Document ID: SEC-2015-1646-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2015-10-14T04:00Z

[Federal Register Volume 80, Number 198 (Wednesday, October 14, 2015)]
[Notices]
[Pages 61855-61857]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26033]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76092; File No. SR-BATS-2015-77]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 3.13 (Payment Designed To Influence Market Prices, Other Than Paid 
Advertising)

October 7, 2015.
    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 September 23, 2015, BATS Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been substantially 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 filed a proposal to amend BZX Rule 3.13 to conform 
with: (i) Financial Industry Regulatory Authority, Inc. (``FINRA'') 
Rule 5230 for purposes of an agreement between the Exchange and FINRA 
pursuant to Rule 17d-2 under the Act \5\ and (ii) the rules of EDGA 
Exchange, Inc. (``EDGA'') and EDGX Exchange, Inc. (``EDGX'').\6\ 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.
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    \5\ 17 CFR 240.17d-2.
    \6\ See EDGA Rule 3.13 and EDGX Rule 3.13.
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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
    Pursuant to Rule 17d-2 under the Act,\7\ the Exchange and FINRA 
entered into an agreement to allocate regulatory responsibility for 
common rules (``17d-2 Agreement''). The 17d-2 Agreement covers common 
members of the Exchange and FINRA (``Common Members'') and allocates to 
FINRA regulatory responsibility, with respect to Common Members, for 
the following: (i) Examination of Common Members for compliance with 
federal securities laws, rules and regulations and Exchange rules that 
the Exchange has certified as identical or substantially similar to 
FINRA rules; (ii) investigation of Common Members for violations of 
federal securities laws, rules or regulations, and Exchange rules that 
the Exchange has certified as identical or substantially identical to 
FINRA rules; and (iii) enforcement of compliance by Common Members with 
the federal securities laws, rules and regulations, and Exchange rules 
that the Exchange has certified as identical or substantially similar 
to FINRA rules.\8\
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    \7\ 17 CFR 240.17d-2.
    \8\ See Exchange Act Release No. 58375 (Aug. 18, 2008), 73 FR 
46498 (Aug. 21, 2008) (approving File No. 10-182).
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    The 17d-2 Agreement included a certification by the Exchange that 
states that the requirements contained in certain Exchange rules are 
identical, or substantially similar, to certain FINRA rules that have 
been identified as comparable. Currently, Exchange Rule 3.13 is not 
fully incorporated into the 17d-2 Agreement as it does not include 
exceptions similar to FINRA Rule 5230. Therefore, to conform to 
comparable FINRA Rule 5230 for purposes of the 17d-2 Agreement, the 
Exchange proposes to amend Exchange Rule 3.13 to adopt rule text that 
is substantially similar to FINRA Rule 5230.
    Currently, Exchange Rule 3.13 (Payment Designed To Influence Market 
Prices, Other than Paid Advertising) states that ``[n]o Member shall 
directly or indirectly, give, permit to be given, or offer to give 
anything of value to any person for the purpose of influencing or 
rewarding the action of such person in connection with the publication 
or circulation in any newspaper, investment service or similar 
publication of any matter which has, or is intended to have, an effect 
upon the market price of any security; provided, that the Rule shall 
not be construed to apply to a matter which is clearly identifiable as 
paid advertising.''
    First, the Exchange proposes to redesignate Rule 3.13 as ``Payments 
Involving Publications that Influence the Market Price of a Security''. 
This title would mirror that of FINRA Rule 5230. The Exchange also 
proposes to delete the text of Rule 3.13 in its entirety and replace it 
with rule text that is substantially similar to FINRA Rule 5230. As 
amended, paragraph (a) would continue to prohibit Exchange members from 
directly or indirectly, giving, permitting to be given, or offering to 
give anything of value to ``any person for the purpose of influencing 
or rewarding the action of such person in connection with the 
publication or circulation in any electronic or other public media, 
including any investment service or similar publication, Web site,

[[Page 61856]]

newspaper, magazine or other periodical, radio, or television program 
of any matter that has, or is intended to have, an effect upon the 
market price of any security.'' This language is similar to current 
Rule 3.13. Proposed paragraph (b) would set forth exceptions to the 
prohibitions under paragraph (a). These exceptions would allow for 
compensation paid to a person in connection with the publication or 
circulation of: (i) A communication that is clearly distinguishable as 
paid advertising, like current Rule 3.13; (ii) a communication that 
discloses the receipt of compensation and the amount thereof in 
accordance with Section 17(b) of the Securities Act of 1933; or (iii) a 
research report, as that term is defined in FINRA Rule 2241.\9\ 
Proposed paragraph (a) and the exceptions set forth under proposed 
paragraph (b) are substantially similar to FINRA Rule 5230.\10\
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    \9\ See FINRA Rule 2241(a)(9) for the definition of the term 
``research report''.
    \10\ The only difference between the proposed text of Rule 3.13 
and FINRA Rule 5230 is that FINRA Rule 5230 references NASD Rule 
2711 while proposed Rule 3.13 references FIRNA Rule 2241. This 
difference reflects the Commission's approval of a proposed rule 
change filed by FINRA that replaced NASD Rule 2711 with FINRA Rule 
2241. See Exchange Act Release No. 75471 (July 16, 2015), 80 FR 
43482 (July 22, 2015) (SR-FINRA-2014-047).
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    The proposed rule text is also identical to EDGA Rule 3.13 and EDGX 
Rule 3.13.\11\ In early 2014, the Exchange and its affiliate, BATS Y-
Exchange, Inc. (``BYX''), received approval to effect a merger 
(``Merger'') of the Exchange's parent company, BATS Global Markets, 
Inc., with Direct Edge Holdings LLC, the indirect parent of EDGX and 
EDGA (together with BZX and BYX, the ``BGM Affiliated Exchanges''). In 
the context of the Merger, the BGM Affiliated Exchanges are working to 
align their rules, retaining only intended differences between the BGM 
Affiliated Exchanges. Thus, the proposed text of Rule 3.13 is also 
identical to recent rule changes filed with the Commission by EDGA and 
EDGX to amend their identical rule text to that proposed herein. This 
proposed rule change would enable the Exchange to adopt rules that 
correspond to rules of EDGA and EDGX and provide a consistent rule set 
across each of the BGM Affiliated Exchanges.\12\
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    \11\ EDGA and EDGX have filed proposed rule changes with the 
Commission to replace references to NASD Rule 2711 in their 
respective Rules 3.13 with FINRA Rule 2241. See SR-EDGA-2015-38 and 
SR-EDGX-2015-43. See also supra note 10.
    \12\ BYX has filed an identical proposal with the Commission to 
amend its Rule 3.13. See SR-BYX-2015-41.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b)(5) of the Act,\13\ which requires, among other 
things, that the Exchange's rules be 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, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. The Exchange believes that the 
proposed rule change would further these requirements by providing 
greater harmonization between Exchange and FINRA rules of similar 
purpose, resulting in greater uniformity and less burdensome and more 
efficient regulatory compliance. As such, the Exchange believes that 
the proposed rule change would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities and would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \13\ 15 U.S.C. 78f(b)(5).
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    In addition, the Exchange believes that the proposed rule change 
would provide greater harmonization between rules of similar purpose on 
the BGM Affiliated Exchanges, resulting in greater uniformity and less 
burdensome and more efficient regulatory compliance and understanding 
of Exchange rules. As such, the Exchange believes that the proposed 
rule change would foster cooperation and coordination with persons 
engaged in facilitating transactions in securities and would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system. Similarly, the Exchange also believes that, 
by harmonizing the rules across each BGM Affiliated Exchange, the 
proposal would enhance the Exchange's ability to fairly and efficiently 
regulate its members, meaning that the proposed rule change is 
equitable and would promote fairness in the market place.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule change is not designed to address any competitive 
issues but rather to provide greater harmonization among Exchange and 
FINRA rules of similar purpose, resulting in less burdensome and more 
efficient regulatory compliance for Common Members and facilitating 
FINRA's performance of its regulatory functions under the 17d-2 
Agreement. In addition, the Exchange believes that allowing it to 
implement substantively identical rules across each of the BGM 
Affiliated Exchanges does not present any competitive issues, but 
rather is designed to provide greater harmonization among Exchange, 
BYX, EDGX, and EDGA rules of similar purpose.

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 proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has designated this rule filing as non-controversial 
under section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) 
thereunder.\15\ 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 after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest, the proposed rule 
change has become effective pursuant to section 19(b)(3)(A) of the Act 
and Rule 19b-4(f)(6) thereunder.\16\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4.
    \16\ Rule 19b-4(f)(6) also requires that the Exchange give the 
Commission written notice of its 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 satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily temporarily suspend the rule 
change if it appears to the Commission that this action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes this action, the 
Commission shall institute proceedings under section 19(b)(2)(B) of the 
Act \17\ to

[[Page 61857]]

determine whether the proposed rule should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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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 proposal 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-BATS-2015-77 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-BATS-2015-77. 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-BATS-2015-77 and should be 
submitted on or before November 4, 2015.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26033 Filed 10-13-15; 8:45 am]
BILLING CODE 8011-01-P