2016-11401. Self-Regulatory Organizations; Bats BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.13, Order Execution and Routing, To Delete the IOCM and ICMT Routing Options

May 10, 2016.

Pursuant to the provisions of 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 May 2, 2016, Bats BYX Exchange, Inc. (the “Exchange” or “BYX”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a “non-controversial” proposed rule change pursuant to Section 19(b)(3)(A) of the Act ^[3] and Rule 19b-4(f)(6)(iii) thereunder,^[4] which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange filed a proposal to amend Rule 11.13, Order Execution and Routing, to delete the IOCM and ICMT routing options. The Exchange also proposes to amend its fee schedule to delete: (i) References to the IOCM and ICMT routing options under footnote 8; and (ii) fee code PX, which is yielded on orders routed using the RMPT routing option or routed to Bats EDGX Exchange, Inc. (“EDGX”) to execute against MidPoint Peg Orders ^[5] on EDGX using ICMT or IOCM routing options.

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.

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 the Statutory Basis for, the Proposed Rule Change

1. Purpose

The Exchange proposes to amend Rule 11.13, Order Execution and Routing, to delete the IOCM and ICMT routing options. The Exchange also proposes to amend its fee schedule to delete: (i) References to the IOCM and ICMT routing options under footnote 8; and (ii) fee code PX, which is yielded on orders routed using the RMPT routing option or routed to EDGX to execute against MidPoint Peg Orders on EDGX using ICMT or IOCM routing options.

Under Rule 11.13(b)(3)(O), an order utilizing the IOCM routing option checks the System ^[6] for available shares and then is sent, as MidPoint Peg Order with a Time-in-Force of IOC, to EDGX. Under Rule 11.13(b)(3)(P), an order utilizing the ICMT routing option checks the System for available shares, then is sent to destinations on the System routing table and then is sent, as MidPoint Peg Order with a Time-in-Force of IOC, to EDGX. If shares remain unexecuted after routing pursuant to both the IOCM and ICMT routing options, they are posted on the book, unless otherwise instructed by the User.^[7]

Footnote 8 of the fee schedule states that orders in securities priced below $1.00 that remove liquidity utilizing certain routing strategies, including IOCM and ICMT are charged a fee of $0.29% of the trade's total dollar value. Fee code PX is yielded on orders routed using the RMPT routing option or routed to EDGX to execute against MidPoint Peg Orders on EDGX using ICMT or IOCM routing options. Orders that yield fee code PX pay a fee of $0.0012 per share in securities priced at or above $1.00 and 0.29% of the trade's dollar value for securities priced below $1.00.

Because few Users elect the IOCM or ICMT routing options, the Exchange has determined that the current demand does not warrant the infrastructure and ongoing maintenance expenses required to support the products. Therefore, the Exchange proposes to delete the IOCM and ICMT routing options under Rule 11.13(b)(3)(O) and (P) as well as a reference to the IOCM and ICMT routing options under Rule 11.13(b)(3)(H). The Exchange also proposes to amend its fee schedule to delete: (i) References to the IOCM and ICMT routing options under footnote 8; and (ii) fee code PX, which is yielded on orders routed using the RMPT routing option or routed to EDGX to execute against MidPoint Peg Orders on EDGX using ICMT or IOCM routing options. Users seeking to route midpoint eligible orders to EDGX may use alternative methods, such as connecting to EDGX directly or through a third party service provider, or electing another routing option offered by the Exchange that enables a User to post an order to certain primary listing markets.^[8]

The Exchange intends to implement the proposed rule change on May 5, 2016.^[9]

2. Statutory Basis

The Exchange believes that its proposal is consistent with Section 6(b) of the Act ^[10] in general, and furthers the objectives of Section 6(b)(5) of the Act ^[11] in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, 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.

The Exchange does not believe that this proposal will permit unfair discrimination among customers, brokers, or dealers because the IOCM and ICMT routing options will no longer be available to all Users. The Exchange has few Users electing the IOCM and ICMT routing options and has determined that the current demand does not warrant the infrastructure and ongoing maintenance expense required to support the products. Routing through the Exchange is voluntary and alternative routing options offered by the Exchange as well as other methods remain available to Users that wish to route midpoint eligible orders to EDGX.^[12] In addition, the IOCM and ICMT routing options are not core product offerings by the Exchange, nor is the Exchange required by the Act to offer such products. Therefore, the Exchange believes the proposed rule change would make its rules clearer and less confusing for investors by removing routing options that will no longer be offered by the Exchange; thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system, and, in general, protecting investors and the public interest.

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

The Exchange does not believe that the proposal will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issues but rather avoid investor confusion by eliminating the IOCM and ICMT routing options that are to be discontinued by the Exchange.

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, it has become effective pursuant to Section 19(b)(3)(A) of the Act ^[13] and Rule 19b-4(f)(6) thereunder.^[14]

A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act ^[15] normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) ^[16] 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 so that the proposal may become operative immediately upon filing. The Exchange states that waiver of the 30-day operative delay would allow the Exchange to modify its rules in a timely manner by: (i) Eliminating a rule that accounts for services with few subscribers that the Exchange intends to discontinue; and (ii) accurately describing the alternative routing options available to Users, thereby avoiding potential investor confusion during the operative delay period. Based on the foregoing, the Commission believes the waiver of the operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposal operative upon filing.^[17]

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 to determine whether the proposed rule change 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 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 [e-mail]. Please include File Number SR-BatsBYX-2016-06 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-BatsBYX-2016-06. 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-BatsBYX-2016-06, and should be submitted on or before June 6, 2016.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.¹⁸

Robert W. Errett,

Deputy Secretary.

Footnotes

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).

5.  See EDGX Rule 11.8(d). The BYX fee schedule uses the term “EDGX MPM” for fee code PX. EDGX MPM is intended to refer to contra side MidPoint Peg Orders on EDGX.

6.  The “System” is the Exchange's 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. See Exchange Rule 1.5(aa).

7.  The term “User” is defined as “any Member or Sponsored Participant who is authorized to obtain access to the System pursuant to Rule 11.3.” See Exchange Rule 1.5(cc).

8.  See e.g., Rule 11.13(b)(3)(Q) (describing the RMPT routing option under which a Mid-Point Peg Order checks the System for available shares and any remaining shares are then sent to destinations on the System routing table that support midpoint eligible orders. If any shares remain unexecuted after routing, they are posted on the BYX book as a MidPoint Peg Order, unless otherwise instructed by the User).

9.  See Bats to Decommission ICMT, IOCM, and TRIM3 Routing Strategies, issued April 18, 2016, available at http://cdn.batstrading.com/​resources/​release_​notes/​2016/​Bats-to-Decommission-ICMT-IOCM-and-TRIM3-Routing-Strategies.pdf.

10.  15 U.S.C. 78f(b).

11.  15 U.S.C. 78f(b)(5).

12.  See supra note 8 and accompanying text.

13.  15 U.S.C. 78s(b)(3)(A).

14.  17 CFR 240.19b-4(f)(6). As required under Rule 19b-4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the 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.

15.  17 CFR 240.19b-4(f)(6).

16.  17 CFR 240.19b-4(f)(6)(iii).

17.  For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).