Document ID: SEC-2016-0203-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2016-02-08T05:00Z

[Federal Register Volume 81, Number 25 (Monday, February 8, 2016)]
[Notices]
[Pages 6552-6554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-02336]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77036; File No. SR-EDGX-2016-01]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
21.1, Definitions, Relating to the Operation of the Attribution Feature 
of EDGX Options

February 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 January 21, 2016, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to authorize the Exchange's equity 
options platform (``EDGX Options'') to make a modification to Rule 21.1 
(Definitions) in connection with the operation of the attribution 
feature of EDGX Options, as described below. The Exchange has 
designated this proposal as non-controversial and provided the 
Commission with the notice required by Rule 19b-4(f)(6)(iii) under the 
Act.\5\
---------------------------------------------------------------------------

    \5\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    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
    The Exchange is proposing to modify Rule 21.1, Definitions, which 
sets forth the various definitions applicable to the operation of the 
EDGX Options platform, including order types and order type modifiers 
accepted by EDGX Options. As set forth in Rule 21.1, an order can be 
attributed on EDGX Options, meaning that such order is displayed with 
not only a price and size

[[Page 6553]]

but also a User's \6\ market participant identifier, or MPID (such 
order an ``Attributable Order''). Alternatively, a User may also submit 
an order that is designated for display on an anonymous basis, a ``Non-
Attributable Order.'' Rule 21.1(c) also states that all orders shall be 
treated as Attributable Orders unless a User has entered instructions 
to treat such orders as Non-Attributable Orders. In addition to 
attribution, as discussed in Rule 21.1, Exchange Rule 21.15(c) states 
that the Exchange will indicate on OPRA when there is Customer interest 
on EDGX Options and will identify Customer orders and trades as such on 
the Exchange's proprietary data feeds.
---------------------------------------------------------------------------

    \6\ The term User is defined in Rule 1.5(ee) as ``any Member or 
Sponsored Participant who is authorized to obtain access to the 
System pursuant to Rule 11.3.''
---------------------------------------------------------------------------

    While the Exchange does not propose to modify the identification of 
Customer interest, orders or trades to either OPRA or on Exchange 
proprietary data feeds, the Exchange proposes to eliminate the ability 
for a Customer order to also be an Attributable Order. In other words, 
though Customer interest, orders and trades would still be identified 
as such through applicable data feeds, only non-Customer orders could 
be identified on Exchange data feeds with attribution to a specified 
MPID. The Exchange believes that limiting the use of Attributable 
Orders to non-Customer orders is reasonable because such functionality 
was primarily intended for Market Makers and other professional 
participants that typically provide liquidity to indicate their 
presence on EDGX Options with attribution to their MPID.
    The Exchange notes that it does not propose the change set forth 
above due to concerns with respect to Customer orders being entered as 
Attributable Orders but rather due to current system limitations in 
supporting both the attribution feature and the identifcation [sic] of 
Customer orders as such. On balance, the Exchange believes that the 
identification of orders as Customer orders is more consistent with the 
operation of other options exchanges and important to the Exchange's 
pro rata priority model than is the attribution of a particular 
Customer order to a specific MPID.
    The Exchange also notes that the equities platform of the Nasdaq 
Stock Market LLC (``Nasdaq'') also limits the availability of 
attribution to certain market participants, including market makers.\7\
---------------------------------------------------------------------------

    \7\ See Nasdaq Rule 4756(b), which permits Nasdaq Market Makers 
and Nasdaq ECNs to attribute their quotations on Nasdaq. See also 
Nasdaq Rule 4702(b)(2)(A), which limits the availability of Nasdaq 
``Price to Display Orders'' to Nasdaq Market Makers and further 
states that all Price to Display Orders are Attributable Orders.
---------------------------------------------------------------------------

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.\8\ In particular, the 
proposal is consistent with Section 6(b)(5) of the Act \9\ because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed rule change will allow the Exchange to continue to 
accept Attributable Orders from non-Customers while also designating 
Customer orders as such on applicable data feeds. As set forth above, 
the Exchange believes that non-Customers quoting and providing 
liquidity are the most likely users of the Attributable Order feature 
and that restricting Customer orders from the use of the feature is 
appropriate given the separate identification of Customer orders on 
applicable data feeds. As set forth above, at least one other exchange 
has similarly limited attribution to certain professional market 
participants.\10\
---------------------------------------------------------------------------

    \10\ See supra note 7.
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issues but rather to make a 
modification to the Exchange's attribution offering to ensure that the 
Exchange's System and rules are consistent and that the most important 
features can be offered to Users in their varying capacities. As noted 
above, at least one other exchange has similarly limited attribution to 
certain professional market participants.\11\
---------------------------------------------------------------------------

    \11\ Id.
---------------------------------------------------------------------------

(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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
Because the 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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) 
thereunder.\14\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's 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 
requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) 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 asked the Commission to waive the 
30-day operative delay so that the Exchange may continue to permit non-
Customers to attribute their orders and to allow the Exchange to label 
orders as Customer Orders. The Commission believes that the proposal 
will update the rules of the Exchange to accurately reflect how the 
System operates with respect to Attributable Orders thereby avoiding 
confusion by market participants. Based on the foregoing, the 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\15\ The

[[Page 6554]]

Commission hereby grants the Exchange's request and designates the 
proposal operative upon filing.
---------------------------------------------------------------------------

    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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. 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 No. SR-EDGX-2016-01 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 No. SR-EDGX-2016-01. 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 No. SR-EDGX-2016-01 and should be 
submitted on or before February 29, 2016.
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-02336 Filed 2-5-16; 8:45 am]
 BILLING CODE 8011-01-P