Document ID: SEC-2013-1482-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2013-08-20T04:00Z

[Federal Register Volume 78, Number 161 (Tuesday, August 20, 2013)]
[Notices]
[Pages 51250-51251]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-20203]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70199; File No. SR-BATS-2013-036]

Self-Regulatory Organizations; BATS Exchange, Inc.; Order 
Approving a Proposed Rule Change To Introduce a Connectivity Option 
Through Points of Presence

August 14, 2013.

I. Introduction

    On June 19, 2013, BATS Exchange, Inc. (``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 
introduce a connectivity option through Points of Presence (PoPs). The 
proposed rule change was published for comment in the Federal Register 
on July 3, 2013.\3\ The Commission received no comment letters on the 
proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 69877 (June 27, 2013), 
78 FR 40241 (``Notice'').
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II. Description of the Proposal

    The Exchange currently maintains a presence in two third-party data 
centers: (i) the primary data center where the Exchange's business is 
primarily conducted on a daily basis, and (ii) a secondary data center, 
which is predominantly maintained for business continuity purposes. 
Exchange participants, including participants trading on the Exchange 
and market data recipients, are required to connect directly to the 
Exchange at the primary or secondary data centers where the Exchange 
currently maintains servers. If an Exchange participant does not have a 
presence within these data centers, then the participant is required to 
obtain connectivity from the participant's location, or data center, to 
the data centers where the Exchange's servers are located. The Exchange 
is proposing to provide market participants with the ability to access 
the Exchange's network via physical ports at data center entry points, 
or PoPs, at data centers other than the Exchange's primary or secondary 
data center (``Remote Data Centers'').
    PoP ports will be located at Remote Data Centers in order to 
provide participants connectivity to the Exchange. In the Notice, the 
Exchange represented that connectivity established via PoP ports will 
allow market participants to perform all of the operations that they 
would typically perform when connecting directly to the Exchange, 
including order entry and receipt of market data. Participants would 
establish a physical connection to a PoP port in the Remote Data 
Center, from which the Exchange would provide the requisite 
connectivity to allow participants to access the Exchange's servers.\4\
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    \4\ The Exchange would contract with a third party 
telecommunications provider to supply connectivity to the Exchange 
to its participants.
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    Participants that do not maintain a presence in either of the 
Exchange's data centers must currently establish connectivity to such 
data centers themselves through third party telecommunications 
providers. By making PoP entry points available, the Exchange is 
reducing or eliminating the need for participants to contract 
themselves for third party connectivity located in the same data center 
as such PoP ports. The Exchange believes that some participants may 
choose to connect to the Exchange at a PoP location to the extent that 
the Exchange's service offering makes connecting to the Exchange in 
this manner more easily established or more cost effective. In the 
Notice, the Exchange suggested that the PoPs may be most attractive to 
smaller market participants that otherwise may not connect to the 
Exchange.
    The Exchange proposes to provide the option to connect to the 
Exchange via PoPs to any member or non-member that has been approved to 
connect to the Exchange. Any member or non-member opting not to access 
the Exchange at a PoP location would still be able to access the 
Exchange in the existing data centers as they do currently.

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \5\ 
and the rules and regulations thereunder applicable to a national 
securities exchange. Additionally, in approving this proposed rule 
change, the Commission

[[Page 51251]]

has considered the proposed rule's impact on efficiency, competition, 
and capital formation.\6\ The Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\7\ which 
requires, among other things, that the Exchange's rules be designed to 
prevent fraudulent and manipulative acts and practices, 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; and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \5\ 15 U.S.C. 78f.
    \6\ See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange notes that competition for customers and order flow 
amongst exchanges and other non-exchange market participants is 
considerable and that the Exchange is offering this new connectivity 
option to keep pace with changes in the industry and evolving customer 
needs. The Exchange further states that the offering is entirely 
optional and is geared towards attracting new customers, as well as 
retaining existing customers. Additionally, the Exchange has 
represented that it will make PoPs equally available to any Exchange 
member or non-member that has been approved to connect to the 
Exchange.\8\ Finally, the Exchange does not believe that demand will 
exceed the capacity planned for PoP access. However, in the event that 
demand does exceed the capacity planned for PoP access, the Exchange 
represented that it would expand its infrastructure as necessary in 
order to meet demand.\9\ For the reasons noted above, the Commission 
finds that the proposal is consistent with Section 6(b)(5) of the Act.
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    \8\ See Notice, supra note 3, at 40242. The Exchange notes that 
this would include any Member, non-member service bureau that acts 
as a conduit for orders entered by Exchange Members, Sponsored 
Participant, or market data recipient. Id.
    \9\ Id.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-BATS-2013-036) be, and it 
hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Kevin M. O'Neill,
Deputy Secretary.
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    \11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-20203 Filed 8-19-13; 8:45 am]
BILLING CODE 8011-01-P