Document ID: SEC-2009-0959-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Its New Sponsored Access Risk Management Tool Service
Posted Date: 2009-07-14T04:00Z

[Federal Register Volume 74, Number 133 (Tuesday, July 14, 2009)]
[Notices]
[Pages 34068-34070]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-16576]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60236; File No. SR-BATS-2009-019]

 Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Establish 
Its New Sponsored Access Risk Management Tool Service

July 2, 2009.
    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 June 26, 2009, BATS Exchange, Inc. (``BATS'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Exchange filed the proposed rule change pursuant to 
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) 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).

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[[Page 34069]]

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

    The Exchange proposes to establish its new Sponsored Access Risk 
Management Tool (the ``Tool'') service.

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 those 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 proposes to offer the Tool service to BATS Members and 
Member organizations.

Background

    The Exchange defines a ``Sponsored Participant'' as a person who 
has entered into a sponsorship arrangement with a Sponsoring Member.\5\ 
A ``Sponsoring Member'' is defined as a broker-dealer that is a Member 
of the Exchange and has been designated by a Sponsored Participant to 
execute, clear and settle transactions occurring on the Exchange.\6\ 
Under BATS Rule 11.3(b), a Sponsoring Member may allow its customers to 
enter orders directly into the trading systems of the Exchange as 
Sponsored Participants, without the Sponsoring Member acting as an 
intermediary.
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    \5\ See BATS Rule 1.5(w).
    \6\ See BATS Rule 1.5(x).
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Sponsored Access Risk Management Tool

    To facilitate the ability of a Sponsoring Member to monitor and 
oversee the sponsored access activity of its Sponsored Participants, 
the Exchange will offer the Sponsored Access Risk Management Tool. This 
optional service will act as a risk filter by causing the orders of 
Sponsored Participants to be evaluated by the Tool prior to entering 
the Exchange's trading systems for execution. When a Sponsored 
Participant's order is evaluated by the Tool, it determines whether the 
order complies with the order criteria established by the Sponsoring 
Member for that Sponsored Participant. The order criteria pertain to 
such matters as the size of the order (e.g., maximum notional value per 
order and maximum shares per order), the order type (e.g., pre-market, 
post-market, short sales and ISOs), restricted securities, easy to 
borrow securities, and order cut-off (e.g., block new orders and cancel 
all open orders).
    The Tool also offers Sponsoring Members the capability to receive 
FIX Drop Order Copy sessions, which include the complete FIX 
conversation, as well as web based management tools to configure the 
Sponsored Access controls.
    The Sponsoring Member, and not the Exchange, will have full 
responsibility for ensuring that Sponsored Participants' sponsored 
access to the Exchange complies with the Exchange's sponsored access 
rules. The use of the Tool by a Sponsoring Member does not 
automatically constitute compliance with Exchange Rules.
    The Sponsored Participant's orders are validated in the FIX handler 
prior to entering the matching engine. Based on parameters provided to 
the Tool by the Sponsoring Member, the order is immediately passed on 
to the matching engine or rejected back to the Sponsored Participant.
    The Exchange does not require Sponsoring Members to use the Tool. 
Sponsoring Members are free to use any appropriate risk-management tool 
or service. The Exchange will not provide preferential treatment to 
Sponsoring Members using the Tool.
    The Exchange proposes to make the Tool available to its Members 
upon request. The Exchange believes the Tool will offer the Exchange's 
Members another option in the efficient risk management of its 
Sponsored Participants' access to BATS Exchange.
2. Statutory Basis
    The rule change proposed in this submission 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.\7\ Specifically, the 
proposed change is consistent with Section 6(b)(5) of the Act,\8\ 
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, and, in general, protect investors and 
the public interest. The proposed rule change also is designed to 
support the principles of Section 11A(a)(1) \9\ in that it seeks to 
assure economically efficient execution of securities transactions, 
make it practicable for brokers to execute investors' orders in the 
best market, and provide an opportunity for investors' orders to be 
executed without the participation of a dealer. Specifically, the 
Exchange believes that the proposed rule change is consistent with all 
of the aforementioned principles because it fosters competition by 
providing another option in the efficient risk management of trading on 
the Exchange. BATS notes that a similar functionality has already been 
found to be consistent with the Act by the Commission.\10\
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78k-1(a)(1).
    \10\ Securities Exchange Act Release No. 59354 (February 3, 
2009), 74 FR 6683 (February 10, 2009) (SR-NYSE-2008-101) (Approval 
of NYSE Risk Management Gateway).
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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: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) by its terms, does not become operative for 30 days from the 
date on which it was filed, or such shorter time as the Commission may 
designate, if consistent with the protection of investors and the 
public interest, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\13\ 
However, Rule 19b-

[[Page 34070]]

4(f)(6)(iii) \14\ 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 and designate the proposed rule change 
operative upon filing so that the expected benefits to Exchange Users 
from use of the Tool would not be delayed. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. The Commission notes that other 
self-regulatory organizations have similar functionality \15\ and that 
this filing raises no new regulatory issues. Therefore, the Commission 
designates the proposal operative upon filing.\16\
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    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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 complied with this requirement.
    \14\ Id.
    \15\ See Securities Exchange Act Release No. 59354 (February 3, 
2009), 74 FR 6683 (February 10, 2009) (SR-NYSE-2008-101) (Approval 
of NYSE Risk Management Gateway).
    \16\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 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 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.

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-2009-019 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-2009-019. 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 Room on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such 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-2009-019 and should be submitted on or before August 4, 2009.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-16576 Filed 7-13-09; 8:45 am]
BILLING CODE 8010-01-P