Document ID: SEC-2009-1083-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BATS Rule 11.9, Entitled "Orders and Modifiers"
Posted Date: 2009-07-31T04:00Z

[Federal Register: July 31, 2009 (Volume 74, Number 146)]
[Notices]               
[Page 38241-38242]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31jy09-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60387; File No. SR-BATS-2009-025]

 
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
BATS Rule 11.9, Entitled ``Orders and Modifiers''

July 24, 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 July 20, 2009, BATS Exchange, Inc. (``BATS'' or the 
``Exchange'') 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend BATS Rule 11.9, entitled 
``Orders and Modifiers,'' to eliminate the ability of Exchange Users to 
execute market orders on the Exchange outside of Regular Trading 
Hours.\5\
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    \5\ As set forth in BATS Rule 1.5(w), Regular Trading Hours last 
from 9:30 a.m. until 4:00 p.m. Eastern Time.
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    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend BATS Rule 
11.9(a)(2) to eliminate the ability of Exchange Users to execute market 
orders on the Exchange during the Exchange's Pre-Opening or After Hours 
Trading Session.\6\ Although the Exchange imposes certain limitations 
on how far away from the prevailing market a market order can be 
executed at any time,\7\ the Exchange does currently permit the 
execution of market orders outside of Regular Trading Hours. The 
Exchange believes that completely preventing any execution of a BATS 
market order outside of Regular Trading Hours will help to avoid the 
execution of such an order at a price that is significantly worse than 
the price that the User expected to receive based on pricing for a 
security at the time such market order was initially submitted to the 
Exchange. Thus, the Exchange believes that the proposal will provide 
additional protection for those Users that submit market orders to the 
Exchange.
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    \6\ As set forth in BATS Rule 1.5(r), the Pre-Opening Session 
lasts from 8 a.m. until 9:30 a.m. Eastern Time. As set forth in BATS 
Rule 1.5(c), the After Hours Trading Session lasts from 4 until 5 
p.m. Eastern Time.
    \7\ See BATS Rule 11.9(a)(2).
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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.\8\ Specifically, the 
proposed change is consistent with Section 6(b)(5) of the Act,\9\ 
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, by helping to avoid executions of market orders on 
the Exchange at prices that are significantly worse than the price that 
a User expects to receive based on pricing for a security at the time 
an order is initially received by the Exchange. Also, this proposal is 
consistent with existing exchange rules that make clear that market 
orders are rejected outside of regular trading hours on such 
exchanges.\10\ Accordingly, the modifications to BATS Rule 11.9 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ See, e.g., NYSE Arca Equities Rule 7.34(d)(1)(C) and 
(d)(3)(B); ISE Rule 2102, Supplementary Material .01.

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[[Page 38242]]

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 rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days after the date of this filing, or such shorter time as the 
Commission may designate, 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-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. BATS believes that waiver 
of the 30-day operative delay will allow the Exchange to more promptly 
implement the changes to its system to reject market orders outside of 
Regular Trading Hours even if such orders would otherwise execute. BATS 
expects to have technological changes in place to support the proposed 
rule change on July 24, 2009, and believes that benefits to Exchange 
Users expected from the proposed rule change should not be delayed.\15\ 
In addition, the Commission notes that the proposed rule change is 
consistent with the rules of other exchanges that prohibit the 
execution of market orders outside of regular trading hours.\16\ 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 and hereby designates the proposal operative upon 
filing.\17\
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    \13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
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 has satisfied this requirement.
    \14\ Id.
    \15\ See SR-BATS-2009-025, Item 7.
    \16\ See supra note 10.
    \17\ 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 such 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 No. SR-BATS-2009-025 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 No. SR-BATS-2009-025. 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, 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 BATS. 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-2009-025 and should be 
submitted on or before August 21, 2009.
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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\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-18228 Filed 7-30-09; 8:45 am]

BILLING CODE 8010-01-P