Document ID: SEC-2011-0291-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2011-03-04T05:00Z

[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Notices]
[Pages 12155-12157]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4886]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63969; File No. SR-BATS-2011-007]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change by BATS 
Exchange, Inc. to Adopt BATS Rule 11.21, entitled ``Input of Accurate 
Information''

February 25, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 12156]]

notice is hereby given that on February 18, 2011, BATS Exchange, Inc. 
(``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 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 proposes to adopt new BATS Rule 11.21 to require 
Members to identify each order accurately as a Principal, Agency, or 
Riskless Principal Order.

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 proposes to add new BATS Rule 11.21 for the purpose of 
increasing transparency and to enhance the surveillance database and 
audit trail of transaction data used by the Exchange in surveillance of 
its market. The proposed rule change would require Members to identify 
the capacity of each order accurately as a Principal, Agency, or 
Riskless Principal Order. For purposes of surveillance, the Exchange 
currently identifies the capacity of each order as Principal, Agency, 
or Riskless Principal; however, several other capacities are accepted 
upon order entry, including no response, which are thereafter mapped to 
one of the above-listed order capacities. By limiting the order 
capacity upon entry to Principal, Agency, or Riskless Principal and 
requiring Members to accurately submit an order capacity for each 
order, the Exchange will be able to more precisely identify the type of 
order received and more effectively surveil for abusive trading.
    BATS does not have a rule that makes an explicit statement 
regarding a Member's obligation to input accurate information into the 
System. Notwithstanding, BATS believes that disciplinary cases against 
Members entering inaccurate or incomplete information may be brought 
appropriately under BATS Rule 3.1, which requires Members to observe 
high standards of commercial honor and just and equitable principles of 
trade. Rule 3.1 protects the investing public and the securities 
industry from dishonest practices that are unfair to investors or 
hinder the functioning of a free and open market, even though those 
practices may not be illegal or violate a specific rule or regulation. 
Because of the regulatory importance of accurate information input in 
the System, BATS believes a rule that directly addresses Members' 
obligation to provide accurate information is warranted. The proposed 
rule makes clear Members' obligation to input accurate information into 
the System and that failure to do so would be considered a violation of 
BATS Rules.
    BATS notes that it already has a rule in place for its equity 
options platform (``BATS Options'') that requires members of BATS 
Options (``Options Members'') to ensure that accurate information is 
input into the System, a requirement that includes, but is not limited 
to, the capacity of the Options Member as it relates to the order.\5\ 
The Commission has also previously approved rules proposed by the 
Nasdaq Stock Market LLC (``Nasdaq'') that apply to Nasdaq options and 
equities platforms and require participants to ensure that accurate 
information is entered into Nasdaq's system, including but not limited 
to the capacity of the participant.\6\ Thus, the proposed rule change 
would: (1) make BATS Rules regarding equity trading consistent with its 
rules regarding options trading; and (2) bring BATS Rules in line with 
those of other self-regulatory organizations.
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    \5\ BATS Rule 18.2(a)(6).
    \6\ See Securities Exchange Act Release 59547 (March 10, 2009), 
74 FR 11386 (March 17, 2009).
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    In order to allow Members sufficient time to review and complete 
any systems changes necessitated by this filing, the Exchange has 
proposed an operative date of April 4, 2011.
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, for 
the reasons described above, the proposed change is consistent with 
Section 6(b)(5) of the Act,\8\ 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and to protect 
investors and the public interest. Specifically, the changes proposed 
herein will serve to promote the accuracy of information input into the 
Exchange. Accurate information is necessary for the efficient and fair 
operation of the Exchange, and will assist the Exchange in surveilling 
the markets for fraudulent activity.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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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 Changes and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) \10\ thereunder because 
the proposal does not: (i) Significantly affect the protection of 
investors or the public interest; (ii) impose any significant burden on 
competition; and (iii) 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 if consistent with the

[[Page 12157]]

protection of investors and the public interest.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 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.
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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.\12\
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    \12\ 15 U.S.C. 78s(b)(3)(C).
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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-2011-007 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-2011-007. 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 website 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 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-2011-007 and should be 
submitted on or before March 25, 2011.

    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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-4886 Filed 3-3-11; 8:45 am]
BILLING CODE 8011-01-P