Document ID: SEC-2008-1331-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2008-10-01T04:00Z

[Federal Register: October 1, 2008 (Volume 73, Number 191)]
[Notices]               
[Page 57172-57174]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01oc08-133]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58644; File No. SR-BATS-2008-005]

 
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
BATS Rulebook Chapter XI To Add Four New Rules Regarding the 
Registration and Obligations of Market Makers and Amend Rule 1.5 To Add 
Definitions of ``Market Maker'' and ``Market Maker Authorized Trader''

September 25, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 19, 2008, BATS Exchange, Inc. (``BATS'' or the 
``Exchange'') 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. BATS has 
designated the proposed rule change as constituting a non-controversial 
rule change under Rule 19b-4(f)(6) under the Act,\3\ which renders the 
proposal 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\ 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 Chapter XI of the BATS Rulebook 
to add four new rules which would provide for the registration and 
obligations of market makers, as well as amending Rule 1.5 to add the 
definitions of ``Market Maker'' and ``Market Maker Authorized Trader.''
    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 purpose of the proposed rule change is to provide Members the 
ability to register as Market Makers and to provide for the regulation 
of Market Makers. The process for registration as a Market Maker is 
contained in Proposed Rule 11.5, which provides that applicants must 
file applications in such form as the Exchange may prescribe. 
Applicants will be reviewed by the Exchange, which will consider 
factors including the capital, operations, personnel, technical 
resources, and disciplinary history of the applicant. Each Market Maker 
must have and maintain the minimum net capital of at least the amount 
required by Rule 15c3-1 of the Exchange Act.\4\ Pursuant to the 
Proposed Rule, an applicant's registration as a Market Maker will 
become effective upon receipt by the Member of the Exchange's notice of 
approval of registration. The Proposed Rule also provides that the 
registration of a Market Maker may be suspended or terminated by the 
Exchange if the Exchange determines that the Market Maker substantially 
or continually failed to engage in dealings in accordance with Exchange 
Rules, if the Market Maker fails to meet the minimum net capital 
conditions, or the Market Maker fails to maintain fair and orderly 
markets.
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    \4\ 17 CFR 240.15c3-1.
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    Proposed Rule 11.6 provides for the registration and obligations of 
Market Maker Authorized Traders (``MMATs''). The Exchange can register 
a person as a MMAT upon receiving an application in the form 
prescribed, and MMATs are permitted to enter orders only for the 
account of the Market Maker for which they are registered. MMATs may be 
officers, partners, employees or other associated persons of Members 
who are registered as Market Makers. To be eligible for registration as 
a MMAT, a person must complete the training and other programs required 
by the Exchange and successfully complete the General Securities 
Representative Examination (Series 7). Market Makers must ensure that 
their MMATs are properly qualified to perform market making activities. 
The Exchange may suspend or withdraw the registration of a MMAT if the 
Exchange determines that the person has caused the Market Maker to fail 
to comply with the securities laws or rules of the Exchange, if the 
person fails to perform his or her responsibilities properly, or fails 
to maintain fair and orderly markets. If a MMAT is suspended, the 
Market Maker may not allow the person to submit orders. In addition, 
the registration of a MMAT may be withdrawn upon the written request of 
the Member for which the MMAT is registered.
    Proposed Rule 11.7 provides for the registration of Market Makers 
in a security. A Market Maker may become registered in a newly 
authorized

[[Page 57173]]

security or in a security already admitted to dealings on the Exchange 
by filing a security registration form with the Exchange. In 
considering the approval of the registration of the Market Maker in a 
security, the Exchange may consider the financial resources available 
to the Market Maker, the Market Maker's experience in making markets, 
the Market Maker's operational capability, the maintenance and 
enhancement of competition among Market Makers in each security in 
which they are registered, the existence of clearing arrangements for 
the Market Maker's transactions, and the character of the market for 
the security. The Proposed Rule also provides that a Market Maker may 
voluntarily terminate its registration in a security by providing the 
Exchange with a written notice of such termination. The Exchange may 
require a certain minimum prior notice period for such termination and 
may place other conditions on withdrawal and re-registration following 
withdrawal. The Exchange may suspend or terminate any registration of a 
Market Maker in a security whenever it determines that the Market Maker 
has not met any of its obligations or has failed to maintain fair and 
orderly markets.
    Finally, Proposed Rule 11.8 sets out the obligations of Market 
Makers. In general, Market Makers must engage in a course of dealings 
for their own account to assist in the maintenance, insofar as 
reasonably practicable, of fair and orderly markets on the Exchange. 
The responsibilities of Market Makers include, among other things, 
maintaining continuous limit orders to buy and to sell for round lots 
in those securities in which the Market Maker is registered to trade. 
Market Makers will be responsible for the acts and omissions of its 
MMATs. If the Exchange finds any substantial or continued failure by a 
Market Maker to engage in a course of dealing as specified in this 
Rule, such Market Maker will be subject to disciplinary action or 
suspension or revocation of its registration. A Market Maker may apply 
to withdraw temporarily from its Market Maker status in the securities 
for which it is registered and must base this request on demonstrated 
legal or regulatory requirements that necessitate its temporary 
withdrawal.\5\
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    \5\ See electronic mail from Anders Franzon, Associate General 
Counsel, BATS Trading, Inc., to Sarah Albertson, Attorney, Division 
of Trading and Markets, Commission, dated September 23, 2008.
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    These proposed rules will benefit all Exchange participants, 
because Market Makers will assist in the maintenance of fair and 
orderly markets, provide additional liquidity to the Exchange, and 
assist in preventing excess volatility.
2. Statutory Basis
    The Exchange believes the proposal 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).\6\ In particular, the proposed 
changes are consistent with Section 6(b)(5) of the Act,\7\ because they 
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 creating greater liquidity in the Exchange 
market.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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

    No written comments were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rules are based on the approved rules of another self-
regulatory organization.\8\ In addition, the Exchange believes that the 
proposed rules will benefit all Exchange participants, because Market 
Makers will assist in the maintenance of fair and orderly markets, 
provide additional liquidity to the Exchange, and assist in preventing 
excess volatility. Accordingly, the Exchange has designated this rule 
filing as non-controversial under Section 19(b)(3)(A) of the Act \9\ 
and paragraph (f)(6) of Rule 19b-4 thereunder.\10\ In accordance with 
Rule 19b-4(f)(6)(iii),\11\ the Exchange submitted 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.
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    \8\ See NSX Rules 1.5 and 11.5 through 11.8.
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4.
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
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    Because the foregoing proposed rule change is non-controversial and 
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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the 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.

III. 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BATS-2008-005 on the subject line.

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 Number SR-BATS-2008-005. 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 inspection and 
copying in the Commission's Public Reference

[[Page 57174]]

Room, on official business days between the hours of 10 a.m. and 3 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 Number SR-BATS-2008-005 and should be submitted on 
or before October 22, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-23041 Filed 9-30-08; 8:45 am]

BILLING CODE 8011-01-P