80 FR 14191 - Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 52 (March 18, 2015)

[Federal Register Volume 80, Number 52 (Wednesday, March 18, 2015)]
[Notices]
[Pages 14191-14193]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-06124]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74484; File No. SR-BATS-2015-20]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees for Use of BATS Exchange, Inc.

March 12, 2015.
    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 March 2, 2015, BATS Exchange, Inc. (the

[[Page 14192]]

``Exchange'' or ``BATS'') 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 Exchange has designated the proposed rule change as one 
establishing or changing a member due, fee, or other charge imposed by 
the Exchange under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-
4(f)(2) thereunder,\4\ which renders the proposed rule change 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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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 the fee schedule applicable 
to Members \5\ and non-members of the Exchange pursuant to BATS Rules 
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal 
are effective upon filing.
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange.'' See 
Exchange Rule 1.5(n).
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    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to modify the ``Options Pricing'' section of 
its fee schedule effective immediately, in order to modify pricing 
charged by the Exchange's options platform (``BATS Options'') including 
adjusting the rebates associated with Customer Penny Pilot Add Volume 
Tier 1 and Professional and Firm Penny Pilot Add Volume Tiers 1 and 2, 
as further described below.
    The Exchange proposes to adjust the rebate for Customer \6\ orders 
in Penny Pilot Securities \7\ that add liquidity and meet Customer Add 
Volume Tier 1 from $0.45 per contract to $0.40 per contract. Currently, 
the Exchange offers a $0.45 rebate for Customer orders that add 
liquidity and meet Customer Add Volume Tier 1, which requires that the 
Member has an ADV \8\ equal to or greater than 0.05% of average TCV.\9\ 
The Exchange notes that such change will be reflected in both the 
Standard Rates table and the Customer Penny Pilot Add Tiers under 
footnote 1 of the fee schedule.
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    \6\ ``Customer'' applies to any transaction identified by a 
Member for clearing in the Customer range at the Options Clearing 
Corporation (``OCC''), excluding any transaction for a 
``Professional'' as defined in Exchange Rule 16.1.
    \7\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01.
    \8\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day.
    \9\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges to the consolidated transaction 
reporting plan for the month for which the fees apply, excluding 
volume on any day that the Exchange experiences an Exchange System 
Disruption and on any day with a scheduled early market close.
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    The Exchange also proposes to adjust the rebate for Professional 
\10\ and Firm \11\ orders in Penny Pilot Securities that add liquidity 
and meet Professional/Firm Step-up Add Volume Tier 1 and Tier 2 from 
$0.44 per contract to $0.42 per contract. The Exchange currently offers 
a $0.44 rebate for Professional and Firm orders that add liquidity and 
meet Professional/Firm Step-Up Add Volume Tier 1 or Tier 2. Meeting 
Professional/Firm Step-up Add Volume Tier 1 requires that a Member has 
an Options Step-up Add TCV \12\ from June 2014 baseline that is equal 
to or greater than 0.50%. Meeting Professional/Firm Step-up Add Volume 
Tier 2 requires that a Member has an Options Step-up Add TCV from 
September 2014 baseline equal to or greater than 0.30% and an ADV equal 
to or greater than 0.40% of average TCV. The Exchange is not proposing 
to amend the requirements for meeting Professional/Firm Step-up Add 
Volume Tier 1 or Tier 2. The Exchange notes that such changes will be 
reflected in both the Standard Rates table and the Professional and 
Firm Penny Pilot Add Volume Tiers under footnote 2 of the fee schedule.
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    \10\ ``Professional'' applies to any transaction identified by a 
Member as such pursuant to Exchange Rule 16.1.
    \11\ ``Firm'' applies to any transaction identified by a Member 
for clearing in the Firm range at the OCC.
    \12\ ``Options Step-up Add TCV'' means ADAV as a percentage of 
TCV in the relevant baseline month subtracted from current ADAV as a 
percentage of TCV.
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    The Exchange proposes to implement the amendments to its fee 
schedule effective immediately.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange, and, 
in particular, with the requirements of Section 6 of the Act.\13\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\14\ in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members and other persons using any facility or system which the 
Exchange operates or controls. The Exchange notes that it operates in a 
highly competitive market in which market participants can readily 
direct order flow to competing venues if they deem fee levels to be 
excessive.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates and fees such as the ones currently maintained 
on BATS Options have been widely adopted by equities and options 
exchanges and are equitable because they are open to all Members on an 
equal basis and provide additional benefits or discounts that are 
reasonably related to the value to an exchange's market quality 
associated with higher levels of market activity, such as higher levels 
of liquidity provision and/or growth patterns, and introduction of 
higher volumes of orders into the price and volume discovery processes. 
The Exchange believes the proposed reduction of the rebate for orders 
that add liquidity for Customers that meet Customer Add Volume Tier 1 
is a reasonable, fair and equitable, and not unfairly discriminatory 
allocation of fees and rebates because it will provide Members with a 
greater incentive to increase their participation on BATS Options in 
order to receive a higher rebate by meeting a higher Customer Add 
Volume Tier. Currently, the difference between the rebate received for 
orders that qualify for Customer Add Volume Tier 1 and those that 
qualify for Customer Add Volume Tier 2 is only $0.03 per contract, but 
as proposed, the difference would be $0.08 per contract.

[[Page 14193]]

As such, the Exchange believes that increasing the difference in the 
rebates between the tiers will act to incentivize Members to increase 
their ADV as a percentage of TCV to 0.30% in order to qualify for 
Customer Add Volume Tier 2 and receive a rebate of $0.48 per contract. 
Such increased participation on BATS Options will result in higher 
levels of liquidity provision and introduction of higher volumes of 
orders into the price and volume discovery processes, which will 
benefit all participants on BATS Options.
    The Exchange also believes that the proposed reduction of the 
rebates for Professional/Firm Step-up Add Volume Tier 1 and Tier 2 is a 
reasonable, fair and equitable, and not unfairly discriminatory 
allocation of fees and rebates because, as stated above, the Exchange's 
tiered pricing structure is designed such that fees and rebates are 
related to the value of market quality associated with higher levels of 
market activity, such as higher levels of liquidity provision and/or 
growth patterns, and introduction of higher volumes of orders into the 
price and volume discovery processes. As such, the Exchange believes 
that it is reasonable, fair, and equitable to lower the rebates 
associated with Professional/Firm Step-up Add Volume Tier 1 and Tier 2. 
In this same light, the Exchange notes that the proposed amendments 
would bring the rebate for Professional/Firm Step-up Add Volume Tier 1 
and Tier 2 in line with that of the Market Maker Add Volume Tier. The 
Exchange also notes that Professional and Firm orders can continue to 
receive further enhanced rebates through the NBBO Setter Tiers and that 
any order that qualifies for either Professional/Firm Step-Up Add 
Volume Tier 1 or Tier 2 will also qualify for NBBO Setter Tier 1 where 
the order sets the national best bid or offer.
    The Exchange reiterates that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels to be excessive.

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. With respect to the proposed 
new rebates in Customer Add Volume Tier 1 and Professional/Firm Step-Up 
Tier 1 and Tier 2, the Exchange does not believe that any such changes 
burden competition, but instead, that they enhance competition, as they 
are intended to increase the competitiveness of and draw additional 
volume to BATS Options. As stated above, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily direct order flow to competing venues if the deem fee 
structures to be unreasonable or excessive.

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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \15\ and paragraph (f) of Rule 19b-4 
thereunder.\16\ 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.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f).
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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 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 [email protected]. Please include 
File Number SR-BATS-2015-20 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BATS-2015-20. 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 Number SR-BATS-2015-20 and should be 
submitted on or before April 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-06124 Filed 3-17-15; 8:45 am]
BILLING CODE 8011-01-P