[Federal Register Volume 79, Number 143 (Friday, July 25, 2014)]
[Notices]
[Pages 43516-43522]
[FR Doc No: 2014-17513]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72646; File No. SR-BATS-2014-027]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to Rules
11.9, 11.12, 11.18, 21.1 and 21.7 of BATS Exchange, Inc.

July 21, 2014.
    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 9, 2014, BATS Exchange, Inc. (the ``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) 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 filed a proposal to amend Rule 11.9 to add certain
functionality to the Exchange's cash equities trading platform (``BATS
Equities''), to add additional detail regarding existing functionality
in place on BATS Equities, and to correct certain typographical errors.
The Exchange also proposes to make related changes to Rule 11.12 and to
eliminate obsolete language and correct certain typographical errors in
Rule 11.18, all such rules applicable to BATS Equities. Consistent with
its practice of offering similar functionality for the Exchange's
equity options trading platform (``BATS Options'') as it does for BATS
Equities, the Exchange proposes to amend Rule 21.1 to add similar
functionality to BATS Options, to add additional detail regarding
existing functionality in place on BATS Options, and to conform
descriptions where possible between BATS Equities and BATS Options.
Finally, the Exchange proposes to make related changes to Rule 21.7.
    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
    Earlier this year, the Exchange and its affiliate BATS Y-Exchange,
Inc. (``BYX'') received approval to affect a merger (the ``Merger'') of
the Exchange's parent company, BATS Global Markets, Inc., with Direct
Edge Holdings LLC, the indirect parent of EDGX Exchange, Inc.
(``EDGX'') and EDGA Exchange, Inc. (``EDGA'', and together with BZX,
BYX and EDGX, the ``BGM Affiliated Exchanges'').\5\ In the context of
the Merger, the BGM Affiliated Exchanges are working to align certain
system functionality, retaining only intended differences between the
BGM Affiliated Exchanges. Thus, many of the proposals set forth below
are intended to add certain system functionality currently offered by
EDGA and/or EDGX in order to provide a consistent technology offering
for users of the BGM Affiliated Exchanges. In the context of such
alignment, the Exchange is also seeking to improve the transparency and
understandability of its rules, and has therefore proposed various
corrective and clarifying changes, as described below. Finally, as
noted above, BATS Equities and BATS Options offer much of the same
functionality, and thus, in adding functionality and modifying rule
text related to BATS Equities, the Exchange also wishes to do the same
for BATS Options.
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    \5\ See Securities Exchange Act Release No. 71375 (January 23,
2014), 79 FR 4771 (January 29, 2014) (SR-BATS-2013-059; SR-BYX-2013-
039).
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    The specific proposals set forth in more detail below include: (i)
The addition of Fill-or-Kill functionality for both BATS Equities and
BATS Options; (ii) the addition of a new replenishment option with
respect to Reserve Orders as well as additional detail regarding the
existing functionality of Reserve Orders for both BATS Equities and
BATS Options; (iii) the addition of rule text regarding Minimum
Quantity functionality for BATS Equities and additional detail in the
BATS Options description of Minimum Quantity functionality; (iv) the
addition of Stop Orders and Stop Limit Orders for both BATS Equities
and BATS Options; and (v) various corrections to typographical errors
in Exchange rules, elimination of obsolete language in Rule 11.18 as
well as the addition of detail to the routing portion of Rule 11.18.
Fill-or-Kill (``FOK'') Functionality
BATS Equities
    The Exchange proposes to add a Time-in-Force (``TIF'') term of
Fill-or-Kill (``FOK'') to BATS Equities. BATS Equities currently offers
five other TIF terms pursuant to Rule 11.9(b), including Immediate-or-
Cancel (``IOC''). The Exchange proposes to add FOK as a sixth TIF
option for BATS Equities, which would be numbered as 11.9(b)(6). As
proposed, a FOK would be a limit order that is to be executed in its
entirety as soon as it is received and, if not so executed, cancelled.
Example 1--FOK Executes
    Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 10.00 and a non-displayed order to buy 100
shares at 10.00. Assume that a User \6\ submits a limit order to sell
200 shares at 10.00 that is designated with a TIF of FOK.
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    \6\ As defined in BATS Rule 1.5(cc), a User is ``any Member or
Sponsored Participant who is authorized to obtain access to the
System pursuant to Rule 11.3.''

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     The order to sell 200 shares would execute against the
resting displayed and non-displayed orders at 10.00.
Example 2--FOK Does Not Execute
    Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 10.00 and no other equal or better priced
liquidity. Assume that a User submits a limit order to sell 200 shares
at 10.00 that is designated with a TIF of FOK.
     The order to sell 200 shares would be cancelled back to
the User because the order could not be executed in its entirety upon
receipt by the Exchange.
    An order designated as FOK is similar to an IOC order and unique
from other TIFs in that it is either executed immediately or cancelled
back to a User, and thus, the Exchange also proposes to modify Rules
11.9(e)(1) and 11.18(e)(5) to add reference to orders with a TIF of FOK
alongside references to orders with a TIF of IOC, as described below.
First, Rule 11.9(e)(1) states that an order may only be cancelled or
replaced if the order has a TIF term other than IOC and if the order
has not yet been executed. The Exchange proposes to modify Rule
11.9(e)(1) to include the TIF of FOK as another TIF that, when attached
to an order, would mean that the order cannot be cancelled or replaced.
Second, Rule 11.18(e)(5) describes the operation of BATS market orders
\7\ and IOC orders in the context of the Plan to Address Extraordinary
Market Volatility Pursuant to Rule 608 of Regulation NMS under the Act
(the ``Limit Up-Limit Down Plan'').\8\ The Exchange proposes to modify
Rule 11.18(e)(5) to include orders with a TIF of FOK along with such
description. Specifically, the Exchange proposes to make clear that,
like IOC and BATS market orders, FOK orders will only be executed if
such executions are possible at or within the price bands prescribed by
the Limit Up-Limit Down Plan, and that if an order with a TIF of FOK
cannot be so executed, the remainder of the order will be cancelled.
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    \7\ See Rule 11.9(a)(2) for a description of BATS market orders.
    \8\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down
Release'').
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BATS Options
    The Exchange also proposes to add a TIF term of Fill-or-Kill
(``FOK'') to BATS Options. BATS Options currently offers four other TIF
terms pursuant to Rule 21.1(f), including Immediate Or Cancel
(``IOC''). The Exchange proposes to add FOK as a fifth TIF option for
BATS Equities [sic], which would be numbered as 21.1(f)(5). As
proposed, a FOK would be a limit order that is to be executed in its
entirety as soon as it is received and, if not so executed, cancelled.
Thus, the proposed definition is identical to the proposed definition
for BATS Equities, as is the proposed operation of FOK functionality.
Example 1--FOK Executes
    Assume the NBBO is 10.00 x 10.05 and the Exchange has a displayed
order to buy 10 contracts at 10.00 with reserve size of 10 contracts.
Assume that a User submits a limit order to sell 20 contracts at 10.00
that is designated with a TIF of FOK.
     The order to sell 20 contracts would execute against the
displayed and reserve size of the resting reserve order at 10.00.
Example 2--FOK Does Not Execute
    Assume the NBBO is 10.00 x 10.05 and the Exchange has a displayed
order to buy 10 contracts at 10.00 and no other equal or better priced
liquidity. Assume that a User submits a limit order to sell 20
contracts at 10.00 that is designated with a TIF of FOK.
     The order to sell 20 contracts would be cancelled back to
the User because the order could not be executed in its entirety upon
receipt by the Exchange.
    Consistent with BATS Equities, an order designated as FOK is
similar to an IOC order, and thus, the Exchange proposes to modify Rule
21.7(a), which describes the process by which BATS Options opens its
market each trading day, and includes IOC amongst orders that are not
accepted prior to the Exchange's opening process. The Exchange proposes
to add orders designated as FOK to the list of orders not accepted
prior to the opening process.
Reserve Orders and Replenishment
BATS Equities
    The Exchange currently offers Reserve Orders, which are defined in
Rule 11.9(c)(1) as limit orders ``with a portion of the quantity
displayed . . . and with a reserve portion of the quantity . . . that
is not displayed.'' Pursuant to current Rule 11.12(a)(5), the displayed
quantity of a Reserve Order has time priority as of the time of
display. Further, as currently described, if the displayed quantity of
the Reserve Order is decremented such that 99 shares or fewer would be
displayed, the displayed portion of the Reserve Order shall be
refreshed for (i) the original displayed quantity, or (ii) the entire
reserve quantity, if the remaining reserve quantity is smaller than the
original displayed quantity. Finally, as set forth in Rule 11.12(a)(5),
a new timestamp is created both for the refreshed and reserved portion
of the order each time it is refreshed from reserve.
    The Exchange proposes to add Random Replenishment functionality, as
described below, and to [sic] additional detail to Rule 11.9(c)(1),
which defines Reserve Orders. In making these changes, the Exchange
proposes to remove details regarding replenishment from Rule
11.12(a)(5), as such details are proposed to be included in Rule
11.9(c)(1).
    The Exchange proposes to leave the current definition of Reserve
Order as currently drafted, but to add the defined terms ``Display
Quantity'' to refer to the displayed quantity of a Reserve Order and
``Reserve Quantity'' to refer to the non-displayed quantity of a
Reserve Order. The Exchange also proposes to explicitly state within
Rule 11.9(c)(1) that both the Display Quantity and the Reserve Quantity
of a Reserve Order are available for execution against incoming orders.
    As noted above, the Exchange currently sets forth the details
regarding replenishment of a Reserve Order in Rule 11.12(a)(5). The
Exchange proposes to move these details to Rule 11.9(c)(1) and to make
certain changes necessary to support the proposed Random Replenishment
functionality. Specifically, proposed Rule 11.9(c)(1) would state that
if the Display Quantity of an order is reduced to less than a round
lot, the System will, in accordance with the User's instruction,
replenish the Display Quantity from the Reserve Quantity using one of
the replenishment instructions set forth in the Rule. The Exchange also
proposes to state in Rule 11.9(c)(1) that if the remainder of an order
is less than the replenishment amount, the System \9\ will replenish
and display the entire remainder of the order.
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    \9\ As defined in BATS Rule 1.5(aa), the System is the
electronic communications and trading facility designated by the
Board through which securities orders of Users are consolidated for
ranking, execution and, when applicable, routing away.
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    The Exchange currently requires Users to designate the original
display quantity of an order, which is also the amount to which an
order is replenished (unless the remainder of an order is smaller than
the original displayed quantity) under the current replenishment
functionality. The Exchange refers to this quantity as ``max floor'' in
its specifications. The Exchange proposes to add a defined term of
``Max Floor'' to Rule 11.9(c)(1), which would be a mandatory value
entered by a User that will determine the quantity of the order to be
initially displayed by the System and will also

be used to determine the replenishment amount under both replenishment
options described below.
    The Exchange currently offers one replenishment option, which uses
the number of shares from reserve necessary to return the displayed
quantity of an order to its original display amount. The Exchange
proposes to retain this replenishment option and to define it as
``Fixed Replenishment.'' As proposed, Fixed Replenishment will apply to
any order for which Random Replenishment has not been selected. Under
the Fixed Replenishment option, the System will replenish the Display
Quantity of an order to the Max Floor designated by the User.
    The Exchange also proposes to add a new replenishment option,
Random Replenishment. As proposed, Random Replenishment is an
instruction that a User may attach to an order with Reserve Quantity
where replenishment quantities for the order are randomly determined by
the System within a replenishment range established by the User.
Further, as proposed, the User entering an order into the System
subject to the Random Replenishment instruction must select a
replenishment value and a Max Floor. The initial Display Quantity will
be the Max Floor. The Display Quantity of an order when replenished
will be determined by the System randomly selecting a round lot number
of shares within a replenishment range that is between: (i) The Max
Floor minus the replenishment value; and (ii) the Max Floor plus the
replenishment value. The Exchange believes that the Random
Replenishment is an optimization of current System functionality as it
will help to achieve the general goal of Reserve Orders, which is to
display less than the full interest that one represents in order to
avoid moving the market. Random Replenishment will help Users to
further disguise reserve interest by replenishing the Display Quantity
of a Reserve Order to a variable amount so that other participants are
less likely to detect that such order is in fact a Reserve Order with
additional non-displayed size.
    In addition to the changes set forth above, the Exchange proposes
to modify Rule 11.9(e)(3) to state that the Max Floor set for an order
can be modified through the use of a replace message rather than
requiring a User to cancel and re-enter an order. The Exchange also
proposes to modify Rule 11.12(a)(3) to make clear that a modification
to the Max Floor of a Reserve Order will not cause such order to lose
priority. The Exchange believes that this is appropriate because a
modification to Max Floor of a resting Reserve Order will not change
the handling or display of the order in any way until replenishment is
caused due to the reduction of the Display Quantity to less than a
round lot. When such replenishment occurs (based on the new Max Floor),
the order will receive a new timestamp, and thus, will have a new
priority.
Example 1(a)--Fixed Replenishment
    Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 9.99, a displayed order to sell 100 shares
at 10.01, and no other equal or better priced liquidity.
     A User enters an order into the System to buy 10,000
shares at 10.00 with a Display Quantity (i.e., Max Floor) of 1,000
shares and a Reserve Quantity of 9,000 shares. Because Random
Replenishment was not designated the order defaults to a Fixed
Replenishment quantity of 1,000 shares.
     An inbound market order to sell 400 shares is entered into
the System and executes against the Display Quantity of 1,000 shares,
resulting in a remaining Display Quantity of 600 shares.
     Another market order to sell 600 shares is entered into
the System and executes against the 600 displayed shares. The Display
Quantity is then replenished by the System from the Reserve Quantity to
the order's original displayed quantity of 1,000 shares, resulting in a
remaining Reserve Quantity of 8,000 shares. Both the Display Quantity
and the Reserve Quantity receive new timestamps upon replenishment.
Example 1(b)--Fixed Replenishment
    Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 9.99, a displayed order to sell 100 shares
at 10.01, and no other equal or better priced liquidity.
     User A enters Order 1, a limit order to buy 6,000 shares
at 10.00, the NBB, with a Display Quantity (i.e., Max Floor) of 1,000
shares and a Reserve Quantity of 5,000 shares. Because Random
Replenishment was not designated the order defaults to a Fixed
Replenishment quantity of 1,000 shares.
     User B then enters Order 2, a display-eligible limit order
to buy 600 shares at 10.00 with no Reserve Quantity.
     An inbound market order to sell 2,000 shares is entered
into the System.
     The order to sell first executes against the Display
Quantity of 1,000 shares of Order 1, then executes against the full 600
shares of Order 2, and then executes against 400 shares of the Reserve
Quantity of Order 1 (i.e., the displayed quantities of Orders 1 and 2
execute in time priority, followed by the Reserve Quantity of Order 1).
     The Display Quantity of Order 1 is then replenished for
1,000 shares, leaving a Reserve Quantity of 3,600 shares. Both the
Display Quantity and the Reserve Quantity receive new timestamps upon
replenishment.
Example 2(a)--Random Replenishment
    Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 9.99, a displayed order to sell 100 shares
at 10.01, and no other equal or better priced liquidity.
     A User enters an order into the System to buy 10,000
shares at 10.00 and designates such order for Random Replenishment with
a Max Floor of 1,000 shares and a replenishment value of 400 shares.
     The initial Display Quantity of the order is 1,000 shares
and the Reserve Quantity is 9,000 shares.
     An inbound market order to sell 950 shares is entered into
the System and executes against the Display Quantity of the order
(1,000 shares), leaving a 50 share Display Quantity. Because the
remaining Display Quantity is less than a round lot, the System will
replenish the Display Quantity.
     With a replenishment value of 400, subsequent
replenishments will return the Display Quantity to a randomly selected
round lot value between 600 shares (i.e., Max Floor minus the
replenishment value) and 1,400 shares (i.e., Max Floor plus the
replenishment value).
     Assume the System selects a Display Quantity of 1,200
shares. The System will refresh the order with 1,150 shares from the
Reserve Quantity, thus generating a new Display Quantity of 1,200
shares to sell at 10.00, and a Reserve Quantity of 7,850 shares.
Example 2(b)--Random Replenishment
    Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 9.99, a displayed order to sell 100 shares
at 10.01, and no other equal or better priced liquidity.
     A User enters an order into the System to buy 5,000 shares
at 10.00 and designates such order for Random Replenishment with a Max
Floor of 2,000 shares and a replenishment value of 1,000 shares.
     The initial Display Quantity of the order is 2,000 shares
and the Reserve Quantity is 3,000 shares.
     An inbound market order to sell 1,800 shares is entered
into the System and executes against the Display

Quantity of the order (2,000 shares), leaving a 200 share Display
Quantity.
     A second inbound market order to sell 700 shares is
entered into the System and executes against the Display Quantity of
the order (200 shares) and 500 shares of the Reserve Quantity of the
order, leaving no Display Quantity and a Reserve Quantity of 2,500
shares.
     With a replenishment value of 1,000, subsequent
replenishments would otherwise return the Display Quantity to a
randomly selected round lot value between 1,000 shares (i.e., Max Floor
minus the replenishment value) and 3,000 shares (i.e., Max Floor plus
the replenishment value). However, in this example, because the Reserve
Quantity is now 2,500 shares, the System would instead replenish the
Display Quantity to a round lot value between 1,000 and 2,500 shares.
     Assume the System selects a Display Quantity of 2,000
shares, leaving a Reserve Quantity of 500 shares.
     An inbound market order to sell 2,050 shares is entered
into the System and executes against the Display Quantity of the order
(2,000 shares) and 50 shares of the Reserve Quantity of the order,
leaving no Display Quantity and a Reserve Quantity of 450 shares.
Because the remaining Reserve Quantity is less than the lower end of
the replenishment range (i.e., 1,000 shares), the System will Display
the entire remainder of the order, or 450 shares.
BATS Options
    The Exchange also offers Reserve Order functionality for BATS
Options, with the only notable difference being that Reserve Orders do
not replenish until the displayed quantity of the order is fully
executed on BATS Options, whereas on BATS Equities, Reserve Orders
replenish once the Display Quantity is less than a round lot.
Accordingly, in order to keep both the rule text and the functionality
offered by BATS Equities and BATS Options the same, the Exchange is
proposing changes to Rule 21.1(d)(1) that are similar to those
described for BATS Equities above. In addition, the Exchange is
proposing to correct an error in its current rule text. Specifically,
the Exchange's current rules state that the reserve portion of an order
retains the timestamp of its original entry when replenishment occurs.
However, the BATS Options functionality is indeed the same as that on
BATS Equities in that a new timestamp is created for both the
replenished and reserved amount each time the order is replenished from
the reserve quantity. Accordingly, the Exchange proposes to modify the
language to conform to that of BATS Equities.
    The Exchange notes that the examples of Fixed Replenishment and
Random Replenishment would operate the same on BATS Options as set
forth for BATS Equities, with the exception that replenishment does not
occur until the Display Quantity is completely exhausted.
Minimum Quantity Functionality
BATS Equities
    The Exchange proposes to codify existing functionality already
offered by BATS Equities by introducing a definition of Minimum
Quantity Order in Rule 11.9(c)(5). The Exchange notes that the main
difference between a Minimum Quantity Order and an order with a TIF of
FOK is that an order with a specified minimum quantity may be partially
executed so long as the execution size is equal to or exceeds the
quantity provided by the User whereas a FOK Order must be executed in
full.
    A Minimum Quantity Order, as proposed, is a limit order to buy or
sell that will only execute if a specified minimum quantity of shares
can be obtained. The Exchange proposes to state in Rule 11.9(c)(5) that
orders with a specified minimum quantity will only execute against
multiple, aggregated orders if such executions would occur
simultaneously (rather than only executing against a single order that
satisfies the applicable minimum quantity). Finally, the Exchange will
only honor a specified minimum quantity on BATS Only Orders that are
non-displayed or IOCs. The Exchange will disregard a minimum quantity
on any other order.
    The Exchange notes that a specified minimum quantity is only
applicable to BATS Only Orders, which are not routed to other market
centers, because of the practical difficulty the Exchange would face in
trying to achieve a minimum quantity through its routing process. For
instance, although most market centers have a feature similar to or
identical to the Exchange's minimum quantity functionality, the
Exchange cannot guarantee that all away market centers would always
have such functionality. Minimum quantity is also inconsistent with
routed orders because under most of the Exchange's routing options an
order is split into multiple smaller orders that are routed
simultaneously to away market centers. Similarly, the Exchange notes
that a specified minimum quantity is only possible to apply to non-
displayed orders or IOCs due to the Exchange's obligations to honor
displayed quotations by executing such quotations against incoming
orders.\10\ By limiting the minimum quantity instruction to non-
displayed orders or IOCs the Exchange avoids the display of a quotation
that is not executable unless a specific condition is met.
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    \10\ See, e.g., Rule 602 of Regulation NMS (the ``Firm Quote
Rule''). 17 CFR 240.602.
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Example 1--Minimum Quantity Order Executes
    Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 10.00 and a non-displayed order to buy 100
shares at 10.00. Assume that a User submits an IOC limit order to sell
500 shares at 10.00 with a minimum quantity of 200 shares.
     The order to sell 500 shares would receive a partial
execution of 200 shares against the resting displayed and non-displayed
orders at 10.00. The remaining 300 shares would be cancelled back to
the User.
Example 2--Minimum Quantity Order Does Not Execute
    Assume the NBBO is 10.00 x 10.01 and the Exchange has a displayed
order to buy 100 shares at 10.00 and a non-displayed order to buy 100
shares at 10.00. Assume that a User submits an IOC limit order to sell
500 shares at 10.00 with a minimum quantity of 300 shares.
     The order to sell would be cancelled back to the User
because the required execution of at least 300 shares could not be
satisfied upon receipt by the Exchange.
BATS Options
    Minimum Quantity Orders available on BATS Options are defined in
Rule 21.1(d)(3). The main substantive difference between the
functionality offered by BATS Equities and that offered by BATS Options
is that a specified minimum quantity will only be honored on BATS
Options with respect to an IOC order because non-displayed orders are
not accepted by BATS Options. Thus, Minimum Quantity Orders cannot rest
on the BATS Options order book. The Exchange proposes to modify the
definition of Minimum Quantity Order for BATS Options to make clear
that while a Minimum Quantity Order can execute against multiple,
aggregated orders (rather than only executing against a single order
that satisfies the applicable minimum quantity), such execution will
only occur if it would occur simultaneously. The Exchange

also proposes to delete reference to the rejection of Minimum Quantity
Orders received prior to the market open or after the market close.
Because a Minimum Quantity Order must be an IOC to be entered into BATS
Options, it is true that such orders are not accepted prior to the open
as IOCs are rejected pursuant to Rule 21.7, as described above.
However, because this is described in Rule 21.7 and does not appear in
other rules describing BATS Options order types or order type
modifiers, the Exchange believes that the reference is redundant and
potentially confusing. Because the Exchange rejects all orders received
by BATS Options after the close the Exchange believes that the
reference to post-close orders in the Minimum Quantity Order
description is unnecessary and potentially confusing.
    The Exchange notes that the first two examples of Minimum Quantity
Orders set forth above would operate the same on BATS Options as set
forth for BATS Equities. The third example [sic] is inapplicable
because, as described above, Minimum Quantity Orders cannot post to the
BATS Options order book.
Stop and Stop Limit Order Functionality
BATS Equities
    The Exchange proposes to adopt new orders that trigger based on
trades occurring on the Exchange or reported on other marketplaces.
Specifically, the Exchange proposes to adopt Stop Orders and Stop Limit
Orders. Stop Orders and Stop Limit Orders are not executable unless and
until their stop price is triggered. As proposed, a Stop Order is an
order that becomes a BATS market order \11\ when the stop price is
elected. In contrast, a Stop Limit Order is an order that becomes a
limit order when the stop price is elected. The triggering events for
Stop Orders and Stop Limit Orders will be the same. A Stop Order or
Stop Limit Order to buy will be elected when the consolidated last sale
in the security occurs at, or above, the specified stop price. A Stop
Order or Stop Limit Order to sell will be elected when the consolidated
last sale in the security occurs at, or below, the specified stop
price.
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    \11\ See Rule 11.9(a)(2).
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Example 1--Stop Order Is Triggered
    Assume the NBBO is 7.80 x 8.00. Assume that a User submits a Stop
Order to buy 500 shares with a stop price of 8.05.
     Assume the NBBO shifts gradually upwards to 8.00 by 8.05.
An execution reported by another exchange at 8.05 will trigger the stop
price of the Stop Order, which will convert into a BATS market order to
buy.
Example 2--Stop Limit Order Is Triggered
    Assume the NBBO is 7.84 x 7.85. Assume that a User submits a Stop
Limit Order to buy 500 shares at 8.04 with stop limit price of 8.05.
     Assume the NBBO shifts gradually upwards to 8.03 by 8.05.
An execution reported by another exchange at 8.05 will trigger the stop
price of the Stop Limit Order, which will convert into a limit order to
buy at 8.04.
    In addition to the changes set forth above, the Exchange proposes
to modify Rule 11.9(e)(3) to state that the stop price of an order can
be modified through the use of a replace message rather than requiring
a User to cancel and re-enter an order. The Exchange also proposes to
modify Rule 11.12(a)(3) to make clear that a modification to the stop
price of a Stop Order or Stop Limit Order will not cause such an order
to lose priority. The Exchange believes that this is appropriate
because a modification to the stop price of a resting order will not
change the handling of the order in any way other than to trigger the
order based on a different subsequent trade than the order otherwise
would have.
BATS Options
    The Exchange proposes to adopt for BATS Options the same
description of Stop Orders and Stop Limit Orders as it is proposing for
BATS Equities. There are no substantive differences between the way
that Stop Orders and Stop Limit Orders will operate as between BATS
Equities and BATS Options.
    Stop and stop limit order functionality is also offered by several
other Exchange competitors of BATS Options, including NYSE MKT LLC
(``NYSE MKT'') (pursuant to Rule 900.3NY) and the International
Securities Exchange (``ISE'') (pursuant to Rule 715). The Exchange
notes that there are substantive differences with respect to the event
that triggers a stop order or stop limit order between the market
centers that offer such functionality. For instance, pursuant to NYSE
MKT Rule 900.3NY, a stop order or stop limit order is triggered based
on consolidated trades or quotes on the exchange. The ISE, in contrast,
triggers stop orders and stop limit orders on trades only but looks to
trades on the ISE rather than consolidated trades. The Exchange has
proposed triggering Stop Orders and Stop Limit Orders on consolidated
trades, including the Exchange, which is consistent with the NYSE MKT
implementation. However, the Exchange does not propose to trigger Stop
Orders or Stop Limit Orders based on quotes, which is consistent with
the ISE implementation. As noted above, the Exchange prefers to retain
consistency when possible between functionality offered by BATS
Equities and BATS Options.
    The Exchange notes that the examples of Stop Orders and Stop Limit
Orders set forth above would operate the same on BATS Options as they
would on BATS Equities.
Additional Changes
    The Exchange proposes to correct three incorrect internal cross-
references in Rule 11.9(c)(7)(B), each of which points to paragraph
(c)(6)(A) but is intended to refer to paragraph (c)(7)(A). The Exchange
proposes to instead simply reference paragraph (A) above, which the
Exchange believes is sufficient detail when read in context.
    The Exchange also proposes to eliminate all references in Rule
11.18 to individual stock trading pauses issued by a primary listing
market and related definitions, which are contained in Rule 11.18(d),
11.18(e)(6) and 11.18(f). The stock trading pauses described in such
provisions have been fully phased out as securities have become subject
to the Limit Up-Limit Down Plan. The Plan is already operational with
respect to all securities, and thus, the Exchange believes that all
references to individual stock trading pauses should be removed. This
change will also serve to eliminate certain duplicative references that
have occurred through amendments to Rule 11.18, including amendments
related to the operation of the Limit Up-Limit Down Plan as well as
other amendments. The Exchange also proposes various other corrections
to the numbering of Rule 11.18 for consistency with other portions of
its rules. The Exchange also proposes to eliminate a reference to the
operational date of the Limit Up-Limit Down Plan now that it is, in
fact, already operational.
    In reviewing Rule 11.18 in connection with the above-described
corrections, the Exchange determined to also add additional detail to
the routing description of Rule 11.18 to reflect the existing
functionality of the System. In particular, the Exchange proposes to
affirmatively state in Rule 11.18 that the System will not route buy
(sell) interest at a price above (below) the Upper (Lower) Price
Band.\12\ Because

executions cannot occur outside of applicable price bands anyway, the
Exchange believes it is inefficient to route orders outside of price
bands. For example, assume that the Lower Price Band is $9.50 and the
Upper Price Band is $10.50. Further assume the NBBO is $10.00 by
$11.00, and thus, that the national best offer of $11.00 is not
executable.\13\ If the Exchange received a routable limit order to buy
at $11.00 such order would not be routed to the available quotation(s)
at $11.00 because such quotation could not be executed. The Exchange
notes that the proposed rule text reflecting that the Exchange will not
route if there are not executable quotations available is consistent
with the rules of several other market centers, including EDGA and
EDGX.\14\
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    \12\ The Upper Price Band and Lower Price Band are defined terms
in the Limit Up-Limit Down Plan.
    \13\ The Exchange notes that this condition, with the national
best bid and/or national best offer outside of applicable price
bands, is defined in the Plan as Straddle State (as long as the
security is not in a Limit State). The Exchange also notes that
pursuant to the Plan if a security is in a Straddle State and
trading in that stock deviates from normal trading characteristics,
the applicable listing exchange may, but is not required to, declare
a trading pause for that security.
    \14\ See, e.g., EDGA Rule 11.9(b)(1)(B)(i); EDGX Rule
11.9(b)(1)(B)(i); NASDAQ Rule 4120(a)(12)(E)(4); NYSE Arca Rule
7.11(a)(7).
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2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent
with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act'')
\15\ and further the objectives of Section 6(b)(5) of the Act \16\
because they are designed to promote just and equitable principles of
trade, to remove impediments to and perfect the mechanism of a free and
open market and a national market system, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, and, in general, to protect investors and the public
interest. The proposed rule change also is designed to support the
principles of Section 11A(a)(1) \17\ of the Act in that it seeks to
assure fair competition among brokers and dealers and among exchange
markets.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------

    The proposed rule changes to add functionality are generally
intended to add certain system functionality currently offered by EDGA
and/or EDGX in order to provide a consistent technology offering for
the BGM Affiliated Exchanges. A consistent technology offering, in
turn, will simplify the technology implementation, changes and
maintenance by Users of the Exchange that are also participants on BYX,
EDGA and/or EDGX. The proposed rule changes would also provide Users
with access to functionality that is generally available on markets
other than the BGM Affiliated Exchanges and may result in the efficient
execution of such orders and will provide additional flexibility as
well as increased functionality to the Exchange's System and its Users.
The Exchange also believes that the changes to correct or provide
additional specificity regarding the functionality of the System would
promote just and equitable principles of trade and remove impediments
to a free and open market by providing greater transparency concerning
the operation of the System. The Exchange also believes that the
proposed amendments will contribute to the protection of investors and
the public interest by making the Exchange's rules easier to
understand.
    As explained elsewhere in this proposal, the proposed FOK
functionality is similar to existing IOC and Minimum Quantity
functionality and is available on numerous other market centers,
including EDGA and EDGX. Similarly, the proposed Minimum Quantity
functionality for BATS Equities is intended to codify functionality
that has been available on the Exchange since its inception and is
available on numerous other market centers, including BATS Options.
Finally, the Stop Orders and Stop Limit Orders that the Exchange
proposes to add are available on numerous other market centers,
including EDGA and EDGX. Thus, the Exchange believes that each of these
proposed functionality additions have already been accepted as
consistent with the Act and offered by various market centers for many
years. Also, to the extent any of the proposals differ from
functionality available on other market centers as described elsewhere
in this proposal, the Exchange does not believe that any such
differences present any additional policy issues to be considered under
the Act. The Exchange's addition of such functionality is consistent
with the Act for the reasons set forth above.
    The Exchange believes that the additional detail with respect to
the operation of Reserve Orders and restructuring to move certain
descriptions related to Reserve Order handling from Rule 11.12 to Rule
11.9 are consistent with the Act for the reasons set forth above
related to transparency of the operation of the System. The Exchange
believes that the addition of the Random Replenishment option is
consistent with the Act as it will help to achieve the general goal of
Reserve Orders, which is to display less than the full interest that
one represents in order to avoid moving the market. Random
Replenishment will help Users to further disguise reserve interest by
replenishing the Display Quantity of a Reserve Order to a variable
amount so that other participants are less likely to detect that such
order is in fact a Reserve Order with additional non-displayed size.
Given the consistency of this functionality with the overall intent of
Reserve Orders, and the widespread and longstanding offering of Reserve
Orders by most market centers, the Exchange believes that the Random
Replenishment option is consistent with the Act.
    As explained above, the Exchange is proposing to correct the error
in its current rule text with respect to the creation of a new
timestamp for both the replenished and reserved amount of a Reserve
Order each time the order is replenished from the reserve quantity on
BATS Options. The Exchange believes that this change is consistent with
the Act in that it provides clarity with respect to the functionality
of the System and operates the same as Reserve Orders on BATS Equities,
which have applied a new timestamp to both the replenished and reserved
amount in accordance with BATS Equities rules since the inception of
the Exchange. The Exchange does not believe that providing a new
timestamp to the replenished and reserved amounts of a Reserve Order is
in any way less consistent with the Act than allowing the reserve
portion of an order to retain its original timestamp. Rather, the
Exchange simply believes that this is an implementation detail and that
the functionality could operate either way consistently with the Act.
The Exchange also believes that its implementation in which Reserve
Orders are assigned a new timestamp each time that the displayed
portion is replenished from reserve is consistent with the Act in that
it keeps the timestamp for the entire order the same (for both the
displayed and reserve portions of the order) each time the order is
modified with respect to its displayed and reserved size.
    The Exchange believes that the proposed change with respect to the
fact that the Exchange does not route orders outside of price bands
established by the Limit Up-Limit Down Plan is consistent with the Act
in that it reflects the current operation of the System, is consistent
with the rules of other Exchanges that have adopted such functionality
consistent with the Act, and because routing such orders would be
inefficient, even if they would return to the Exchange unexecuted. As
described above, the Exchange believes

that the other proposed changes to its rulebook to correct
typographical changes and add additional detail to the way that certain
functionality currently operates provides further clarification to
Members, Users, and the investing public regarding the operation of the
Exchange's System.

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

    The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
reiterates that the proposed rule change is being proposed in the
context of the technology integration of the BGM Affiliated Exchanges.
Thus, the Exchange believes this proposed rule change is necessary to
permit fair competition among national securities exchanges. In
addition, the Exchange believes the proposed rule change will benefit
Exchange participants in that it is one of several changes necessary to
achieve a consistent technology offering by the BGM Affiliated
Exchanges.

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 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 \18\ and Rule 19b-4(f)(6)
thereunder.\19\
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to 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 has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \20\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \21\ 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, noting
that doing so will allow the Exchange to immediately clarify its rules
with respect to existing functionality already offered by the Exchange;
correct typographical errors in the Exchange's rules; and offer certain
functionality that is already available on other market centers, which
will allow the Exchange to remain competitive with such other market
centers. In addition, the Exchange states that, to the extent a
proposed change optimizes existing functionality, the Exchange does not
believe that there is a reason to delay the availability of such
optimization. Furthermore, the Exchange states that waiver of the
operative delay will allow the Exchange to continue to strive towards a
complete technology integration of the BGM Affiliated Exchanges, with
gradual roll-outs of new functionality to ensure stability of the
System. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the 30-day operative delay and
designates the proposal operative upon filing.\22\
---------------------------------------------------------------------------

    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 17 CFR 240.19b-4(f)(6)(iii).
    \22\ For 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).
---------------------------------------------------------------------------

    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.

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<EMAIL_ADDRESS>Please include
File Number SR-BATS-2014-027 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 Number SR-BATS-2014-027. 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 the 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-2014-027 and should be
submitted on or before August 15, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-17513 Filed 7-24-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 120 (Wednesday, June 22, 2016)]
[Notices]
[Pages 40745-40746]
[FR Doc No: 2016-14753]

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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[Docket No. FMCSA-2016-0038]

Qualification of Drivers; Exemption Applications; Diabetes

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Notice of denials.

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

SUMMARY: FMCSA announces its denial of 78 applications from individuals
who requested an exemption from the Federal diabetes standard
applicable to interstate truck and bus drivers and the reasons for the
denials. FMCSA has statutory authority to exempt individuals from the
diabetes requirement if the exemptions granted will not compromise
safety. The Agency has concluded that granting these exemptions does
not provide a level of safety that will be equivalent to, or greater
than, the level of safety maintained without the exemptions for these
commercial motor vehicle (CMV) drivers.

FOR FURTHER INFORMATION CONTACT: Christine A. Hydock, Chief, Medical
Programs Division,<PHONE_NUMBER><EMAIL_ADDRESS>FMCSA,
Department of Transportation, 1200 New Jersey Avenue SE., Room W64-113,
Washington, DC 20590-0001. Office hours are 8:30 a.m. to 5 p.m., e.t.,
Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION:

Background

    Under 49 U.S.C. 31136(e) and 31315, FMCSA may grant an exemption
from the Federal diabetes standard for a renewable 2-year period if it
finds ``such an exemption would likely achieve a level of safety that
is equivalent to, or greater than, the level that would be achieved
absent such an exemption.'' The procedures for requesting an exemption
are set forth in 49 CFR part 381.
    Accordingly, FMCSA evaluated 78 individual exemption requests on
their merits and made a determination that these applicants do not
satisfy the criteria eligibility or meet the terms and conditions of
the Federal exemption program. Each applicant has, prior to this
notice, received a letter of final disposition on the exemption
request. Those decision letters fully outlined the basis for the denial
and constitute final Agency action. The list published in this notice
summarizes the Agency's recent denials as required under 49 U.S.C.
31315(b)(4) by periodically publishing names and reasons for denial.
    The following applicant, Robert A. Pettella, withdrew his
application from the application process.
    The following 12 applicants met the diabetes requirements of 49 CFR
391.41(b)(3) and do not need an exemption:

Reuben T. Askew
Steven E. Eastburn
Quinzell Faison
James Griffin
Bayram A. Kabakci
John C. Lasbury
James M. Moore
Saul N. Morales
Jaime S. Ortiz
Curtis W. Stanley
Eric A. Williams
Allen T. Wooten

    The following 21 applicants were not operating CMVs in interstate
commerce:

Felipe H. Abrego
Michael D. Adamson
Daniel J. Arena, Jr.
David R. Brooks, Jr.
Roger L. Harper
Gary T. Hedrick
Raymond Honaker
Shaun F. Hutchinson
Sondra R. Jones
Kevin M. Kurpiewski
Randy Lamb
James P. Moran
Jesse L. Mumford
Jason M. Palermo
John J. Raley II
Leonard F. Robinson
Donald G. Ross, Jr.
Tracy A. Rowland
Rachelle M. Seaver
Robert Taylor
Robert Webb

    The following 3 applicants had renal insufficiency:

Harold J. Bowen, Jr.
Robert A. Rye
John J. Steele

    The following 7 applicants had more than one hypoglycemic episode
requiring hospitalization or the assistance of others, or had one such
episode but not had one year of stability following the episode:

Timothy W. Adams
Robert A. Beaty
Andrew S. Crawford
Jesse J.D. Graber
Ryan B. Silva
Jimmy R. Toton
Deborah C. Williams

    The following 9 applicants had other medical conditions making the
applicant otherwise unqualified under the Federal Motor Carrier Safety
Regulations:

Nader M. Abdelrahman
Richard G. Baker
Patrick L. Beasley
John T. Brecken
Robert E. Davis
Marlin L. Gabbard
Marvin D. Mitchell
David W. Presby
Darrel J. Shafer

    The following applicant, Tina M.M. Kent, was unable to have an
endocrinologist state the applicant is able to operate a CMV from a
diabetes standpoint.
    The following applicant, Henry G.E. Martinez, currently resides in
Puerto Rico. He is not eligible because a Federal exemption is for
drivers operating only in the United States.
    The following 3 applicants did not meet the minimum age criteria
outlined in 49 CFR 391.41(b)(1) which states that an individual must be
at least 21 years old to operate a CMV in interstate commerce:

Ervin L. Fulton, Jr.
Henry G. McGinnis
Samuel J. Opatz

    The following 19 applicants were excepted from the diabetes
standard based on 49 CFR390.3(f):

Brian K. Aldrich
Christopher A. Ball
John A. Bowman
Wilbert A. Cummings, Jr.
Larry W. Davlin
Theodore J. Hargraves
Erick B. Hobson
Stanley Holiday, Jr.
Mark J. Huselstein
Wesley T. Johnson

Robert R. Martinez
Robert S. Mendoza
Arbra M. Patton
Vincent Randle
Robert J. Stepien
Franklin T. Sult
Calvin R. Williams
Melissa F. Williams
Ronald D. Williams

    Issued on: June 13, 2016.
Larry W. Minor,
Associate Administrator for Policy.
[FR Doc. 2016-14753 Filed 6-21-16; 8:45 am]
 BILLING CODE 4910-EX-P