Document ID: SEC-2016-1380-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats EDGX Exchange, Inc.
Posted Date: 2016-08-08T04:00Z

[Federal Register Volume 81, Number 152 (Monday, August 8, 2016)]
[Notices]
[Pages 52496-52498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18701]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78460; File No. SR-BatsEDGX-2016-36]

Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Reflect the Dissolution of One of the Exchange's Intermediate Holding 
Companies, Direct Edge Holdings LLC

August 2, 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 July 26, 2016, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 
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)(iii).
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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 reflect the dissolution of one of 
the Exchange's intermediate holding companies, Direct Edge Holdings LLC 
(``DEH''), on December 31, 2015, by: (i) Amending the bylaws of the 
Exchange's ultimate parent company, Bats Global Markets, Inc. (the 
``Corporation''), to remove reference to DEH, as well as Bats Global 
Markets Holdings, an intermediate holding company wholly owned by the 
Corporation (``BGMH''), (ii) amending the bylaws of the Exchange to 
remove reference to DEH, (iii) deleting the DEH certificate of 
formation and operating agreement from the Exchange's rules, and (iv) 
amending the operating agreement of the Exchange's sole stockholder, 
Direct Edge LLC (``DE LLC''), to reflect that DE LLC's sole member is 
the Corporation rather than DEH and to make other related changes.
    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On December 17, 2015, DEH filed a certificate of cancellation with 
the State of Delaware, effective December 31,

[[Page 52497]]

2015. As a result, DEH was dissolved, its affairs wound up, and its 
certificate of formation and operating agreement were cancelled, each 
effective December 31, 2015. In connection with DEH's dissolution, the 
Corporation proposes to amend its bylaws on-file with the Commission to 
remove reference to DEH because the entity no longer exists. The 
Exchange also proposes to remove reference to BGMH because inclusion of 
the reference to BGMH is unnecessary. Specifically, the applicable 
provision relates to any entity in which the Corporation holds an 
interest and the text the Exchange proposes to eliminate is a 
parenthetical that was intended to provide examples, not an exhaustive 
list, of such entities.
    Similarly, the Exchange intends to amend its bylaws to remove 
reference to DEH. Specifically, the Exchange proposes to remove 
references to DEH contained in Article XI, Section 2 of the bylaws, 
which prohibits members of the boards of affiliated entities from 
attending meetings related to the self-regulatory function of the 
Exchange.
    Because DEH has been dissolved, the Exchange also proposes to 
delete the DEH certificate of formation and operating agreement from 
the Exchange's rules. Though the DEH certificate of formation did not 
have any information pertinent to the Exchange, the Exchange notes that 
the DEH operating agreement did contain certain provisions applicable 
to the Exchange's status as a self-regulatory organization. For 
example, Article X, Section 1 provided that DEH would not interfere 
with the Exchange's responsibilities under the Act and Article X, 
Section 2 provided that DEH would cooperate with the Exchange in 
furtherance of such responsibilities. These provisions and the others 
in the operating agreement of DEH related to the Exchange were designed 
to impose restrictions upon DEH for so long as DEH indirectly owned the 
Exchange or were intended to require cooperation by DEH to ensure that 
the Exchange could meet its regulatory obligations. Thus, while the 
dissolution of DEH and the proposed elimination of the operating 
agreement does remove some provisions applicable to the Exchange, there 
is no impact on the Exchange. The Exchange notes that each one of these 
provisions is duplicative of a provision included in the operating 
agreement of DE LLC. Also, the Exchange notes that the primary 
limitations upon the interference with the independence of the Exchange 
related to either ownership or governance are contained either in the 
organizational documents of Exchange or the Corporation, and not the 
organizational documents of any intermediate holding company.
    Finally, DE LLC intends to amend and restate its operating 
agreement to reflect that DE LLC's sole member is the Corporation 
rather than DEH and include the contact information of the member. In 
connection with these changes, the Exchange also proposes to reflect 
the following changes to the operating agreement of DE LLC: (i) general 
language to reflect the amendment and restatement of the operating 
agreement; and (ii) restructuring of certain language related to DE 
LLC's formation. None of the proposed changed described above requires 
a filing with the State of Delaware.
    The purpose of this rule filing is to amend the bylaws of the 
Corporation, the ultimate parent company of the Exchange, to amend the 
bylaws of the Exchange, and to amend and restate the operating 
agreement of DE LLC, the sole stockholder of the Exchange, each as 
described in this proposal.\5\ The purpose of the rule filing is also 
to remove reference to the DEH certificate of formation and operating 
agreement, as neither document is still operative. Thus, the changes 
described herein only relate to references contained in the bylaws of 
the Corporation and the Exchange as well as the operating agreement of 
DE LLC, and do not impact the governance of the Exchange. The Exchange 
will continue to be governed by its existing certificate of 
incorporation and bylaws, as amended by this proposal. The stock in, 
and voting power of, the Exchange will continue to be directly and 
solely held by DE LLC, and the governance of the Exchange will continue 
under its existing structure.
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    \5\ The Exchange notes that such changes have already been filed 
in connection with corporate documents on-file with the Secretary of 
State of Delaware.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and 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.\6\ In particular, the 
proposal is consistent with Section 6(b)(1) of the Act, because it 
retains, without modification, the existing limitations on ownership 
and total voting power that currently exist and that are designed to 
prevent any stockholder from exercising undue control over the 
operation of the Exchange and to assure that the Exchange is able to 
carry out its regulatory obligations under the Act. Under the proposal, 
the Corporation is making certain administrative changes to the bylaws 
of the Corporation, the bylaws of the Exchange and the operating 
agreement of DE LLC. These changes, however, do not impact the 
governance of the Exchange nor do they modify the ownership of the 
Corporation.
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    \6\ 15 U.S.C. 78f(b).
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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. As described above, the proposed rule change 
is simply to reflect the dissolution of DEH, including the deletion of 
the certificate of formation and operating agreement of DEH and all 
references to DEH in the governance documents of the Corporation, the 
Exchange, and DE LLC. The Exchange has also proposed to remove an 
unnecessary reference in the Corporation's bylaws to BGMH. The changes 
described in the proposal do not impact the governance of the Exchange 
nor do they modify the ownership of the Corporation.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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

    Because the foregoing proposed rule change does not: (A) 
Significantly affect the protection of investors or the public 
interest; (B) impose any significant burden on competition; and (C) by 
its terms, 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 \7\ and 
paragraph (f)(6) of Rule 19b-4 thereunder,\8\ the Exchange has 
designated this rule filing as non-controversial. The Exchange has 
given 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

[[Page 52498]]

shorter time as designated by the Commission.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4.
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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: (1) 
Necessary or appropriate in the public interest; (2) for the protection 
of investors; or (3) 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 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 Number SR-BatsEDGX-2016-36 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-BatsEDGX-2016-36. 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 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 Number SR-BatsEDGX-2016-36 and should 
be submitted on or before August 29, 2016.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18701 Filed 8-5-16; 8:45 am]
 BILLING CODE 8011-01-P