80 FR 34753 - Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of EDGA Exchange, Inc.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 116 (June 17, 2015)

[Federal Register Volume 80, Number 116 (Wednesday, June 17, 2015)]
[Notices]
[Pages 34753-34756]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-14821]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75147; File No. SR-EDGA-2015-24]


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

June 11, 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 June 9, 2015, EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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.\3\ 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 \4\ and Rule 19b-4(f)(2) 
thereunder,\5\ 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\ The Commission notes that a previous version of the proposal 
was filed as SR-EDGA-2015-21. The proposal was withdrawn on June 9, 
2015.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 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 its fees and rebates 
applicable to Members \6\ of the Exchange pursuant to EDGA Rule 15.1(a) 
and (c) (``Fee Schedule'') to: (i) Increase the rebate from $0.00040 
per share to $0.00150 per share for orders that yield fee code A, which 
routes to the Nasdaq Stock Market LLC (``Nasdaq'') and adds liquidity; 
and (ii) adopt fees for the use of a communication and routing service 
known as BATS Connect.
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    \6\ The term ``Member'' is defined as ``any registered broker or 
dealer, or any person associated with a registered broker or dealer, 
that has been admitted to membership in the Exchange. A Member will 
have the status of a ``member'' of the Exchange as that term is 
defined in Section 3(a)(3) of the Act.'' 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: (i) Increase the rebate from $0.00040 per 
share to $0.00150 per share for orders that yield fee code A, which 
routes to Nasdaq and adds liquidity; and (ii) adopt fees for the use of 
a communication and routing service known as BATS Connect.
Fee Code A
    In securities priced at or above $1.00, the Exchange currently 
provides a rebate of $0.00040 per share for Members' orders that yield 
fee code A, which routes to Nasdaq and adds liquidity. The Exchange 
proposes to amend its Fee Schedule to increase this rebate to $0.00150 
per share for Members' orders that yield fee code A. The proposed 
change represents a pass through of the rate that BATS Trading, Inc. 
(``BATS Trading''), the Exchange's affiliated routing broker-dealer, is 
rebated for routing orders to Nasdaq when it does not qualify for a 
volume tiered rebate. When BATS Trading routes to Nasdaq, it is rebated 
a standard rate of $0.00150 per share.\7\ BATS Trading will pass 
through this rate on Nasdaq to the Exchange and the Exchange, in turn, 
will pass through this rate to its Members. The Exchange notes that the 
proposed change is in response to Nasdaq's June 2015 fee change where 
Nasdaq will no longer offer a rebate of $0.00040 per share for orders 
in select symbols (``Nasdaq's Select Symbol Program'') to its 
customers, such as

[[Page 34754]]

BATS Trading, and such orders will be subject to the regular Nasdaq 
Pricing Schedule.\8\
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    \7\ The Exchange notes that to the extent BATS Trading does or 
does not achieve any volume tiered discount on Nasdaq or routes an 
order to Nasdaq in a symbol that is not included in Nasdaq's Select 
Symbol Program to receive a rebate of $0.00150 per share, its rate 
for fee code A will not change. The Exchange further notes that, due 
to billing system limitations that do not allow for separate rates 
by tape, it will pass through the lesser rebate of $0.00150 per 
share for all Tapes A, B & C securities.
    \8\ See Nasdaq Equity Trader Alert #2015-70, Nasdaq Ends Access 
Fee Experiment, available at http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2015-70.
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BATS Connect
    On May 27, 2015, the Exchange filed a proposed rule change with the 
Commission to adopt a communication and routing service known as BATS 
Connect.\9\ The Exchange now proposes to adopt fees related to the use 
of BATS Connect that are equal to the fees charged for an identical 
service, also called BATS Connect, offered by the Exchange's affiliate, 
EDGX.\10\ BATS Connect is offered by the Exchange on a voluntary basis 
in a capacity similar to a vendor. In sum, BATS Connect is a 
communication service that provides subscribers an additional means to 
receive market data from and route orders to any destination connected 
to the Exchange's network. BATS Connect does not provide any advantage 
to subscribers for connecting to the Exchange's affiliates \11\ as 
compared to other method of connectivity available to subscribers. The 
servers of the subscriber need not be located in the same facilities as 
the Exchange in order to subscribe to BATS Connect. Subscribers may 
also seek to utilize BATS Connect in the event of a market disruption 
where other alternative connection methods become unavailable.
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    \9\ See file no. SR-EDGA-2015-20.
    \10\ See the EDGX fee schedule available at http://batstrading.com/support/fee_schedule/edgx/. See also Securities 
Exchange Act Release No. 73780 (December 8, 2014), 79 FR 73942 
(December 12, 2014) (SR-EDGX-2014-28) and file no. SR-EDGX-2015-27.
    \11\ The Exchange's affiliated exchanges are EDGX, BATS 
Exchange, Inc. (``BZX''), and BATS Y-Exchange, Inc. (``BYX''). The 
Exchange understands that its affiliated Exchange's intend to file 
identical proposed rule changes to adopt the fees for the BATS 
Connect service with the Commission. The Exchange also notes that 
its affiliated Exchanges have also filed proposed rule changes with 
the Commission to adopt rules describing the BATS Connect service.
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    The Exchange will charge a monthly connectivity fee to subscribers 
utilizing BATS Connect to route orders to other exchanges and broker-
dealers that are connected to the Exchange's network. The amount of the 
connectivity fee varies based solely on the bandwidth selected by the 
subscriber. Specifically, the Exchange proposes to charge $350 for 1 
Mb, $700 for 5 Mb, $950 for 10 Mb, $1,500 for 25 Mb, $2,500 for 50 Mb, 
and $3,500 for 100 Mb.
    BATS Connect would also allow subscribers to receive market data 
feeds from the exchanges connected to the Exchange's network. In such 
case, the subscriber would pay the Exchange a connectivity fee, which 
varies and is based solely on the amount of bandwidth required to 
transmit the selected data product to the subscriber. The proposed 
connectivity fees are set forth in the Exhibit 5 attached hereto and 
range from no charge to $11,500 based on the market data product the 
subscriber selects.
    The Exchange also proposes to adopt a discounted fee of $4,160 per 
month for subscribers who purchase connectivity to a bundle of select 
market data products. The following market data products would be 
included in the bundle: UQDF/UTDF/OMDF, CQS/CTS, Nasdaq TotalView, 
Nasdaq BX TotalView, Nasdaq PSX TotalView, NYSE ArcaBook, NYSE MKT 
OpenBook Ultra, and BBS/TTDS. Absent the discount, a subscriber 
purchasing connectivity through BATS Connect for each of these market 
data products would pay a total monthly fee of $5,200. As proposed, a 
subscriber who purchases connectivity to each of the above market data 
products would be charged a monthly fee of $4,160, which represents a 
20% discount. The subscribers would pay any fees charged by the 
exchange providing the market data feed directly to that exchange.
    The Exchange notes that it will not charge a fee to subscribers 
utilizing BATS Connect to route orders to or receive market data 
products from the Exchange's affiliates, EDGX, BZX, and BYX. BATS 
Connect provides subscribers a means to access exchanges and market 
centers on the Exchange's network. In all cases, BATS Connect 
subscribers would be continue to be liable for the necessary fees 
charged by that exchange or market center, including any required 
connectivity fees. Market participants who chose a method other than 
BATS Connect to connect to another exchange or market center would also 
pay any required connectivity fees directly to that exchange or market 
center. Likewise, BATS Connect subscribers would be liable for any 
connectivity fees charged by the Exchange's affiliate.
Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule immediately.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(4),\13\ 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 proposed rule change reflects a competitive 
pricing structure designed to incent market participants to direct 
their order flow to the Exchange. The Exchange believes that the 
proposed rates are equitable and non-discriminatory in that they apply 
uniformly to all Members. The Exchange believes the fees and credits 
remain competitive with those charged by other venues and therefore 
continue to be reasonable and equitably allocated to Members.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
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Fee Code A
    The Exchange believes that its proposal to increase the pass 
through rebate for Members' orders that yield fee code A from $0.00040 
to $0.00150 per share represents an equitable allocation of reasonable 
dues, fees, and other charges among Members and other persons using its 
facilities. Prior to Nasdaq's Select Symbol Program, Nasdaq provided 
BATS Trading a rebate of $0.00150 per share for orders yielding fee 
code A, which BATS Trading passed through to the Exchange and the 
Exchange passed through to its Members. In June 2015, Nasdaq terminated 
its Select Symbol Program, thereby increasing the rebate it provides 
its customers, such as BATS Trading, from a rebate of $0.00040 per 
share to its standard rebate of $0.00150 per share for orders that are 
routed to Nasdaq in symbols included in its Select Symbol Program.\14\ 
Therefore, the Exchange believes that the proposed change in fee code A 
from a rebate of $0.00040 per share to a rebate of $0.00150 per share 
is equitable and reasonable because it accounts for the pricing changes 
on Nasdaq. In addition, the proposal allows the Exchange to continue to 
charge its Members a pass-through rate for orders that are routed to 
Nasdaq. The Exchange notes that routing through BATS Trading is 
voluntary. Lastly, the Exchange also believes that the proposed 
amendment is non-discriminatory because it applies uniformly to all 
Members.
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    \14\ See supra note 7.

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[[Page 34755]]

BATS Connect
    The Exchange also believes that its proposal is consistent with 
Section 6(b)(4) of the Act,\15\ in that it provides for the equitable 
allocation of reasonable dues, fees and other charges among members and 
other persons using its facilities. First, the Exchange will charge a 
connectivity fee to subscribers utilizing BATS Connect to route orders 
to other exchanges and market centers that are connected to the 
Exchange's network, which varies based solely on the amount of 
bandwidth selected by the subscriber. The amounts of the connectivity 
fees are also reasonable as compared to similar fees charged by other 
exchanges. For purposes of order routing, the Exchange proposes to 
charge $350 for 1 Mb, $700 for 5 Mb, $950 for 10 Mb, $1,500 for 25 Mb, 
$2,500 for 50 Mb, and $3,500 for 100 Mb. The New York Stock Exchange, 
Inc. (``NYSE'') currently charges $300 for 1 Mb, $700 for 5 Mb, $900 
for 10 Mb, $1,500 for 25 Mb, $2,000 for 50 Mb, and $2,600 for 100 
Mb.\16\ The Exchange notes that, overall, the connectivity fee for 
routing of orders to other market centers proposed by the Exchange is 
similar to than that charged by the NYSE.
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    \15\ 15 U.S.C. 78f(b)(4).
    \16\ See NYSE's SFTI Americas Product and Service List available 
at http://www.nyxdata.com/docs/connectivity.
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    Second, with regard to utilizing BATS Connect to receive market 
data products from other exchanges, the Exchange would only charge 
subscribers a connectivity fee, the amount of which is based solely on 
the amount of bandwidth required to transmit that specific data product 
to the subscribers. The amounts of the connectivity fees are also 
reasonable as compared to similar fees charged by other exchanges. For 
example, for market data connectivity, the Nasdaq Stock Market LLC 
(``Nasdaq'') charges $1,412 per month for CQS/CTS data feed, and the 
Exchange proposes to charge $1,000 per month connectivity for CQS/CTS 
data feed.\17\ The Exchange notes that, overall, the connectivity fee 
for receipt of other market centers' data feed proposed by the Exchange 
is similar to that charged by Nasdaq.
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    \17\ See Nasdaq Rule 7034 (setting forth Nasdaq's connectivity 
fees for receipt of third party market data products).
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    The Exchange believes it is reasonable to offer such discounted 
pricing to subscribers who purchase connectivity to a bundle of market 
data products as it would enable them to reduce their overall 
connectivity costs for the receipt of market data. As stated above, 
BATS Connect is offered and purchased on a voluntary basis and 
subscribers can discontinue use at any time and for any reason, 
including due to an assessment of the reasonableness of fees charged. 
Moreover, the Exchange believes the proposed fees are reasonable and 
equitable because they continue to be based on the Exchange's costs to 
cover the amount of bandwidth required to provide connectivity to the 
select bundle of data feeds. The proposed fees will continue to allow 
the Exchange to recoup this cost, while providing subscribers with an 
alternative means to connect to the select bundle of data feeds at a 
discounted rate.
    The subscribers would pay any fees: (i) Charged by the exchange 
providing the market data feed directly to that exchange (ii) charged 
by a market center to which they routed an order and an execution 
occurred directly to that market center. The Exchange itself would not 
charge any additional fees.\18\ BATS Connect is offered and purchased 
on a voluntary basis, in that neither the Exchange nor subscribers are 
required by any rule or regulation to make this product available. 
Accordingly, subscribers can discontinue use at any time and for any 
reason, including due to an assessment of the reasonableness of fees 
charged.
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    \18\ The Exchange's rules and fees would not address the fees or 
manner of operation of any destination to which the subscriber asked 
that an order be routed.
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    Moreover, the Exchange believes the proposed fees are reasonable 
and equitable because they are based on the Exchange's costs to cover 
hardware, installation, testing and connection, as well as expenses 
involved in maintaining and managing the service. The proposed fees 
allow the Exchange to recoup these costs, while providing subscribers 
with an alternative means to connect to other exchange and market 
centers. The Exchange believes that the proposed fees are reasonable 
and equitable in that they reflect the costs and the benefit of 
providing alternative connectivity.
    The Exchange also believes it is equitable and reasonable to 
provide BATS Connect to subscribers for no charge to route orders to or 
receive market data products from the Exchange's affiliates. BATS 
Connect provides subscribers a means to access exchanges and market 
centers on the Exchange's network. In all cases, BATS Connect 
subscribers would be continue to be liable for the necessary fees 
charged by the Exchange, its affiliate, or another exchange or market 
center, including any required connectivity fees. As stated above, BATS 
Connect is offered and purchased on a voluntary basis, and subscribers 
and market participants may choose an alternative method to connect to 
the Exchange, its affiliates, or another exchange or market center 
connected to the Exchange's network. Such other services may also offer 
at no charge connectivity to certain exchanges or a group of 
exchanges.\19\ Therefore, the Exchange believes that the [sic] 
providing BATS Connect to subscribers at no charge to route orders to 
or receive market data products from the Exchange's affiliates is 
reasonable and equitable as they will continue to be liable to the 
Exchange or its affiliate for any required connectivity fees.
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    \19\ See NYSE's SFTI Americas Product and Service List available 
at http://www.nyxdata.com/docs/connectivity (offering at no charge 
connectivity to the NYSE, NYSE MKT LLC, and NYSE Arca, Inc.).
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    Lastly, the Exchange also believes that the proposed amendments to 
its fee schedule are non-discriminatory because they will apply 
uniformly to all subscribers. All subscribers that voluntarily select 
various service options will be charged the same amount for the same 
services. All subscribers have the option to select any connectivity 
option, and there is no differentiation among subscribers with regard 
to the fees charged for the service. Further, the benefits of selecting 
such services are the same for all subscribers, irrespective of whether 
their servers are located in the same facility as the Exchange.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes its proposed amendments to its Fee Schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. 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.
Fee Code A
    The Exchange believes that its proposal to pass through a rebate of 
$0.00150 per share for Members' orders that yield fee code A would 
increase intermarket competition because it offers customers an 
alternative means to

[[Page 34756]]

route to Nasdaq for a similar rate as entering orders in certain 
symbols on Nasdaq directly. The Exchange believes that its proposal 
would not burden intramarket competition because the proposed rate 
would apply uniformly to all Members.
BATS Connect
    The Exchange believes the proposed fees for BATS Connect will not 
result in any burden on competition. The proposed rule change is 
designed to provide subscribers with an alternative means to access 
other market centers on the Exchange's network if they choose or in the 
event of a market disruption where other alternative connection methods 
become unavailable. BATS Connect is not the exclusive method to connect 
to these market centers and subscribers may utilize alternative methods 
to connect to the product if they believe the Exchange's proposed 
pricing is unreasonable or otherwise. Therefore, the Exchange does not 
believe the proposed rule change will have any effect on competition.

(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 unsolicited 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 \20\ and paragraph (f) of Rule 19b-4 
thereunder.\21\ 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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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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-EDGA-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-EDGA-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 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 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-EDGA-2015-24 and should be 
submitted on or before July 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14821 Filed 6-16-15; 8:45 am]
BILLING CODE 8011-01-P