[Federal Register Volume 80, Number 198 (Wednesday, October 14, 2015)]
[Notices]
[Pages 61855-61857]
[FR Doc No: 2015-26033]

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SECURITIES AND EXCHANGE COMMISSION

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

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

October 7, 2015.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 23, 2015, BATS Exchange, Inc. (``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been substantially prepared by the Exchange. The Exchange has
designated this proposal as a ``non-controversial'' proposed rule
change pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with
the Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange filed a proposal to amend BZX Rule 3.13 to conform
with: (i) Financial Industry Regulatory Authority, Inc. (``FINRA'')
Rule 5230 for purposes of an agreement between the Exchange and FINRA
pursuant to Rule 17d-2 under the Act \5\ and (ii) the rules of EDGA
Exchange, Inc. (``EDGA'') and EDGX Exchange, Inc. (``EDGX'').\6\ The
text of the proposed rule change is available at the Exchange's Web
site at www.batstrading.com, at the principal office of the Exchange,
and at the Commission's Public Reference Room.
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    \5\ 17 CFR 240.17d-2.
    \6\ See EDGA Rule 3.13 and EDGX Rule 3.13.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.

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

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

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

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

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

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

    The Exchange has neither solicited nor received written comments on
the proposal.

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

    The Exchange has designated this rule filing as non-controversial
under section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6)
thereunder.\15\ Because the proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, the proposed rule
change has become effective pursuant to section 19(b)(3)(A) of the Act
and Rule 19b-4(f)(6) thereunder.\16\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4.
    \16\ Rule 19b-4(f)(6) also requires that the Exchange give the
Commission written notice of its intent to file the proposed rule
change, along with a brief description and text of the proposed rule
change, at least five business days prior to the date of filing of
the proposed rule change, or such shorter time as designated by the
Commission. The Exchange satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily temporarily suspend the rule
change if it appears to the Commission that this action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes this action, the
Commission shall institute proceedings under section 19(b)(2)(B) of the
Act \17\ to

determine whether the proposed rule should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal is
consistent with the Act. Comments may be submitted by any of the
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File No. SR-BATS-2015-77 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-BATS-2015-77. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-BATS-2015-77 and should be
submitted on or before November 4, 2015.
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    \18\ 17 CFR 200.30-3(a)(12).

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