81 FR 63241 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of Bats BZX Exchange, Inc.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 178 (September 14, 2016)

[Federal Register Volume 81, Number 178 (Wednesday, September 14, 2016)]
[Notices]
[Pages 63241-63243]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-22028]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78787; File No. SR-BatsBZX-2016-57]


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

September 8, 2016.
    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 August 31, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-Members of the Exchange pursuant to BZX Rules 
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 its fee schedule applicable to the 
Exchange's options platform (``BZX Options'') to: (i) Adopt a new 
Quoting Incentive Program Tier under footnote 5; and (ii) adopt a new 
NBBO Setter Tier under footnote 4.
Quoting Incentive Program (``QIP'') Tier 4
    The Exchange currently offers three QIP tiers under footnote 5, 
which provide an additional rebate per contract for orders that add 
liquidity to the BZX Options Book \6\ in options classes in which a 
Member is a Market Maker \7\ registered on BZX Options pursuant to Rule 
22.2. The Market Maker must be registered with BZX Options in an 
average of 20% or more of the associated options series in a class in 
order to qualify for QIP rebates for that class. The QIP tiers provide 
an enhanced rebate ranging from $0.02 to $0.05 per contract to 
qualifying Market Maker orders that yield fee code PM or NM. The 
Exchange now proposes to add QIP Tier 4 under which a Market Maker may 
receive an additional rebate of $0.03 per contract, where the Member 
has an ADAV \8\ in Market Maker orders equal to or greater than 0.40% 
of average TCV.\9\
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    \6\ See Exchange Rule 16.1(a)(9).
    \7\ ``Market Maker'' applies to any transaction identified by a 
Member for clearing in the Market Maker range at the OCC, where such 
Member is registered with the Exchange as a Market Maker as defined 
in Rule 16.1(a)(37).
    \8\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added.
    \9\ ``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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NBBO Setter Tier
    The Exchange currently offers four NBBO Setter tiers under footnote 
4, which provide an additional rebate per contract for non-Customer 
orders that add liquidity and establish a new National Best Bid or 
Offer (``NBBO''). The NBBO Setter tiers provide an enhanced rebate 
ranging from $0.02 to $0.05 per contract to qualifying non-Customer 
orders that yield fee code PA, PF, PM, PN, NA, NF, NM or NN. The 
Exchange now proposes to add a new NBBO Setter Tier 4 under which a 
non-Customer order may receive an additional rebate of $0.03 per 
contract where the Member has an ADAV in Market Maker orders equal to 
or greater than 0.40% of average TCV. As a result, the current NBBO 
Setter Tier 4 will be renamed to NBBO Setter Tier 5.
Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule as of September 1, 2016.

[[Page 63242]]

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.\10\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates such as those currently maintained on the 
Exchange have been widely adopted by equities and options exchanges and 
are equitable because they are open to all Members on an equal basis 
and provide additional benefits or discounts that are reasonably 
related to the value to an exchange's market quality associated with 
higher levels of market activity, such as higher levels of liquidity 
provision and/or growth patterns, and introduction of higher volumes of 
orders into the price and volume discovery processes.
    The Exchange believes that its proposal to add a new QIP Tier 4 
under footnote 5 is reasonable, fair and equitable and non-
discriminatory, for the reasons set forth above with respect to volume-
based pricing generally. In addition, the Exchange believes the amount 
of the proposed rebate offered under QIP Tier 4 is equitable and 
reasonable because it is generally in line with the rebates offered 
pursuant to QIP Tiers 1 to 3. The Exchange also notes that although 
registration as a Market Maker is required to qualify for QIP, such 
registration is available to all Members on an equal basis. The 
Exchange also believes that the proposed tier is reasonable, fair and 
equitable, and non-discriminatory because it, like the QIP generally, 
is aimed to incentivize active market making on the Exchange.
    The Exchange believes that its proposal to add a new NBBO Setter 
Tier 4 under footnote 4 is reasonable, fair and equitable and non-
discriminatory, for the reasons set forth above with respect to volume-
based pricing generally. Similar to the pricing tiers discussed above, 
this incentive is reasonably related to the value to the Exchange's 
market quality associated with higher levels of market activity, 
including liquidity provision and the introduction of higher volumes of 
orders into the price and volume discovery processes. In particular, 
the enhanced rebate will encourage Market Maker orders at the NBBO, and 
is therefore directly focused on encouraging aggressively priced 
liquidity provision on BZX Options. The proposed differentiation 
between Market Makers and other market participants recognizes the 
differing contributions made to the liquidity and trading environment 
on the Exchange by these market participants. Market Makers, unlike 
other market participants, have obligations to the market and 
regulatory requirements,\12\ which normally do not apply to other 
market participants. A Market Maker has the obligation to make 
continuous markets, engage in course of dealings reasonably calculated 
to contribute to the maintenance of a fair and orderly market, and not 
make bids or offers or enter into transactions that are inconsistent 
with such course of dealings. On the other hand, other market 
participants do not have such obligations on the Exchange. For the same 
reasons, the Exchange believes it is reasonable to provide an 
additional incentive in the form of the proposed new NBBO Setter Tier 4 
to Members submitting Market Maker orders.
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    \12\ See Exchange Rule 22.5, Obligations of Market Makers.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the 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. To the contrary, 
the Exchange has designed the proposed amendments to its fee schedule 
in order to enhance its ability to compete with other exchanges. Also, 
the Exchange believes that the expansion of criteria required to 
qualify for volume-tiered rebates by the Exchange contributes to rather 
than burdens competition, as such changes are intended to incentivize 
participants to increase their participation on the Exchange. 
Similarly, the introduction of a new QIP and NBBO Setter tier are 
intended to provide incentives to Market Makers to encourage them to 
enter orders to the Exchange, and thus is again intended to enhance 
competition.
    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. 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 changes to the Exchange's tiered pricing structure burdens 
competition, but instead, enhances competition as it is intended to 
increase the competitiveness of the Exchange. Also, the Exchange 
believes that the price changes contribute to, rather than burden 
competition, as such changes are broadly intended to incentivize 
participants to increase their participation on the Exchange, which 
will increase the liquidity and market quality on the Exchange, which 
will then further enhance the Exchange's ability to compete with other 
exchanges.

(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 \13\ and paragraph (f) of Rule 19b-4 
thereunder.\14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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:

[[Page 63243]]

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-BatsBZX-2016-57 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-BatsBZX-2016-57. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; 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-BatsBZX-2016-57 and should 
be submitted on or before October 5, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-22028 Filed 9-13-16; 8:45 am]
 BILLING CODE 8011-01-P