Investing

SEC Approves Bats Client Suspension Rule to Curtail Manipulative Trading

Chris Lange

Published: February 23, 2016 12:45 pm

Last Updated: January 13, 2020 12:49 pm

Bats Global Markets (Bats) has just received approval from the U.S. Securities and Exchange Commission (SEC) for the Bats Client Suspension Rule. Basically this rule assists the company in taking swifter action to prohibit manipulative behavior, such as spoofing and layering, on the Bats Exchanges.

The rule was approved February 18 and distinguishes itself by specifically addressing disruptive quoting and trading practices, such as spoofing and layering, by means of an expedited process.

Under the current disciplinary process in U.S. markets, certain manipulative behaviors, while they can be identified quickly, can sometimes take months or even several years to reach final resolution. This rule actually accelerates the process and assists regulators at the Bats Exchanges in stopping such ongoing disruptive quoting and trading behavior in a matter of weeks.

At the center of the matter, the rule considers problematic and recurring activities that the company believes are most frequently undertaken by small groups of day traders, often located in foreign jurisdictions, and potentially hinder an exchange’s ability to respond in a timely manner.

Tami Schademann, Bats Chief Regulatory Officer and Executive Vice President, commented:

As we’ve noted previously, instances of spoofing and layering are limited in the U.S. markets, but we believe regulators should have the proper tools to stop such disruptive quoting and trading behavior as quickly as possible for the benefit of all investors.

She added:

The Client Suspension Rule, which is designed to preserve our clients’ due process rights through expedited notice and an opportunity to be heard by an impartial Hearing Officer, is our latest attempt to stand up for all of these investors and put a stop to disruptive quoting and trading practices, such as spoofing and layering.