Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing with the Commission a proposal to amend the functionality of the Market Maker Peg Order to more closely resemble analogous order types offered by NASDAQ Stock Market LLC (“Nasdaq”) and EDGX Exchange, Inc. (“EDGX”)
The text of the proposed rule change is available at the Exchange's Web site at
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.
The purpose of this proposed rule change is to amend BATS Rule 11.9(c)(16). Specifically, the Exchange proposes to: (1) Remove the option to allow Market Maker Peg Orders to be priced and executed during the Pre-Opening Session
The Exchange is proposing to amend BATS Rule 11.9(c)(16) to eliminate the option for Market Maker Peg Orders to be priced and executed outside of Regular Trading Hours and to cancel all Market Maker Peg Orders that are on the BATS Book at the end of Regular Trading Hours. As currently written, a Market Maker may enter a Market Maker Peg Order at any time during the Pre-Opening Session
Specifically, the Exchange is proposing rule changes to eliminate the ability for a Market Maker to designate that an order be priced and executable immediately upon entry during the Pre-Opening Session, to state that all Market Maker Peg Orders that are on the BATS Book expire at the end of Regular Trading Hours, and to reject all Market Maker Peg Orders entered during the After Hours Trading Session. The Exchange is proposing these changes in order to make its Market Maker Peg Order functionality more closely resemble that of Market Maker Peg Orders at Nasdaq and EDGX. Because the Market Maker Peg Order is designed to help Market Makers meet their quoting obligation on the Exchange and the Exchange's quoting obligations do not include any obligations outside of Regular Trading Hours, the Exchange does not believe that allowing Market Maker Peg Orders to be priced and executed outside of Regular Trading Hours provides Market Makers with any benefit that would warrant the additional complexity that the
The Exchange is proposing to amend BATS Rule 11.9(c)(16) to eliminate the functionality that would allow a Market Maker to designate Market Maker Peg Orders to be cancelled where there is no NBBO and the order would otherwise be priced to the last reported sale from the single plan processor. Currently, a Market Maker may optionally designate that a Market Maker Peg Order be cancelled where it would be priced to the last reported sale from the single plan processor.
The Exchange is proposing to eliminate this functionality in order to make its Market Maker Peg Order functionality more closely resemble that of Market Maker Peg Orders at Nasdaq and EDGX. Additionally, the Exchange believes that removing the ability to designate that Market Maker Peg Orders be cancelled where the order would peg based on the last reported sale will, in conjunction with the other changes proposed in this filing, act to simplify the Market Maker Peg Order type, thereby increasing its utility to Market Makers and decreasing the likelihood of unforeseen complications.
The Exchange is proposing to amend BATS Rule 11.9(c)(16) in order to eliminate the functionality that would allow a Market Maker to designate a more aggressive offset from the NBBO than the Designated Percentage. As currently written, the rule allows a Market Maker to designate a more aggressive offset from the NBBO and a percentage away from the NBBO or the price of the last reported sale from the responsible single plan processor at which the order will be adjusted back to the Market Maker-designated offset.
The Exchange is proposing to eliminate this functionality in order to, as mentioned above, simplify the Market Maker Peg Order functionality. Market Makers will still be able to enter orders priced more aggressively than the automatically priced Market Maker Peg Orders and will have access to existing pegged order functionality. The Exchange believes that this existing functionality will provide Market Makers with the necessary tools to enter orders priced more aggressively than the Market Maker Peg Order while not adding an additional level of complexity by requiring Market Makers to establish additional parameters for their Market Maker Peg Orders.
The Exchange is proposing to amend BATS Rule 11.9(c)(16) in order to make clear that a Market Maker Peg Order will not use its own pegged price as the basis for adjusting the order's price. Where there is no NBBO and a Market Maker Peg Order, whether upon entry or already on the BATS Book, is pegged to the last reported sale from the single plan processor, the Market Maker Peg Order will be reported to the SIPs and will be disseminated to the Exchange as the NBBO. The Exchange is seeking to make clear that, in this situation, the Exchange will not reprice the order based on the fact that the Market Maker Peg Order is the NBBO. Rather, the Exchange will only adjust the market Maker Peg Order when there is either a new consolidated last sale or a new NBBO is established by a national securities exchange.
The Exchange is proposing to amend BATS Rule 11.9(c)(16) in order to make clear that only a registered Market Maker can enter a Market Maker Peg Order. The Exchange believes that, as currently constructed, only a registered Market Maker is allowed to enter Market Maker Peg Orders under Rule 11.9(c)(16) despite lacking any explicit language stating as much. As discussed above, the order type was created to help Market Makers comply with their quoting requirements on the Exchange and, for that reason, the behaviors of the Market Maker Peg Order are based specifically on the Exchange's quoting requirements. The Exchange does not make the order type available to other market participants because it does not believe that there would be any demand for the order type or that it would be particularly useful for market participants that are not Market Makers, especially given the availability of more customizable peg orders.
The Exchange believes that the proposal is consistent with Section 6(b) of the Act
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 proposed changes to the Market Maker Peg Order type functionality will further align the Exchange's functionality with that offered by certain other competing market centers. Specifically, the rule change proposed herein is based on Nasdaq Rule 4751(f)(15) and EDGX Rule 11.5(c)(15).
The Exchange has neither solicited nor received written comments on the proposed rule change.
Because the foregoing proposed rule change does not significantly affect the protection of investors or the public interest, does not impose any significant burden on competition, and, by its terms, does not 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) of the Act
The Exchange has requested that the Commission waive the 30-day operative delay. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Doing so will allow the Exchange to make the improvements and clarifications to the Market Maker Peg Order effective immediately and address any technical or operative issues that member organizations may experience if the Exchange's implementation of Market Maker Peg Order is different from that of other exchanges.
Therefore, the Commission designates the proposal operative upon filing.
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. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B)
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.