80 FR 29139 - 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 97 (May 20, 2015)

[Federal Register Volume 80, Number 97 (Wednesday, May 20, 2015)]
[Notices]
[Pages 29139-29142]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-12147]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74968; File No. SR-BATS-2015-38]


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.

May 14, 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 May 6, 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.
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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: (i) add a new standard rate and a fee code NM

[[Page 29140]]

associated with Market Maker \6\ orders that add liquidity in non-Penny 
Pilot Securities; \7\ (ii) add a new footnote 7 entitled ``Market Maker 
Non-Penny Pilot Add Volume Tiers''; (iii) simplifying the Exchange's 
physical connection fees; (iv) certain corresponding changes associated 
with the new rebates associated with Market Maker orders in non-Penny 
Pilot Securities; and (v) a non-substantive, clarifying change in 
footnote 5.
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    \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.
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Standard Rate in Market Maker Orders in Non-Penny Pilot Securities
    Currently, the Exchange offers a rebate of $0.65 per contract for 
Market Maker orders that add liquidity in non-Penny Pilot Securities. 
The Exchange is proposing to create a new fee code NM and to change the 
standard rate for Market Maker orders that add liquidity in non-Penny 
Pilot Securities to a rebate of $0.42 per contract. Such orders will be 
eligible for the enhanced rebates available under the NBBO Setter 
Tiers, the Quoting Incentive Program Tiers, and the new Market Maker 
Non-Penny Pilot Add Volume Tiers proposed below. The Exchange is not 
proposing to change pricing for Professional \8\ or Firm \9\ orders or 
for any Market Maker orders that do not add liquidity non-Penny Pilot 
Securities.
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    \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.
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Market Maker Non-Penny Pilot Add Volume Tiers
    As described above, the Exchange currently provides a rebate of 
$0.65 per contract for Market Maker orders that add liquidity in non-
Penny Pilot Securities, which it proposes to change to $0.42 per 
contract. The Exchange is also proposing to add new footnote 7 to its 
fee schedule entitled ``Market Maker Non-Penny Pilot Add Volume Tiers'' 
in order to offer enhanced rebates for Market Maker orders in non-Penny 
Pilot Securities to Members that meet certain thresholds. Specifically, 
the Exchange is proposing to: (i) Provide a rebate of $0.45 per 
contract where the Member has an ADV \10\ equal to or greater than 
0.30% of average TCV; \11\ and (ii) provide a rebate of $0.52 where the 
Member has an ADV equal to or greater than 1.00% of average TCV. Where 
a Member does not meet either of these thresholds, they would receive 
the standard rebate of $0.42 per contract, as proposed above.
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    \10\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, 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.
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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.\12\ 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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    \12\ See Securities Exchange Act Release No. 70199 (August 14, 
2013), 78 FR 51250 (August 20, 2013) (SR-BATS-2013-036) (Order 
Approving a Proposed Rule Change to Introduce a Connectivity Option 
Through Points of Presence).
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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.
Corresponding Changes
    In conjunction with the changes proposed above, the Exchange is 
proposing to make certain corresponding changes, including: (i) Add fee 
code NM references in footnotes 4 and 5; (ii) removing the reference to 
``MM'' (short for Market Maker) from the description in fee code NA; 
and (iii) remove the words ``Market Maker Add Volume'' from both Market 
Maker Add Volume Tier 1 and Tier 2 in footnote 6.
Clarifying Change
    The Exchange is proposing to add references to the fee codes PA and 
PF in footnote 5. While the Fee Codes and Associated Fees table 
indicates that footnote 5 applies to both fee codes PA and PF, the fee 
codes are not included in the footnote itself as fee codes to which the 
footnote is applicable.
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.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed reduction of the standard rebate 
for Market Maker orders in non-Penny Pilot Securities that add 
liquidity is a reasonable, fair and equitable 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 any of the enhanced rebate tiers for which the 
orders are eligible, including the NBBO Setter Tiers, the Quoting 
Incentive Program Tiers, and the Market Maker Non-Penny Pilot Add 
Volume Tiers proposed herein. Finally, while adjusting the standard 
rebate of $0.65 per contract to remove liquidity to $0.42 per share 
will obviously result in a

[[Page 29141]]

reduction in rebates paid per contract to Members, the Exchange 
believes that 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 BATS Options. The Exchange also believes 
that the proposed fee change is non-discriminatory because it would 
apply uniformly to all Members [sic].
    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 that the proposed addition of Market Maker Non-
Penny Pilot Add Volume Tiers is a reasonable, fair and equitable 
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, which will result in enhanced market 
quality for all Members.
    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.
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.
Corresponding and Clarifying Changes
    Finally, the Exchange believes that the corresponding and 
clarifying changes discussed above are non-substantive and 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 non-Penny 
Pilot Securities, particularly the enhanced rebates available under the 
Market Maker Non-Penny Pilot Add 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 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.
    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.

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.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(2).
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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-2015-38 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 Number SR-BATS-2015-38. 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 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;

[[Page 29142]]

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-2015-38 and should be submitted on or before June 10, 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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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12147 Filed 5-19-15; 8:45 am]
BILLING CODE 8011-01-P