80_FR_42277 80 FR 42141 - 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.

80 FR 42141 - 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 136 (July 16, 2015)

Page Range42141-42146
FR Document2015-17395

Federal Register, Volume 80 Issue 136 (Thursday, July 16, 2015) 
[Federal Register Volume 80, Number 136 (Thursday, July 16, 2015)]
[Notices]
[Pages 42141-42146]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-17395]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75422; File No. SR-BATS-2015-52]


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.

July 10, 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 July 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.
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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 its fees and rebates 
applicable to Members \5\ of the Exchange pursuant to Rule 15.1(a) and 
(c).
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    \5\ A 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) Amend footnote 2 to remove Professional \6\ orders from 
the Professional and Firm Penny Pilot Add Volume Tiers related to the 
pricing for Professional and Firm \7\ orders that add liquidity in 
Penny Pilot Securities; \8\ (ii) further amend footnote 2 to change the 
standards for meeting Tiers 1 and 2, changing the rebate for Tier 2, 
and adding a new Tier 3; (iii) amend the standard rebate associated 
with Fee Code PF for Firm orders that add liquidity in Penny Pilot 
Securities; (iv) create a new Fee Code NF for Firm orders that add 
liquidity in non-Penny Pilot Securities; (v) create a new footnote 8 
titled ``Firm Non-Penny Pilot Add Volume Tiers;'' (vi) add a new Tier 3 
to the Market Maker Penny Pilot Add Volume Tiers; (vii) amend the fees 
that the Exchange charges for orders routed by the Exchange for 
execution at other venues, including those associated with Fee Codes 
2C, CC, CF, HF, and OF; and (viii) amend the Options Physical 
Connection Fees for both 1G and 10G physical ports.
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    \6\ ``Professional'' applies to any transaction identified by a 
Member as such pursuant to Exchange Rule 16.1.
    \7\ ``Firm'' applies to any transaction identified by a Member 
for clearing in the Firm range at the OCC.
    \8\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01.
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Professional Orders in Penny Pilot Securities
    The Exchange proposes to remove Professional orders from inclusion 
in the Professional and Firm Penny Pilot

[[Page 42142]]

Add Volume Tiers, which apply to fee codes PA and PF. Currently, the 
Exchange provides a standard rebate of $0.40 per contract under Fee 
Code PA for Professional orders that add liquidity in Penny Pilot 
Securities and an enhanced rebate of $0.42 per contract for each 
Professional or Firm order that adds liquidity in Penny Pilot 
Securities and meets the requirements for either Tier 1 or Tier 2 of 
the Professional and Firm Penny Pilot Add Volume Tiers. Specifically, 
the Exchange is proposing to eliminate Professional orders from the 
Professional and Firm Penny Pilot Add Volume Tiers such that 
Professional orders subject to Fee Code PA would not be eligible for 
enhanced rebates under footnote 2. Such orders would remain eligible to 
receive enhanced rebates under footnotes 4 (NBBO Setter Tiers) and 5 
(Quoting Incentive Program Tiers).
Firm Orders That Add Liquidity in Penny Pilot Add Volume Tiers
    The Exchange is proposing to make several changes to the Firm Penny 
Pilot Add Volume Tiers. First, the Exchange is proposing to change the 
standard rebate associated with Fee Code PF for Firm orders that add 
liquidity in Penny Pilot Securities from $0.40 per contract to $0.36 
per contract. The Exchange is also proposing to change the rebate for 
Firm orders in Penny Pilot Securities for Members that meet Tier 1 of 
the Firm Penny Pilot Add Volume Tiers from $0.42 per contract to $0.40 
per contract.
    The Exchange is also proposing to amend the standards required to 
meet Tiers 1 and 2 of the Firm Penny Pilot Add Volume Tiers. Currently, 
a Member qualifies for Tier 1 where the Member has an Options Step-up 
Add TCV \9\ from June 2014 baseline equal to or greater than 0.50% and 
qualifies for Tier 2 where the Member has: (i) An Options Step-Up Add 
TCV from September 2014 baseline equal to or greater than 0.30%; and 
(ii) an ADV \10\ equal to or greater than 0.40% of average TCV.\11\ 
Specifically, the Exchange is proposing to change the Tier 1 required 
criteria such that a Member qualifies for Tier 1 where the Member has 
an ADV equal to or greater than 0.30% of average TCV. The Exchange is 
also proposing to change the Tier 2 required criteria such that a 
Member qualifies for Tier 2 where the Member has an ADV equal to or 
greater than 1.00% of average TCV.
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    \9\ ``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.
    \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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    The Exchange is also proposing to add an additional tier to the 
Firm Penny Pilot Add Volume Tier under footnote 2 of the fee schedule. 
As described above, the Exchange currently offers two tiers under the 
Firm Penny Pilot Add Volume Tiers. The Exchange is proposing to add 
Tier 3 under which Members would receive a $0.43 per contract rebate 
for Firm orders that add liquidity in Penny Pilot Securities where the 
Member: (i) Has an ADAV \12\ in Firm orders in Penny Pilot Securities 
equal to or greater than 0.35% of average TCV; and (ii) has an ADV 
equal to or greater than 1.00% of average TCV.
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    \12\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added per day.
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Firm Orders That Add Liquidity in Non-Penny Pilot Securities
    The Exchange is proposing to make two changes to its fee schedule 
regarding Firm orders that add liquidity in non-Penny Pilot Securities. 
First, the Exchange is proposing to create a new Fee Code NF which 
would apply to Firm orders that add liquidity in non-Penny Pilot 
Securities and for which the standard pricing would be a $0.40 rebate 
per contract. As part of this change, the Exchange is also proposing to 
delete the reference to ``Firm'' in Fee Code NA, which currently 
applies to both Professional and Firm orders that add liquidity in non-
Penny Pilot Securities, which are subject to a standard rebate of $0.65 
per contract. Like Fee Code NA, as proposed, orders yielding Fee Code 
NF would be eligible for enhanced rebates under the NBBO Setter Tiers 
and the Quoting Incentive Program Tiers.
    The Exchange is also proposing to add a new footnote 8 titled 
``Firm Non-Penny Pilot Add Volume Tiers'' under which there would be 
three new tiers offering enhanced rebates for Firm orders that add 
liquidity in non-Penny Pilot Securities. Specifically, as proposed, the 
tiers would provide the following rebates under the following 
conditions for Firm orders that add volume in non-Penny Pilot 
Securities: Tier 1 would provide a $0.50 rebate per contract to a 
Member that has an ADV equal to or greater than 0.05% of average TCV; 
Tier 2 would provide a $0.60 rebate per contract to a Member that has 
an ADV equal to or greater than 0.15% of average TCV; and Tier 3 would 
provide a $0.65 rebate per contract to Member that has an ADV equal to 
or greater than 0.25% of average TCV.
Market Maker Penny Pilot Add Volume Tiers
    The Exchange is proposing to add a new Tier 3 to the Market Maker 
Penny Pilot Add Volume Tiers in order to provide another means for 
Market Maker orders in Penny Pilot Securities to receive a rebate of 
$0.42 per contract. Currently, the standard rebate for Market Maker 
orders in Penny Pilot Securities is $0.36 per contract. Such orders can 
receive an enhanced rebate of $0.40 by meeting Tier 1 of the Market 
Maker Penny Pilot Add Volume Tiers or $0.42 by meeting Tier 2 of such 
Tiers. The Exchange is proposing to add a new Tier 3 under which a 
Member would receive $0.42 per contract where: (i) The Member has an 
ADAV in Firm orders in Penny Pilot Securities (orders that yield Fee 
Code PF) equal to or greater than 0.35% of average TCV; and (ii) the 
Member has an ADV equal to or greater than 1.00% of average TCV.
Routing Fee Changes
    The Exchange currently charges certain flat rates for routing to 
other options exchanges based on the approximate cost of routing to 
such venues. Such flat rates for routing to such options exchanges is 
based on the cost of transaction fees assessed by each venue as well as 
costs to the Exchange for routing (i.e., clearing fees, connectivity 
and other infrastructure costs, membership fees, etc.) (collectively, 
``Routing Costs''). To address different fees at various other options 
exchanges, the Exchange differentiates its flat rates depending on 
whether they are for Customer orders or for Professional, Firm, and 
Market Maker \13\ orders (collectively, ``non-Customer orders'').
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    \13\ As defined on the Exchange's fee schedule, the terms 
``Firm'' and ``Market Maker'' apply to any transaction identified by 
a member for clearing in the Firm or Market Maker range, 
respectively, at the Options Clearing Corporation (``OCC'').
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    As noted previously and as set forth above, the Exchange's current 
approach to routing fees is to set forth in a simple manner certain 
flat fees that approximate the cost of routing to other options 
exchanges. The Exchange then monitors the fees charged as compared to 
the costs of its routing services, as well as monitoring for specific 
fee changes by other options exchanges, and adjusts its flat routing 
fees and/or groupings to ensure that the Exchange's fees do indeed 
result in a rough approximation of overall Routing Costs, and are not 
significantly higher or lower

[[Page 42143]]

in any area. Over the last several months, due to various increases in 
fees assessed by other options exchanges, the Exchange's overall 
Routing Costs have increased. As a result, and in order to avoid 
subsidizing routing to away options exchanges and to continue providing 
quality routing services, the Exchange proposes various increases to 
the charges assessed for most orders routed to most options exchanges, 
as set forth below.
    The Exchange is proposing to amend the fees that the Exchange 
charges for orders routed by the Exchange for execution at other 
venues, including those associated with Fee Codes 2C, CC, CF, HF, and 
OF. The Exchange is proposing to amend the fees for those Fee Codes as 
follows: From $0.00 to $0.47 per contract for orders yielding Fee Code 
2C, which are Customer orders routed to C2 Options Exchange, Inc. 
(``C2''); from $0.12 to $0.13 per contract for orders yielding Fee Code 
CC, which are Customer orders routed to Chicago Board Options Exchange 
(``CBOE''); from $0.65 to $0.75 per contract for orders yielding Fee 
Code CF, which are Professional, Firm, or Market Maker orders routed to 
CBOE; from $0.65 to $0.70 per contract for orders yielding Fee Code HF, 
which are Professional, Firm, or Market Maker orders routed to NASDAQ 
OMX PHLX LLC (``PHLX''); and from $0.65 to $0.99 for orders yielding 
Fee Code OF, which are Professional, Firm, or Market Maker orders 
routed to BOX Options Exchange, LLC (``BOX''). The Exchange notes that 
certain of the above changes are being proposed in order to maintain a 
simple, flat fee structure for routing to other venues in both Penny 
Pilot Securities and non-Penny Pilot Securities.
Physical Connection Fees
    The Exchange proposes to amend its fee schedule to modify its fees 
for physical connectivity. A physical port is utilized by a Member or 
non-Member to connect to the Exchange at the data centers where the 
Exchange's servers are located. 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 the 
following physical connectivity fees for Members and non-Members on a 
monthly basis: $1,000 per physical port that connects to the System 
\14\ via 1 gigabyte circuit; and $2,500 per physical port that connects 
to the System via 10 gigabyte circuit.
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    \14\ The term ``System'' is defined as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.'' See Exchange Rule 
1.5(cc).
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    The Exchange now proposes to amend its physical connectivity fees 
to align its fees with its affiliates.\15\ The Exchange proposes to 
increase the fee per physical port that connects to the System via: (i) 
1 gigabyte circuit from $1,000 per month to $2,000 per month; and (ii) 
10 gigabyte circuit from $2,500 per month to $4,000 per month.
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    \15\ For purposes of this filing, the Exchange's affiliates are 
EDGX Exchange, Inc. (``EDGX''), EDGA Exchange, Inc. (``EDGA''), the 
Exchange's equity exchange (``BATS Equities'') and BATS Y-Exchange, 
Inc. (``BYX'', together with BATS Equities, EDGA and EDGX, the 
``BATS Exchanges''). The Exchange notes that each of its affiliates 
will also file proposed rule changes with Commission to adopt 
similar physical connectivity fees to be effective July 1, 2015.
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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.\16\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with section 6(b)(4) of the Act,\17\ 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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    \16\ 15 U.S.C. 78f.
    \17\ 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.
Professional Orders in Penny Pilot Securities
    The Exchange believes the proposed removal of Professional orders 
in Penny Pilot Securities that add liquidity from the Professional and 
Firm Penny Pilot Add Volume Tiers is a reasonable, fair and equitable, 
and not unfairly discriminatory allocation of fees and rebates because, 
while Members entering such orders will not be eligible for the $0.02 
per contract enhanced rebate that they would have potentially been 
eligible to receive under the tiers ($0.42 per contract vs. $0.40 per 
contract standard rebate for Fee Code PA), such Members will still be 
eligible for enhanced rebates through both the NBBO Setter Tiers (up to 
an additional $0.04 per contract) and the Quoting Incentive Program 
Tiers (also up to an additional $0.04 per contract). Further, such a 
reduction in rebates will allow the Exchange to allocate fees and 
rebates to other orders in order to encourage increased participation 
on BATS Options, which the Exchange believes 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.
Firm Orders That Add Liquidity in Penny Pilot Add Volume Tiers
    The Exchange also believes that the proposed amendments to the fee 
schedule related to Firm orders in Penny Pilot Securities related to 
the standard rebate under Fee Code PF and the proposed amendments to 
footnote 2, including to reduce the rebate for Tier 1, add a new tier, 
and amend the standards for Tiers 1 and 2 is a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and 
rebates because it will provide Members entering Firm orders with the 
opportunity to receive higher rebates while simultaneously encouraging 
greater participation on BATS Options, which, as described above the 
Exchange believes 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. Specifically, the Exchange believes that the reduction of the 
standard rebate associated with Fee Code PF combined with the amended 
and lowered standard for meeting Tier 1 of the Firm Penny Pilot Add 
Volume Tiers is a reasonable, fair and equitable, and not unfairly 
discriminatory

[[Page 42144]]

allocation of fees and rebates because, in conjunction, they will both 
provide Members with a reasonably achievable threshold for receiving 
the same rebate as they do today while at the same time encouraging and 
rewarding higher levels of participation on the Exchange overall. The 
Exchange also believes that amending the standard for meeting Tier 2 is 
a reasonable, fair and equitable, and not unfairly discriminatory 
allocation of fees and rebates because it will similarly encourage 
increased participation on the Exchange by offering a rebate that 
applies equally to all Members without regard to prior trading volumes. 
Such rebate will encourage greater general participation on the 
Exchange, 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. Finally, the Exchange believes that proposed Tier 3 is a 
reasonable, fair and equitable, and not unfairly discriminatory 
allocation of fees and rebates because the second of its two 
requirements (that a Member has an ADV equal to or greater than 1.00% 
of average TCV) is identical to the only requirement for meeting Tier 
2, meaning that any Member that meets Tier 2 will only need to meet the 
additional requirement that a Member has an ADAV in Firm orders in 
Penny Pilot Securities equal to or greater than 0.35% of average TCV in 
order to receive the enhanced rebate. This will provide a direct 
incentive for any Member that meets Tier 2 to further increase 
participation in Firm orders in Penny Pilot Securities and, as with 
each of the proposed changes mentioned in this paragraph, will 
encourage greater participation on the Exchange, 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.
Firm Orders That Add Liquidity in Non-Penny Pilot Securities
    The Exchange believes that the amendments for Firm orders that add 
liquidity in non-Penny Pilot Securities mark a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and 
rebates because while the new Fee Code NF and the associated standard 
rebate marks a reduction in rebate (from $0.65 per contract to $0.40 
per contract), under the new Firm Non-Penny Pilot Add Volume Tiers, 
Members will be eligible to receive an enhanced rebate ($0.50 per 
contract) by meeting a relatively low threshold of ADV as a percentage 
of TCV (0.05%), will receive a further enhanced rebate ($0.60 per 
contract) by meeting Tier 2 (0.15% ADV as a percentage of TCV), or 
receive the same rebate that they currently receive ($0.65 per 
contract) by meeting Tier 3 (0.25% of average TCV). Further, the 
proposed standard rebate is still higher than those offered at NOM and 
NYSE Arca, Inc., which each charge fees for Firm orders that add 
liquidity in non-Penny Pilot Securities. The Exchange believes that 
such a fee structure will provide Members with the ability to receive 
reasonable rebates while strongly encouraging Members to increase their 
participation on the Exchange. 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.
Market Maker Penny Pilot Add Volume Tiers
    The Exchange believes that the addition of Tier 3 to the Market 
Maker Penny Pilot Add Volume Tiers is a reasonable, fair and equitable, 
and not unfairly discriminatory allocation of fees and rebates because 
it provides an opportunity for Market Maker orders that add liquidity 
in Penny Pilot Securities with an alternate means of achieving the 
current maximum rebate of $0.42 per contract and only represents a 
potential increase in rebates for such orders. The inclusion of the 
requirement that a Member has an ADAV in Firm orders in Penny Pilot 
Securities equal to or greater than 0.35% is designed to incentivize 
Members to increase their participation on the Exchange in 
organizational order flow beyond just Market Maker orders. Further, 
this enhanced rebate will incentivize increased participation on BATS 
Options both through the enhanced rebate itself and the required 
criteria for a Member to become eligible for the enhanced rebate. 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.
Routing Fee Changes
    As explained above, the Exchange generally attempts to approximate 
the cost of routing to other options exchanges, including other 
applicable costs to the Exchange for routing. The Exchange believes 
that a pricing model based on approximate Routing Costs is a 
reasonable, fair and equitable approach to pricing. Specifically, the 
Exchange believes that its proposal to modify fees is fair, equitable 
and reasonable because the fees are generally an approximation of the 
cost to the Exchange for routing orders to such exchanges, and the 
proposal is in response to various increases in fees assessed by other 
options exchanges. Accordingly, the Exchange believes that the proposed 
increases are fair, equitable and reasonable because they will help the 
Exchange to avoid subsidizing routing to away options exchanges and to 
continue providing quality routing services. The Exchange believes that 
its flat fee structure for orders routed to various venues is a fair 
and equitable approach to pricing, as it provides certainty with 
respect to execution fees at groups of away options exchanges. Under 
its flat fee structure, taking all costs to the Exchange into account, 
the Exchange may operate at a slight gain or slight loss for orders 
routed to and executed at away options exchanges. As a general matter, 
the Exchange believes that the proposed fees will allow it to recoup 
and cover its costs of providing routing services to such exchanges. 
The Exchange also believes that the proposed fee structure for orders 
routed to and executed at these away options exchanges is fair and 
equitable and not unreasonably discriminatory in that it applies 
equally to all Members.
Physical Connection Fees
    The Exchange believes that the proposal represents an equitable 
allocation of reasonable dues, fees, and other charges as its fees for 
physical connectivity are reasonably constrained by competitive 
alternatives. If a particular exchange charges excessive fees for 
connectivity, affected Members and non-Members may opt to terminate 
their connectivity arrangements with that exchange, and adopt a 
possible range of alternative strategies, including routing to the 
applicable exchange through another participant or market center or 
taking that exchange's data indirectly. Accordingly, if the Exchange 
charges excessive fees, it would stand to lose not only connectivity 
revenues but also revenues associated with the execution of orders 
routed to it, and, to the extent applicable, market data revenues. The 
Exchange believes that this competitive dynamic imposes powerful 
restraints on the ability of any exchange to charge unreasonable fees 
for connectivity.
    Furthermore, the proposed rule change is also an equitable 
allocation of

[[Page 42145]]

reasonable dues, fees, and other charges as the Exchange believes that 
the increased fees obtained will enable it to cover its increased 
infrastructure costs associated with establishing physical ports to 
connect to the Exchange's Systems. The additional revenue from the 
increased fees will also enable the Exchange to continue to maintain 
and improve its market technology and services. The Exchange believes 
that the proposed fees for 1 gigabyte circuit of $2,000 per month and 
for 10 gigabyte circuit of $4,000 per month are reasonable in that they 
are less than analogous fees charged by the Nasdaq Stock Market LLC 
(``Nasdaq''), which are $2,500 per month for 1 gigabyte connectivity 
and range from $10,000-$15,000 per month for 10 gigabyte circuits.\18\ 
In addition, the Exchange proposed physical connectivity fees are 
designed to align the Exchange's fees with its affiliates.\19\
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    \18\ See Nasdaq Rule 7034(b).
    \19\ See supra note 15.
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    Finally, the Exchange believes that the proposed rates are 
equitable and non-discriminatory in that they apply uniformly to all 
Members and non-Members. Members and non-Members will continue to 
choose whether they want more than one physical port and choose the 
method of connectivity based on their specific needs. All Exchange 
Members that voluntarily select various service options will be charged 
the same amount for the same services. As is true of all physical 
connectivity, all Members and non-Members have the option to select any 
connectivity option, and there is no differentiation with regard to the 
fees charged for the service.
    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 
changes to fees for Professional and Firm orders that add liquidity in 
Penny Pilot Securities, including the proposed changes to the 
Professional and Firm 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 and draw additional volume to BATS Options.
    Similarly, with respect to the proposed new fees for Firm orders 
that add liquidity in non-Penny Pilot Securities, including both new 
Fee Code NF and new Firm 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 and draw additional volume to BATS Options.
    With respect to the proposed new Tier 3 of the Market Maker Penny 
Pilot Add Volume Tiers, the Exchange similarly believes that the 
changes do not burden competition, but rather allow the Exchange to 
better compete and are intended to draw additional volume to BATS 
Options.
    As it relates to the proposed routing fee changes, the proposed 
changes will assist the Exchange in recouping costs for routing orders 
to other options exchanges on behalf of its participants in a manner 
that is a better approximation of actual costs than is currently in 
place and that reflects pricing changes by various options exchanges as 
well as increases to other Routing Costs incurred by the Exchange. The 
Exchange also notes that Members may choose to mark their orders as 
ineligible for routing to avoid incurring routing fees.\20\
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    \20\ See BATS Rule 21.1(d)(8) (describing ``BATS Only'' orders 
for BATS Options) and BATS Rule 21.9(a)(1) (describing the BATS 
Options routing process, which requires orders to be designated as 
available for routing).
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    Finally, as it relates to physical connection fees, the Exchange 
believes that fees for connectivity are constrained by the robust 
competition for order flow among exchanges and non-exchange markets. 
Further, excessive fees for connectivity, including port fee access, 
would serve to impair an exchange's ability to compete for order flow 
rather than burdening competition. The proposal to increase the fees 
for physical connectivity would bring the fees charged by the Exchange 
closer to similar fees charged for physical connectivity by other 
exchanges.\21\ In addition, the proposed rule change does not impose 
any burden on intramarket competition as the fees are uniform for all 
Members and non-Members. The Exchange notes that Members and non-
Members also have the ability to obtain access to these services 
without the need for an independent physical port connection, such as 
through alternative means of financial extranets and service bureaus 
that act as a conduit for orders entered by Members and non-Members.
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    \21\ See supra note 18.
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    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 \22\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\23\ 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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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 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-2015-52 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-2015-52. This file 
number should be included on the subject line if email is used. To help 
the

[[Page 42146]]

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; 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-2015-52 and should be 
submitted on or before August 6, 2015.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-17395 Filed 7-15-15; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 80, No. 136 / Thursday, July 16, 2015 / Notices 42141 Rule 17Ad–22(b)(2) 20 requires For the Commission, by the Division of II. Self-Regulatory Organization’s registered clearing agencies, among Trading and Markets, pursuant to delegated Statement of the Purpose of, and other things, to establish, implement, authority.27 Statutory Basis for, the Proposed Rule maintain, and enforce written policies Jill M. Peterson, Change and procedures reasonably designed to Assistant Secretary. In its filing with the Commission, the use margin requirements to limit its [FR Doc. 2015–17400 Filed 7–15–15; 8:45 am] Exchange included statements credit exposures to participants under concerning the purpose of and basis for BILLING CODE 8011–01–P normal market conditions and use risk- the proposed rule change and discussed based models and parameters to set any comments it received on the margin requirements. SECURITIES AND EXCHANGE proposed rule change. The text of these The Commission finds that the COMMISSION statements may be examined at the proposed rule change is consistent with places specified in Item IV below. The Section 17A of the Act 21 and the rules Exchange has prepared summaries, set [Release No. 34–75422; File No. SR–BATS– thereunder applicable to OCC. The forth in sections A, B, and C below, of 2015–52] proposal will integrate new pricing the most significant parts of such models into the STANS methodology to Self-Regulatory Organizations; BATS statements. accommodate the manner in which the Exchange, Inc.; Notice of Filing and exercise settlement amount for Asian A. Self-Regulatory Organization’s Immediate Effectiveness of a Proposed Statement of the Purpose of, and Options and Cliquet Options is Rule Change Related to Fees for Use Statutory Basis for, the Proposed Rule determined. The Commission believes of BATS Exchange, Inc. Change these changes are designed to enable OCC to accurately compute margin July 10, 2015. 1. Purpose requirements for Asian Option and Pursuant to section 19(b)(1) of the The Exchange proposes to modify the Cliquet Option positions through its Securities Exchange Act of 1934 (the ‘‘Options Pricing’’ section of its fee STANS methodology, therefore ‘‘Act’’),1 and Rule 19b–4 thereunder,2 schedule, effective immediately, in reducing the risk that clearing member notice is hereby given that on July 1, order to modify pricing charged by the margin assets would be insufficient 2015, BATS Exchange, Inc. (the Exchange’s options platform (‘‘BATS should OCC need to use such assets to ‘‘Exchange’’ or ‘‘BATS’’) filed with the Options’’) including: (i) Amend footnote close-out the positions of a defaulted Securities and Exchange Commission 2 to remove Professional 6 orders from clearing member. The Commission (‘‘Commission’’) the proposed rule the Professional and Firm Penny Pilot therefore believes that the proposed rule change as described in Items I, II and III Add Volume Tiers related to the pricing change is reasonably designed to limit below, which Items have been prepared for Professional and Firm 7 orders that OCC’s credit exposures to participants by the Exchange. The Exchange has add liquidity in Penny Pilot Securities; 8 under normal market conditions and designated the proposed rule change as (ii) further amend footnote 2 to change use risk-based models and parameters to one establishing or changing a member the standards for meeting Tiers 1 and 2, set margin requirements, consistent due, fee, or other charge imposed by the changing the rebate for Tier 2, and with the requirements of Rule 17Ad– Exchange under section 19(b)(3)(A)(ii) adding a new Tier 3; (iii) amend the 22(b)(2).22 Accordingly, the Commission of the Act 3 and Rule 19b–4(f)(2) standard rebate associated with Fee believes that the proposed rule change Code PF for Firm orders that add is designed to assure the safeguarding of thereunder,4 which renders the liquidity in Penny Pilot Securities; (iv) securities and funds in OCC’s custody proposed rule change effective upon create a new Fee Code NF for Firm or control or for which it is responsible, filing with the Commission. The orders that add liquidity in non-Penny consistent with section 17A(b)(3)(F) of Commission is publishing this notice to Pilot Securities; (v) create a new the Act.23 solicit comments on the proposed rule footnote 8 titled ‘‘Firm Non-Penny Pilot change from interested persons. IV. Conclusion Add Volume Tiers;’’ (vi) add a new Tier I. Self-Regulatory Organization’s 3 to the Market Maker Penny Pilot Add On the basis of the foregoing, the Statement of the Terms of Substance of Volume Tiers; (vii) amend the fees that Commission finds that the proposal is the Proposed Rule Change the Exchange charges for orders routed consistent with the requirements of the by the Exchange for execution at other Act and in particular with the The Exchange filed a proposal to venues, including those associated with requirements of section 17A of the amend its fees and rebates applicable to Fee Codes 2C, CC, CF, HF, and OF; and Act 24 and the rules and regulations Members 5 of the Exchange pursuant to (viii) amend the Options Physical thereunder. Rule 15.1(a) and (c). Connection Fees for both 1G and 10G It is therefore ordered, pursuant to physical ports. section 19(b)(2) of the Act,25 that the The text of the proposed rule change proposed rule change (File No. SR– is available at the Exchange’s Web site Professional Orders in Penny Pilot OCC–2015–010) be, and hereby is, at www.batstrading.com, at the Securities approved.26 principal office of the Exchange, and at The Exchange proposes to remove the Commission’s Public Reference Professional orders from inclusion in 20 17 CFR 240.17Ad–22(b)(2). Room. the Professional and Firm Penny Pilot 21 15 U.S.C. 78q–1. tkelley on DSK3SPTVN1PROD with NOTICES 22 17 CFR 240.17Ad–22(b)(2). 27 17 CFR 200.30–3(a)(12). 6 ‘‘Professional’’ applies to any transaction 23 15 U.S.C. 78q–1(b)(3)(F). 1 15 U.S.C. 78s(b)(1). identified by a Member as such pursuant to 24 15 U.S.C. 78q–1. 2 17 CFR 240.19b–4. Exchange Rule 16.1. 25 15 U.S.C. 78s(b)(2). 3 15 U.S.C. 78s(b)(3)(A)(ii). 7 ‘‘Firm’’ applies to any transaction identified by 26 In approving the proposed rule change, the 4 17 CFR 240.19b–4(f)(2). a Member for clearing in the Firm range at the OCC. Commission considered the proposal’s impact on 5 A Member is defined as ‘‘any registered broker 8 ‘‘Penny Pilot Securities’’ are those issues quoted efficiency, competition and capital formation. 15 or dealer that has been admitted to membership in pursuant to Exchange Rule 21.5, Interpretation and U.S.C. 78c(f). the Exchange.’’ See Exchange Rule 1.5(n). Policy .01. VerDate Sep<11>2014 17:39 Jul 15, 2015 Jkt 235001 PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 E:\FR\FM\16JYN1.SGM 16JYN1

42142 Federal Register / Vol. 80, No. 136 / Thursday, July 16, 2015 / Notices Add Volume Tiers, which apply to fee or greater than 0.30% of average TCV. provide a $0.65 rebate per contract to codes PA and PF. Currently, the The Exchange is also proposing to Member that has an ADV equal to or Exchange provides a standard rebate of change the Tier 2 required criteria such greater than 0.25% of average TCV. $0.40 per contract under Fee Code PA that a Member qualifies for Tier 2 where Market Maker Penny Pilot Add Volume for Professional orders that add liquidity the Member has an ADV equal to or Tiers in Penny Pilot Securities and an greater than 1.00% of average TCV. enhanced rebate of $0.42 per contract The Exchange is also proposing to add The Exchange is proposing to add a for each Professional or Firm order that an additional tier to the Firm Penny new Tier 3 to the Market Maker Penny adds liquidity in Penny Pilot Securities Pilot Add Volume Tier under footnote 2 Pilot Add Volume Tiers in order to and meets the requirements for either of the fee schedule. As described above, provide another means for Market Tier 1 or Tier 2 of the Professional and the Exchange currently offers two tiers Maker orders in Penny Pilot Securities Firm Penny Pilot Add Volume Tiers. under the Firm Penny Pilot Add to receive a rebate of $0.42 per contract. Specifically, the Exchange is proposing Volume Tiers. The Exchange is Currently, the standard rebate for to eliminate Professional orders from proposing to add Tier 3 under which Market Maker orders in Penny Pilot the Professional and Firm Penny Pilot Members would receive a $0.43 per Securities is $0.36 per contract. Such Add Volume Tiers such that contract rebate for Firm orders that add orders can receive an enhanced rebate of Professional orders subject to Fee Code liquidity in Penny Pilot Securities $0.40 by meeting Tier 1 of the Market PA would not be eligible for enhanced where the Member: (i) Has an ADAV 12 Maker Penny Pilot Add Volume Tiers or rebates under footnote 2. Such orders in Firm orders in Penny Pilot Securities $0.42 by meeting Tier 2 of such Tiers. would remain eligible to receive equal to or greater than 0.35% of The Exchange is proposing to add a new enhanced rebates under footnotes 4 average TCV; and (ii) has an ADV equal Tier 3 under which a Member would (NBBO Setter Tiers) and 5 (Quoting to or greater than 1.00% of average TCV. receive $0.42 per contract where: (i) The Incentive Program Tiers). Member has an ADAV in Firm orders in Firm Orders That Add Liquidity in Non- Penny Pilot Securities (orders that yield Firm Orders That Add Liquidity in Penny Pilot Securities Fee Code PF) equal to or greater than Penny Pilot Add Volume Tiers The Exchange is proposing to make 0.35% of average TCV; and (ii) the The Exchange is proposing to make two changes to its fee schedule Member has an ADV equal to or greater several changes to the Firm Penny Pilot regarding Firm orders that add liquidity than 1.00% of average TCV. Add Volume Tiers. First, the Exchange in non-Penny Pilot Securities. First, the Routing Fee Changes is proposing to change the standard Exchange is proposing to create a new rebate associated with Fee Code PF for Fee Code NF which would apply to The Exchange currently charges Firm orders that add liquidity in Penny Firm orders that add liquidity in non- certain flat rates for routing to other Pilot Securities from $0.40 per contract Penny Pilot Securities and for which the options exchanges based on the to $0.36 per contract. The Exchange is standard pricing would be a $0.40 approximate cost of routing to such also proposing to change the rebate for rebate per contract. As part of this venues. Such flat rates for routing to Firm orders in Penny Pilot Securities for change, the Exchange is also proposing such options exchanges is based on the Members that meet Tier 1 of the Firm to delete the reference to ‘‘Firm’’ in Fee cost of transaction fees assessed by each Penny Pilot Add Volume Tiers from Code NA, which currently applies to venue as well as costs to the Exchange for routing (i.e., clearing fees, $0.42 per contract to $0.40 per contract. both Professional and Firm orders that The Exchange is also proposing to connectivity and other infrastructure add liquidity in non-Penny Pilot amend the standards required to meet costs, membership fees, etc.) Securities, which are subject to a Tiers 1 and 2 of the Firm Penny Pilot (collectively, ‘‘Routing Costs’’). To standard rebate of $0.65 per contract. Add Volume Tiers. Currently, a Member address different fees at various other Like Fee Code NA, as proposed, orders qualifies for Tier 1 where the Member options exchanges, the Exchange yielding Fee Code NF would be eligible has an Options Step-up Add TCV 9 from differentiates its flat rates depending on for enhanced rebates under the NBBO June 2014 baseline equal to or greater whether they are for Customer orders or Setter Tiers and the Quoting Incentive for Professional, Firm, and Market than 0.50% and qualifies for Tier 2 Program Tiers. Maker 13 orders (collectively, ‘‘non- where the Member has: (i) An Options The Exchange is also proposing to add Customer orders’’). Step-Up Add TCV from September 2014 a new footnote 8 titled ‘‘Firm Non- As noted previously and as set forth baseline equal to or greater than 0.30%; Penny Pilot Add Volume Tiers’’ under above, the Exchange’s current approach and (ii) an ADV 10 equal to or greater which there would be three new tiers to routing fees is to set forth in a simple than 0.40% of average TCV.11 offering enhanced rebates for Firm manner certain flat fees that Specifically, the Exchange is proposing orders that add liquidity in non-Penny approximate the cost of routing to other to change the Tier 1 required criteria Pilot Securities. Specifically, as options exchanges. The Exchange then such that a Member qualifies for Tier 1 proposed, the tiers would provide the monitors the fees charged as compared where the Member has an ADV equal to following rebates under the following to the costs of its routing services, as conditions for Firm orders that add well as monitoring for specific fee 9 ‘‘Options Step-Up Add TCV’’ means ADAV as volume in non-Penny Pilot Securities: changes by other options exchanges, a percentage of TCV in the relevant baseline month Tier 1 would provide a $0.50 rebate per subtracted from current ADAV as a percentage of and adjusts its flat routing fees and/or TCV. contract to a Member that has an ADV groupings to ensure that the Exchange’s 10 ‘‘ADV’’ means average daily volume calculated equal to or greater than 0.05% of fees do indeed result in a rough as the number of contracts added or removed, average TCV; Tier 2 would provide a tkelley on DSK3SPTVN1PROD with NOTICES combined, per day. approximation of overall Routing Costs, $0.60 rebate per contract to a Member and are not significantly higher or lower 11 ‘‘TCV’’ means total consolidated volume that has an ADV equal to or greater than calculated as the volume reported by all exchanges to the consolidated transaction reporting plan for 0.15% of average TCV; and Tier 3 would 13 As defined on the Exchange’s fee schedule, the the month for which the fees apply, excluding terms ‘‘Firm’’ and ‘‘Market Maker’’ apply to any volume on any day that the Exchange experiences 12 ‘‘ADAV’’ means average daily added volume transaction identified by a member for clearing in an Exchange System Disruption and on any day calculated as the number of contracts added per the Firm or Market Maker range, respectively, at the with a scheduled early market close. day. Options Clearing Corporation (‘‘OCC’’). VerDate Sep<11>2014 17:39 Jul 15, 2015 Jkt 235001 PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 E:\FR\FM\16JYN1.SGM 16JYN1

Federal Register / Vol. 80, No. 136 / Thursday, July 16, 2015 / Notices 42143 in any area. Over the last several gigabyte circuit; and $2,500 per physical higher volumes of orders into the price months, due to various increases in fees port that connects to the System via 10 and volume discovery processes. assessed by other options exchanges, the gigabyte circuit. Professional Orders in Penny Pilot Exchange’s overall Routing Costs have The Exchange now proposes to amend Securities increased. As a result, and in order to its physical connectivity fees to align its avoid subsidizing routing to away fees with its affiliates.15 The Exchange The Exchange believes the proposed options exchanges and to continue proposes to increase the fee per physical removal of Professional orders in Penny providing quality routing services, the port that connects to the System via: (i) Pilot Securities that add liquidity from Exchange proposes various increases to 1 gigabyte circuit from $1,000 per the Professional and Firm Penny Pilot the charges assessed for most orders month to $2,000 per month; and (ii) 10 Add Volume Tiers is a reasonable, fair routed to most options exchanges, as set gigabyte circuit from $2,500 per month and equitable, and not unfairly forth below. to $4,000 per month. discriminatory allocation of fees and The Exchange is proposing to amend rebates because, while Members the fees that the Exchange charges for Effectiveness Date entering such orders will not be eligible orders routed by the Exchange for As noted above, the Exchange for the $0.02 per contract enhanced execution at other venues, including proposes to implement the amendments rebate that they would have potentially those associated with Fee Codes 2C, CC, to its fee schedule effective been eligible to receive under the tiers CF, HF, and OF. The Exchange is immediately. ($0.42 per contract vs. $0.40 per proposing to amend the fees for those contract standard rebate for Fee Code Fee Codes as follows: From $0.00 to 2. Statutory Basis PA), such Members will still be eligible $0.47 per contract for orders yielding The Exchange believes that the for enhanced rebates through both the Fee Code 2C, which are Customer orders proposed rule change is consistent with NBBO Setter Tiers (up to an additional routed to C2 Options Exchange, Inc. the requirements of the Act and the $0.04 per contract) and the Quoting (‘‘C2’’); from $0.12 to $0.13 per contract rules and regulations thereunder that Incentive Program Tiers (also up to an for orders yielding Fee Code CC, which are applicable to a national securities additional $0.04 per contract). Further, are Customer orders routed to Chicago exchange, and, in particular, with the such a reduction in rebates will allow Board Options Exchange (‘‘CBOE’’); requirements of section 6 of the Act.16 the Exchange to allocate fees and rebates from $0.65 to $0.75 per contract for Specifically, the Exchange believes that to other orders in order to encourage orders yielding Fee Code CF, which are the proposed rule change is consistent increased participation on BATS Professional, Firm, or Market Maker with section 6(b)(4) of the Act,17 in that Options, which the Exchange believes orders routed to CBOE; from $0.65 to it provides for the equitable allocation will result in higher levels of liquidity $0.70 per contract for orders yielding of reasonable dues, fees and other provision and introduction of higher Fee Code HF, which are Professional, charges among members and other volumes of orders into the price and Firm, or Market Maker orders routed to persons using any facility or system volume discovery processes, which will NASDAQ OMX PHLX LLC (‘‘PHLX’’); which the Exchange operates or benefit all participants on BATS and from $0.65 to $0.99 for orders controls. The Exchange notes that it Options. yielding Fee Code OF, which are operates in a highly competitive market Firm Orders That Add Liquidity in Professional, Firm, or Market Maker in which market participants can Penny Pilot Add Volume Tiers orders routed to BOX Options Exchange, readily direct order flow to competing LLC (‘‘BOX’’). The Exchange notes that The Exchange also believes that the venues if they deem fee levels to be certain of the above changes are being proposed amendments to the fee excessive. schedule related to Firm orders in proposed in order to maintain a simple, Volume-based rebates and fees such Penny Pilot Securities related to the flat fee structure for routing to other as the ones currently maintained on standard rebate under Fee Code PF and venues in both Penny Pilot Securities BATS Options have been widely the proposed amendments to footnote 2, and non-Penny Pilot Securities. adopted by equities and options including to reduce the rebate for Tier Physical Connection Fees exchanges and are equitable because 1, add a new tier, and amend the they are open to all Members on an standards for Tiers 1 and 2 is a The Exchange proposes to amend its equal basis and provide additional fee schedule to modify its fees for reasonable, fair and equitable, and not benefits or discounts that are reasonably unfairly discriminatory allocation of physical connectivity. A physical port is related to the value to an exchange’s utilized by a Member or non-Member to fees and rebates because it will provide market quality associated with higher Members entering Firm orders with the connect to the Exchange at the data levels of market activity, such as higher centers where the Exchange’s servers are opportunity to receive higher rebates levels of liquidity provision and/or while simultaneously encouraging located. The Exchange currently growth patterns, and introduction of maintains a presence in two third-party greater participation on BATS Options, data centers: (i) The primary data center which, as described above the Exchange designated by the Board through which securities believes will result in higher levels of where the Exchange’s business is orders of Users are consolidated for ranking, primarily conducted on a daily basis, execution and, when applicable, routing away.’’ See liquidity provision and introduction of and (ii) a secondary data center, which Exchange Rule 1.5(cc). higher volumes of orders into the price is predominantly maintained for 15 For purposes of this filing, the Exchange’s and volume discovery processes, which affiliates are EDGX Exchange, Inc. (‘‘EDGX’’), EDGA will benefit all participants on BATS business continuity purposes. The Exchange, Inc. (‘‘EDGA’’), the Exchange’s equity Exchange currently assesses the exchange (‘‘BATS Equities’’) and BATS Y- Options. Specifically, the Exchange tkelley on DSK3SPTVN1PROD with NOTICES following physical connectivity fees for Exchange, Inc. (‘‘BYX’’, together with BATS believes that the reduction of the Members and non-Members on a Equities, EDGA and EDGX, the ‘‘BATS Exchanges’’). standard rebate associated with Fee The Exchange notes that each of its affiliates will Code PF combined with the amended monthly basis: $1,000 per physical port also file proposed rule changes with Commission to that connects to the System 14 via 1 adopt similar physical connectivity fees to be and lowered standard for meeting Tier effective July 1, 2015. 1 of the Firm Penny Pilot Add Volume 14 The term ‘‘System’’ is defined as ‘‘the 16 15 U.S.C. 78f. Tiers is a reasonable, fair and equitable, electronic communications and trading facility 17 15 U.S.C. 78f(b)(4). and not unfairly discriminatory VerDate Sep<11>2014 17:39 Jul 15, 2015 Jkt 235001 PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 E:\FR\FM\16JYN1.SGM 16JYN1

42144 Federal Register / Vol. 80, No. 136 / Thursday, July 16, 2015 / Notices allocation of fees and rebates because, in threshold of ADV as a percentage of based on approximate Routing Costs is conjunction, they will both provide TCV (0.05%), will receive a further a reasonable, fair and equitable Members with a reasonably achievable enhanced rebate ($0.60 per contract) by approach to pricing. Specifically, the threshold for receiving the same rebate meeting Tier 2 (0.15% ADV as a Exchange believes that its proposal to as they do today while at the same time percentage of TCV), or receive the same modify fees is fair, equitable and encouraging and rewarding higher rebate that they currently receive ($0.65 reasonable because the fees are levels of participation on the Exchange per contract) by meeting Tier 3 (0.25% generally an approximation of the cost overall. The Exchange also believes that of average TCV). Further, the proposed to the Exchange for routing orders to amending the standard for meeting Tier standard rebate is still higher than those such exchanges, and the proposal is in 2 is a reasonable, fair and equitable, and offered at NOM and NYSE Arca, Inc., response to various increases in fees not unfairly discriminatory allocation of which each charge fees for Firm orders assessed by other options exchanges. fees and rebates because it will similarly that add liquidity in non-Penny Pilot Accordingly, the Exchange believes that encourage increased participation on Securities. The Exchange believes that the proposed increases are fair, the Exchange by offering a rebate that such a fee structure will provide equitable and reasonable because they applies equally to all Members without Members with the ability to receive will help the Exchange to avoid regard to prior trading volumes. Such reasonable rebates while strongly subsidizing routing to away options rebate will encourage greater general encouraging Members to increase their exchanges and to continue providing participation on the Exchange, which participation on the Exchange. Such quality routing services. The Exchange will result in higher levels of liquidity increased participation on BATS believes that its flat fee structure for provision and introduction of higher Options will result in higher levels of orders routed to various venues is a fair volumes of orders into the price and liquidity provision and introduction of and equitable approach to pricing, as it volume discovery processes, which will higher volumes of orders into the price provides certainty with respect to benefit all participants on BATS and volume discovery processes, which execution fees at groups of away options Options. Finally, the Exchange believes will benefit all participants on BATS exchanges. Under its flat fee structure, that proposed Tier 3 is a reasonable, fair Options. taking all costs to the Exchange into and equitable, and not unfairly account, the Exchange may operate at a Market Maker Penny Pilot Add Volume discriminatory allocation of fees and slight gain or slight loss for orders Tiers rebates because the second of its two routed to and executed at away options requirements (that a Member has an The Exchange believes that the exchanges. As a general matter, the ADV equal to or greater than 1.00% of addition of Tier 3 to the Market Maker Exchange believes that the proposed average TCV) is identical to the only Penny Pilot Add Volume Tiers is a fees will allow it to recoup and cover its requirement for meeting Tier 2, meaning reasonable, fair and equitable, and not costs of providing routing services to that any Member that meets Tier 2 will unfairly discriminatory allocation of such exchanges. The Exchange also only need to meet the additional fees and rebates because it provides an believes that the proposed fee structure requirement that a Member has an opportunity for Market Maker orders for orders routed to and executed at ADAV in Firm orders in Penny Pilot that add liquidity in Penny Pilot these away options exchanges is fair and Securities equal to or greater than 0.35% Securities with an alternate means of equitable and not unreasonably of average TCV in order to receive the achieving the current maximum rebate discriminatory in that it applies equally enhanced rebate. This will provide a of $0.42 per contract and only to all Members. direct incentive for any Member that represents a potential increase in rebates for such orders. The inclusion of the Physical Connection Fees meets Tier 2 to further increase participation in Firm orders in Penny requirement that a Member has an The Exchange believes that the Pilot Securities and, as with each of the ADAV in Firm orders in Penny Pilot proposal represents an equitable proposed changes mentioned in this Securities equal to or greater than 0.35% allocation of reasonable dues, fees, and paragraph, will encourage greater is designed to incentivize Members to other charges as its fees for physical participation on the Exchange, which increase their participation on the connectivity are reasonably constrained will result in higher levels of liquidity Exchange in organizational order flow by competitive alternatives. If a provision and introduction of higher beyond just Market Maker orders. particular exchange charges excessive volumes of orders into the price and Further, this enhanced rebate will fees for connectivity, affected Members volume discovery processes, which will incentivize increased participation on and non-Members may opt to terminate benefit all participants on BATS BATS Options both through the their connectivity arrangements with Options. enhanced rebate itself and the required that exchange, and adopt a possible criteria for a Member to become eligible range of alternative strategies, including Firm Orders That Add Liquidity in Non- for the enhanced rebate. Such increased routing to the applicable exchange Penny Pilot Securities participation on BATS Options will through another participant or market The Exchange believes that the result in higher levels of liquidity center or taking that exchange’s data amendments for Firm orders that add provision and introduction of higher indirectly. Accordingly, if the Exchange liquidity in non-Penny Pilot Securities volumes of orders into the price and charges excessive fees, it would stand to mark a reasonable, fair and equitable, volume discovery processes, which will lose not only connectivity revenues but and not unfairly discriminatory benefit all participants on BATS also revenues associated with the allocation of fees and rebates because Options. execution of orders routed to it, and, to while the new Fee Code NF and the the extent applicable, market data Routing Fee Changes tkelley on DSK3SPTVN1PROD with NOTICES associated standard rebate marks a revenues. The Exchange believes that reduction in rebate (from $0.65 per As explained above, the Exchange this competitive dynamic imposes contract to $0.40 per contract), under generally attempts to approximate the powerful restraints on the ability of any the new Firm Non-Penny Pilot Add cost of routing to other options exchange to charge unreasonable fees Volume Tiers, Members will be eligible exchanges, including other applicable for connectivity. to receive an enhanced rebate ($0.50 per costs to the Exchange for routing. The Furthermore, the proposed rule contract) by meeting a relatively low Exchange believes that a pricing model change is also an equitable allocation of VerDate Sep<11>2014 17:39 Jul 15, 2015 Jkt 235001 PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 E:\FR\FM\16JYN1.SGM 16JYN1

Federal Register / Vol. 80, No. 136 / Thursday, July 16, 2015 / Notices 42145 reasonable dues, fees, and other charges competitiveness of and draw additional bureaus that act as a conduit for orders as the Exchange believes that the volume to BATS Options. entered by Members and non-Members. increased fees obtained will enable it to Similarly, with respect to the As stated above, the Exchange notes cover its increased infrastructure costs proposed new fees for Firm orders that that it operates in a highly competitive associated with establishing physical add liquidity in non-Penny Pilot market in which market participants can ports to connect to the Exchange’s Securities, including both new Fee Code readily direct order flow to competing Systems. The additional revenue from NF and new Firm Non-Penny Pilot Add venues if the deem fee structures to be the increased fees will also enable the Volume Tiers, the Exchange does not unreasonable or excessive. Exchange to continue to maintain and believe that any such changes burden competition, but instead, that they C. Self-Regulatory Organization’s improve its market technology and enhance competition, as they are Statement on Comments on the services. The Exchange believes that the proposed fees for 1 gigabyte circuit of intended to increase the Proposed Rule Change Received From $2,000 per month and for 10 gigabyte competitiveness of and draw additional Members, Participants or Others circuit of $4,000 per month are volume to BATS Options. The Exchange has not solicited, and reasonable in that they are less than With respect to the proposed new Tier does not intend to solicit, comments on analogous fees charged by the Nasdaq 3 of the Market Maker Penny Pilot Add this proposed rule change. The Stock Market LLC (‘‘Nasdaq’’), which Volume Tiers, the Exchange similarly Exchange has not received any written are $2,500 per month for 1 gigabyte believes that the changes do not burden comments from members or other connectivity and range from $10,000– competition, but rather allow the interested parties. $15,000 per month for 10 gigabyte Exchange to better compete and are intended to draw additional volume to III. Date of Effectiveness of the circuits.18 In addition, the Exchange BATS Options. Proposed Rule Change and Timing for proposed physical connectivity fees are As it relates to the proposed routing Commission Action designed to align the Exchange’s fees with its affiliates.19 fee changes, the proposed changes will The foregoing rule change has become Finally, the Exchange believes that assist the Exchange in recouping costs effective pursuant to section 19(b)(3)(A) the proposed rates are equitable and for routing orders to other options of the Act 22 and paragraph (f)(2) of Rule non-discriminatory in that they apply exchanges on behalf of its participants 19b–4 thereunder.23 At any time within uniformly to all Members and non- in a manner that is a better 60 days of the filing of the proposed rule Members. Members and non-Members approximation of actual costs than is change, the Commission summarily may will continue to choose whether they currently in place and that reflects temporarily suspend such rule change if want more than one physical port and pricing changes by various options it appears to the Commission that such choose the method of connectivity exchanges as well as increases to other action is necessary or appropriate in the based on their specific needs. All Routing Costs incurred by the Exchange. public interest, for the protection of Exchange Members that voluntarily The Exchange also notes that Members investors, or otherwise in furtherance of select various service options will be may choose to mark their orders as the purposes of the Act. If the charged the same amount for the same ineligible for routing to avoid incurring Commission takes such action, the services. As is true of all physical routing fees.20 Commission shall institute proceedings connectivity, all Members and non- Finally, as it relates to physical to determine whether the proposed rule Members have the option to select any connection fees, the Exchange believes should be approved or disapproved. connectivity option, and there is no that fees for connectivity are constrained by the robust competition IV. Solicitation of Comments differentiation with regard to the fees charged for the service. for order flow among exchanges and Interested persons are invited to The Exchange reiterates that it non-exchange markets. Further, submit written data, views and operates in a highly competitive market excessive fees for connectivity, arguments concerning the foregoing, in which market participants can including port fee access, would serve including whether the proposed rule readily direct order flow to competing to impair an exchange’s ability to change is consistent with the Act. venues if they deem fee levels to be compete for order flow rather than Comments may be submitted by any of excessive. burdening competition. The proposal to the following methods: increase the fees for physical B. Self-Regulatory Organization’s connectivity would bring the fees Electronic Comments Statement on Burden on Competition charged by the Exchange closer to • Use the Commission’s Internet The Exchange does not believe that similar fees charged for physical comment form (http://www.sec.gov/ the proposed rule change will impose connectivity by other exchanges.21 In rules/sro.shtml); or any burden on competition not addition, the proposed rule change does • Send an email to rule-comments@ necessary or appropriate in furtherance not impose any burden on intramarket sec.gov. Please include File Number SR– of the purposes of the Act. With respect competition as the fees are uniform for BATS–2015–52 on the subject line. to the proposed changes to fees for all Members and non-Members. The Exchange notes that Members and non- Paper Comments Professional and Firm orders that add liquidity in Penny Pilot Securities, Members also have the ability to obtain • Send paper comments in triplicate including the proposed changes to the access to these services without the to Secretary, Securities and Exchange Professional and Firm Penny Pilot Add need for an independent physical port Commission, 100 F Street NE., Volume Tiers, the Exchange does not connection, such as through alternative Washington, DC 20549–1090. tkelley on DSK3SPTVN1PROD with NOTICES believe that any such changes burden means of financial extranets and service All submissions should refer to File competition, but instead, that they Number SR–BATS–2015–52. This file 20 See BATS Rule 21.1(d)(8) (describing ‘‘BATS enhance competition, as they are number should be included on the Only’’ orders for BATS Options) and BATS Rule intended to increase the 21.9(a)(1) (describing the BATS Options routing subject line if email is used. To help the process, which requires orders to be designated as 18 See Nasdaq Rule 7034(b). available for routing). 22 15 U.S.C. 78s(b)(3)(A). 19 See supra note 15. 21 See supra note 18. 23 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 17:39 Jul 15, 2015 Jkt 235001 PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 E:\FR\FM\16JYN1.SGM 16JYN1

42146 Federal Register / Vol. 80, No. 136 / Thursday, July 16, 2015 / Notices Commission process and review your have been primarily prepared by ICE Description, the credit spread response comments more efficiently, please use Clear Europe. The Commission is component of the margin model would only one method. The Commission will publishing this notice to solicit be revised to provide that the tail post all comments on the Commission’s comments on the proposed changes to estimation of the relevant fitted returns Internet Web site (http://www.sec.gov/ the rules from interested persons. distribution is based on devolatilized rules/sro.shtml). Copies of the returns. The use of devolatilized returns I. Self-Regulatory Organization’s submission, all subsequent in this manner facilitates the Statement of the Terms of Substance of amendments, all written statements comparison of returns for periods with the Proposed Rule Change with respect to the proposed rule different volatilities. change that are filed with the ICE Clear Europe proposes to amend Procyclicality of Portfolio Spread Commission, and all written certain of its credit default swap Response. In order to limit communications relating to the (‘‘CDS’’) risk policies (the ‘‘Risk Policy procyclicality of the spread response proposed rule change between the Amendments’’) in order to enhance its component of the model, ICE Clear Commission and any person, other than current risk model. Europe proposes to modify the CDS Risk those that may be withheld from the II. Self-Regulatory Organization’s Policy and Risk Model Description to public in accordance with the Statement of the Purpose of, and use an additional portfolio analysis that provisions of 5 U.S.C. 552, will be Statutory Basis for, the Proposed Rule features price changes observed during available for Web site viewing and Change and immediately after the Lehman printing in the Commission’s Public Brothers default. The analysis considers Reference Room, 100 F Street NE., In its filing with the Commission, ICE Clear Europe included statements price scenarios derived from the greatest Washington, DC 20549, on official price decrease and increase during and business days between the hours of concerning the purpose of and basis for the proposed rule change. The text of immediately after the Lehman Brothers 10:00 a.m. and 3:00 p.m. Copies of such default. These scenarios are designed to filing will also be available for these statements may be examined at the places specified in Item IV below. capture the default of a major inspection and copying at the principal participant in the credit market and the office of the Exchange. All comments ICE Clear Europe has prepared summaries, set forth in sections (A), (B), market response to the event. The received will be posted without change; introduced scenarios are defined in the Commission does not edit personal and (C) below, of the most significant aspects of such statements. price terms to maintain the stress identifying information from severity during periods of low credit submissions. You should submit only A. Self-Regulatory Organization’s spread levels (high price) when the information that you wish to make Statement of the Purpose of, and spread response requirements, available publicly. All submissions Statutory Basis for, the Proposed Rule computed under the current framework, should refer to File Number SR–BATS– Change are expected to be lower. Furthermore, 2015–52 and should be submitted on or the Lehman default price scenarios are before August 6, 2015. 1. Purpose also incorporated into the calculation of For the Commission, by the Division of The principal purpose of the CDS Guaranty Fund requirements.3 Trading and Markets, pursuant to delegated proposed rule change is to amend authority.24 certain ICE Clear Europe risk policies Recovery Rate Sensitivity Requirements Jill M. Peterson, relating to the CDS product category to ICE Clear Europe proposes to revise Assistant Secretary. incorporate enhancements to the the Risk Model Description to existing CDS risk model. The relevant [FR Doc. 2015–17395 Filed 7–15–15; 8:45 am] incorporate a more sensitive parameter policies being modified are the CDS BILLING CODE 8011–01–P estimation approach for the RRSR Risk Policy (‘‘CDS Risk Policy’’) and the CDS Risk Model Description (‘‘Risk computation. The RRSR factor is Model Description’’). ICE Clear Europe designed to capture the risk of SECURITIES AND EXCHANGE fluctuations in market expected COMMISSION does not propose to make any changes to its Clearing Rules or Procedures in recovery rates under CDS transactions. [Release No. 34–75426; File No. SR–ICEEU– connection with these amendments. Under the current model, the RRSR is 2015–010] The proposed rule change would, determined using fixed minimum and among other matters, (i) modify the maximum recovery rate stress scenarios Self-Regulatory Organizations; ICE based on sector levels. In calculating the credit spread response component of the Clear Europe Limited; Notice of Filing RRSR, all instruments belonging to a risk model to devolatilize returns, (ii) of Proposed Rule Change Relating to risk factor (‘‘RF’’) or risk sub-factor enhance the portfolio spread response Credit Default Swap Risk Policies (‘‘RSF’’) are subjected to recovery rate component of the risk model to limit July 10, 2015. procyclicality, (iii) establish a new stress scenarios to obtain resulting Pursuant to section 19(b)(1) of the framework for recovery rate sensitivity profit/loss responses, and the worst Securities Exchange Act of 1934 requirement (‘‘RRSR’’) parameters, (iv) scenario response is chosen for the (‘‘Act’’) 1 and Rule 19b–4 thereunder 2 modify the CDS Guaranty Fund estimation of the RRSR. (In addition, notice is hereby given that on June 25, allocation methodology, (v) modify these same recovery rate stress scenarios 2015, ICE Clear Europe Limited (‘‘ICE index liquidity and concentration 3 This enhancement also addresses a regulatory Clear Europe’’ or the ‘‘Clearing House’’) charges and (vi) revise procedures for requirement in Article 30 of the Regulatory filed with the Securities and Exchange intraday margin calls. The Risk Policy Technical Standards implementing the European tkelley on DSK3SPTVN1PROD with NOTICES Commission (‘‘Commission’’) the Amendments also include certain other Market Infrastructure Regulations (‘‘EMIR’’). proposed rule change as described in clarifications and conforming changes. Commission Delegated Regulation (EU) No. 153/ Items I, II, and III below, which Items The following is a summary of the 2013 of 19 December 2012 Supplementing principal changes in the Risk Policy Regulation (EU) No. 648/2012 of the European Parliament and of the Council with regard to 24 17 CFR 200.30–3(a)(12). Amendments: Regulatory Technical Standards on Requirements 1 15 U.S.C. 78s(b)(1). Devolatilization of Credit Spread for Central Counterparties (the ‘‘Regulatory 2 17 CFR 240.19b–4. Response. Under the revised Risk Model Technical Standards’’). VerDate Sep<11>2014 17:39 Jul 15, 2015 Jkt 235001 PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 E:\FR\FM\16JYN1.SGM 16JYN1


Document Created: 2015-12-15 13:13:51
Document Modified: 2015-12-15 13:13:51
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation80 FR 42141 
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