Document ID: SEC-2012-2007-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2012-12-06T05:00Z

[Federal Register Volume 77, Number 235 (Thursday, December 6, 2012)]
[Notices]
[Pages 72894-72895]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-29456]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68330; File No. SR-BATS-2012-045]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Expand 
the Availability of Risk Management Tools

November 30, 2012.
    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 19, 2012, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing with the Commission a proposal to expand the 
availability of the Exchange's Risk Management Tool (the ``Tool'') to 
all Exchange Members.\3\ The Tool is currently available only to 
Members that provide sponsored access to other market participants, as 
described below.
---------------------------------------------------------------------------

    \3\ A Member is any registered broker or dealer that has been 
admitted to membership in 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 defines a ``Sponsored Participant'' as a person who 
has entered into a sponsorship arrangement with a Sponsoring Member.\4\ 
A ``Sponsoring Member'' is defined as a broker-dealer that is a Member 
of the Exchange and has been designated by a Sponsored Participant to 
execute, clear and settle transactions occurring on the Exchange.\5\ 
Under BATS Rule 11.3(b), a Sponsoring Member may allow its customers to 
enter orders directly into the trading systems of the Exchange as 
Sponsored Participants, without the Sponsoring Member acting as an 
intermediary.
---------------------------------------------------------------------------

    \4\ See BATS Rule 1.5(w).
    \5\ See BATS Rule 1.5(x).
---------------------------------------------------------------------------

    To facilitate the ability of a Sponsoring Member to monitor and 
oversee the sponsored access activity of its Sponsored Participants, 
the Exchange offers the Sponsored Access Risk Management Tool.\6\ This 
optional service acts as a risk filter by causing the orders of 
Sponsored Participants to be evaluated by the Tool prior to entering 
the Exchange's matching engine for execution. When a Sponsored 
Participant's order is evaluated by the Tool, it determines whether the 
order complies with the order criteria established by the Sponsoring 
Member for that Sponsored Participant. The order criteria pertain to 
such matters as the size of the order (e.g., maximum notional value per 
order and maximum shares per order), the order type (e.g., pre-market, 
post-market, short sales and ISOs), restricted securities, easy to 
borrow securities, and order cut-off (e.g., block new orders and cancel 
all open orders).
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 60236 (July 2, 
2009), 74 FR 34068 (July 14, 2009) (SR-BATS-2009-019) (notice of 
filing and immediate effectiveness of proposed rule change to 
establish a Sponsored Access Risk Management Tool).
---------------------------------------------------------------------------

    Given recent market events, the Exchange proposes to expand the 
availability of the Tool to all Members. As amended, the Tool can be 
configured by a Member to provide an Exchange offered risk management 
solution. Just as the use of the Tool by a Sponsoring Member does not 
automatically constitute compliance with Exchange Rules, the Exchange 
does not believe that use of the Tool can replace Member-managed risk 
management solutions. However, the Exchange does believe that the Tool 
can be a valuable

[[Page 72895]]

addition to risk management solutions implemented by Members.
    As is currently the case, orders subject to the Tool will be 
validated by the Exchange prior to entering the Exchange's matching 
engine. Based on parameters provided to the Tool, the order will be 
immediately passed on to the matching engine or rejected back to the 
entering Member.
    The Exchange does not propose to require Members to use the Tool. 
Members are free to use any appropriate risk-management tool or 
service. The Exchange will not provide preferential treatment to 
Members using the Tool.
    The Exchange proposes to make the Tool available to its Members 
upon request. The Exchange believes the Tool will offer the Exchange's 
Members another option in the efficient risk management of its Members' 
access to BATS Exchange.
2. Statutory Basis
    The rule change 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 Section 6(b) of the Act.\7\ Specifically, the 
proposed change is consistent with Section 6(b)(5) of the Act,\8\ 
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. The proposed rule change also is designed to 
support the principles of Section 11A(a)(1) \9\ in that it seeks to 
assure economically efficient execution of securities transactions, 
make it practicable for brokers to execute investors' orders in the 
best market, and provide an opportunity for investors' orders to be 
executed without the participation of a dealer. Specifically, the 
Exchange believes that the proposed rule change is consistent with all 
of the aforementioned principles because it fosters competition by 
providing another option in the efficient risk management of trading on 
the Exchange. In particular, the Exchange notes that the proposal is 
consistent with Section 11(A)(a)(1) in that it makes available to all 
Exchange Members a Tool that previously was available only to Members 
that provided sponsored access to Sponsored Participants. The Exchange 
notes that a similar functionality has already been found to be 
consistent with the Act by the Commission.\10\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78k-1(a)(1).
    \10\ Securities Exchange Act Release No. 59354 (February 3, 
2009), 74 FR 6683 (February 10, 2009) (SR-NYSE-2008-101) (Approval 
of NYSE Risk Management Gateway).
---------------------------------------------------------------------------

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 Change and Timing for 
Commission Action

    Because the foregoing 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 \11\ and Rule 19b-
4(f)(6)(iii) thereunder.\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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.

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-BATS-2012-045 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.

All submissions should refer to File Number SR-BATS-2012-045. 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BATS-2012-045 and should be 
submitted on or before December 27, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29456 Filed 12-5-12; 8:45 am]
BILLING CODE 8011-01-P