80 FR 28328 - Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Y-Exchange, Inc.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 95 (May 18, 2015)

[Federal Register Volume 80, Number 95 (Monday, May 18, 2015)]
[Notices]
[Pages 28328-28331]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-11879]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74939; File No. SR-BYX-2015-24]


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

May 12, 2015.
    Pursuant to 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 1, 2015, BATS Y-Exchange, Inc. (the ``Exchange'' or ``BYX'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``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

[[Page 28329]]

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 BYX 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 its fee schedule in order to: (1) 
Amend the rebate associated with removing liquidity from the Exchange; 
(2) eliminate the NBBO Setter Tier; and (3) simplify pricing related to 
Physical Connection Fees.
Standard Remove Rebate
    The Exchange currently provides a rebate of $0.0016 per share for 
Members' orders that remove liquidity from the Exchange, which includes 
those orders that yield fee codes BB, N, and W. The Exchange proposes 
to amend its Fee Schedule to decrease the rebate for orders that remove 
liquidity to $0.0015 per share.
NBBO Setter Tier
    The Exchange currently offers an additional incentive per share for 
orders from Members that have an ADAV \6\ equal to or greater than 
0.30% of the TCV \7\ and that add liquidity on the Exchange and 
establish a new NBBO. Specifically, the Exchange provides an additional 
rebate of $0.0001 per share for such orders. The Exchange is proposing 
to eliminate this additional incentive because it has not achieved the 
desired effect, despite being designed to incentivize Members to add 
liquidity that sets the NBBO. As such, the Exchange is proposing to 
delete the NBBO Setter Tier in footnote 3 and replace it with 
``(Reserved.)'' The Exchange is also proposing to delete each reference 
to footnote 3 in the Fee Codes and Associated Fees section of the fee 
schedule.
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    \6\ ``ADAV'' means average daily volume calculated as the number 
of shares added per day.
    \7\ ``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.
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Physical Connection Fees
    The Exchange currently maintains a presence in two third-party data 
centers: (i) The primary data center where the Exchange's business is 
primarily conducted on a daily basis, and (ii) a secondary data center, 
which is predominantly maintained for business continuity purposes. The 
Exchange currently assesses fees to Members and non-Members of $1,000 
for any 1G physical port connection at either data center and of $2,500 
for any 10G physical port connection at either data center. The 
Exchange also provides market participants with the ability to access 
the Exchange's network through another data center entry point, or 
Point of Presence (``PoP''), at a data center other than the Exchange's 
primary or secondary data center.\8\ The Exchange currently charges 
$2,000 for any 1G physical port to connect to the Exchange in any data 
center where the Exchange maintains a PoP other than the Exchange's 
primary or secondary data center and $5,000 per month for each single 
physical 10G port provided by the Exchange to any Member or non-member 
in any data center where the Exchange maintains a PoP other than the 
Exchange's primary or secondary data center.
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    \8\ See Securities Exchange Act Release No. 74050 (January 14, 
2015), 80 FR 2989 (January 21, 2015) (SR-BYX-2015-01) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related 
to Fees for use of BATS Y-Exchange, Inc.).
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    The Exchange proposes to simplify its pricing structure by imposing 
a uniform rate for physical ports regardless of the data center in 
which the port connection is made. Specifically, the Exchange proposes 
to charge $1,000 per month for all 1G physical port connections and 
$2,500 per month for all 10G physical ports in any location where the 
Exchange offers the ability to connect to Exchange systems, including 
the secondary data center and any PoP location. In conjunction with the 
proposed change, the Exchange also proposes minor changes to re-format 
the chart that sets forth physical connection fees and also proposes to 
re-locate such chart and the accompanying text such that physical 
connection fees directly follow logical port fees.
Implementation Date
    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 objectives of Section 6 of the Act,\9\ in general, and 
furthers the objectives of Section 6(b)(4),\10\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. The Exchange also 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 at a particular 
venue to be excessive. The Exchange believes that the proposed rates 
are equitable and non-discriminatory in that they apply uniformly to 
all Members.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
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Standard Remove Rebate
    The Exchange believes that its proposal to decrease the standard 
rebate for orders that remove liquidity and yield fee codes BB, N, or W 
represents an equitable allocation of reasonable dues, fees, and other 
charges among Members and other persons using its facilities because it 
will reduce costs for the Exchange, thereby allowing the Exchange to 
apply those costs elsewhere to the benefit of all Members. While 
adjusting the Exchange's rebate of $0.0016 per share to remove 
liquidity to $0.0015 per share will obviously result in a reduction in 
rebates paid per share to Members, the Exchange believes that

[[Page 28330]]

any potential negative impact of this change will be outweighed by the 
Exchange's ability to apply the cost savings to other areas of the 
business, including enhanced rebates, reduced fees, and improved 
technology on the Exchange. The Exchange also believes that the 
proposed fee change is non-discriminatory because it would apply 
uniformly to all Members.
NBBO Setter Tier
    The Exchange believes that the proposed elimination of the NBBO 
Setter Tier represents an equitable allocation of reasonable dues, 
fees, and other charges among Members and other persons using its 
facilities because, as described above, the reduced fees offered by 
this tier is not affecting Members' behavior in the manner originally 
conceived by the Exchange. While the Exchange acknowledges the benefit 
of Members entering orders that set the NBBO, the Exchange has 
generally determined that it is providing additional rebates for 
liquidity that would be added on the Exchange regardless of whether the 
tier existed. By reducing these fees, the Exchange is not only reducing 
the fees it receives for orders that would set the NBBO without being 
incentivized to do so, but also missing out on the opportunity to offer 
other rebates or reduced fees that could incentivize other behavior 
that would enhance market quality on the Exchange, which would benefit 
all Members. As such, the Exchange also believes that the proposed 
elimination of the NBBO Setter Tier would be non-discriminatory in that 
it currently applies equally to all Members and, upon elimination, 
would no longer be available to any Members. Further, it will allow the 
Exchange to explore other ways in which it may enhance market quality 
for all Members.
Physical Connection Fees
    The Exchange believes that providing uniform rates for all 1G and 
10G physical connections to Exchange is reasonable because such change 
represents a reduction in fees for any Member that connects to the 
Exchange at a PoP location and no change to fees for any Member located 
in the Exchange's primary or secondary data center. The Exchange also 
believes that the proposal is equitably allocated and not unreasonably 
discriminatory because, as proposed, market participants will be able 
to access the Exchange at uniform rates regardless of whether such 
access is at the Exchange's primary or secondary data center location 
or another location where the Exchange offers access.

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

    The Exchange does not believe its proposed amendments to its fee 
schedule would impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act.
Standard Remove Rebate
    The Exchange does not believe that its proposal to amend the 
standard rebate for orders that remove liquidity from the Exchange 
would burden competition, but, rather, enhance the Exchange's ability 
to compete with other market centers. As described above, the Exchange 
believes that the reduced rebate would allow the Exchange opportunities 
to use the cost savings in order to enhance other components of the 
Exchange, including offering enhanced rebates, reduced fees, and 
improved technology on the Exchange, which the Exchange believes would 
better equip it to compete with other market centers.
NBBO Setter Tier
    The Exchange does not believe that its proposal to eliminate the 
NBBO Setter Tier would burden competition, but, rather, enhance the 
Exchange's ability to compete with other market centers. As described 
above, the Exchange believes that it is offering a reduction in fees 
for orders that would be submitted to the Exchange without the reduced 
fee, which prevents the Exchange from being able to offer other rebates 
or reduced fees that might be able to enhance market quality to the 
benefit of all Members. As such, eliminating the NBBO Setter Tier will 
allow the Exchange other opportunities to enhance market quality on the 
Exchange and ultimately, better compete with other market centers.
Physical Connection Fees
    The Exchange does not believe that the proposed change to physical 
port fees represents a significant departure from previous pricing 
offered by the Exchange or pricing offered by the Exchange's 
competitors. Rather, as described above, the Exchange is simply 
normalizing its fees for physical access to the Exchange regardless of 
the location where a physical connection is made. The offering is 
consistent with the Exchange's own economic incentives to facilitate as 
many market participants as possible in connecting to its market. 
Accordingly, the Exchange does not believe that the proposed change 
will impair the ability of Members or competing venues to maintain 
their competitive standing in the financial markets. The Exchange does 
not believe that its proposal would burden intramarket competition 
because the fees for physical connections would apply uniformly to all 
Members.

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 \11\ and paragraph (f) of Rule 19b-4 
thereunder.\12\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-BYX-2015-24 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-BYX-2015-24. 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

[[Page 28331]]

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 
such filing also will be available for inspection and copying at the 
principal offices 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-BYX-2015-24, and should be submitted on or before June 
8, 2015. June 5, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-11879 Filed 5-15-15; 8:45 am]
 BILLING CODE 8011-01-P