Document ID: SEC-2012-0279-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2012-02-16T05:00Z

[Federal Register Volume 77, Number 32 (Thursday, February 16, 2012)]
[Notices]
[Pages 9279-9281]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-3609]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66380; File No. SR-BATS-2012-009]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify 
Exchange Rule 11.23 Relating to Auctions of Exchange-Listed Securities

February 10, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 9280]]

notice is hereby given that on February 3, 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 and II 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposal to amend Rule 
11.23 entitled ``Auctions'' to allow orders designated to participate 
in the opening auction on the Exchange (``Opening Auction'') to 
participate in an auction in the initial public offering (``IPO'') for 
a security on the Exchange (``IPO Auction'').
    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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange recently proposed and received approval of rules 
governing auctions conducted on the Exchange for securities listed on 
the Exchange (``Exchange Auctions'').\3\ Specifically, the Exchange 
adopted rules for conducting an Opening Auction, a closing auction on 
the Exchange, an IPO Auction, or an auction in the event of a halt of 
trading in the security. The purpose of this filing is to allow orders 
designated to participate in the Opening Auction to also participate in 
an IPO Auction, as governed by Rule 11.23.
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    \3\ See Securities Exchange Act Release No. 65619 (October 25, 
2011), 76 FR 67238 (October 31, 2011) (SR-BATS-2011-032).
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    Specifically, the Exchange proposes to amend several portions of 
Rule 11.23 to allow MOO, LOO, and LLOO orders to participate in IPO 
Auctions. Under the proposal, MOO orders would behave like market 
orders participating in an IPO Auction currently behave. LOO and LLOO 
orders would behave like limit orders participating in an IPO Auction 
currently behave. In order to effect the change, the Exchange proposes 
to amend the definition of Eligible Auction Orders for IPO Auctions to 
include those orders designated to exclusively participate in the 
Opening Auction. The Exchange also proposes modifications to the 
definitions of MOO, LOO, and LLOO orders and to make clear that these 
Opening Auction orders that are not executed as part of the IPO Auction 
would be cancelled immediately following the IPO Auction, exactly as 
currently occurs in the Opening Auction.
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.\4\ In particular, the 
proposal is consistent with Section 6(b)(5) of the Act,\5\ 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. The proposed rule change is also 
consistent with Section 11A(a)(1) of the Act \6\ in that it seeks to 
assure fair competition among brokers and dealers by providing IPO 
Auction functionality that is consistent with that of other market 
centers for which market participants have already designed their 
trading systems.\7\ The Exchange believes that the proposed rule change 
promotes just and equitable principles of trade in that it promotes 
transparency and uniformity across markets concerning the eligibility 
of certain order types for IPO Auctions.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78k-1(a)(1).
    \7\ See NYSE Arca Equities Rule 7.31(t). The Exchange is 
proposing to provide functionality analogous to that already 
available at NYSE Arca, which allows Auction-Only Orders, which 
consists of only MOO and LOO orders, to participate in the next 
auction that occurs after the order is entered. For example, a MOO 
or LOO order entered at NYSE Arca at any time will participate in 
the next occurring auction and the remaining non-executed shares are 
cancelled upon completion of the auction. The Exchange is proposing 
to apply this functionality only to IPO Auctions, while NYSE Arca 
applies the functionality to all auctions.
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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

    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 \8\ and Rule 19b-
4(f)(6)(iii) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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.\10\ 
However, Rule 19b-4(f)(6)(iii) \11\ 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. The Exchange notes that 
waiver of this requirement will allow the Exchange, before any future 
IPO Auctions, to harmonize with other market centers its rules 
regarding the eligibility of orders designated for participation in the 
Opening Auction for participation in IPO Auctions. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
would allow the Exchange to avoid confusion among its Members and would 
immediately provide certainty with respect to the Exchange's rules 
regarding participation in IPO auctions. For this reason, the 
Commission

[[Page 9281]]

designates the proposed rule change to be operative upon filing with 
the Commission.\12\
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    \10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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 requirement.
    \11\ Id.
    \12\ 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 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BATS-2012-009 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-2012-009. 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 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 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-2012-009 and should be 
submitted on or before March 8, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-3609 Filed 2-15-12; 8:45 am]
BILLING CODE 8011-01-P