Document ID: SEC-2015-2153-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.,
Posted Date: 2015-12-28T05:00Z

[Federal Register Volume 80, Number 248 (Monday, December 28, 2015)]
[Notices]
[Pages 80825-80827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32523]

[[Page 80825]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76714; File No. SR-EDGX-2015-64]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
11.6(n)(1), Routing/Posting Instructions, To Amend the Aggressive 
Instruction

December 21, 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 December 16, 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 and 
II 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 amend the Aggressive instruction 
under Exchange Rule 11.6(n)(1) to route such orders where that order 
has been locked or crossed by other Trading Centers. The proposed rule 
change is based on recently filed proposed rule changes by BATS 
Exchange, Inc. (``BZX'') and BATS Y-Exchange, Inc. (``BYX'').\5\
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    \5\ See Securities Exchange Act Release Nos. 76623 (December 11, 
2015) (SR-BATS-2015-112), and 76625 (December 11, 2015) (SR-BYX-
2015-49) (amending the Aggressive Re-Route instruction under BYX and 
BZX Rules 11.13(b)(4)(A) to route such orders where that order has 
been locked or crossed by other Trading Centers).
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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 the 
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 BYX (together with BZX, EDGA and 
EDGX, the ``BGM Affiliated Exchanges'').\6\ In the context of the 
Merger, the BGM Affiliated Exchanges are working to align their rules 
and functionality, retaining only intended differences between the BGM 
Affiliated Exchanges. Thus, the Exchange proposes to amend the 
Aggressive instruction under Exchange Rule 11.6(n)(1) in order to 
conform with recently filed proposed rule changes by BYX and BZX\7\ to 
provide a consistent rule set across each of the BGM Affiliated 
Exchanges.\8\
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    \6\ See Securities Exchange Act Release No. 71449 (January 30, 
2014), 79 FR 6961 (February 5, 2014) (SR-EDGX-2013-43; SR-EDGA-2013-
34).
    \7\ See supra note 5.
    \8\ The Exchange notes that EDGA intends to file an identical 
proposal with the Commission.
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    Users \9\ may submit Limit Orders \10\ to the Exchange that are 
processed pursuant to Exchange Rules 11.10(a) and 11.11, as set forth 
below. Rule 11.10(a) describes the process by which an incoming order 
would execute against the EDGX Book.\11\ To the extent an order has not 
been executed in its entirety against the EDGX Book, Rule 11.11 then 
describes the process of routing marketable Limit Orders to one or more 
Trading Centers, including a description of how the Exchange treats any 
unfilled balance that returns to the Exchange following the first 
attempt to fill the order through the routing process. If not filled 
through routing, and based on the order instructions, the unfilled 
balance of the order may be posted to the EDGX Book.
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    \9\ The term ``User'' means ``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).
    \10\ See Exchange Rule 11.8(b).
    \11\ See Exchange Rule 1.5(d).
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    The Aggressive instruction subjects an order to the routing process 
after being posted to the EDGX Book only if the order is subsequently 
crossed by another Trading Center (rather than if the order is locked 
or crossed). Further, a routable Limit Order with a Non-Displayed \12\ 
instruction posted to the EDGX Book that is crossed by another 
accessible Trading Center will be automatically routed to the crossing 
Trading Center. The Exchange proposes to modify the Aggressive 
instruction to also provide that, where the order is locked by another 
accessible Trading Center, it would be automatically routed to the 
locking Trading Center. The proposed amendment would also apply to 
orders with a Non-Displayed instruction and Aggressive instruction.\13\
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    \12\ See Exchange Rule 11.6(e)(2).
    \13\ The Exchange also provides the Super Aggressive instruction 
which directs the System to route the order if an away Trading 
Center locks or crosses the limit price of the order resting on the 
EDGX Book. See Exchange Rule 11.6(n)(2). When any order with a Super 
Aggressive instruction is locked by an incoming order with a Post 
Only instruction that does not remove liquidity pursuant to Rule 
11.6(n)(4) below, the order with a Super Aggressive instruction is 
converted to an executable order and will remove liquidity against 
such incoming order (``liquidity swap functionality''). Id. Once 
amended, the only difference between the Aggressive and Super 
Aggressive instructions would be that the liquidity swap 
functionality described above would be available to an order subject 
to the Super Aggressive instruction and not available to an order 
subject to the Aggressive instruction.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \14\ and furthers the objectives of 
Section 6(b)(5) of the Act \15\ 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, 
to foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, and, in general, to protect 
investors and the public interest. Specifically, the proposed changes 
are designed to provide Users with additional control over their orders 
in the context of a national market system where quotations may lock or 
cross orders posted to the EDGX Book and to facilitate executions on 
the Exchange consistent with User instructions. Thus, the proposals are 
directly targeted at removing impediments to and perfecting the 
mechanism of a free and

[[Page 80826]]

open market and national market system. The proposed rule change also 
is designed to support the principles of Section 11A(a)(1) \16\ of the 
Act in that it seeks to assure fair competition among brokers and 
dealers and among exchange markets. Lastly, the Exchange notes that the 
proposed amendments to the Aggressive instruction previously existed on 
BZX and BYX as the RECYCLE routing option.\17\
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78k-1(a)(1).
    \17\ See Securities Exchange Act Release Nos. 59967 (May 21, 
2009), 74 FR 25793 (May 29, 2009) (SR-BATS-2009-015) (proposing to 
allow the designation of an order as eligible for re-routing after 
being posted to the BATS Book if another Trading Center has locked 
or crossed the posted order); 62404 (June 30, 2010), 75 FR 39303 
(July 8, 2010) (SR-BATS-2010-017) (naming the designation of an 
order as eligible for re-routing after being posted to the BATS Book 
if another Trading Center has locked or crossed the posted order as 
the RECYCLE routing option);and 63097 (October 13, 2010), 75 FR 
64767 (October 20, 2010) (SR-BATS-2010-002)[sic] (naming the 
designation of an order as eligible for re-routing after being 
posted to the BATS Book if another Trading Center has locked or 
crossed the posted order as the RECYCLE routing option).
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    Consistent with Section 6(b)(5) of the Act,\18\ the proposed rule 
change, combined with the planned filing for EDGA, would allow the BGM 
Affiliated Exchanges to provide a consistent set of rules as it relates 
to the routing of orders that are locked or crossed by a Trading 
Center. 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.
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    \18\ 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 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
believes that proposed amendment to the Aggressive functionality 
encourages competition by increasing the likelihood of executions of 
orders that have been posted to the Exchange. The increased likelihood 
of an execution where the order is locked by a quotation on a Trading 
Center should attract additional order flow to the Exchange.

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days 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 Act \19\ and Rule 19b-4(f)(6) thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \21\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \22\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
stated that waiver of the operative delay will allow the Exchange to 
immediately provide Users with additional control over their orders in 
the context of a national market system where quotations may lock or 
cross orders posted to the EDGX Book and to facilitate executions on 
the Exchange consistent with User instructions.\23\ The Commission 
believes the waiver of the operative delay is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\24\
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    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ The Exchange further stated that it will provide Members 
with reasonable advance notice of the proposed rule change's 
implementation date.
    \24\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change 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-2015-64 on the subject line.
Paper Comments
     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-EDGX-2015-64. 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

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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-EDGX-2015-64, and should be submitted on or before 
January 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-32523 Filed 12-24-15; 8:45 am]
 BILLING CODE 8011-01-P