Document ID: SEC-2016-2166-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc.
Posted Date: 2016-12-09T05:00Z

[Federal Register Volume 81, Number 237 (Friday, December 9, 2016)]
[Notices]
[Pages 89176-89181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29465]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79467; File No. SR-BatsBZX-2016-81]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to BZX 
Rule 11.23, Auctions, To Amend How the Official Auction Prices Are 
Calculated and Add Additional Specificity Regarding the Handling of RHO 
Orders During an Opening Auction for a BZX Listed Security

December 5, 2016
    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 November 30, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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) 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\ 5 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).
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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 Exchange Rule 11.23, 
Auctions, to: (i) Amend how the official auction prices are calculated 
and make related changes to the definitions of Indicative Price and 
Auction Only Price; and (ii)

[[Page 89177]]

add additional specificity regarding the handling of Regular Hours Only 
(``RHO'') Orders \5\ during an Opening Auction for a BZX listed 
security \6\ by describing situations in which RHO limit orders may be 
modified prior to the auction and cancelled after an auction.
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    \5\ An RHO Order is ``[a] limit or market order that is 
designated for execution only during Regular Trading Hours, which 
includes the Opening Auction, the Closing Auction, and IPO/Halt 
Auctions for BZX listed securities and the Opening Process for non-
BZX-listed securities (as such terms are defined in Rule 11.23 and 
11.24). Any portion of a market RHO order will be cancelled 
immediately following any auction in which it is not executed.'' See 
Exchange Rule 11.9(b)(7).
    \6\ A BZX listed security is a security listed on the Exchange 
pursuant to Chapter 14 of the Exchange's Rules and includes both 
corporate listed securities and Exchange Traded Products (``ETPs'').
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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
    The Exchange proposes to amend Exchange Rule 11.23, Auctions, to: 
(i) Amend how the official auction prices are calculated and make 
related changes to the definitions of Indicative Price and Auction Only 
Price; and (ii) add additional specificity regarding the handling of 
RHO Orders during an Opening Auction for a BZX listed security by 
describing situations in which RHO limit orders may be modified prior 
to the auction and cancelled after an auction.
Official Auction Prices, Indicative Price, and Auction Only Price
    In general, the price for the Opening, Closing, IPO, Halt, and 
Volatility Closing auctions is established by determining the price 
level that maximizes the number of shares executed.\7\ In determining 
the auction price, the Exchange takes into account all buy and sell 
interest at each price level on the Auction Book \8\ and the Continuous 
Book.\9\ Today, in the event of a volume based tie at multiple price 
levels, the price of the Opening and Closing auctions will be the price 
closest to the Volume Based Tie Breaker.\10\ In the event of a volume 
based tie at multiple price levels for an IPO, Halt, and Volatility 
Closing auctions, the price closest to the issuing price will be used 
for IPO Auctions and the price level closest to the final last sale 
eligible trade will be used for Halt and the Volatility Closing 
Auctions.
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    \7\ See Exchange Rules 11.23(b)(2)(B), (c)(2)(B), (d)(2)(D), and 
(e)(2)(D).
    \8\ See Exchange Rule 11.23(a)(1).
    \9\ See Exchange Rule 11.23(a)(7).
    \10\ ``Volume Based Tie Breaker'' is defined as ``the midpoint 
of the NBBO for a particular security where the NBBO is a Valid 
NBBO. A NBBO is a Valid NBBO where: (i) There is both a NBB and NBO 
for the security; (ii) the NBBO is not crossed; and (iii) the 
midpoint of the NBBO is less than the Maximum Percentage away from 
both the NBB and the NBO. The Maximum Percentage will be determined 
by the Exchange and will be published in a circular distributed to 
Members with reasonable advance notice prior to initial 
implementation and any change thereto. Where the NBBO is not a Valid 
NBBO, the price of the Final Last Sale Eligible Trade will be 
used.'' See Exchange Rule 11.23(a)(23).
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    The Exchange proposes to amend Exchange Rules 11.23(b)(2)(B), 
(c)(2)(B), (d)(2)(D), and (e)(2)(D) to state that the prices of the 
Opening Auction, Closing Auction, IPO Auction, Halt Auction, and 
Volatility Closing Auction, respectively, will also occur at a price 
that not only maximizes the number of shares executed, but also 
minimizes the total imbalance. In all auctions, the auction price will 
first be established by determining the price level within the Collar 
Price Range \11\ that maximizes the number of shares executed. In the 
event of a volume based tie at multiple price levels, the auction price 
will be the price level that results in the minimum total imbalance. 
Lastly, should there be both a volume based tie and a tie in minimum 
total imbalance at multiple price levels, the auction price of the: (i) 
Opening and Closing auctions will be the price closest to the Volume 
Based Tie Breaker; (ii) Halt and Volatility Closing auctions will be 
the price closest to the final last sale eligible trade; and (iii) IPO 
auction will be the price closest to the issuing price.
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    \11\ See Exchange Rule 11.23(a)(6).
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    The below examples illustrate how the auction price, Auction Only 
Price and Indicative Price is selected today and how these prices will 
be selected under the proposed rule change. This first example 
illustrates current behavior. Assume that the NBBO is $24.90 x $25.10, 
which means that the Volume Based Tie Breaker is $25.00.

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                                                                                                            Total sell
                    Total buy shares                        Buy shares         Price        Sell shares       shares       Paired shares     Imbalance
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0.......................................................  ..............           25.05  ..............             300               0            -300
500.....................................................             500           25.01  ..............             300             300             200
700.....................................................             200           25.00             100             300             300             400
1,200...................................................             500           24.95             200             200             200           1,000
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    In this example, current behavior would dictate that $25.00 would 
be selected as the auction price, Auction Only Price, and the 
Indicative Price, as applicable, because at $25.00 the maximum number 
of shares would be executed (300 shares, in a tie with $25.01) and of 
the two price levels at which 300 shares would be executed, $25.00 is 
closest to the Volume Based Tie Breaker.
    Under the same scenario described above, but using the price level 
that minimizes the total imbalance where there is a tie for the maximum 
number of shares executed in the auction at multiple price levels 
instead of the Volume Based Tie Breaker, the price chosen as the 
auction price, Auction Only Price, and Indicative Price would be 
$25.01. $25.01 would be used because, as noted above, 300 shares would 
be executed at both $25.00 and $25.01, but the imbalance at $25.01 is 
200 shares while the imbalance at $25.00 is 400 shares. Stated another 
way, less executable interest would

[[Page 89178]]

remain unexecuted at $25.01 (200 shares) than at $25.00 (400 shares).

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                                                                                                            Total sell
                    Total buy shares                        Buy shares         Price        Sell shares       shares       Paired shares     Imbalance
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0.......................................................  ..............           25.05  ..............             300               0            -300
500.....................................................             500           25.01  ..............             300             300             200
700.....................................................             200           25.00             100             300             300             400
1,200...................................................             500           24.95             200             200             200           1,000
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    This third example illustrates the proposed behavior when there is 
a tie for the maximum number of shares executed in the auction at 
multiple price levels and a tie in minimum total imbalance within those 
price levels. In such a situation, the price level closest to the 
Volume Based Tie Breaker will be used. Under this example, assume that 
the NBBO is $24.94 x $25.16, which means that the Volume Based Tie 
Breaker is $25.05.

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                                                                                                            Total sell
                    Total buy shares                        Buy shares         Price        Sell shares       shares       Paired shares     Imbalance
--------------------------------------------------------------------------------------------------------------------------------------------------------
500.....................................................             500           25.08  ..............             200             200             300
500.....................................................  ..............           25.07  ..............             200             200             300
500.....................................................  ..............           25.06  ..............             200             200             300
1,000...................................................             500           25.05  ..............             200             200             800
1,200...................................................             200           25.00  ..............             200             200           1,000
1,700...................................................             500           24.95             200             200             200           1,500
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    In this example, there is a tie for the maximum number of shares 
executed in the auction at 200 shares for every price level from $24.95 
to $25.08. Looking at the imbalance, there is also a tie at 300 shares 
at each of $25.06, $25.07, and $25.08. As such, the proposed behavior 
would look to the Volume Based Tie Breaker to determine the auction 
price, Auction Only Price, and Indicative Price. Because the Volume 
Based Tie Breaker is $25.05, $25.06 is selected because it is the 
closest of $25.06, $25.07, and $25.08 to the Volume Based Tie Breaker.
    The Exchange believes the proposed amendments are necessary to 
ensure that the price selected for the auction is reasonably based on 
all buying and selling interest for that security and is the price at 
which the most orders may be matched resulting in the minimal 
imbalance. Selecting a price that would minimize the imbalance best 
reflects the value of the security based on the auction's price 
discovery process because it is the price level where the amount of buy 
and sell interest is closest to equal. As noted above, minimizing the 
imbalance at the price levels at which the most shares will execute in 
the auction will result in the price closest to equilibrium because 
that price level has the least amount of executable interest that 
remains unexecuted. As a result, the proposed rule changes should also 
enhance the Exchange's auction processes resulting in improved price 
discovery of BZX listed securities.
    As a result of the above changes to the determination of the 
official auction price, the Exchange also proposes to make a related 
change to the definition of Indicative Price under paragraph (a)(10) of 
Rule 11.23. Indicative Price is currently defined as the price at which 
the most shares from the Auction Book and the Continuous Book would 
match.\12\ The Indicative Price is disseminated publicly beginning at 
8:00 a.m. Eastern Time for an Opening \13\ and IPO Auction,\14\ 3:00 
p.m. Eastern Time for a Closing Auction,\15\ five (5) minutes prior to 
the commencement of a Halt Auction,\16\ and at the time a security is 
halted after 3:50 p.m. Eastern Time for a Volatility Closing 
Auction.\17\ The Indicative Price is designed to facilitate price 
discovery and transparency while helping resolve order imbalances in 
the time leading up to an auction and the determination of the auction 
price.
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    \12\ See Exchange Rule 11.23(a)(10).
    \13\ See Exchange Rule 11.23(b)(2)(A).
    \14\ See Exchange Rule 11.23(d)(2)(A).
    \15\ See Exchange Rule 11.23(c)(2)(A).
    \16\ See Exchange Rule 11.23(d)(2)(A).
    \17\ See Exchange Rule 11.23(e)(2)(A).
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    Today, the Exchange will publish the price at which the most shares 
may be executed as the Indicative Price by taking into account all buy 
and sell interest at each price level. Like the determination of each 
of the auction prices discussed above, the Indicative Price reflects 
the price at which the maximum number of shares may be executed, but 
may not reflect the price which would result in the minimum total 
imbalance where there are multiple price levels at which the most 
shares may be executed. Therefore, like the amendments to the 
determination of auction prices above, the Exchange proposes to amend 
the definition of Indicative Price to ensure that the maximum number of 
shares will ultimately be executed in the auction resulting in the 
minimum total imbalance. Indicative Price will continue to be defined 
as ``the price at which the most shares from the Auction Book and the 
Continuous Book would match.'' However, the definition of Indicative 
Price would be expanded to state that in the event of a volume based 
tie at multiple price levels, the Indicative Price will be the price 
which results in the minimum total imbalance. In the event of a volume 
based tie and a tie in minimum total imbalance at multiple price 
levels, the Indicative Price will be the price closest to the Volume 
Based Tie Breaker.
    Lastly, the Exchange also publishes an Auction Only Price, which is 
the price at which the most shares from the Auction Book would match. 
Currently, in the event of a volume based tie at multiple price levels, 
the Auction Only Price will be the price closest to the Volume Based 
Tie Breaker. Auction Only Price will continue to be defined under 
Exchange Rule 11.23(a)(2) to state that the Auction Only Price will be 
the price at which the most shares from the Auction Book would match. 
However, the definition will be expanded to harmonize the calculation 
of the Auction Only Price with the above changes. As amended, in the 
event of a volume based tie at multiple price levels, the Auction Only 
Price will be the price which results in the minimum

[[Page 89179]]

total imbalance. In the event of a volume based tie and a tie in 
minimum total imbalance at multiple price levels, the Auction Only 
Price will be the price closest to the Volume Based Tie Breaker.
RHO Orders
    An RHO Order is ``[a] limit or market order that is designated for 
execution only during Regular Trading Hours, which includes the Opening 
Auction, the Closing Auction, and IPO/Halt Auctions for BZX listed 
securities and the Opening Process for non-BZX-listed securities (as 
such terms are defined in Rule 11.23 and 11.24). RHO orders are also 
Eligible Auction Orders \18\ and may participate in the Opening 
Auction.\19\ Any Eligible Auction Orders designated for the Opening 
Auction will be queued until 9:30 a.m. at which time they will be 
eligible to be executed in the Opening Auction. Any portion of a RHO 
market order will be cancelled immediately following any auction in 
which it is not executed.'' \20\ However, any portion of an RHO limit 
order that is not executed in the auction will be placed on the 
Continuous Book at the conclusion of the auction and commencement of 
Regular Trading Hours (subject to the cancelling of certain RHO limit 
orders are described below).
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    \18\ See Exchange Rule 11.23(a)(8).
    \19\ See id.
    \20\ See Exchange Rule 11.9(b)(7).
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    In general, Eligible Auction Orders designated for the Opening 
Auction may not be cancelled or modified between 9:28 a.m. and 9:30 
a.m.\21\ The Exchange now proposes to add additional specificity to 
Rule 11.23(b)(1) regarding how RHO limit orders are handled in the 
Opening Auction. Specifically, the Exchange proposes to amend Rule 
11.23(b)(1)(B) to describe current behavior that allows Members to 
modify, but not cancel, RHO limit orders designated for the Opening 
Auction between 9:28 a.m. and 9:30 a.m.\22\
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    \21\ See Exchange Rule 11.23(b)(1)(B).
    \22\ Currently, RHO market orders submitted between 9:28 a.m. 
and 9:30 a.m. are rejected. See Exchange Rule 11.23(b)(1)(A). 
Modifications to RHO limit orders between 9:28 a.m. and 9:30 a.m. 
would not be limited by Exchange Rule 11.9(e)(3) as such orders are 
not active until the Opening Auction occurs at 9:30 a.m.
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    The rule text currently provides that RHO limit orders submitted 
between 9:28 a.m. and 9:30 a.m. are treated as Late-Limit-On-Open 
(``LLOO'') \23\ orders until the Opening Auction has concluded. The 
Exchange proposes to amend Rule 11.23(b)(1)(B) to state that RHO limit 
orders that are modified between 9:28 a.m. and 9:30 a.m. will also be 
treated as LLOO orders until the Opening Auction is concluded. During 
the Opening Auction, RHO limit orders will be priced in accordance with 
the operation of LLOO orders as described in Rule 11.23(a)(12),\24\ 
subject to the order's limit price. At the conclusion of the Opening 
Auction, any unexecuted portion of a RHO limit order will be placed on 
the Continuous Book at its limit price (subject to the cancelling of 
certain RHO limit orders are described below). The Exchange believes 
that such treatment is consistent with the existing treatment of RHO 
limit orders submitted between 9:28 a.m. and 9:30 a.m. which are 
subject to the pricing restrictions applicable to LLOO orders. However, 
because, unlike LLOO orders, RHO limit orders will be added to the 
Continuous Book at the conclusion of the Opening Auction at their limit 
price, Members should be able to modify such orders between 9:28 a.m. 
and 9:30 a.m. Such functionality provides Members the price protections 
necessary to incentivize early entry of orders for participation in the 
Opening Auction while simultaneously allowing a Member to control an 
order that will be entered onto the Continuous Book if it is not 
executed in the Opening Auction.
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    \23\ See Exchange Rule 11.23(a)(12).
    \24\ Under Exchange Rule 11.23(a)(12), LLOO orders are priced as 
follows: to the extent a LLOO bid or offer received by the Exchange 
has a limit price that is more aggressive than the NBB or NBO, the 
price of such bid or offer is adjusted to be equal to the NBB or 
NBO, respectively, at the time of receipt by the Exchange. Where the 
NBB or NBO becomes more aggressive, the limit price of the LLOO bid 
or offer will be adjusted to the more aggressive price, only to the 
extent that the more aggressive price is not more aggressive than 
the original User entered limit price. The limit price will never be 
adjusted to a less aggressive price. If there is no NBB or NBO, the 
LLOO bid or offer, respectively, will assume its entered limit 
price. Notwithstanding the foregoing, a LLOO order entered during 
the Quote-Only Period of an IPO will be converted to a limit order 
with a limit price equal to the original User entered limit price 
and any LLOO orders not executed in their entirety during the IPO 
Auction will be cancelled upon completion of the IPO Auction.
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    The Exchange also proposes to describe within Exchange Rule 
11.23(b)(1) how RHO orders with a limit price outside of the Collar 
Price Range are handled. Where the Opening Auction would have occurred 
at a price level but for such price level being greater than (less 
than) the high (low) range of the Collar Price Range (i.e., outside the 
Collar Price Range), all buy (sell) limit RHO orders with a limit price 
more aggressive than the BZX Official Opening Price that are not 
executed in the Opening Auction will be cancelled.
    The Collar Price Range is utilized to help limit volatility during 
the auction process and to reduce the possibility that an auction would 
occur at a price that would qualify as clearly erroneous under Exchange 
Rule 11.17(c)(1) and that may result in cancelled executions.\25\ The 
process to select the price of an Opening Auction as described above 
could lead to a price that is outside of the Collar Price Range. In 
that case, the Exchange will then look to find a price to execute the 
auction within the Collar Price Range and in accordance with the price 
selection process set forth above. The Exchange selecting a less 
aggressive price for the auction within the Collar Price Range can 
result in the unexecuted RHO limit orders priced more aggressively than 
the auction price being placed on the Continuous Book upon conclusion 
of the Opening Auction.
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    \25\ As set forth under Exchange Rule 11.23(a)(6), the ``Collar 
Price Range'' is the range from a set percentage below the Collar 
Midpoint (as defined below) to above the Collar Midpoint, such set 
percentage being dependent on the value of the Collar Midpoint at 
the time of the auction, as described below. The Collar Midpoint 
will be the Volume Based Tie Breaker for all applicable auctions, 
except for IPO Auctions in ETPs (as defined in Rule 11.8, 
Interpretation and Policy .02(d)(2)), for which the Collar Midpoint 
will be the issue price. Specifically, the Collar Price Range will 
be determined as follows: Where the Collar Midpoint is $25.00 or 
less, the Collar Price Range shall be the range from 10% below the 
Collar Midpoint to 10% above the Collar Midpoint; where the Collar 
Midpoint is greater than $25.00 but less than or equal to $50.00, 
the Collar Price Range shall be the range from 5% below the Collar 
Midpoint to 5% above the Collar Midpoint; and where the Collar 
Midpoint is greater than $50.00, the Collar Price Range shall be the 
range from 3% below the Collar Midpoint to 3% above the Collar 
Midpoint.
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    The Exchange believes that it is necessary and appropriate to 
cancel RHO orders with a limit price that is more aggressive than the 
auction price in such circumstances. Other than RHO limit orders, all 
Eligible Auction Orders will simply be cancelled if they do not execute 
in the Opening Auction. RHO limit orders, however, are unique in that 
they rest on the Auction Book until the conclusion of the Opening 
Auction, at which point any unexecuted portion is added to the 
Continuous Book. This could result in unexecuted RHO limit orders 
priced more aggressively than the auction price to be added to the 
Continuous Book, immediately applying price pressure in the direction 
of the price that the Opening Auction would have initially occurred but 
for the Exchange selecting a price within the Collar Price Range, 
thereby controverting the purpose of the Collar Price Range. Further, 
such a set of circumstances would also undermine the value of the price 
discovery process of the Opening Auction and could result in executions 
eligible for review as

[[Page 89180]]

clearly erroneous under Exchange Rule 11.17. The Exchange notes that 
Members whose RHO limit orders are cancelled because the price of the 
order is more aggressive than the Collar Price Range may always 
resubmit such orders at less aggressive prices or after regular trading 
begins.
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.\26\ 
Specifically, the proposed change is consistent with Section 6(b)(5) of 
the Act,\27\ 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. The proposed 
rule change will enhance the Exchange's auction processes resulting in 
improved price discovery of BZX listed securities. Specifically, the 
Exchange believes amending the calculations of auction prices and the 
definitions of Indicative Price and Auction Only Price promotes just 
and equitable principles of trade by ensuring that the maximum number 
of shares will ultimately be executed in the auction resulting in the 
minimum total imbalance generally because selecting a price that would 
minimize the imbalance best reflects the value of the security based on 
the auction's price discovery process because it is the price level 
where the amount of buy and sell interest is closest to equal. Further, 
minimizing the imbalance at the price levels at which the most shares 
will execute in the auction will result in the price closest to 
equilibrium because that price level has the least amount of executable 
interest that remains unexecuted. These proposed amendments are similar 
to auction price selection process of other exchanges \28\ and would 
enhance the price discovery and transparency while helping resolve 
order imbalances in the time leading up to an auction and the 
determination of the ultimate auction price.
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    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(5).
    \28\ See e.g., Nasdaq Stock Market LLC (``Nasdaq'') Rules 
4752(a)(2)(A) and 4752(d)(2) (outlining the selection of the Nasdaq 
Current Reference Price and auction price).
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    The Exchange believes allowing Members to modify RHO limit orders 
between 9:28 a.m. and 9:30 a.m. promotes just and equitable principles 
of trade, removes impediments to, and perfects the mechanism of, a free 
and open market and a national market system. Such functionality 
provides Members the price protections necessary to incentivize early 
entry of orders for participation in the Opening Auction while 
simultaneously allowing a Member to control an order that will be 
entered onto the Continuous Book if it is not executed in the Opening 
Auction. In addition, the modification of a RHO limit order between 
9:28 a.m. and 9:30 a.m. would have no impact on the pricing of the 
Opening Auction as such order are priced in accordance with the 
operation of LLOO orders as described in Rule 11.23(a)(12),\29\ subject 
to the order's limit price, on the Continuous Book.
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    \29\ See supra note 24.
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    The proposal also supports the objectives of perfecting the 
mechanism of a free and open market and the national market system 
because not cancelling RHO orders with limit prices more aggressive 
than the Collar Price Range would result in executions vastly different 
from the auction price shortly after the regular trading commences. As 
such, the proposal also protects investors because it would prevent the 
executions of orders at prices not related to the current market for 
the security and possibly not in line with the investor's intent at the 
time they entered the orders prior to the commencement of the auction 
process. The Exchange believes this undermines the price discovery 
process of the auction and could result in executions eligible for 
review as clearly erroneous under Exchange Rule 11.17. The Exchange 
notes that Members whose RHO limit orders are cancelled because the 
price of the order is more aggressive than the Collar Price Range may 
always resubmit such orders at less aggressive prices or after regular 
trading begins. Therefore, the Exchange believes the proposed rule 
change promotes just and equitable principles of trade, removes 
impediments to, and perfects the mechanism of, a free and open market 
and a national market system.

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, the proposal 
will promote competition because the Exchange believes the proposal 
improves and enhances the Exchange's auction processes, thereby 
attracting additional order flow to the Exchange. The proposed rule 
change is, in effect, pro-competition as it promotes fair and orderly 
markets and protects investors through enhanced auction processes.

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 \30\ and Rule 19b-4(f)(6) thereunder.\31\
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    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 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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    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 No. SR-BatsBZX-2016-81 on the subject line.

[[Page 89181]]

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 No. SR-BatsBZX-2016-81. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-BatsBZX-2016-81, and should be 
submitted on or before December 30, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-29465 Filed 12-8-16; 8:45 am]
BILLING CODE 8011-01-P