[Federal Register Volume 81, Number 105 (Wednesday, June 1, 2016)]
[Notices]
[Pages 35106-35111]
[FR Doc No: 2016-12776]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77914; File No. SR-BX-2016-028]

Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Provide a
Process for an Expedited Suspension Proceeding and Adopt a Rule To
Prohibit Disruptive Quoting and Trading Activity

May 25, 2016.
    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 May 19, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II and III below, which
Items have been prepared by the Exchange. 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.
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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 a new rule to adopt a new equity
rule to clearly prohibit disruptive quoting and trading activity on the
Exchange, as further described below. Further the Exchange proposes to
amend Exchange Rules to permit the Exchange to take prompt action to
suspend Members or their clients that violate such rule.
    The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxbx.cchwallstreet.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 aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is filing this proposal to adopt a new rule to clearly
prohibit disruptive quoting and trading activity on the Exchange for
the equities market and to amend Exchange Rules to permit the Exchange
to take prompt action to suspend Members or their clients that violate
such rule.
Background
    As a national securities exchange registered pursuant to Section 6
of the Act, the Exchange is required to be organized and to have the
capacity to enforce compliance by its members and persons associated
with its members, with the Act, the rules and regulations thereunder,
and the Exchange's Rules. Further, the Exchange's Rules are required to
be ``designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade . . . and,
in general, to protect investors and the public interest.'' \3\ In
fulfilling these requirements, the Exchange has developed a
comprehensive regulatory program that includes automated surveillance
of trading activity that is both operated directly by Exchange staff
and by staff of the Financial Industry Regulatory Authority (``FINRA'')
pursuant to a Regulatory Services Agreement (``RSA''). When disruptive
and potentially manipulative or improper quoting and trading activity
is identified, the Exchange or FINRA (acting as an agent of the
Exchange) conducts an investigation into the activity, requesting
additional information from the Member or Members involved. To the
extent violations of the Act, the rules and regulations thereunder, or
Exchange Rules have been identified and confirmed, the Exchange or
FINRA as its agent will commence the enforcement process, which might
result in, among other things, a censure, a requirement to take certain
remedial actions, one or more restrictions on future business
activities, a monetary fine, or even a temporary or permanent ban from
the securities industry.
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    \3\ 15 U.S.C. 78f(b)(1).
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    The process described above, from the identification of disruptive
and potentially manipulative or improper quoting and trading activity
to a final resolution of the matter, can often take several years. The
Exchange believes that this time period is generally necessary and
appropriate to afford the subject Member adequate due process,
particularly in complex cases. However, as described below, the
Exchange believes that there are certain obvious and uncomplicated
cases of disruptive and manipulative behavior or cases where the
potential harm to investors is so large that the Exchange should have
the authority to initiate an expedited suspension proceeding in order
to stop the behavior from continuing on the Exchange.
    In recent years, several cases have been brought and resolved by
the Exchange and other SROs that involved allegations of wide-spread
market manipulation, much of which was ultimately being conducted by
foreign persons and entities using relatively rudimentary technology to
access the markets and over which the Exchange and other SROs had no
direct jurisdiction. In each case, the conduct involved a pattern of
disruptive quoting and trading activity indicative of manipulative
layering \4\ or spoofing.\5\ The Exchange and other SROs were able to
identify the disruptive quoting and trading activity in real-time or
near real-time; nonetheless, in accordance with Exchange Rules and the
Act, the Members responsible for such conduct or responsible for their
customers' conduct were allowed to continue the disruptive quoting and
trading activity on the Exchange and other exchanges during the
entirety of the subsequent

lengthy investigation and enforcement process. The Exchange believes
that it should have the authority to initiate an expedited suspension
proceeding in order to stop the behavior from continuing on the
Exchange if a Member is engaging in or facilitating disruptive quoting
and trading activity and the Member has received sufficient notice with
an opportunity to respond, but such activity has not ceased.
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    \4\ ``Layering'' is a form of market manipulation in which
multiple, non-bona fide limit orders are entered on one side of the
market at various price levels in order to create the appearance of
a change in the levels of supply and demand, thereby artificially
moving the price of the security. An order is then executed on the
opposite side of the market at the artificially created price, and
the non-bona fide orders are cancelled.
    \5\ ``Spoofing'' is a form of market manipulation that involves
the market manipulator placing non-bona fide orders that are
intended to trigger some type of market movement and/or response
from other market participants, from which the market manipulator
might benefit by trading bona fide orders.
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    The following two examples are instructive on the Exchange's
rationale for the proposed rule change.
    In July 2012, Biremis Corp. (formerly Swift Trade Securities USA,
Inc.) (the ``Firm'') and its CEO were barred from the industry for,
among other things, supervisory violations related to a failure by the
Firm to detect and prevent disruptive and allegedly manipulative
trading activities, including layering, short sale violations, and
anti-money laundering violations.\6\ The Firm's sole business was to
provide trade execution services via a proprietary day trading platform
and order management system to day traders located in foreign
jurisdictions. Thus, the disruptive and allegedly manipulative trading
activity introduced by the Firm to U.S. markets originated directly or
indirectly from foreign clients of the Firm. The pattern of disruptive
and allegedly manipulative quoting and trading activity was widespread
across multiple exchanges, and the Exchange, FINRA, and other SROs
identified clear patterns of the behavior in 2007 and 2008. Although
the Firm and its principals were on notice of the disruptive and
allegedly manipulative quoting and trading activity that was occurring,
the Firm took little to no action to attempt to supervise or prevent
such quoting and trading activity until at least 2009. Even when it put
some controls in place, they were deficient and the pattern of
disruptive and allegedly manipulative trading activity continued to
occur. As noted above, the final resolution of the enforcement action
to bar the Firm and its CEO from the industry was not concluded until
2012, four years after the disruptive and allegedly manipulative
trading activity was first identified.
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    \6\ See Biremis Corp. and Peter Beck, FINRA Letter of
Acceptance, Waiver and Consent No.<PHONE_NUMBER>202, July 30, 2012.
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    In September of 2012, Hold Brothers On-Line Investment Services,
Inc. (the ``Firm'') settled a regulatory action in connection with the
Firm's provision of a trading platform, trade software and trade
execution, support and clearing services for day traders.\7\ Many
traders using the Firm's services were located in foreign
jurisdictions. The Firm ultimately settled the action with FINRA and
several exchanges, including the Exchange, for a total monetary fine of
$3.4 million. In a separate action, the Firm settled with the
Commission for a monetary fine of $2.5 million.\8\ Among the alleged
violations in the case were disruptive and allegedly manipulative
quoting and trading activity, including spoofing, layering, wash
trading, and pre-arranged trading. Through its conduct and insufficient
procedures and controls, the Firm also allegedly committed anti-money
laundering violations by failing to detect and report manipulative and
suspicious trading activity. The Firm was alleged to have not only
provided foreign traders with access to the U.S. markets to engage in
such activities, but that its principals also owned and funded foreign
subsidiaries that engaged in the disruptive and allegedly manipulative
quoting and trading activity. Although the pattern of disruptive and
allegedly manipulative quoting and trading activity was identified in
2009, as noted above, the enforcement action was not concluded until
2012. Thus, although disruptive and allegedly manipulative quoting and
trading was promptly detected, it continued for several years.
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    \7\ See Hold Brothers On-Line Investment Services, LLC, FINRA
Letter of Acceptance, Waiver and Consent No.<PHONE_NUMBER>0001,
September 25, 2012.
    \8\ In the Matter of Hold Brothers On-Line Investment Services,
LLC, Exchange Act Release No. 67924, September 25, 2012.
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    The Exchange also notes the current criminal proceedings that have
commenced against Navinder Singh Sarao. Mr. Sarao's allegedly
manipulative trading activity, which included forms of layering and
spoofing in the futures markets, has been linked as a contributing
factor to the ``Flash Crash'' of 2010, and yet continued through 2015.
    The Exchange believes that the activities described in the cases
above provide justification for the proposed rule change, which is
described below.
Rule 9400--Expedited Client Suspension Proceeding
    The Exchange proposes to adopt new Rule 9400, which is currently
reserved, to set forth procedures for issuing suspension orders,
immediately prohibiting a Member from conducting continued disruptive
quoting and trading activity on the Exchange. Importantly, these
procedures would also provide the Exchange the authority to order a
Member to cease and desist from providing access to the Exchange to a
client of the Member that is conducting disruptive quoting and trading
activity in violation of proposed Rule 2170. Under proposed paragraph
(a) of Rule 9400, with the prior written authorization of the Chief
Regulatory Officer (``CRO'') or such other senior officers as the CRO
may designate, the Office of General Counsel or Regulatory Department
of the Exchange (such departments generally referred to as the
``Exchange'' for purposes of proposed Rule 9400) may initiate an
expedited suspension proceeding with respect to alleged violations of
Rule 2170, which is proposed as part of this filing and described in
detail below. Proposed paragraph (a) would also set forth the
requirements for notice and service of such notice pursuant to the
Rule, including the required method of service and the content of
notice.
    Proposed paragraph (b) of Rule 9400 would govern the appointment of
a Hearing Panel as well as potential disqualification or recusal of
Hearing Officers. The proposed provision is consistent with existing
Exchange Rule 9231(b). The Exchange's Rules provide for a Hearing
Officer to be recused in the event he or she has a conflict of interest
or bias or other circumstances exist where his or her fairness might
reasonably be questioned in accordance with Rules 9233(a). In addition
to recusal initiated by such a Hearing Officer, a party to the
proceeding will be permitted to file a motion to disqualify a Hearing
Officer. However, due to the compressed schedule pursuant to which the
process would operate under Rule 9400, the proposed rule would require
such motion to be filed no later than 5 days after the announcement of
the Hearing Panel and the Exchange's brief in opposition to such motion
would be required to be filed no later than 5 days after service
thereof. Pursuant to existing Rule 9233(c), a motion for
disqualification of a Hearing Officer shall be decided by the Chief
Hearing Officer based on a prompt investigation. The applicable Hearing
Officer shall remove himself or herself and request the Chief Executive
Officer to reassign the hearing to another Hearing Officer such that
the Hearing Panel still meets the compositional requirements described
in Rule 9231(b). If the Chief Hearing Officer determines that the
Respondent's grounds for disqualification are insufficient, it shall
deny the Respondent's motion for disqualification by setting forth the
reasons for the denial in writing and the Hearing Panel will proceed
with the hearing.
    Under paragraph (c) of the proposed Rule, the hearing would be held
not

later than 15 days after service of the notice initiating the
suspension proceeding, unless otherwise extended by the Chairman of the
Hearing Panel with the consent of the Parties for good cause shown. In
the event of a recusal or disqualification of a Hearing Officer, the
hearing shall be held not later than five days after a replacement
Hearing Officer is appointed. Proposed paragraph (c) would also govern
how the hearing is conducted, including the authority of Hearing
Officers, witnesses, additional information that may be required by the
Hearing Panel, the requirement that a transcript of the proceeding be
created and details related to such transcript, and details regarding
the creation and maintenance of the record of the proceeding. Proposed
paragraph (c) would also state that if a Respondent fails to appear at
a hearing for which it has notice, the allegations in the notice and
accompanying declaration may be deemed admitted, and the Hearing Panel
may issue a suspension order without further proceedings. Finally, as
proposed, if the Exchange fails to appear at a hearing for which it has
notice, the Hearing Panel may order that the suspension proceeding be
dismissed.
    Under paragraph (d) of the proposed Rule, the Hearing Panel would
be required to issue a written decision stating whether a suspension
order would be imposed. The Hearing Panel would be required to issue
the decision not later than 10 days after receipt of the hearing
transcript, unless otherwise extended by the Chairman of the Hearing
Panel with the consent of the Parties for good cause shown. The Rule
would state that a suspension order shall be imposed if the Hearing
Panel finds by a preponderance of the evidence that the alleged
violation specified in the notice has occurred and that the violative
conduct or continuation thereof is likely to result in significant
market disruption or other significant harm to investors.
    Proposed paragraph (d) would also describe the content, scope and
form of a suspension order. As proposed, a suspension order shall be
limited to ordering a Respondent to cease and desist from violating
proposed Rule 2170 and/or to ordering a Respondent to cease and desist
from providing access to the Exchange to a client of Respondent that is
causing violations of Rule 2170. Under the proposed rule, a suspension
order shall also set forth the alleged violation and the significant
market disruption or other significant harm to investors that is likely
to result without the issuance of an order. The order shall describe in
reasonable detail the act or acts the Respondent is to take or refrain
from taking, and suspend such Respondent unless and until such action
is taken or refrained from. Finally, the order shall include the date
and hour of its issuance. As proposed, a suspension order would remain
effective and enforceable unless modified, set aside, limited, or
revoked pursuant to proposed paragraph (e), as described below.
Finally, paragraph (d) would require service of the Hearing Panel's
decision and any suspension order consistent with other portions of the
proposed rule related to service.
    Proposed paragraph (e) of Rule 9400 would state that at any time
after the Hearing Officers served the Respondent with a suspension
order, a Party could apply to the Hearing Panel to have the order
modified, set aside, limited, or revoked. If any part of a suspension
order is modified, set aside, limited, or revoked, proposed paragraph
(e) of Rule 9400 provides the Hearing Panel discretion to leave the
cease and desist part of the order in place. For example, if a
suspension order suspends Respondent unless and until Respondent ceases
and desists providing access to the Exchange to a client of Respondent,
and after the order is entered the Respondent complies, the Hearing
Panel is permitted to modify the order to lift the suspension portion
of the order while keeping in place the cease and desist portion of the
order. With its broad modification powers, the Hearing Panel also
maintains the discretion to impose conditions upon the removal of a
suspension--for example, the Hearing Panel could modify an order to
lift the suspension portion of the order in the event a Respondent
complies with the cease and desist portion of the order but
additionally order that the suspension will be re-imposed if Respondent
violates the cease and desist provisions [sic] modified order in the
future. The Hearing Panel generally would be required to respond to the
request in writing within 10 days after receipt of the request. An
application to modify, set aside, limit or revoke a suspension order
would not stay the effectiveness of the suspension order.
    Finally, proposed paragraph (f) would provide that sanctions issued
under the proposed Rule 9400 would constitute final and immediately
effective disciplinary sanctions imposed by the Exchange, and that the
right to have any action under the Rule reviewed by the Commission
would be governed by Section 19 of the Act. The filing of an
application for review would not stay the effectiveness of a suspension
order unless the Commission otherwise ordered.
Rule 2170--Disruptive Quoting and Trading Activity Prohibited
    The The Exchange currently has authority to prohibit and take
action against manipulative trading activity, including disruptive
quoting and trading activity, pursuant to its general market
manipulation rules, including Rules 2110, 2111 and 2120. The Exchange
proposes to adopt new Rule 2170, which would more specifically define
and prohibit disruptive quoting and trading activity on the Exchange.
As noted above, the Exchange also proposes to apply the proposed
suspension rules to proposed Rule 2170.
    Proposed Rule 2170 would prohibit Members from engaging in or
facilitating disruptive quoting and trading activity on the Exchange,
as described in proposed Rule 2170(i) and (ii), including acting in
concert with other persons to effect such activity. The Exchange
believes that it is necessary to extend the prohibition to situations
when persons are acting in concert to avoid a potential loophole where
disruptive quoting and trading activity is simply split between several
brokers or customers. The Exchange believes, that with respect to
persons acting in concert perpetrating an abusive scheme, it is
important that the Exchange have authority to act against the parties
perpetrating the abusive scheme, whether it is one person or multiple
persons.
    To provide proper context for the situations in which the Exchange
proposes to utilize its proposed authority, the Exchange believes it is
necessary to describe the types of disruptive quoting and trading
activity that would cause the Exchange to use its authority.
Accordingly, the Exchange proposes to adopt Rule 2170(i) and (ii)
providing additional details regarding disruptive quoting and trading
activity. Proposed Rule 2170(i)(a) describes disruptive quoting and
trading activity containing many of the elements indicative of
layering. It would describe disruptive quoting and trading activity as
a frequent pattern in which the following facts are [sic] present: (i)
A party enters multiple limit orders on one side of the market at
various price levels (the ``Displayed Orders''); and (ii) following the
entry of the Displayed Orders, the level of supply and demand for the
security changes; and (iii) the party enters one or more orders on the
opposite side of the market of the Displayed Orders (the ``Contra-Side
Orders'') that are subsequently executed; and (iv) following the

execution of the Contra-Side Orders, the party cancels the Displayed
Orders. Proposed Rule 2170(i)(b) describes disruptive quoting and
trading activity containing many of the elements indicative of spoofing
and would describe disruptive quoting and trading activity as a
frequent pattern in which the following facts are present: (i) A party
narrows the spread for a security by placing an order inside the
national best bid or offer; and (ii) the party then submits an order on
the opposite side of the market that executes against another market
participant that joined the new inside market established by the order
described in proposed (b)(i) that narrowed the spread. The Exchange
believes that the proposed descriptions of disruptive quoting and
trading activity articulated in the rule are consistent with the
activities that have been identified and described in the client access
cases described above. The Exchange further believes that the proposed
descriptions will provide Members with clear descriptions of disruptive
quoting and trading activity that will help them to avoid engaging in
such activities or allowing their clients to engage in such activities.
    The Exchange proposes to make clear in proposed Rule 2170(ii),
unless otherwise indicated, the descriptions of disruptive quoting and
trading activity do not require the facts to occur in a specific order
in order for the rule to apply. For instance, with respect to the
pattern defined in proposed Rule 2170(i)(a) it is of no consequence
whether a party first enters Displayed Orders and then Contra-side
Orders or vice-versa. However, as proposed, it is required for supply
and demand to change following the entry of the Displayed Orders. The
Exchange also proposes to make clear that disruptive quoting and
trading activity includes a pattern or practice in which some portion
of the disruptive quoting and trading activity is conducted on the
Exchange and the other portions of the disruptive quoting and trading
activity are conducted on one or more other exchanges. The Exchange
believes that this authority is necessary to address market
participants who would otherwise seek to avoid the prohibitions of the
proposed Rule by spreading their activity amongst various execution
venues. In sum, proposed Rule 2170 coupled with proposed Rule 9400
would provide the Exchange with authority to promptly act to prevent
disruptive quoting and trading activity from continuing on the
Exchange.
    Below is an example of how the proposed rule would operate.
    Assume that through its surveillance program, Exchange staff
identifies a pattern of potentially disruptive quoting and trading
activity. After an initial investigation the Exchange would then
contact the Member responsible for the orders that caused the activity
to request an explanation of the activity as well as any additional
relevant information, including the source of the activity. If the
Exchange were to continue to see the same pattern from the same Member
and the source of the activity is the same or has been previously
identified as a frequent source of disruptive quoting and trading
activity then the Exchange could initiate an expedited suspension
proceeding by serving notice on the Member that would include details
regarding the alleged violations as well as the proposed sanction. In
such a case the proposed sanction would likely be to order the Member
to cease and desist providing access to the Exchange to the client that
is responsible for the disruptive quoting and trading activity and to
suspend such Member unless and until such action is taken.
    The Member would have the opportunity to be heard in front of a
Hearing Panel at a hearing to be conducted within 15 days of the
notice. If the Hearing Panel determined that the violation alleged in
the notice did not occur or that the conduct or its continuation would
not have the potential to result in significant market disruption or
other significant harm to investors, then the Hearing Panel would
dismiss the suspension order proceeding.
    If the Hearing Panel determined that the violation alleged in the
notice did occur and that the conduct or its continuation is likely to
result in significant market disruption or other significant harm to
investors, then the Hearing Panel would issue the order including the
proposed sanction, ordering the Member to cease providing access to the
client at issue and suspending such Member unless and until such action
is taken. If such Member wished for the suspension to be lifted because
the client ultimately responsible for the activity no longer would be
provided access to the Exchange, then such Member could apply to the
Hearing Panel to have the order modified, set aside, limited or
revoked. The Exchange notes that the issuance of a suspension order
would not alter the Exchange's ability to further investigate the
matter and/or later sanction the Member pursuant to the Exchange's
standard disciplinary process for supervisory violations or other
violations of Exchange rules or the Act.
    The Exchange reiterates that it already has broad authority to take
action against a Member in the event that such Member is engaging in or
facilitating disruptive or manipulative trading activity on the
Exchange. For the reasons described above, and in light of recent cases
like the client access cases described above, as well as other cases
currently under investigation, the Exchange believes that it is equally
important for the Exchange to have the authority to promptly initiate
expedited suspension proceedings against any Member who has
demonstrated a clear pattern or practice of disruptive quoting and
trading activity, as described above, and to take action including
ordering such Member to terminate access to the Exchange to one or more
of such Member's clients if such clients are responsible for the
activity.
    The Exchange recognizes that its proposed authority to issue a
suspension order is a powerful measure that should be used very
cautiously. Consequently, the proposed rules have been designed to
ensure that the proceedings are used to address only the most clear and
serious types of disruptive quoting and trading activity and that the
interests of Respondents are protected. For example, to ensure that
proceedings are used appropriately and that the decision to initiate a
proceeding is made only at the highest staff levels, the proposed rules
require the CRO or another senior officer of the Exchange to issue
written authorization before the Exchange can institute an expedited
suspension proceeding. In addition, the rule by its terms is limited to
violations of Rules 2170, when necessary to protect investors, other
Members and the Exchange. The Exchange will initiate disciplinary
action for violations of Rule 2170, pursuant to Rule 9400. Further, the
Exchange believes that the proposed expedited suspension provisions
described above that provide the opportunity to respond as well as a
Hearing Panel determination prior to taking action will ensure that the
Exchange would not utilize its authority in the absence of a clear
pattern or practice of disruptive quoting and trading activity.
    Notwithstanding the adoption of the proposed rules along with
existing disciplinary rules in the 9000 series, the Exchange also notes
that that it may impose temporary restrictions upon the automated entry
or updating of orders or quotes/orders as the Exchange may determine to
be necessary to protect the integrity of the Exchange's systems

pursuant to Rule 4611(c).\9\ Also, pursuant to Rule 9555(a)(2) \10\ if
a member, associated person, or other person cannot continue to have
access to services offered by the Exchange or a member thereof with
safety to investors, creditors, members, or the Exchange, the
Exchange's Regulation Department staff may provide written notice to
such member or person limiting or prohibiting access to services
offered by the Exchange or a member thereof. This ability to impose a
temporary restriction upon Members assists the Exchange in maintaining
the integrity of the market and protecting investors and the public
interest.
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    \9\ For example, such temporary restrictions may be necessary to
address a system problem at a particular BX Market Maker, BX ECN or
Order Entry Firm or at the Exchange, or an unexpected period of
extremely high message traffic.
    \10\ See Rule 9555, entitled ``Failure to Meet the Eligibility
or Qualification Standards or Prerequisites for Access to
Services.''
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \11\ in general, and furthers the objectives of Section
6(b)(5) of the Act \12\ in particular, in that it is 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, and, in general to protect investors and the public
interest. Pursuant to the proposal, the Exchange will have a mechanism
to promptly initiate expedited suspension proceedings in the event the
Exchange believes that it has sufficient proof that a violation of Rule
2170 has occurred and is ongoing.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    Further, the Exchange believes that the proposal is consistent with
Sections 6(b)(1) and 6(b)(6) of the Act,\13\ which require that the
rules of an exchange enforce compliance with, and provide appropriate
discipline for, violations of the Commission and Exchange rules. The
Exchange also believes that the proposal is consistent with the public
interest, the protection of investors, or otherwise in furtherance of
the purposes of the Act because the proposal helps to strengthen the
Exchange's ability to carry out its oversight and enforcement
responsibilities as a self-regulatory organization in cases where
awaiting the conclusion of a full disciplinary proceeding is unsuitable
in view of the potential harm to other Members and their customers.
Also, the Exchange notes that if this type of conduct is allowed to
continue on the Exchange, the Exchange's reputation could be harmed
because it may appear to the public that the Exchange is not acting to
address the behavior. The proposed expedited process would enable the
Exchange to address the behavior with greater speed.
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    \13\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
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    As explained above, the Exchange notes that it has defined the
prohibited disruptive quoting and trading activity by modifying the
traditional definitions of layering and spoofing \14\ to eliminate an
express intent element that would not be proven on an expedited basis
and would instead require a thorough investigation into the activity.
As noted throughout this filing, the Exchange believes it is necessary
for the protection of investors to make such modifications in order to
adopt an expedited process rather than allowing disruptive quoting and
trading activity to occur for several years.
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    \14\ See supra, notes 4 and 5.
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    Through this proposal, the Exchange does not intend to modify the
definitions of spoofing and layering that have generally been used by
the Exchange and other regulators in connection with actions like those
cited above. The Exchange believes that the pattern of disruptive and
allegedly manipulative quoting and trading activity was widespread
across multiple exchanges, and the Exchange, FINRA, and other SROs
identified clear patterns of the behavior in 2007 and 2008 in the
equities markets.\15\ The Exchange believes that this proposal will
provide the Exchange with the necessary means to enforce against such
behavior in an expedited manner while providing Members with the
necessary due process. The Exchange believes that its proposal is
consistent with the Act because it provides the Exchange with the
ability to remove impediments to and perfect the mechanism of a free
and open market and a national market system, and, in general to
protect investors and the public interest from such ongoing behavior.
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    \15\ See Section 3 herein, the Purpose section, for examples of
conduct referred to herein.
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    The Exchange further believes that the proposal is consistent with
Section 6(b)(7) of the Act,\16\ which requires that the rules of an
exchange ``provide a fair procedure for the disciplining of members and
persons associated with members . . . and the prohibition or limitation
by the exchange of any person with respect to access to services
offered by the exchange or a member thereof.'' Finally, the Exchange
also believes the proposal is consistent with Sections 6(d)(1) and
6(d)(2) of the Act,\17\which require that the rules of an exchange with
respect to a disciplinary proceeding or proceeding that would limit or
prohibit access to or membership in the exchange require the exchange
to: provide adequate and specific notice of the charges brought against
a member or person associated with a member, provide an opportunity to
defend against such charges, keep a record, and provide details
regarding the findings and applicable sanctions in the event a
determination to impose a disciplinary sanction is made. The Exchange
believes that each of these requirements is addressed by the notice and
due process provisions included within proposed Rule 9400. Importantly,
as noted above, the Exchange will use the authority proposed in this
filing only in clear and egregious cases when necessary to protect
investors, other Members and the Exchange, and even in such cases, the
Respondent will be afforded due process in connection with the
suspension proceedings.
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    \16\ 15 U.S.C. 78f(b)(7).
    \17\ U.S.C. 78f(d)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. To the contrary, the Exchange
believes that each self-regulatory organization should be empowered to
regulate trading occurring on their [sic] market consistent with the
Act and without regard to competitive issues. The Exchange is
requesting authority to take appropriate action if necessary for the
protection of investors, other Members and the Exchange. The Exchange
also believes that it is important for all exchanges to be able to take
similar action to enforce its [sic] rules against manipulative conduct
thereby leaving no exchange prey to such conduct.
    The Exchange does not believe that the proposed rule change imposes
an undue burden on competition, rather this process will provide the
Exchange with the necessary means to enforce against violations of
manipulative quoting and trading activity in an expedited manner, while
providing Members with the necessary due process.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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

    Because the foregoing 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, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \18\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\19\
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \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 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.
---------------------------------------------------------------------------

    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: (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 such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.

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<EMAIL_ADDRESS>Please include
File No. SR-BX-2016-028 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-BX-2016-028. 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 No. SR-BX-2016-028, and should be
submitted on or before June 22, 2016.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-12776 Filed 5-31-16; 8:45 am]
BILLING CODE 8011-01-P


It has already been suggested that the use of quinolones in animal husbandry
should be reassessed (Jacob-Reitsma
½ET½AL
, 1994). It is not to be expected
that innovations in the field of antimicrobial therapy will primarily be made
available as veterinary drugs, or that the use of such new substances would
necessarily be economically feasible in food producing animals.
8.3.2
Suppression of pathogens
Some reports indicate that the use of AFA may suppress the excretion of
3ERPULINA½HYODYSENTERIAE
, thereby lowering the sensitivity of diagnostic tests
(Ronne and Jensen, 1992; Fellström
½ET½AL
, 1996). If methods for control of
swine dysentery by improved bacteriological diagnostics were to become
available, removal of at least certain AFA before testing would be advisable.
Theoretically, AFA with effects on gram-negative bacteria, such as the
quinoxalines and possibly flavomycin, would be expected to suppress the
shedding of for example salmonella as long as resistance has not developed.
This could be looked on as an advantage as the burden of zoonotic pathogens
originating from animals in the final product would be lower. On the other
hand, when control programs are instituted, the increased number of false
negatives could, depending on diagnostic methods used, frustrate
identification of infected animals or herds. This would influence the cost of
such programmes.
8.3.3
Favouring of enteric pathogens
All food-borne infections pose a considerable threat to human health and the
economy of individuals, families and nations (quoted from WHO, 1996). The
major causes of food borne infections in EU are
3ALMONELLA
and
#AMPYLOBACTER½
infections. Eggs, broiler meat, meat and meat products and
raw sprouts are the main sources for salmonellosis within the EU. Verotoxin
producing
%COLI
have lately emerged as serious new enteric pathogens.
Other zoonotic food borne pathogens of interest are
,ISTERIA½MONOCYTOGENES
and
9ERSINIA½ENTEROCOLITICA
The use of some AFA is likely to enhance colonisation and shedding of
zoonotic enteric pathogens. Relevant literature on this subject has only been
found for salmonella (for a critical appraisal of published studies see 4.8).
Most studies have been focused on prevalence of shedding of salmonellae
over time, as an indicator of the likelihood of the individual animal shedding
salmonella at the time of slaughter (for a review see Gustafson, 1983). The
results of these studies are conflicting. However, a dose-dependent response

SOU 1997:132
8. Assessment
209
for salmonella shedding of chickens fed avoparcin has been established by
Barrow (1989). For other AFA, no dose-response studies have been found.
The sample sizes in most of these studies examined are rather small.
Studies designed to detect small differences in this aspect inevitably involve
large group sizes. In table 8.IV, sample sizes needed in order to detect small
differences with a 95% confidence level (type I error of 0.05) and an
allowance for a type II error of 0.2 have been calculated.
Table 8.IV. Sample sizes needed to detect differences in prevalence between
groups of animals at various levels of prevalence in the control group
4ABELL½)6½!NTAL½PROV½SOM½KR¤VS½F¶R½ATT½UPPT¤CKA½SKILLNADER½I½PREVALENS
MELLAN½GRUPPER½AV½DJUR½VID½OLIKA½PREVALENS½I½KONTROLLGRUPPEN
$IFFERENCE¹TO¹DETECT
3AMPLE¹SIZE¹REQUIRED
WHEN¹THE¹PREVALENCE¹IN¹THE¹CONTROL¹GROUP¹IS

1%
30 000
39 000
29 000
5%
1 300
1 600
1 100
10%
300
400
300
Obviously, studies of this size may be impractical. Not only would the
group sizes be very large, but all animals in each group must be sampled. For
smaller studies information on the smallest difference that could have been
detected (detection level) should be included. Alternatively, the allowances
for type I and type II errors could be reversed (see 4.8).
An equally important but less studied issue, related to consumer exposure,
is whether the use of AFA affects the likelihood of a flock becoming infected
at all when the animals are exposed to low doses of organisms. The
epidemiologic unit of interest in this case would be the flock, not the
individual animals. A reduction of the number of salmonellae needed in
order to establish colonisation following avoparcin exposure has been shown
(Smith and Tucker, 1980). Such a reduction would increase the risk of flocks
getting infected in natural settings.
In countries where investments are being made in control programs for
salmonellosis, any effect in terms of increased likelihood of colonisation of
animals will negatively affect the benefit/cost ratio of the programs.
The prevalence of shedding by individual animals may not be the best way
to examine the impact of AFA on consumer exposure to salmonella.
Intensive rearing of broilers, where thousands of birds are kept together is
conducive to the spread of salmonellae and other zoonotic pathogens.
Transfer of salmonella between birds occurs during transport and between
carcasses and parts during processing. Inoculation of tracer bacteria into
chicken carcasses has shown that a high degree of spread of these bacteria to
other carcasses occurs during slaughter (Stewart, 1965, cit. by Bryan and
Doyle, 1995). Under such conditions, a few infected birds can easily spread

8. Assessment
SOU 1997:132
210
pathogens to many animals or animal products. Thus, even a low prevalence
within a flock at the time of slaughter will result in most of the carcasses
becoming contaminated unless rigorous hygienic control measures are
applied. In pigs, contamination during slaughtering is easier to avoid.
No studies on the effects of AFA on prevalence in the final product has
been found. To examine the effects of an increased prevalence of salmonella
in animal products, the resulting increase in cases of salmonellosis in humans
has been calculated (table 8.V). The calculation was made as:
additional cases = increased prevalence in product * P(i) * N
where; P(i)= the probability of getting infected if contact with contaminated
product
N= population size, 100 000
It was assumed that all members of the population were exposed to the
product on a yearly basis. On basis of data from Canada, Todd and Harwig
(1996) calculated the ratio of humans diseased from/exposed to salmonella
contaminated poultry products to 1/80 or approximately 1%. P(i) was
therefore assumed to be 1%.
The cost for one reported case of salmonellosis was calculated by Engvall
and co-workers (1994) for Sweden to approximately 14 000 SEK. This figure
does not include costs due to premature deaths. The estimated average for
both reported and non-reported cases was approximately 8 000 SEK. If the
use of AFA increases the prevalence of enteric pathogens in the final product
by 5% and the likelihood of getting diseased if exposed is 1%, this will result
in 50 additional cases per 100 000 inhabitants at a society cost of 400 000
SEK.
Table 8.V. Effect of increased prevalence of salmonella on risk of
contracting salmonellosis through contact with animal products
4ABELL½6½%FFEKTEN½AV½¶KAD½F¶REKOMST½AV½SALMONELLA½F¶R½RISKEN½ATT½INSJUKNA½I
SALMONELLOS½EFTER½KONTAKT½MED½DJURPRODUKTER
)NCREASED¹PREVALENCE
IN¹PRODUCT
!DDITIONAL¹CASES¹PER¹¹¹INHABITANTS¹AT¹0I

1%
1
10
50
5%
5
50
250
10%
10
100
500
<s>1</s>
Probability of getting infected if contact with infected product

3ANNOLIKHET½ATT½BLI½INFEKTERAD½OM½MAN½HAR½KONTAKT½MED½PRODUKTEN

SOU 1997:132
8. Assessment
211
The example above illustrates that even a seemingly marginal increase of
the prevalence of enteric pathogens in animal products can have a significant
impact on human health.
A further quantification of the risk cannot be performed as hitherto
published studies on the possible effects of AFA on enteric pathogens have
not addressed the issue of consumer exposure (see also 4.8).
8.3.4
Toxicological aspects
Target species
Most AFA are not absorbed from the gut and/or are given at comparatively
low dosages. Toxic reactions in the target species would therefore normally
not be expected. Exceptions are the quinoxalines (see chapter 5),
halofuginone, nicarbacin and the ionophores (see chapter 7).
The quinoxalines cause adrenal damage in pigs leading to
hypoaldosteronism at doses and exposure times well within the range of
those permitted for growth promotion. This has been clearly documented in
experimental settings but no field reports have been found. Symptoms of
intoxication may be overlooked as they typically consist of dry faeces and
increased thirst.
Halofuginone interferes with collagen synthesis resulting in loss of skin
tensile strength. This leads to skin scratches and sores in live birds and skin
tears during slaughter and processing, leading to reduced carcass quality.
Unpublished Swedish observations when this product was used in the middle
of the 80s are consistent with these findings. Due to problems with carcass
quality that were put in connection with the use of halofuginone, the product
was abandoned by the industry (Engström, B. personal communication
2
1997)
Nicarbacin interferes with the thermoregulatory balance at high ambient
temperatures. The effect is dose dependent. In regions where climatological
conditions are such that critical temperatures are seldom reached, this
problem is not likely to occur.
The ionophores have a narrow safety margin, often in the range of 2-3
times the recommended dose. Toxic effects are directed mainly against
skeletal muscle and/or cardiac muscle. Numerous reports on intoxication of
poultry due to accidental overdose with ionophores have been published. The
prevalence of this condition may be underestimated due to diagnostic
difficulties.
2
Björn Engström, Department of Poultry, National Veterinary Institute (SVA) Sweden

8. Assessment
SOU 1997:132
212
Exposure of non-target species, e.g. by accidental intake, may have serious
consequences but is not likely to present a substantial risk under good
manufacturing practices.
Residues
As mentioned above, most AFA are not absorbed from the gut and/or are
given at comparatively low dosages. Residues at levels potentially harmful
for the consumer would therefore normally not be expected. Exceptions to
this are the quinoxalines and the nitroimidazoles.
Quinoxalines and their metabolites are mutagenic
IN½VITRO
and are
potentially genotoxic (FAO/WHO, 1995). Genotoxic substances cause
chromosomal aberrations in eukaryotic cells. Due to the additive effects of
such aberrations, even a very low dose may pose a risk. Acceptable daily
intakes (ADI) have not been set.
Nitroimidazoles have shown mutagenic and genotoxic potential in several
tests and their carcinogenic potential cannot be ruled out. Neither JECFA,
not CVMP could establish an ADI.
Low, or very low concentrations of AFA residues in food might elicit
allergic reactions in sensitised individuals. Such low concentrations might be
present in or on animal products due to absorption from the gut or to faecal
contamination. The population at risk for such allergic reaction is likely to be
very small and the cause of the reaction would be difficult to determine. No
reports of food related allergy implicating AFA approved in EU have been
found.
Occupational hazards
Several AFA (macrolides, quinoxalines, bacitracin) are potent antigens and
occupational exposure on a daily basis can lead to sensibilisation.
Occupational contact dermatitis and/or asthma seem to be rather frequent as
judged by reports in the literature. Allergic reactions have also been reported
for amprolium, meticlorpindol, robenidine and halofuginone. Airborne
antigen or direct contact is thought to be the main cause for these reactions.
As the handling of feed and litter inevitably involves formation of airborne
particles, the exposure of the population at risk must be regarded as high.
Usage of special galenic formulations of premixes may reduce the exposure.
As for the remaining AFA and coccidiostats, no reports on allergic
reactions have been found. However, the causal diagnosis of such reactions
can be extremely difficult. At least in Sweden, there is no report system for
side-effects in humans caused by substances used in animals. Thus, the
absence of reports does not exclude the possibility of such hazards.

SOU 1997:132
8. Assessment
213
Concerning the potential genotoxicity of nitroimidazoles and quinoxalines,
not only the safety for the consumer should be considered. When these
substances are used on the farm, humans are exposed to low doses on a daily
basis. The exposure by inhalation or other routes during the handling of feed
and manure is not known. The possibility of additive effects has to be borne
in mind, as farmers are often exposed not only to these but to many,
potentially offensive chemicals.
8.4
Safety for the environment
AFA are typically administered over a long period. Large groups of animals
are involved and many additives are poorly absorbed and therefore excreted
to a considerable extent. The effects will depend on the length of time that
the substance in question persists in the environment. Persistence may lead to
increase in concentrations over time, due to bioaccumulation.
In order to assess the exposure in various environmental compartments, the
fate of the AFA in the ecosystem has to be known. A model for antibiotic
release from feedlots was presented by Addison (1984) in which
volatilisation, degradation, diffusion, adsorption to sediment, losses to
ground water and streams etc. is calculated. This model clearly illustrates the
complexity of the matter.
Table 8.VI shows some hazards for the environment related to AFA usage
that can be envisaged.
Table 8.VI. Potential hazards and consequences of AFA usage for the
environment
4ABELL½6)½0OTENTIELLA½FAROR½OCH½KONSEKVENSER½F¶R½MILJ¶N½ORSAKADE½AV½!&4
ANV¤NDNING
(AZARDS
#ONSEQUENCES
,IKELIHOOD
Toxic effect on terrestrial
fauna
loss of diversity
reduced soil fertility
reduced decomposition
low
Toxic effect on aquatic fauna
loss of diversity
reduction of fish numbers
low
Toxic effect on plants
loss of diversity
reduction of crops
low
Toxic effect on microflora
loss of diversity
reduced soil fertility
high but transient
Co-transfer of genes
increased virulence of plant
pathogens
unknown
Most AFA are likely to be degraded by soil microbes, as they are
antibiotics, produced by microorganisms. According to available literature,
most antibiotic substances appear to have a half life in soil of about 2-3
weeks at 20°C, while lower temperatures generally cause a slower

8. Assessment
SOU 1997:132
214
degradation. As light and temperature are important variables regarding
degradation times, separate risk assessments may be necessary for different
geographic areas. Synthetic substances such as quinoxalines are more likely
to persist in the environment.
Concentrations in manure would be expected to be too low for any toxic
effects on either terrestrial or aquatic fauna, provided that no
bioaccumulation occurs. If the slurry concentration of the substance is 50
ppm, the concentration in soil would be roughly 1 ppm with an application of
manure of 25 tonnes/hectare and a ploughing depth of 10 cm (table 8.VII).
This is in most situations unlikely to have an effect on eukaryotic cells.
However, as the minimum inhibitory concentration for naturally susceptible
soil microbes is in the same magnitude, a temporary disruption of the
microflora would be expected. This effect has been demonstrated as a
transient reduction in nitrification when a low concentration of tylosin was
added to soil (Bewick, 1978).
Table 8.VII. Predicted environmental concentration (ppm) in soil at
various concentrations of AFA in slurry
1
4ABELL½6))½5PPSKATTADE½!&4½KONCENTRATIONER½I½JORD½PPM	½EFTER
G¶DSLING½MED½G¶DSEL½MED½OLIKA½!&4
KONCENTRATIONER

!&!¹IN¹SLURRY¹PPM
0REDICTED¹ENVIRONMENTAL¹CONCENTRATION
PPM	¹AT¹PLOUGH¹DEPTH¹OF
¹CM
¹CM
1
0.03
0.02
10
0.3
0.2
25
0.8
0.4
50
1.7
0.8
75
2.5
1.3
100
3.3
1.7
<s>1</s>
Application of 25 tonnes slurry  per ha, soil density 1.5g/cm
<s>3</s>

½!PPLIKATION½AV½½TON½FLYTG¶DSEL½PER½HA½JORDDENSITET½GCM

As discussed in chapter 4 and 6, the environment will also serve as a
reservoir for resistance genes and bacteria carrying these genes. Resistance in
itself is not a problem for the environment, as the consequence of resistance
is impairment of therapy. If the resistance genes are located on DNA
segments harbouring virulence genes, transfer between microorganisms
present in soil or water could theoretically lead to an increase in virulence of
plant or wildlife pathogens. This could ultimately increase the prevalence or
severity of diseases. No information is available on the occurrence of such
events.
Accurate risk-assessment of environmental effects of AFA is hampered by
the circumstance that the most extensive data bearing on the effects of AFA
are those gathered by commercial organisations when seeking regulatory
approval, and that these data are dealt with confidentially between the

SOU 1997:132
8. Assessment
215
organisations and the regulatory agencies. It would be in the public interest,
and would help to strengthen confidence in regulatory decisions, if these data
were made publicly available under arrangements that protect the legitimate
commercial interests of the companies concerned.
8.5
Prophylactic effects of AFA
Many authors have discussed increased animal health problems due to
infectious diseases when antibacterial feed additives are withheld (e.g.
McOrist, 1997; Viaene, 1997). This poses questions as to what degree
antibacterials at their permitted dosages for growth promotion also have
therapeutic and/or prophylactic effects.
Permitted AFA dosages are usually around 20 ppm (range 1-100 ppm)
which for most substances is substantially lower than therapeutic doses, but
there is an overlap between dosages permitted for growth promotion and
recommended doses for prophylaxis and therapy. Even at a ”low” dosage
they will have antimicrobial effects in the intestine, since minimum
inhibitory concentrations for normally sensitive bacteria are around 1-5 ppm
(see 3.2 and 4.2)
The Swedish experience from banning antibacterial growth promoters in
1986 was the emergence of clinical problems and disturbances of the health
status of piglets and broilers which initially created an increased demand for
medicated feed with antibiotics at therapeutic dosages. By changing feed
composition, improvements in hygiene, changing rearing strategies etc. this
is now largely corrected for (Wierup, 1996).
Important animal diseases for which preventive effects of AFA at the
dosages given for performance enhancement have been described include
necrotic enteritis in poultry, swine dysentery, bacterial enteritis and porcine
proliferative enteritis (see chapter 3.2). Several antibacterial feed additives
also have indications as therapeutic drugs for these animal diseases.
According to the available literature there are no indications that the basic
mode of action of AFA is different from that of antibacterials when used for
prevention or therapy. The growth promoting effect can be ascribed to a
reduction of pathogen load and the animal’s response to this. This
prophylactic effect is applicable whether the manifestastion of the pathogen
is clinical or subclinical.
Documentation on prophylactic and/or therapeutic effects of AFA is not
included in the application for approval and such effects are therefore not
evaluated in the approval process.

8. Assessment
SOU 1997:132
216
8.6
The risks and the benefits
8.6.1
The benefits
The major beneficial effect of AFA is their prophylactic and therapeutic
effects in relation to some bacterial diseases. However, according to article 7
in directive 70/524/EEC such properties are only allowed for coccidiostats
and other medicinal substances. It is questionable whether this lack of
coherence between regulations and the actual situation caters for consumer
confidence built on transparency.
Usage of AFA improves feed utilisation and growth rate. This will
generate an economic profit and, depending on its distribution, producers,
consumers or others may benefit. Other sequels to AFA usage are reductions
in manure and nitrogen output. This may be seen as beneficial from an
environmental point of view. However, all these positive effects can also be
achieved by other means.
8.6.2
Indirect long-term losses and animal welfare aspects
AFA have been used for over 4 decades and this has undoubtedly contributed