Document ID: SEC-2012-0413-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2012-03-14T04:00Z

[Federal Register Volume 77, Number 50 (Wednesday, March 14, 2012)]
[Notices]
[Pages 15153-15155]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6289]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66571; File No. SR-BATS-2012-013]

 Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing of Proposed Rule Change by BATS Exchange, Inc. to Amend BATS 
Rule 2.12, Entitled ``BATS Trading, Inc. as Inbound Router''

March 12, 2012.
    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 March 8, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 2.12, to make permanent the 
existing pilot program that permits the Exchange to receive inbound 
routes of equities orders through BATS Trading, Inc. (``BATS 
Trading''), the Exchange's routing broker-dealer, from BATS Y-Exchange, 
Inc. (``BYX'').
    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
    Currently, BATS Trading is the approved outbound order routing 
facility of BYX.\3\ The Exchange has been authorized to receive inbound 
routes of equities orders by BATS Trading from BYX.\4\ The Exchange's 
authority to receive inbound routes of equities orders by BATS Trading 
from BYX is currently subject to a pilot period of twelve months, 
ending April 15, 2012.

[[Page 15154]]

The Exchange hereby seeks permanent approval to permit the Exchange to 
accept inbound orders that BATS Trading routes in its capacity as a 
facility of BYX. This is reflected in the proposed amendment to BATS 
Rule 2.12(b).
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 62716 (August 13, 
2010), 75 FR 51295 (August 19, 2010) (Order Approving Application of 
BATS Y-Exchange, Inc. for Registration as a National Securities 
Exchange).
    \4\ See Securities Exchange Act Release Nos. 62901 (September 
13, 2010), 75 FR 57097 (September 17, 2010) (SR-BATS-2010-024) 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change to Adopt BATS Rule 2.12, Entitled ``BATS Trading, Inc. as 
Inbound Router'' and To Make Related Changes); 65516 (October 7, 
2011), 76 FR 63977 (October 14, 2011) (SR-BATS-2011-040) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to Extend 
the Pilot Period of the Inbound Router, as Described in Rule 2.12).
---------------------------------------------------------------------------

    Under the pilot, the Exchange is committed to the following 
obligations and conditions:
     The Exchange shall enter into a plan pursuant to Rule 17d-
2 under the Exchange Act with a non-affiliated self-regulatory 
organization (``SRO'') to relieve the Exchange of regulatory 
responsibilities for BATS Trading with respect to rules that are common 
rules between the Exchange and the non-affiliated SRO, and enter into a 
regulatory contract (``Regulatory Contract'') with a non-affiliated SRO 
to perform regulatory responsibilities for BATS Trading for unique 
Exchange rules.
     The Regulatory Contract shall require the Exchange to 
provide the non-affiliated SRO with information, in an easily 
accessible manner, regarding all exception reports, alerts, complaints, 
trading errors, cancellations, investigations, and enforcement matters 
(collectively ``Exceptions'') in which BATS Trading is identified as a 
participant that has potentially violated Exchange or SEC Rules, and 
shall require that the non-affiliated SRO provide a report, at least 
quarterly, to the Exchange quantifying all Exceptions in which BATS 
Trading is identified as a participant that has potentially violated 
Exchange or SEC Rules.
     The Exchange, on behalf of BATS Global Markets, Inc., 
shall establish and maintain procedures and internal controls 
reasonably designed to ensure that BATS Trading does not develop or 
implement changes to its system on the basis of non-public information 
regarding planned changes to Exchange systems, obtained as a result of 
its affiliation with the Exchange, until such information is available 
generally to similarly situated member organizations of the Exchange in 
connection with the provision of inbound order routing to the Exchange.
     The Exchange may furnish to BATS Trading the same 
information on the same terms that the Exchange makes available in the 
normal course of business to any other member organization.
    The Exchange is in compliance with the above-listed obligations and 
conditions. In meeting them, the Exchange has set up mechanisms that 
protect the independence of the Exchange's regulatory responsibility 
with respect to BATS Trading, as well as demonstrate that BATS Trading 
cannot use any information that it may have because of its affiliation 
with the Exchange to its advantage. Since the Exchange has met all the 
above-listed obligations and conditions, it now seeks permanent 
approval of the Exchange and BATS Trading's inbound routing 
relationship. Upon approval of the proposed rule change, the Exchange 
will continue to comply with the obligations and conditions as set 
forth in proposed BATS Rule 2.12.
2. Statutory Basis
    The Exchange believes that its 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) of the Act.\5\ In particular, the 
proposal is consistent with Section 6(b)(5) of the Act,\6\ 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.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the proposed rule change will allow the Exchange to 
continue receiving inbound routes of equities orders from BATS Trading 
acting in its capacity as a facility of BYX, in a manner consistent 
with prior approvals and established protections. The Exchange believes 
that meeting the commitments established during the pilot program 
demonstrates that the Exchange has mechanisms that protect the 
independence of the Exchange's regulatory responsibility with respect 
to BATS Trading, as well as demonstrates that BATS Trading cannot use 
any information that it may have because of its affiliation with the 
Exchange to its advantage.

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 Changes and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be 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-BATS-2012-013 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 Number SR-BATS-2012-013. 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 
a.m. and 3 p.m. Copies of such filing

[[Page 15155]]

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 publicly available. All submissions should refer to File Number 
SR-BATS-2012-013 and should be submitted on or before April 4, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-6289 Filed 3-12-12; 4:15 pm]
BILLING CODE 8011-01-P