80 FR 20285 - 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 72 (April 15, 2015)

[Federal Register Volume 80, Number 72 (Wednesday, April 15, 2015)]
[Notices]
[Pages 20285-20289]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-08546]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74692; File No. SR-BATS-2015-28]


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.

April 9, 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 April 1, 2015, BATS Exchange, Inc. (the ``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.
---------------------------------------------------------------------------

    \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).

---------------------------------------------------------------------------

[[Page 20286]]

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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: (i) Adjusting the standard rebate associated with Market 
Maker \6\ orders that add liquidity in Penny Pilot Securities; \7\ (ii) 
to add a new tier to the Market Maker Penny Pilot Add Volume Tier; 
(iii) adjusting the standard fees paid for Professional,\8\ Firm \9\ 
and Market Maker orders that remove liquidity in Penny Pilot Securities 
and do not qualify for any reduced fees; and (iv) to make certain 
changes to the Professional, Firm and Market Maker Penny Pilot Take 
Volume Tiers, as further described below. The Exchange is also 
proposing to make certain corresponding changes to the fee schedule.
---------------------------------------------------------------------------

    \6\ ``Market Maker'' applies to any transaction identified by a 
Member for clearing in the Market Maker range at the OCC.
    \7\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01.
    \8\ ``Professional'' applies to any transaction identified by a 
Member as such pursuant to Exchange Rule 16.1.
    \9\ ``Firm'' applies to any transaction identified by a Member 
for clearing in the Firm range at the OCC.
---------------------------------------------------------------------------

Market Maker Orders That Add Liquidity in Penny Pilot Securities
    The Exchange proposes to reduce the standard rebate for Market 
Maker orders that add liquidity in Penny Pilot Securities. Currently, 
the Exchange provides a rebate of $0.40 per contract as a standard 
rebate for Market Maker orders that add liquidity in Penny Pilot 
Securities under fee code PM. The Exchange is proposing to reduce the 
standard rebate for Market Maker orders that add liquidity in Penny 
Pilot Securities from $0.40 per contract to $0.35 per contract in 
conjunction with the addition of adding a new tier to the Market Maker 
Penny Pilot Add Volume Tier, as further described below. The Exchange 
notes that this standard rebate is still higher than the standard 
rebate of $0.20 per contract offered by the options platform operated 
by NASDAQ Stock Market LLC (``NOM''). The Exchange also notes that 
Members will still be eligible to receive the current rebates of $0.42 
and $0.40 by meeting the existing Market Maker Penny Pilot Add Volume 
Tier and the new Market Maker Penny Pilot Add Volume Tier 1 proposed 
below, respectively.
Market Maker Penny Pilot Add Volume Tier
    The Exchange is also proposing to add a new tier to the Market 
Maker Penny Pilot Add Volume Tier under footnote 6 of the fee schedule. 
Currently, the only enhanced rebate available under footnote 6 provides 
a $0.42 rebate per contract to a Member that has an ADAV \10\ equal to 
or greater than 1.00% of average TCV \11\ and an ADV \12\ equal to or 
greater than 2.00% of average TCV. The Exchange is proposing to add an 
additional tier to the Market Maker Penny Pilot Add Volume Tier such 
that a Member receives a $0.40 rebate per contract in Market Maker 
orders that add liquidity in Penny Pilot Securities where the Member 
has an ADV equal to or greater than 0.30% of average TCV.
---------------------------------------------------------------------------

    \10\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added per day.
    \11\ ``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.
    \12\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day.
---------------------------------------------------------------------------

Professional, Firm and Market Maker Orders That Remove Liquidity in 
Penny Pilot Securities
    The Exchange proposes to increase the standard fee for 
Professional, Firm and Market Maker orders that remove liquidity in 
Penny Pilot Securities. Currently, the Exchange charges $0.48 per 
contract as a standard fee for Professional, Firm and Market Maker 
orders that remove liquidity in Penny Pilot Securities under fee code 
PP. The Exchange is proposing to increase the standard fees for 
Professional, Firm and Market Maker orders that remove liquidity in 
Penny Pilot Securities from $0.48 per contract to $0.49 per contract in 
conjunction with the addition of two new tiers and the amendment of the 
pricing for another tier in the Professional, Firm and Market Maker 
Penny Pilot Take Volume Tiers, as further described below. The Exchange 
notes that this standard fee is still lower than the standard fee of 
$0.50 charged by the options platform operated by NYSE Arca, Inc. 
(``Arca''). The Exchange also notes that Members will still be eligible 
to receive the current fees of $0.48, $0.47, and $0.45 or the new $0.43 
charge per contract by meeting applicable Professional, Firm and Market 
Maker Penny Pilot Take Volume Tiers.
Professional, Firm and Market Maker Penny Pilot Take Volume Tiers
    The Exchange is also proposing to increase the fees for the Non-
Customer Take Volume Tier 1 and to add two new tiers to the 
Professional, Firm and Market Maker Penny Pilot Take Volume Tiers under 
footnote 3 of the fee schedule. Currently, the fee schedule contains 
three tiers that provide reduced fees available under footnote 3, under 
which a Member would pay either $0.47 or $0.45. The Exchange is not 
proposing to amend the required criteria for any of these three tiers, 
but rather to increase the fee for orders that meet the required 
criteria for Non-Customer Take Volume Tier 1 (applicable where a Member 
has an ADV equal to or greater than 1.00% of average TCV) from $0.47 
per contract to $0.48 per contract. The Exchange is also proposing to 
add new Non-Customer Take Volume Tier 2 and Tier 4. Under proposed Non-
Customer Take Volume Tier 2, a Member that has an ADV equal to or 
greater than 1.25% of average TCV will pay a reduced fee of $0.47. 
Under proposed Non-Customer Take Volume Tier 4, a Member that has an 
ADAV in Customer orders that is equal to or greater than 2.00% of

[[Page 20287]]

average TCV would pay a reduced fee of $0.43 per contract.
Corresponding Changes
    In conjunction with the changes proposed above, the Exchange is 
also proposing to make certain corresponding changes to update the 
Standard Rates chart of the fee schedule and related to the numbering 
of existing tiers. Specifically, the Exchange proposes to update the 
Standard Rates chart to reflect the potential rebate of $0.35 for a 
Market Maker order that adds liquidity as well as the new high remove 
rate of $0.49 and low remove rate of $0.43, each now possible for non-
Customer orders. The Exchange is also proposing to change Non-Customer 
Take Volume Tier 2 to Non-Customer Take Volume Tier 3 and to make the 
Market Maker Add Volume Tier the Market Maker Add Volume Tier 2. 
Finally, the Exchange is also proposing to pluralize the title of the 
Market Maker Penny Pilot Add Volume Tier to be the Market Maker Penny 
Pilot Add Volume Tiers.
Effectiveness Date
    As noted above, 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    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 standard rebate for 
Market Maker orders in Penny Pilot Securities that add liquidity 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 Market Maker Add 
Volume Tier, including the proposed new Market Maker Add Volume Tier 1. 
Proposed Market Maker Add Volume Tier 1 would provide a rebate of $0.40 
per contract, the same as the current standard rebate for Market Maker 
orders that add liquidity in Penny Pilot Securities, and Members are 
eligible for such rebates where the Member has an ADV equal to or 
greater than 0.30% of average TCV. As such, the Exchange believes that 
decreasing the standard rebate will act to incentivize Members to 
increase their trading activity on the Exchange in order to qualify for 
proposed Market Maker Add Volume Tier 1 or Tier 2 and receive a rebate 
of $0.40 or $0.42 per contract, respectively, which are the same 
rebates currently available to Members today for such orders. Such 
increased participation on BATS Options, particularly in Market Maker 
orders, 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. Further, as noted above, the proposed standard rebate is still 
significantly higher than the standard rebate offered by NOM of $0.20 
per contract.
    Similarly, the Exchange believes that the addition of new Market 
Maker Add Volume Tier 1 is reasonable, fair and equitable, and not 
unfairly discriminatory allocation of fees and rebates because it will 
act to incentivize Members to meet minimum standards of Market Maker 
trading activity on BATS Options in order to receive an additional 
$0.05 rebate per contract ($0.40 per contract versus the proposed 
standard rebate of $0.35 per contract). The proposed new tier will 
allow Members to continue to receive the same rebate that they 
currently receive for Market Maker orders that add liquidity in Penny 
Pilot Securities, which the Exchange believes will incentivize Members 
to increase or maintain their ADV as a percentage of TCV of at least 
0.30%. Such increased participation on the BATS Options, particularly 
in Market Maker orders, 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 believes the proposed increase of the standard fees 
for Professional, Firm and Market Maker orders that remove liquidity in 
Penny Pilot Securities (from $0.48 per contract to $0.49 per contract) 
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 be eligible for lower fees by meeting a higher Professional, 
Firm and Market Maker Penny Pilot Take Volume Tier. Included in the 
Professional, Firm and Market Maker Penny Pilot Take Volume Tiers are 
the proposed new Non-Customer Take Volume Tiers 2 and 4, the second of 
which would actually provide a lower fee ($0.43 per contract) for 
Members than currently is available for non-Customer orders and will 
further encourage increased participation on the BATS Options. 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. Further, as noted above, the proposed 
standard fee is still lower than the standard fee offered by Arca of 
$0.50 per contract.
    Similarly, the Exchange believes that the proposed increase in fees 
for Non-Customer Take Volume Tier 1 from $0.47 to $0.48 per contract 
and the proposed new Non-Customer Take Volume Tier 2 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 be eligible 
for lower fees by meeting a higher Professional, Firm and Market Maker 
Penny Pilot Take Volume Tier. These proposed changes, when viewed in 
conjunction with one another, will incentivize Members to: (i) Have an 
ADV equal to or greater than 1.00% of average TCV in order to receive 
the lower fees associated with Non-Customer Take Volume Tier 1; and 
(ii) further increase their ADV to reach 1.25% of average TCV in order 
to meet proposed Non-Customer Take Volume

[[Page 20288]]

Tier 2 and receive a fee of $0.47 per contract. While the price change 
for Non-Customer Take Volume Tier 1 does result in an increased fee for 
Members that qualify for the tier, the Exchange believes that the 
benefit to all participants on BATS Options from incentivizing 
increased participation on BATS Options outweighs the additional cost 
for those Members that qualify for Tier 1. Further, the requirements to 
meet proposed Tier 2 are only an additional 0.25% ADV as a percentage 
of average TCV, which would provide Members with fees identical to 
those that they would pay today under Tier 1. As such, the Exchange 
believes that the proposed change to Non-Customer Take Volume Tier 1 
and the proposed new Non-Customer Take Volume Tier 2 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 which 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 new Non-Customer Take 
Volume Tier 4 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 both Customer and non-Customer orders. Under proposed 
Tier 4, Members that have an ADAV in Customer orders equal to or 
greater than 2.00% of average TCV will be eligible for $0.43 per 
contract fees for Non-Customer orders that remove liquidity in Penny 
Pilot Securities. The Exchange further emphasizes that the proposed 
change is a reasonable, fair and equitable, and not unfairly 
discriminatory allocation of fees and rebates because it allows the 
Exchange to further incentivize Customer orders that add liquidity 
beyond the $0.50 per contract rebate that such orders receive. The 
Exchange believes that such additional incentives for Customer orders 
combined with the incentive for non-Customer orders that remove 
liquidity will lead Members to increase participation in both Customer 
and non-Customer orders. Incentivizing Members to increase 
participation in both added Customer liquidity and non-Customer orders 
that remove liquidity 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 to a greater extent than most tier changes because it will 
incentivize increased participation in multiple order capacities 
simultaneously. As stated above, such increased participation benefits 
all participants on BATS Options, even those that are not receiving the 
lower fees from achieving Tier 4.
    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.
    Finally, the Exchange believes that the non-substantive changes 
discussed above would contribute to the protection of investors and the 
public interest by helping to avoid confusion with respect the Exchange 
fee schedule.

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 for Market Maker orders that add liquidity in Penny Pilot 
Securities, including the proposed new Market Maker Add Volume Tier 1, 
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. Similarly, with respect to the proposed new fees for 
Professional, Firm and Market Maker Orders that remove liquidity in 
Penny Pilot Securities, include the proposed new tiers and adjusted 
rebates in the Professional, Firm and Market Maker Penny Pilot Take 
Volume Tiers, 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)(2) 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. If 
the Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule should be approved 
or disapproved.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2015-28 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-2015-28. 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

[[Page 20289]]

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 Number SR-BATS-2015-28 and should be submitted on or before May 6, 
2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Brent J. Fields,
Secretary.
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2015-08546 Filed 4-14-15; 8:45 am]
BILLING CODE 8011-01-P