Document ID: SEC-2009-0695-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BATS Rule 11.13, entitled "Order Execution"
Posted Date: 2009-05-22T04:00Z

[Federal Register: May 22, 2009 (Volume 74, Number 98)]
[Notices]               
[Page 24057-24059]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22my09-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59934; File No. SR-BATS-2009-013]

 
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
BATS Rule 11.13, entitled ``Order Execution''

May 15, 2009.
    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, 2009, BATS Exchange, Inc. (``BATS'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend BATS Rule 11.13, entitled 
``Order Execution,'' to provide Users \5\ of the Exchange with another 
option with respect to the Exchange's method of processing the unfilled 
balance of a limit order that returns to the Exchange after being 
routed away to one or more away Trading Centers \6\ for execution.
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    \5\ As defined in BATS Rule 1.5(bb).
    \6\ As defined in BATS Rule 2.11.
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    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.

[[Page 24058]]

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 purpose of the proposed rule change is to provide Users of the 
Exchange with another option with respect to the Exchange's method of 
processing the unfilled balance of a limit order that returns to the 
Exchange after being routed away to one or more away Trading Centers 
for execution. In connection with this additional option, the Exchange 
has also proposed various clarifying changes related to the 
functionality of the current processing options.
    The Exchange currently allows Users to submit various types of 
limit orders to the Exchange that are processed pursuant to Rules 
11.13(a)(1) and 11.13(a)(2)(B), as set forth below. Rule 11.13(a)(1) 
describes the process by which an incoming order would execute against 
the BATS Book.\7\ To the extent an order has not been executed in its 
entirety against the BATS Book, Rule 11.13(a)(2)(B) then describes the 
process of routing marketable limit orders \8\ to one or more Trading 
Centers, including a description of how the Exchange treats any 
unfilled balance that returns to the Exchange following the first 
attempt to fill the order through the routing process. Currently, the 
Exchange either converts such unfilled balance to a BATS Only order, 
and processes it in accordance with Rule 11.9(c)(4) or again checks the 
BATS Book for liquidity, then routes the order to away Trading Centers 
until the Exchange has confirmed that no available liquidity exists on 
the BATS Book or at away Trading Centers and the order's limit price 
has been reached.
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    \7\ As defined in BATS Rule 1.5(d).
    \8\ Market orders are also routed away, pursuant to Rule 
11.13(a)(2)(A), however the Exchange is not proposing any changes to 
the treatment of routed market orders at this time.
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    The Exchange believes that the proposed changes to Rule 11.13 make 
the process described above more clear. In addition, the Exchange 
proposes to offer Users a third option for processing of the unfilled 
balance that returns to the Exchange. As proposed, the new Rule 
11.13(a)(2)(B) will allow Users to instruct the Exchange to execute the 
order against the BATS Book and route the order to away Trading Centers 
up to the limit price of the order. At the limit price, the Exchange 
will attempt to execute the order against the BATS Book one time and 
attempt to fill the order at one or more away Trading Centers, and then 
cancel any unfilled balance of the order back to the User. This differs 
from the second option because under the new, proposed option, after 
routing the order away at the limit price, the Exchange will not again 
check the BATS Book for available liquidity before canceling the order 
back to the User.
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.\9\ Specifically, the 
proposed change is consistent with Section 6(b)(5) of the Act,\10\ 
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, by allowing Users to instruct the Exchange to 
attempt to execute their orders at the applicable limit price against 
the BATS Book and then at one or more away Trading Centers, but then to 
promptly cancel the remaining balance back. This functionality will 
allow the Exchange to seek to execute the order as promptly as possible 
but will also provide Users with a faster response as to whether their 
orders have been executed.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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(B) Self-Regulatory Organization's Statement of 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 Regarding the 
Proposed Rule Changes 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

    Because the foregoing rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days after the date of this filing, 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) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\13\ 
However, Rule 19b-4(f)(6)(iii) \14\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay. BATS states that 
implementation of the order type described in this filing will provide 
BATS Users with another option with respect to the handling of orders 
routed away from the Exchange that is completely optional, and will not 
require any programming changes by BATS Users unless they choose to use 
the new functionality.\15\ The Commission believes that waiving the 30-
day operative delay is consistent with the protection of investors and 
the public interest because such waiver will allow BATS Users to 
immediately benefit from this minor variation to the order handling 
used by the Exchange today pursuant to the Exchange's existing rules. 
In addition, the Commission notes that the proposal does not raise any 
new substantive issues. The Commission hereby grants

[[Page 24059]]

the Exchange's request and designates the proposal operative upon 
filing.\16\
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    \13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and 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. The Exchange has satisfied this notice requirement.
    \14\ Id.
    \15\ See SR-BATS-2009-013, Item 7.
    \16\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change the Commission may summarily abrogate 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 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-2009-013 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-2009-013. 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 changes 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 inspection and 
copying 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 also will be available for 
inspection and copying at the principal office of BATS. 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-2009-013 and should be 
submitted on or before June 12, 2009.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-11941 Filed 5-21-09; 8:45 am]

BILLING CODE 8010-01-P