiliated Exchanges.\11\ The proposed changes to Rule 11.15 are as 
follows:
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    \11\ The Exchange notes that BYX and BZX are to file rule 
changes with the Commission to propose a series of changes to their 
Rules 11.17, Clearly Erroneous Executions, to conform with other 
provisions of EDGA and EDGX Rule 11.15 to ensure each of the BGM 
Affiliated Exchange have identical rule text with regard to the 
review and handling of clearly erroneous executions.
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     Amend the last sentence of the introductory paragraph to 
include the word ``replaced''.
     Replace references to ``Officer'' with ``Official'' in 
paragraphs (b), (b)(1), (c)(3), (d), (e)(1), (e)(2), (e)(2)(D), and 
(e)(2)(F).
     Replace the term ``Regular Market Session'' with ``Regular 
Trading Hours'' in paragraphs (c)(1), (e)(1), and (g).
     Amend paragraph (b)(1) to: (i) Clarify that requests for 
review must be received by the Exchange within thirty (30) minutes of 
the execution time; (ii) replace the word ``Section'' with 
``paragraph'' and encase ``30'' in parentheses as well as insert the 
word ``thirty'' immediately before ``(30)'' in the second sentence; 
(iii) specify in the fourth sentence that if requested, each party 
shall provide any supporting written information as may be reasonably 
requested by the Official to aid resolution of the matter and remove 
the phrase ``any supporting written information.''
     Amend paragraph (b)(2) to encase both ``30'' and ``60'' in 
parentheses as well as insert the word ``thirty'' immediately before 
``(30)'' and the word ``sixty'' immediately before ``(60)''.
     Amend paragraph (c)(1) to: (i) Delete the word ``the'' 
before the word ``Regular'' and add the word ``during'' before the 
phrase ``the Pre-Opening and . . . '' in the first sentence; (ii) 
remove the ``s'' from the word ``occur'' within the parenthetical in 
the third sentence; and (iii) insert the word ``paragraph'' before 
``(c)(2)'' in the fourth sentence.
     Amend the first sentence of paragraph (c)(3) to: (i) 
Remove the ``s'' from the word ``system''; (ii) replace ``IPO'' with 
the term ``initial public offering''; and (iii) remove ``'s'' from the 
word ``tape''.
     Amend paragraph (d) to: (i) Replace the term ``at its'' 
with ``in his or her''; (ii) replace the word ``subsection'' with 
``paragraph''; and (ii) encase both ``30'' and ``60'' in parentheses as 
well as insert the word ``thirty'' immediately before ``(30)''.
     Reformat and renumber paragraph (d)(1)(A) as (d)(1) and 
(d)(1)(B) as (d)(2).
     Amend renumbered and reformatted paragraph (d)(1) to: (i) 
Not capitalize the word ``Paragraph''; (ii) replace the word 
``Section'' with ``Rule''; and (iii) delete ``, or''.
     Amend renumbered and reformatted paragraph (d)(2) to: (i) 
Not capitalize the word ``Paragraph''; (ii) replace the words ``the 
Section'' with ``this Rule''; and (iii) replace ``11.15'' with the word 
``paragraph'' before the reference to (c)(3).
     Amend paragraph (e)(1) to encase ``30'' in parentheses as 
well as insert the word ``thirty'' immediately before ``(30)'' in the 
third sentence.
     Amend paragraph (e)(2)(B) to rephrase the term ``ten (10) 
Member representatives'' with ``ten (10) representatives of Members''.
     Renumber paragraph (e)(3) as (e)(2)(C) and amend the 
paragraph to: (i) Specify that a request for review on appeal must be 
made, not only via email, but also in writing or other electronic means 
specified from time to time by the Exchange in a circular distributed 
to Members; and (ii) replace ``3:00 ET'' with ``3:00 p.m. Eastern 
Time'' in the third sentence.
     Renumber paragraph (e)(4) as (e)(2)(D).
     Renumber paragraph (e)(5) as (e)(2)(E) and: (i) Replace 
reference to ``Rule 11.15(e)(1)'' with ``paragraph (e)(1) above''; and 
(ii) add a sentence stating that in instances where the Exchange, on 
behalf of a Member, requests a determination by another market center 
that a transaction is clearly erroneous, the Exchange will pass any 
resulting charges through to the relevant Member.
     Renumber paragraph (e)(6) as (e)(2)(F).
     Within paragraph (f), amend: (i) The first sentence to 
replace the word ``the'' with ``an'' before the ``Officer'' and delete 
the word ``such'' before ``other senior level employee designee''; (ii) 
the second sentence to remove the ``s'' from the ``paragraphs'' before 
reference to paragraph (c)(1)-(3); (iii) the third sentence to delete 
the word ``such'' before ``other senior level employee designee''; (iv) 
amend the fourth sentence to delete the term ``such other '' before 
``senior level employee designee'', replace the term ``Regular Session 
Trading'' with ``Regular Trading Hours'', and add the word ``trading'' 
before ``day''; and (v) amend the last sentence to clarify that notice 
shall be provided by the Exchange, replace the word ``Member'' with 
``party'', remove the ``s'' from the ``paragraphs'' and delete 
reference to paragraph (e)(3) and (4) as those paragraph are now 
included in (e)(2).
     Amend paragraph (g) to: (i) Retitle it as ``Officer Acting 
On Own Motion''; (ii) delete the term ``such other '' before ``senior 
level employee designee'' and replace the term ``its'' with ``his or 
her'' in the first sentence; (iii) delete the word ``such'' before 
``other senior level employee designee'' in the fourth sentence; and 
(iv) remove the ``s'' from the ``paragraphs'' and delete reference to 
paragraph (e)(3) and (4) as those

[[Page 60218]]

paragraphs are now included in (e)(2) in the last sentence.
     Within paragraph (h), amend: (i) The first sentence to 
replace the term ``initial public offering'' with ``IPO''; (ii) the 
third and fourth sentences to delete the word ``such'' before ``other 
senior level employee designee''; (iii) the sixth sentence to delete 
the word ``such'' before ``other senior level employee designee'', 
replace the term ``Regular Session Trading'' with ``Regular Trading 
Hours'', and add the word ``trading'' before ``day''; and (v) amend the 
last sentence to replace the term ``subsection'' with ``paragraph'' and 
delete reference to paragraphs (e)(3) and (4) as those paragraphs are 
now included in (e)(2).
    Amend the last sentence in paragraphs (j) and (k) to delete 
reference to paragraphs (e)(3) and (4) as those paragraphs are now 
included in (e)(2).
2. Statutory Basis
    The Exchange believes 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, and, 
in particular, with the requirements of Section 6(b) of the Act.\12\ 
Specifically, the proposed change is consistent with Section 6(b)(5) of 
the Act,\13\ because it is 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. None of these 
changes are designed to amend the Exchange's current review process for 
clearly erroneous executions. Rather, as mentioned above, the proposed 
rule changes, combined with the planned filing for the BYX, BZX, and 
EDGA, would allow the BGM Affiliated Exchanges to provide a consistent 
set of rules as it relates to clearly erroneous executions. Consistent 
rules, in turn, will simplify the regulatory requirements for Members 
of the Exchange that are also participants on EDGA, BYZ and/or BZX. The 
proposed rule change would provide greater harmonization between rules 
of similar purpose on the BGM Affiliated Exchanges, resulting in 
greater uniformity and less burdensome and more efficient regulatory 
compliance and understanding of Exchange Rules. As such, the proposed 
rule change would foster cooperation and coordination with persons 
engaged in facilitating transactions in securities and would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system. Similarly, the Exchange also believes that, 
by harmonizing the rules across each BGM Affiliated Exchange, the 
proposal will enhance the Exchange's ability to fairly and efficiently 
regulate its Members, meaning that the proposed rule change is 
equitable and will promote fairness in the market place. Finally, the 
Exchange believes that the non-substantive changes discussed above will 
contribute to the protection of investors and the public interest by 
helping to avoid confusion with respect to Exchange Rules.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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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 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the act. To the contrary, allowing the 
Exchange to implement substantively identical rules across each of the 
BGM Affiliated Exchanges regarding clearly erroneous executions does 
not present any competitive issues, but rather is designed to provide 
greater harmonization among Exchange, BZX, BYX, and EDGA rules of 
similar purpose. The proposed rule change should, therefore, result in 
less burdensome and more efficient regulatory compliance as well as a 
better understanding of Exchange Rules for common members of the BGM 
Affiliated Exchanges.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    The Exchange has designated this rule filing as non-controversial 
under Section 19(b)(3)(A) of the Act \14\ and paragraph (f)(6) of Rule 
19b-4 thereunder.\15\ The proposed rule change effects a change that 
(A) does not significantly affect the protection of investors or the 
public interest; (B) does not impose any significant burden on 
competition; and (C) by its terms, does not become operative for 30 
days after the date of the filing, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest; provided that the self-regulatory organization 
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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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 may summarily 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

     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-EDGX-2015-42 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-EDGX-2015-42. 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

[[Page 60219]]

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 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-EDGX-2015-42, and should be submitted on or before 
October 26, 2015.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-25180 Filed 10-2-15; 8:45 am]
 BILLING CODE 8011-01-P