Document ID: SEC-2011-0757-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2011-06-01T04:00Z

[Federal Register Volume 76, Number 105 (Wednesday, June 1, 2011)]
[Notices]
[Pages 31660-31666]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-13422]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64546; File No. SR-BATS-2011-018]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing of Proposed Rule Change To Adopt Rules for the Qualification, 
Listing and Delisting of Companies on the Exchange

May 25, 2011.
    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 May 12, 2011, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission

[[Page 31661]]

(``Commission'') the proposed rule change as described in Items I and 
II 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 proposes to adopt rules for the qualification, listing 
and delisting of companies on the Exchange.
    The text of the proposed rule change is available at the Exchange's 
Web site at http://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
    The Exchange is proposing rules to adopt a program for the 
qualification, listing and delisting of companies on the Exchange 
(``Listing Rules''). The Exchange proposes to eliminate the Exchange's 
current rules related to securities traded on BATS pursuant to unlisted 
trading privileges, and to replace such rules with the Listing Rules, 
which are primarily based on and substantially similar to the rules of 
the NASDAQ Stock Market LLC (``Nasdaq''). The Exchange is not proposing 
any changes to the Rules of the Exchange's options market (``BATS 
Options'').
    The Exchange proposes adoption of two distinct tiers of securities 
to be listed on the Exchange, Tier I and Tier II. The proposed 
standards for a security's initial and continued listing on Tier I are 
nearly identical to the existing standards applicable to listing on the 
Nasdaq Global Market (``NGM''). The proposed standards for a security's 
initial and continued listing on Tier II are nearly identical to the 
existing standards applicable to listing on the Nasdaq Capital Market 
(``NCM''). While the quantitative standards for Tier I and II differ, 
the qualitative standards for both tiers are the same, and are based on 
Nasdaq's existing qualitative standards, as described in further detail 
below. The Exchange notes that it has not proposed adoption of a tier 
equivalent to the Nasdaq Global Select Market tier, which is governed 
by the Rule 5300 Series of Nasdaq rules.
    In addition to deletion of the Exchange's current Chapter XIV and 
adoption of the Rules described below, the Exchange proposes to modify 
a cross-reference in Rule 3.21 to align such reference to the new 
location of the defined term ``UTP Derivative Securities.''
Organization
    As proposed, Rule 14.1 contains definitions for the rules related 
to the qualification, listing and delisting of Companies on the 
Exchange; \3\ Rule 14.2 discusses the Exchange's general regulatory 
authority; Rule 14.3 sets forth the procedures and prerequisites for 
gaining a listing on the Exchange; Rules 14.4 and 14.5 contain the 
listing requirements for units; Rule 14.6 sets forth the disclosure 
obligations of listed Companies; Rule 14.7 describes Direct 
Registration Program requirements; Rules 14.8 and 14.9 contain the 
specific and quantitative listing requirements for listing on the 
Exchange in Tiers I and II, respectively; Rule 14.10 contains the 
corporate governance requirements applicable to all Companies; Rule 
14.11 contains special listing requirements for securities other than 
common or preferred stock and warrants; Rule 14.12 contains the 
consequences of a failure to meet the Exchange's listing standards; and 
Rule 14.13 contains Exchange listing fees.
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    \3\ For purposes of the proposed rules, any issuer of a security 
listed or applying to list on the Exchange, including an issuer that 
is not incorporated (e.g., a limited partnership) will be defined as 
a ``Company.''
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General Regulatory Authority of the Exchange
    As proposed, Rule 14.2 makes clear that the Exchange, in addition 
to applying the enumerated criteria set forth in Chapter XIV, has broad 
discretionary authority over the initial and continued listing of 
securities on the Exchange in order to maintain the quality of and 
public confidence in its market, to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
and to protect investors and the public interest. The Exchange may use 
such discretion to deny initial listing, apply additional or more 
stringent criteria for the initial or continued listing of particular 
securities, or suspend or delist particular securities based on any 
event, condition, or circumstance that exists or occurs that makes 
initial or continued listing of the securities on the Exchange 
inadvisable or unwarranted in the opinion of the Exchange, even though 
the securities meet all enumerated criteria for initial or continued 
listing on the Exchange.
    Rule 14.2 provides Companies with guidance regarding the 
circumstances in which the Exchange's use of discretionary authority is 
invoked and the types of factors considered by the Exchange when making 
determinations pursuant to such authority. In addition, Rule 14.2 sets 
forth the Exchange's use of discretionary authority as it relates to a 
Company whose business plan is to complete an initial public offering 
and engage in a merger or acquisition with one or more unidentified 
companies within a specific period of time. The Exchange will permit 
the listing of such a Company if the Company meets all applicable 
initial listing requirements, as well as the conditions described in 
Rule 14.2. In addition, Rule 14.2 addresses the Exchange's use of 
authority when a Company files for protection under any provision of 
the federal bankruptcy laws or comparable foreign laws.
General Procedures and Prerequisites for Listing
    Proposed Rule 14.3 describes the application process that a Company 
must complete in order to be listed on the Exchange. To apply for 
listing on the Exchange, a Company shall execute a Listing Agreement 
and a Listing Application on forms made available by the Exchange in 
order to provide the information required by Section 12(b) of the 
Act.\4\ A Company's qualifications will be determined on the basis of 
financial statements that are either: (i) Prepared in accordance with 
U.S. generally accepted accounting principles; or (ii) reconciled to 
U.S. generally accepted accounting principles as required by the 
Commission's rules; or (iii) prepared in accordance with International 
Financial Reporting Standards, as issued by the International 
Accounting Standards Board, for Companies that are permitted to file 
financial statements using those standards consistent with the 
Commission's rules.
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    \4\ 15 U.S.C. 78l(b).

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[[Page 31662]]

    Rule 14.3 also sets forth the prerequisites for an applicant 
Company to become listed on the Exchange: (1) The security must be 
registered pursuant to Section 12(b) of the Act \5\ or subject to an 
applicable exemption; (2) the Company must be audited by a registered 
independent public accountant; (3) the securities must be eligible for 
a Direct Registration Program operated by a clearing agency registered 
under Section 17A of the Act,\6\ subject to certain exceptions; (4) the 
Company must pay fees required by Rule 14.13; (5) the securities must 
be in good standing with the Commission or Other Regulatory Authority; 
\7\ (6) the Exchange shall certify to the Commission, and the 
securities must become effective, pursuant to the Section 12(d) of the 
Act; \8\ and (7) the securities must be depositary eligible pursuant to 
the rules and procedures of a securities depository registered as a 
clearing agency under Section 17A of the Act \9\ (``Securities 
Depositary'').
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    \5\ 15 U.S.C. 78l(b).
    \6\ 15 U.S.C. 78q-1.
    \7\ As defined in proposed Rule 14.1(t).
    \8\ 15 U.S.C. 78l(d).
    \9\ 15 U.S.C. 78q-1.
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    To foster competition among markets and further the development of 
the national market system, pursuant to Rule 14.13, the Exchange shall 
permit Companies whose securities are listed on another national 
securities exchange to apply also to list those securities on the 
Exchange. The Exchange shall make an independent determination of 
whether such Companies satisfy all applicable listing requirements and 
shall require Companies to enter into a dual listing agreement with the 
Exchange.
    While the Exchange shall certify such dually listed securities for 
listing on the Exchange, the Exchange shall not exercise its authority 
under Rule 14.3(d) separately to designate or register such dually 
listed securities as Exchange national market system securities within 
the meaning of Section 11A of the Act or the rules thereunder. As a 
result, these securities, which are already designated as national 
market system securities under the Consolidated Quotation Service 
(``CQS'') and Consolidated Tape Association national market system 
plans (``CQ and CTA Plans'') or the Nasdaq Unlisted Trading Privileges 
national market system plan (``UTP Plan''), as applicable, shall remain 
subject to those plans. For purposes of the national market system, 
such securities shall continue to trade under their current ticker 
symbol. The Exchange shall continue to send all quotations and 
transaction reports in such securities to the processor for the CTA 
Plan or UTP Plan, as applicable.
Disclosure Obligations
    Proposed Rule 14.6 in order to set forth the requirements of a 
Company to provide information to the Exchange, file financial reports 
and other documentation required pursuant to the Securities Act of 1933 
and the rules and regulations thereunder, and make public disclosures, 
including disclosures required pursuant to Regulation FD.\10\ Such 
requirements include providing the Exchange's Surveillance Department 
with notification prior to public release of material information. In 
addition, Rule 14.6 sets forth obligations regarding notification to 
the Exchange of an administrative nature and also regarding corporate 
actions, such as reverse stock splits and changes to the Company's 
state of incorporation. The Exchange has also proposed two 
Interpretations and Policies to provide Companies with additional 
guidance due to the importance that Companies provide prompt and 
complete notifications. Such notice is critical to the proper 
functioning of the capital markets and to investor confidence.
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    \10\ 17 CFR 243.100 et seq.
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Quantitative Listing Requirements and Standards for Tier I Securities
    The Exchange has proposed to divide the quantitative listing 
standards into two subcategories in the proposed rules: listing 
requirements and listing standards. Under the proposed rules, listing 
requirements are quantitative metrics, all of which a Company must meet 
for initial or continued listing on a particular tier. Listing 
standards consist of bundles of quantitative metrics; however, unlike 
listing requirements, a Company must meet at least one listing standard 
to become listed or to continue listing.
    The specific quantitative listing standards for both Tier I and 
Tier II securities proposed by the Exchange are described below.
Primary Equity Securities--Initial Listing Requirements and Standards
    BATS proposes to adopt quantitative initial listing requirements 
pertaining to the public float, distribution of shares, and trading 
volume of the security identical to the requirements of NGM. 
Specifically, as set forth in proposed Rule 14.8(b), a Company must 
have at a minimum a bid price of at least $4 per share, a minimum of 
1.1 million publicly held shares, and at least 400 round lot holders.
    BATS also proposes to require that the issuer of the security meet 
at least one of the following standards--income, equity, market value, 
or total assets/total revenue. Each of these standards, described 
below, is identical to the comparable NGM standard set forth in Nasdaq 
Rule 5405(b).
    The income standard of Rule 14.8(b)(2)(A) would require that the 
issuer have annual pre-tax income from continuing operations of at 
least $1 million in the most recently completed fiscal year or in two 
of the three most recently completed fiscal years, $15 million in 
stockholders' equity, $8 million in market value of publicly held 
shares, and at least three registered and active Market Makers.\11\
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    \11\ The term Market Maker means a Member that acts as a Market 
Maker on BATS pursuant to Chapter XI of the Exchange's rules.
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    The equity standard of Rule 14.8(b)(2)(B) would require that 
stockholder's equity be at least $30 million, the issuer have a two 
year operating history, that the market value of publicly held shares 
be at least $18 million, and at least three registered and active 
Market Makers.
    The market value standard of Rule 14.8(b)(2)(C), for currently 
publicly traded companies, would require that the market value of 
listed securities be at least $75 million, that the market value of 
publicly held shares be at least $20 million, and at least four 
registered and active Market Makers.
    Finally, the total assets/total revenue standard of Rule 
14.8(b)(2)(D) would require that total assets and total revenue for the 
most recent fiscal year and two of the three most recently completed 
fiscal years be at least $75 million, that the market value of publicly 
held shares be at least $20 million, and at least four registered and 
active Market Makers.
Rights and Warrants, Preferred Stock and Secondary Classes of Common 
Stock--Initial Listing Requirements and Standards
    As is true for primary equity securities, BATS proposes to adopt 
requirements and standards nearly identical to those of NGM as the Tier 
I quantitative initial listing requirements and standards for rights 
and warrants and preferred stock and secondary classes of common stock, 
as further described below.\12\
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    \12\ See Nasdaq Rules 5410 and 5415.
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    BATS proposes to require through Rule 14.8(c)(1) that for initial 
listing at least 450,000 rights or warrants be issued and that the 
underlying security be listed on the respective exchange or

[[Page 31663]]

be a covered security. BATS would also require that for warrants there 
must be at least 400 round lot holders. Finally, BATS would require at 
least three registered and active Market Makers.
    Pursuant to Rule 14.8(d)(1), BATS would require that when the 
primary equity security of an issuer is listed on the respective 
exchange or is a covered security, the preferred stock or secondary 
classes of common stock meet certain similar requirements. Rule 
14.8(d)(1) would also require that there be at least 200,000 publicly 
held shares with a market value of at least $4 million, a minimum bid 
price of at least $4 per share, at least 100 round lot holders, and at 
least three registered and active Market Makers.
    In the event the Company's Primary Equity Security is not listed on 
the Exchange as a Tier I security or is not a Covered Security, the 
Exchange proposes that the preferred stock and/or secondary class of 
common stock be listed on the Exchange as a Tier I security so long as 
the security has met the initial listing criteria for Primary Equity 
Securities as set forth in Rule 14.8(b).
Units--Initial Listing and Maintenance Requirements
    In addition, the Exchange has proposed a stand-alone rule 
applicable to the listing of units as Tier I securities, Rule 14.4. 
Pursuant to Rule 14.4, all units shall have at least one equity 
component. All components of such units shall satisfy the requirements 
for initial and continued listing as Tier I securities, or, in the case 
of debt components, satisfy the requirements described below.
    All debt components of a unit, if any, shall meet the following 
requirements: (A) The debt issue must have an aggregate market value or 
principal amount of at least $5 million; (B) the issuer of the debt 
security must have equity securities listed on the Exchange as a Tier I 
security; and (C) in the case of convertible debt, the equity into 
which the debt is convertible must itself be subject to real-time last 
sale reporting in the United States, and the convertible debt must not 
contain a provision which gives the company the right, at its 
discretion, to reduce the conversion price for periods of time or from 
time to time unless the company establishes a minimum period of ten 
business days within which such price reduction will be in effect. 
Finally, all components of the unit shall be issued by the same issuer. 
All units and issuers of such units shall comply with the initial and 
continued listing requirements of Tier I.
    For initial inclusion, a unit shall have at least three registered 
and active Market Makers. For continued listing, a unit shall have at 
least two registered and active Market Makers, one of which may be a 
Market Maker entering a stabilizing bid.
Primary Equity Securities--Maintenance Requirements and Standards
    As with initial listing requirements and standards, BATS has 
proposed quantitative maintenance requirements based on the maintenance 
requirements and standards applicable to NGM listed issues.\13\ For 
continued approval of a primary equity security listing, BATS Rule 
14.8(e)(1) would require that there be a minimum bid price of $1 per 
share and at least 400 total holders. BATS would also require, under 
14.8(e)(2) that issuers meet at least one of the following standards--
equity, market value, or total assets/total revenue. The equity 
standard would require that stockholders' equity be at least $10 
million, that there be at least 750,000 publicly held shares with a 
market value of at least $5 million, and that there be at least two 
registered and active Market Makers. The market value standard would 
require that the market value of listed securities be at least $50 
million, that there be at least 1.1 million publicly held shares with a 
market value of at least $15 million, and that there be at least two 
registered and active Market Makers. The total assets/total revenue 
standards would require that there be total assets and total revenue of 
at least $50 million each for the most recently completed fiscal year 
or two of the three most recently completed fiscal years, at least 1.1 
million publicly held shares with market value of at least $15 million, 
and at least four registered and active Market Makers.
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    \13\ See Nasdaq Rule 5450(b).
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Rights and Warrants, Preferred Stock and Secondary Classes of Common 
Stock--Maintenance Requirements
    The Exchange proposes to adopt, as Rules 14.8(f) through (g), 
continued listing requirements nearly identical to those set forth in 
Nasdaq rules 5455 through 5460 for rights and warrants, and for 
preferred stock and secondary classes of common stock. The Exchange 
proposes to require that for continued listing, the rights or warrants 
continue to be listed on the Exchange as a Tier I security or be a 
Covered Security; and that there be at least two registered and active 
Market Makers, one of which may be a Market Maker entering a 
stabilizing bid. The Exchange also proposes as Continued Listing 
Requirements for Preferred Stock and Secondary Classes of Common Stock 
that the Company's Primary Equity Security of the Company be listed on 
the Exchange as a Tier I security or as a Covered Security. The 
Exchange proposes that the preferred stock or secondary class of common 
stock have at least 100,000 Publicly Held Shares, a Market Value of 
Publicly Held Shares of at least $1,000,000; a minimum bid price of at 
least $1 per share; at least 100 Public Holders; and at least two 
registered and active Market Makers.
    In the event the Company's Primary Equity Security is not listed on 
the Exchange as a Tier I security or is not a Covered Security, the 
Exchange proposes that the preferred stock and/or secondary class of 
common stock may continue to be listed on the Exchange as a Tier I 
security so long as the security has met the continued listing criteria 
for Primary Equity Securities as set forth in Rule 14.8(e).
Quantitative Listing Requirements and Standards for Tier II Securities
Primary Equity Securities--Initial Listing Requirements and Standards
    BATS proposes to adopt quantitative initial listing requirements 
pertaining to the public float, distribution of shares, and trading 
volume of the security identical to the requirements of NCM.\14\ 
Specifically, as set forth in proposed Rule 14.9(b)(1), a Company must 
have at a minimum bid price of at least $4 per share, a minimum of one 
million publicly held shares, at least 300 round lot holders, and at 
least three registered and active Market Makers. BATS would also 
require that in the case of ADRs there be at least 400,000 issued.
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    \14\ See Nasdaq Rule 5505.
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    The Exchange would require in Rule 14.9(b)(2) that the issuer of 
the security meets at least one of the following identical standards--
equity, market value, or net income.
    The proposed equity standard would require stockholders' equity of 
at least $5 million, that the market value of publicly held shares be 
at least $15 million, and a two year operating history. The proposed 
market value standard would require that the market value of listed 
securities be at least $50 million, that stockholders' equity be at 
least $4 million, and that the market value of publicly held shares be 
at least $15 million. The proposed net income standard requires that 
the net income from continuing operations be at least $750,000 in the 
most recently

[[Page 31664]]

completed fiscal year or in two of the three most recently completed 
fiscal years, that stockholders' equity be at least $4 million, and 
that the market value of publicly held shares be at least $5 million.
Preferred Stock and Secondary Classes of Common Stock; Rights, 
Warrants, and Convertible Debt--Initial Listing Requirements
    As is true for primary equity securities, BATS proposes to adopt 
requirements nearly identical to those of NCM as Tier II quantitative 
initial listing requirements for preferred stock and secondary classes 
of common stock as well as for rights, warrants, and convertible debt, 
as further described below.\15\
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    \15\ See Nasdaq Rules 5510 and 5515.
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    Pursuant to Rule 14.9(c), BATS would require that when the primary 
equity security of an issuer is listed on the respective exchange or is 
a covered security, the preferred stock or secondary classes of common 
stock meet certain similar requirements. Rule 14.9(c)(1) would also 
require that there be at least 200,000 publicly held shares with a 
market value of at least $3.5 million, a minimum bid price of at least 
$4 per share, at least 100 round lot holders, and at least three 
registered and active Market Makers.\16\
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    \16\ See Nasdaq Rule 5510(a).
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    In the event the Company's Primary Equity Security is not listed on 
the Exchange as a Tier II security or is not a Covered Security, the 
Exchange proposes that the preferred stock and/or secondary class of 
common stock be listed on the Exchange as a Tier II security so long as 
the security has met the initial listing criteria for Primary Equity 
Securities as set forth in Rule 14.9(b).
    BATS proposes to require through Rule 14.9(d)(1) that for initial 
listing, rights, warrants, and put warrants meet certain similar 
requirements. BATS would also require that there be at least 400,000 
issued and that the underlying security be listed on the Exchange or be 
a covered security. In the case of warrants, Rule 14.9(d)(1) would 
require there be at least 400 round lot holders, and at least three 
registered and active Market Makers.\17\
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    \17\ See Nasdaq Rule 5515(a).
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    For initial listing of convertible debt securities, BATS Rule 
14.9(d)(2)(A) would require that the principal amount outstanding be at 
least $10 million, that the current last sale information be available 
in the United States with respect to the underlying security into which 
the bond or debenture is convertible, and at least three registered and 
active Market Makers.\18\ In addition to these conditions, the Exchange 
proposes to require that issuers also meet one of the following 
conditions: (i) That the issuer of the debt have an equity security 
that is listed on BATS, Nasdaq, Amex, or the NYSE, or (ii) that an 
issuer whose equity security is listed on BATS, Nasdaq, Amex, or the 
NYSE directly or indirectly owns a majority interest in, or is under 
common control with, the issuer of the debt security, or has guaranteed 
the debt security, or (iii) a nationally recognized securities rating 
organization (an ``NRSRO'') has assigned a current rating to the debt 
security that is no lower than an S&P Corporation ``B'' rating or 
equivalent rating by another NRSRO; or (iv) if no NRSRO has assigned a 
rating to the issue, an NRSRO has currently assigned: (a) an investment 
grade rating to an immediately senior issue; or (b) a rating that is no 
lower than an S&P Corporation ``B'' rating, or an equivalent rating by 
another NRSRO, to a pari passu or junior issue.\19\
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    \18\ See Nasdaq Rule 5515(b).
    \19\ See Nasdaq Rule 5515(b)(4).
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    For initial listing of index warrants, Rule 14.9(d)(3) would 
require that the minimum public distribution be at least 1 million 
warrants, that there be a minimum of 400 public holders, that the 
market value of the index warrants be at least $4 million, and that the 
issuer have a minimum tangible net worth in excess of $150 million. 
This requirement is nearly identical to the corollary NCM 
requirement.\20\
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    \20\ See Nasdaq Rule 5515(c).
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Units--Initial Listing and Maintenance Requirements and Standards
    In addition, the Exchange has proposed a stand-alone rule 
applicable to the listing of units as Tier II securities, Rule 14.5. 
Pursuant to Rule 14.5, all component parts of units shall meet the Tier 
II requirements for initial and continued listing. Further, the minimum 
period for listing of the units shall be 30 days from the first day of 
listing, except the period may be shortened if the units are suspended 
or withdrawn for regulatory purposes. Companies and underwriters 
seeking to withdraw units from listing must provide the Exchange with 
notice of such intent at least 15 days prior to withdrawal.
    For initial inclusion, a unit shall have at least three registered 
and active Market Makers. For continued listing, a unit shall have at 
least two registered and active Market Makers, one of which may be a 
Market Maker entering a stabilizing bid.
Primary Equity Securities--Maintenance Requirements and Standards
    As with initial listing standards, BATS has proposed quantitative 
maintenance requirements based on the maintenance requirements 
applicable to NCM listed issues. For continued approval of a primary 
equity security listing, BATS Rule 14.9(e)(2) would require a minimum 
bid price of $1 per share, at least 300 public holders, at least 
500,000 publicly held shares with a market value of at least $1 
million, and at least two registered and active Market Makers, one of 
which may be a Market Maker entering a stabilizing bid.\21\
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    \21\ See Nasdaq Rule 5550(b).
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    Pursuant to Rule 14.9(e)(2), BATS would require that issuers meet 
at least one of the following standards--equity, market value, or net 
income. Under the equity standard, BATS would require that 
stockholders' equity be at least $2.5 million. The market value 
standard would require that the market value of listed securities be at 
least $35 million. The net income standard would require net income 
from continuing operations of $500,000 in the most recently completed 
fiscal year or in two of the three most recently completed fiscal 
years.
Preferred Stock and Secondary Classes of Common Stock; Rights, 
Warrants, and Convertible Debt--Maintenance Requirements
    The Exchange proposes to adopt, as Rules 14.9(f) through (g), 
continued listing requirements nearly identical to those set forth in 
Nasdaq rules 5455 through 5460 for Preferred Stock and Secondary 
Classes of Common Stock; Rights, Warrants, and Convertible Debt.
    The Exchange proposes Continued Listing Requirements for Preferred 
Stock and Secondary Classes of Common Stock require that when the 
Primary Equity Security is listed on the Exchange as a Tier II security 
or is a Covered Security, a Company's preferred stock or secondary 
class of common stock have a minimum bid price of at least $1 per 
share; at least 100 Public Holders; at least 100,000 Publicly Held 
Shares; a Market Value of Publicly Held Shares of at least $1 million; 
and at least two registered and active Market Makers, one of which may 
be a Market Maker entering a stabilizing bid.
    In the event the Company's Primary Equity Security is not listed on 
the Exchange as a Tier II security or is not

[[Page 31665]]

a Covered Security, the Exchange proposes that the preferred stock and/
or secondary class of common stock be listed on the Exchange as a Tier 
II security so long as the security has met the criteria of the 
continued listing of Primary Equity Securities as set forth in Rule 
14.9(e).
    The Exchange also proposes for Continued Listing Requirements for 
Rights, Warrants, and Convertible Debt to require that for rights, 
warrants, and put warrants (that is, instruments that grant the holder 
the right to sell to the issuing company a specified number of shares 
of the Company's common stock, at a specified price until a specified 
period of time), the underlying security remains listed on the Exchange 
or be a Covered Security, and there be at least two registered and 
active Market Makers, one of which may be a Market Maker entering a 
stabilizing bid.
    For Continued Listing Requirements and Convertible Debt Securities 
the Exchange proposes a principal amount outstanding of at least $5 
million; at least two registered and active Market Makers, one of which 
may be a Market Maker entering a stabilizing bid; and current last sale 
information available in the United States with respect to the 
underlying security into which the bond or debenture is convertible.
Corporate Governance Standards
    In addition to having quantitative listing criteria based on the 
standards applicable to Nasdaq listed companies, particularly those 
designated as NGM or NCM securities, BATS has proposed nearly identical 
qualitative requirements. Specifically, the Exchange proposes to adopt 
in Rule 14.10 corporate governance requirements and related 
interpretations that are nearly identical to the Rule 5600 Series of 
Nasdaq. Such requirements relate to a Company's board of directors, 
audit committee requirements, Independent Director oversight of 
executive compensation, the director nomination process, a mandatory 
code of conduct, shareholder meetings, including proxy solicitation and 
quorum, review of related party transactions, and shareholder approval, 
including voting rights. In addition to the proposed Rule 14.10, the 
Exchange proposes to adopt interpretations and policies equivalent to 
Nasdaq interpretive material. Such interpretations and policies provide 
guidance regarding definitions other matters set forth in Rule 14.10. 
Exemptions to the proposed corporate governance requirements, including 
phase-in schedules, are set forth in paragraph (e) of proposed Rule 
14.10. The Exchange believes that preliminarily adopting uniform 
corporate governance standards to those of Nasdaq will assist issuers 
and their advisors in determining the Exchange's requirements.
Listing Standards for Other Securities
    In addition, the Exchange has proposed Rule 14.11 as a stand-alone 
section for listing standards applicable to ``other securities,'' which 
includes listing requirements for Exchange Traded Funds, Index-Linked 
Securities, Selected Equity-linked Debt Securities, Trust Issued 
Receipts, and Index Warrants. The proposed standards for Rule 14.11 are 
both similar to BATS' current standards, applicable to securities 
traded on the Exchange pursuant to unlisted trading privileges, as well 
as Nasdaq Rules 4700 through 4730.
Failure To Meet Listing Standards
    Securities of a Company that does not meet the listing standards 
set forth in proposed Chapter XIV are subject to delisting from, or 
denial of initial listing on the Exchange. Proposed Rule 14.12 sets 
forth procedures for the independent review, suspension, and delisting 
of Companies that fail to satisfy one or more standards for initial or 
continued listing, and thus are ``deficient'' with respect to the 
listing standards.
    The Listings Qualifications Department will be responsible for 
identifying deficiencies that may lead to delisting or denial of a 
listing application; notifying the Company of the deficiency or denial; 
and issuing Staff Delisting Determinations and Public Reprimand 
Letters. Rule 14.12(c) contains provisions regarding the Listing 
Qualifications Department's process for notifying Companies of 
different types of deficiencies and their corresponding consequences. 
The proposed rule also sets forth the various responsibilities when in 
receipt of notice of a deficiency, including public notification 
responsibilities.
    The Hearings Panel, upon timely request by a Company, will review a 
Staff Delisting Determination, denial of a listing application, or 
Public Reprimand Letter at an oral or written hearing, and issue a 
Decision that may, among other things, grant an ``exception'' to the 
Exchange's listing standards or affirm a delisting. The Exchange 
Listing and Hearings Review Council, upon timely appeal by a Company or 
on its own initiative, may review the Decisions of the Hearings Panel. 
Rule 14.12(e) contains provisions relating to the Listing Council 
appeal process. Finally, the Exchange Board of Directors may exercise 
discretion to call for review a Listing Council Decision.
    Rule 14.12 also sets forth the procedures related to SEC 
notification of the Exchange's final Delisting Determinations, rules 
applicable to Adjudicators and Advisors, and general information 
relating to the adjudicatory process.
    A Company's failure to maintain compliance with the applicable 
provisions of Chapter XIV will result in the termination of the listing 
unless an exception is granted to the Company. The termination of the 
Company's listing will become effective in accordance with the 
procedures set forth herein, including Rule 14.12(g).
Listing Fees
    The Exchange proposes to commence its listings business by charging 
Initial Listing Fees of $100,000 and $50,000 for Tiers I and II, 
respectively. The initial primary listing fee for both Tiers will 
include a $25,000 non-refundable application fee. The Exchange also 
proposes to charge annual fees of $35,000 and $20,000 for Tiers I and 
II, respectively, on a pro-rated basis.
    The Exchange proposes to waive the entry fee for any Company that 
is listed on another national securities exchange if such Company 
transfers its listing to the Exchange, is dually-listed on the Exchange 
and another national securities exchange but ceases to maintain its 
listing on that other national securities exchange or is listed on 
another national securities exchange but not listed on the Exchange, if 
the issuer of such securities is acquired by an unlisted company and, 
in connection with the acquisition, the unlisted company lists 
exclusively on the Exchange. Annual dual listing fees will be $15,000 
for both tiers and will be pro-rated.
    At this time, the Exchange has not proposed to charge for 
ministerial changes implemented by a Company (e.g., name changes and 
symbol changes), nor has the Exchange proposed to charge a fee for 
necessary work related to corporate actions of a Company (e.g., a 
reverse stock split, re-incorporation, etc.).
2. Statutory Basis
    Approval of the rule changes proposed in this submission 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

[[Page 31666]]

Section 6(b) of the Act.\22\ In particular, the proposed change is 
consistent with Section 6(b)(5) of the Act,\23\ because it would 
promote just and equitable principles of trade, remove impediments to, 
and perfect the mechanism of, a free and open market and a national 
market system, and, in general, protect investors and the public 
interest.
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    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(5).
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    The Exchange's proposal comes at a time when there are two dominant 
primary listing venues, the New York Stock Exchange and Nasdaq. 
Further, there have recently been reports of a potential combination of 
these two listing venues under one corporate umbrella. Whether or not 
such combination occurs (and particularly if it does), the Exchange 
believes that the proposed change would increase competition by 
providing an alternative to Nasdaq and the New York Stock Exchange for 
a company seeking to list its securities. Accordingly, the Exchange 
believes that the proposal will provide companies with another option 
for raising capital in the public markets, thereby promoting the 
aforementioned principles discussed in Section 6(b)(5) of the Act.\24\
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    \24\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes the proposal is consistent with Section 
6(b)(9) of the Act,\25\ because Rule 14.3(b)(8) of the proposal would 
adopt rules prohibiting the listing of any security issued in a limited 
partnership rollup transaction (as defined in Section 14(h) of the 
Act), unless such transaction satisfies the criteria of Section 6(b)(9) 
and a broker-dealer that is a member of a national securities 
association subject to Section 15A(b)(12) of the Act participates in 
the rollup transaction.
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    \25\ 15 U.S.C. 78f(b)(9).
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    Finally, the Exchange believes the proposal is consistent with 
Section 6(b)(4) of the Act,\26\ as it provides for the equitable 
allocation of reasonable dues, fees and other charges among issuers. 
Specifically, as proposed, the Exchange is establishing a clear-cut and 
simple pricing structure, that is not variable based on the number of 
shares or other metrics. Thus, the proposed fees are equitable in that 
they will be the same amongst issuers seeking to list Tier I securities 
and the same amongst issuers seeking to list Tier II securities. 
Further, the Exchange believes its proposed pricing is reasonable, as 
the Exchange has not proposed additional fees that issuers incur at 
other exchanges, including fees for issuance of additional shares, name 
changes and other corporate actions. Finally, the Exchange notes that 
its proposed pricing, while not necessarily cheaper for all issuers at 
all other markets, is roughly equivalent or less than issuers would pay 
at other exchanges. For instance, issuers listing on the Nasdaq Global 
Market pay between $125,000 and $225,000 initially (depending on the 
number of shares) and between $35,000 and $99,500 annually, compared to 
proposed Tier I fees of $100,000 initially and $35,000 annually.\27\ 
Similarly, issuers listing on the Nasdaq Capital Market pay either 
$50,000 or $75,000 initially (depending on the number of shares) and 
between $17,500 and $75,000 annually,\28\ compared to proposed Tier II 
fees of $50,000 initially and $20,000 annually. Also, as noted above, 
Nasdaq and NYSE charge multiple other fees applicable to additional 
shares issued by listed companies, corporate actions and related 
activities of issuers, whereas the Exchange's proposed fees do not 
include such additional fees.
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    \26\ 15 U.S.C. 78f(b)(9) [sic].
    \27\ See Nasdaq Rule 5910(a) and (c).
    \28\ See Nasdaq Rule 5920(a) and (c).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change imposes 
any burden on competition.

(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 Changes and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal 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 e-mail to rule-comments@sec.gov. Please include 
File No. SR-BATS-2011-018 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-BATS-2011-018. This file 
number should be included on the subject line if e-mail 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 
a.m. and 3 p.m. Copies of such filing will also 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 No. SR-BATS-2011-018 and should be 
submitted on or before June 22, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-13422 Filed 5-31-11; 8:45 am]
BILLING CODE 8011-01-P