81 FR 71146 - 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 199 (October 14, 2016)
Federal Register Volume 81, Issue 199 (October 14, 2016)
| Page Range | 71146-71149 | |
| FR Document | 2016-24838 |
[Federal Register Volume 81, Number 199 (Friday, October 14, 2016)] [Notices] [Pages 71146-71149] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-24838] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79070; File No. SR-BatsBZX-2016-66] 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. October 7, 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 September 30, 2016, Bats BZX [[Page 71147]] Exchange, Inc. (the ``Exchange'' or ``BZX'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change The Exchange filed a proposal to amend the fee schedule applicable to Members \3\ and non-members of the Exchange pursuant to BZX Rules 15.1(a) and (c). --------------------------------------------------------------------------- \3\ The term ``Member'' is defined as ``any registered broker or dealer that has been admitted to membership in the Exchange.'' See Exchange Rule 1.5(n). --------------------------------------------------------------------------- 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) Modify the Professional Penny Pilot Add Volume Tiers under footnote 9; (ii) remove fee codes PA and NA from footnote 4, NBBO Setter Tiers; (iii) modify the criteria for Tier 5 under footnote 1, Customer Penny Pilot Add; (iv) modify the criteria for the Tier 1 under footnote 3, Non-Customer Penny Pilot Take Volume; and (v) modify the criteria for Tier 1 under footnote 13, Non-Customer Non-Penny Pilot Take Volume. Professional Penny Pilot Add Volume Tiers The Exchange is proposing to add two new tiers under footnote 9, Professional Penny Pilot Add Volume Tiers,\4\ Tier 3 and Tier 4. Currently, Professional \5\ orders that add liquidity in Penny Pilot Securities \6\ receive a standard rebate of $0.25 per contract. In addition, Members who qualify for Tier 1 and Tier 2 under footnote 9, Professional Penny Pilot Add Volume Tier, receive for such orders a rebate of $0.40 and $0.43, respectively. Under the proposed new Tier 3, a Member that has a combined ADAV \7\ in Customer \8\ and Professional orders equal to or greater than 0.30% of average TCV \9\ would receive a $0.46 rebate per contract for each Professional order that adds liquidity in Penny Pilot Securities. Under the proposed new Tier 4, a Member that has a combined ADAV in Customer and Professional orders equal to or greater than 0.50% of average TCV would receive a $0.48 rebate per contract for each Professional order that adds liquidity in Penny Pilot Securities. --------------------------------------------------------------------------- \4\ In addition to the proposed substantive changes to footnote 9, the Exchange proposes to make the title of the footnote plural, as it currently reads ``Professional Penny Pilot Add Volume Tier'' even though there is more than one tier. \5\ As set forth in the Exchange's fee schedule, the term ``Professional'' applies to any transaction identified by a Member as such pursuant to Exchange Rule 16.1. \6\ ``Penny Pilot Securities'' are those issues quoted pursuant to Exchange Rule 21.5, Interpretation and Policy .01. \7\ As set forth in the Exchange's fee schedule, ``ADAV'' means average daily volume calculated as the number of contracts added per day. \8\ As set forth in the Exchange's fee schedule, the term ``Customer'' applies to any transaction identified by a Member for clearing in the Customer range at the Options Clearing Corporation (``OCC''), excluding any transaction for a Broker Dealer or a ``Professional'' as defined in Exchange Rule 16.1. \9\ As set forth in the Exchange's fee schedule, ``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. --------------------------------------------------------------------------- The Exchange is also proposing to modify the criteria necessary to qualify for the Professional Penny Pilot Add Volume Tier 1 and to increase the rebate provided under both Professional Penny Pilot Add Volume Tier 1 and Tier 2 under footnote 9. Currently under Tier 1, a Member must have an ADV \10\ equal to or greater than 0.25% of average TCV in order to receive a rebate of $0.40. The Exchange now proposes an increased rebate of $0.42 pursuant to Tier 1 when a Member has an ADAV in Customer and Professional Orders equal to or greater than 0.10% of average TCV. Thus, in addition to increasing the rebate this change will align the structure of the criteria of Tier 1 with the structure of existing Tier 2 as well as new proposed Tiers 3 and 4 described above. --------------------------------------------------------------------------- \10\ As set forth in the Exchange's fee schedule, ``ADV'' means average daily volume calculated as the number of contracts added or removed, combined, per day. --------------------------------------------------------------------------- Under Tier 2 the Exchange presently provides a rebate of $0.43 for Members who have a combined ADAV in Customer and Professional orders equal to or greater than 0.20% of average TCV. The Exchange is proposing to increase the rebate under Tier 2 to $0.44. In addition, in order to ensure consistent terminology throughout footnote 9, the Exchange proposes to modify the description of Tier 2 to eliminate the reference to ``combined'' such that the Tier will apply when a Member has an ADAV in Customer and Professional orders equal to or greater than 0.20% of average TCV. The Exchange believes the use of the word ``combined'' in this case is unnecessary and inconsistent with other portions of the fee schedule.\11\ The Exchange also notes that changes are required to the Standard Rates table of the fee schedule in connection with the changes to footnote 9 to reflect these changes. --------------------------------------------------------------------------- \11\ See, e.g., footnote 2, Tier 1, which simply refers to ADAV in orders representing multiple capacities (``Away MM/Firm/BD/JBO orders''). --------------------------------------------------------------------------- NBBO Setter Tiers The Exchange's NBBO Setter Program is a program intended to incentivize aggressive quoting on BZX Options by providing an additional rebate upon execution for all orders that add liquidity that set either the national best bid (``NBB'') or national best offer (``NBO''), subject to certain volume requirements. The Exchange currently operates four NBBO Setter Tiers that provide an additional rebate of either $0.02, $0.03 or $0.04 per contract to orders from qualifying Members that submit orders that yield fee codes PA, PF, PM, [sic] NA, NF, NM or NN.\12\ --------------------------------------------------------------------------- \12\ The Exchange notes that it also offers a fifth NBBO Setter Tier that provides an additional rebate of $0.05 per contract to orders from qualifying Members that submit orders that yield fee codes PF, PM and PN. --------------------------------------------------------------------------- The Exchange does not propose to modify the criteria necessary to qualify for the NBBO Setter Tiers or the rebates provided thereunder, however the Exchange does propose to limit the applicability of Tier 1 through Tier 4 to fee codes PF, PM, PN, NF, NM, and NN. Thus, NBBO Setter Tiers rebates would no longer be provided to orders yielding fee codes PA or NA. The Exchange also proposes to eliminate references to [[Page 71148]] footnote 4 for each of these fee codes on the Fee Codes and Associated Fees chart. Customer Penny Pilot Add Tiers The Exchange currently offers a total of eight tiers under footnote 1, Customer Penny Pilot Add Tiers, which provide rebates for Customer orders in Penny Pilot Securities that add liquidity to BZX Options and yield fee code PY. The Exchange proposes to update the required criteria for Customer Add Volume Tier 5 under footnote 1 as set forth below. Presently under Tier 5, the Exchange provides a rebate of $0.53 per contract for a Customer order where a Member: (1) Has an ADAV in Customer orders equal to or greater than 0.60% of average TCV; (2) has an ADAV in Market Maker \13\ orders equal to or greater than 0.30% of average TCV; and (3) has on the Exchange's affiliated equity securities platform (``BZX Equities'') an ADAV equal to or greater than 0.30% of average TCV. The Exchange proposes to modify the second prong of these criteria to decrease the ADAV threshold in Market Maker orders from 0.30% to 0.25%. --------------------------------------------------------------------------- \13\ As set forth in the Exchange's fee schedule, the term ``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). --------------------------------------------------------------------------- Non-Customer Penny Pilot Take Volume Tiers The Exchange currently offers a total of three tiers under footnote 3, Non-Customer Penny Pilot Take Volume Tiers, which provide discounted fees for Non-Customer orders in Penny Pilot Securities that remove liquidity from BZX Options under fee code PP. The Exchange proposes to update the required criteria for Tier 1, as set forth below. The Exchange currently charges $0.44 per contract for Members that qualify for Non-Customer Volume Tier 1, which requires that a Member has (1) an ADAV in Customer orders equal to or greater than 0.60% of average TCV; (2) an ADAV in Market orders equal to or greater than 0.30%; and (3) on BZX Equities an ADAV equal to or greater than 0.30% of average TCV. The Exchange proposes to modify the second prong of these criteria to decrease the ADAV threshold in Market Maker orders from 0.30% to 0.25%. Non-Customer Non-Penny Pilot Take Volume Tiers The Exchange presently offers a total of three tiers under footnote 13, Non-Customer Non-Penny Pilot Take Volume Tiers,\14\ which offer discounted fees for Non-Customer orders in No-Penny Pilot Securities that remove liquidity from BZX Options under fee code NP. The Exchange is proposing to update the required criteria for Tier 1 under footnote 13 as described below. --------------------------------------------------------------------------- \14\ In addition to the proposed substantive changes to footnote 13, the Exchange proposes to make the title of the footnote plural, as it currently reads ``Non-Customer Non-Penny Pilot Take Volume Tier'' even though there is more than one tier. --------------------------------------------------------------------------- Currently, the Exchange charges $1.02 per contract for Members that qualify for Non-Customer Take Volume Tier 1, which requires that a Member has (1) an ADAV in Customer orders equal to or greater than 0.60% of average TCV; (2) an ADAV in Market Maker orders equal to or greater than 0.30% of average TCV; and (3) on BZX Equities an ADAV equal to or greater than 0.30% of average TCV. The Exchange is proposing to modify the second prong of these criteria to decrease the ADAV threshold in Market Maker orders from 0.30% to 0.25%. Implementation Date The Exchange proposes to implement these amendments to its fee schedule as of October 3, 2016. 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.\15\ Specifically, the Exchange believes that the proposed rule change is consistent with Section 6(b)(4) of the Act,\16\ 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. --------------------------------------------------------------------------- \15\ 15 U.S.C. 78f. \16\ 15 U.S.C. 78f(b)(4). --------------------------------------------------------------------------- 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 two new Professional Penny Pilot Add Volume Tiers and update the required criteria and rebate amounts for Tier 1 and Tier 2 under footnote 9 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 rebates offered under the new Professional Penny Pilot Add Volume Tiers, Tier 3 and Tier 4, are equitable and reasonable because they are generally in line with the proposed rebates offered pursuant to Professional Penny Pilot Add Volume Tier 1 and Tier 2. The Exchange believes that the proposed tiers are reasonable, fair and equitable, and non-discriminatory because they, like the Professional Penny Pilot Add Volume Tier generally, are aimed to incentivize active participation on the Exchange. The Exchange believes that its proposal to remove fee codes PA and NA from footnote 4, NBBO Setter Tiers, is reasonable, fair and equitable and non-discriminatory, because the proposal coincides with the addition of new volume tiers and enhanced rebates for transactions that yield fee code PA. Thus, although Professional orders will no longer be able to qualify for NBBO Setter Tiers, there are additional ways to receive enhanced rebates and such rebates have also been increased. Similar to the pricing tiers discussed above, the Exchange believes 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. The proposed modifications to the criteria required to qualify for current Customer (Penny Pilot) Add Tier 5, Non-Customer (Penny Pilot) Take Volume Tier 1, and Non-Customer (Non-Penny Pilot) Take Volume Tier 1, are intended to incentivize additional Members to send Customer orders and/or Market Maker orders to the Exchange in an effort to qualify for the enhanced rebate or lower fee made available by the tiers. The Exchange believes that the proposal to require that the Member have an ADAV in Market Maker orders equal to or greater than 0.25% of average TCV under all three tiers is a reasonable, fair and equitable, and not unfairly discriminatory allocation of fees and rebates because it will make it easier to qualify for enhanced rebates or reduced fees pursuant to such tiers. The [[Page 71149]] increased liquidity from this proposal also benefits all investors by deepening the BZX Options liquidity pool, offering additional flexibility for all investors to enjoy cost savings, supporting the quality of price discovery, promoting market transparency and improving investor protection. Such pricing programs thereby reward a Member's growth pattern on the Exchange and such increased volume increases potential revenue to the Exchange, and will allow the Exchange to continue to provide and potentially expand the incentive programs operated by the Exchange. The Exchange believes that the proposal is reasonable, equitably allocated and non-discriminatory with respect to such Member based on the overall benefit to the Exchange resulting from the success of BZX Options. As noted above, such success allows the Exchange to continue to provide and potentially expand its existing incentive programs to the benefit of all participants on the Exchange. The proposed pricing program is also fair and equitable in that membership in BZX Options is available to all market participants which would provide them with access to the benefits on BZX Options provided by the proposed changes, as described above, even where a member of BZX Options is not necessarily eligible for the proposed increased rebates on the Exchange. Further, the proposed changes will result in Members receiving either the same or an increased rebate than they would currently receive. 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 addition of 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 modifications to criteria applicable to existing volume-tiered rebates and fees are intended to provide incentives to Members to encourage them to enter orders to the Exchange, and thus are 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 \17\ and paragraph (f) of Rule 19b-4 thereunder.\18\ 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. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78s(b)(3)(A). \18\ 17 CFR 240.19b-4(f). --------------------------------------------------------------------------- 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 CommentsUse 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-2016-66 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-2016-66. 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 also will 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-2016-66, and should be submitted on or before November 4, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\ --------------------------------------------------------------------------- \19\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-24838 Filed 10-13-16; 8:45 am] BILLING CODE 8011-01-P
![71146 Federal Register / Vol. 81, No. 199 / Friday, October 14, 2016 / Notices
with Reserve Size. The proposed requirements of the Act 44 and Rule 608 submitted on or before November 4,
changes are intended to facilitate of Regulation NMS.45 2016.
compliance with the Trade-at V. Solicitation of Comments on Partial VI. Accelerated Approval of Proposed
Prohibition.39 Amendment Nos. 1, 2 and 3 to the Rule Change, as Modified by Partial
Finally, the Exchange proposes to Proposed Rule Change Amendment Nos. 1, 2 and 3
amend provisions related to two Interested persons are invited to The Commission finds good cause to
exceptions to the Trade-at Prohibition. submit written data, views, and approve the proposed rule change, as
First, the Exchange proposes to amend arguments concerning the foregoing, modified by Partial Amendment Nos. 1,
the definition of TA ISO to reflect that including whether the proposal, as 2 and 3, prior to the thirtieth day after
ISOs may be routed to the full displayed modified by Partial Amendment Nos. 1, the date of publication of notice of the
size of a Protected Quotation that is 2 and 3, is consistent with the Act. proposed rule change, as modified by
traded-at and to make the corresponding Comments may be submitted by any of Partial Amendment Nos. 1, 2 and 3 in
change to the applicable Trade-at the following methods: the Federal Register. As described
Prohibition exception. Second, the above, the Exchange proposes to amend
Exchange proposes to amend the Trade- Electronic Comments
its rules to comply with the Plan. The
at Prohibition exception for Block Size • Use the Commission’s Internet Commission notes that the Pilot started
Orders to allow such Orders to be comment form (http://www.sec.gov/ implementation on October 3, 2016, and
executed on multiple Trading Centers. rules/sro.shtml); or accelerated approval of the proposal
Further, the Exchange proposes that for • Send an email to rule-comments@ would ensure that the rules of the
purposes of the Block Size Order sec.gov. Please include File Number SR– Exchange would be in place during
exception to the Trade-at Prohibition, NASDAQ–2016–126 on the subject line. implementation. Accordingly, the
the Order must have a size of 5,000 Paper Comments Commission finds good cause, pursuant
shares and the resulting execution upon to Section 19(b)(2) of the Exchange
entry must have a size of 5,000 shares • Send paper comments in triplicate
to Secretary, Securities and Exchange Act,46 to approve the proposed rule
or more in aggregate.40 change, as modified by Partial
Commission, 100 F Street NE.,
The Commission believes that the Washington, DC 20549–1090. Amendment Nos. 1, 2 and 3, on an
proposed changes are reasonably accelerated basis.
All submissions should refer to File
designed to comply with the Plan. VII. Conclusion
Number SR–NASDAQ–2016–126. This
Further, the Commission believes that file number should be included on the
the proposed changes that target It is therefore ordered that, pursuant
subject line if email is used. To help the to Section 19(b)(2) of the Exchange
particular Test Groups are necessary for Commission process and review your
compliance with the Plan.41 Act,47 that the proposed rule change
comments more efficiently, please use (SR–NASDAQ–2016–126), as modified
Accordingly, the Commission finds that only one method. The Commission will
these changes are consistent with by Partial Amendment Nos. 1, 2 and 3,
post all comments on the Commission’s be and hereby is approved on an
Section 6(b)(5) of the Act 42 and Rule Internet Web site (http://www.sec.gov/
608 of Regulation NMS 43 because they accelerated basis.
rules/sro.shtml). Copies of the
implement the Plan and clarify submission, all subsequent For the Commission, by the Division of
Exchange Rules. Trading and Markets, pursuant to delegated
amendments, all written statements authority.48
For these reasons, the Commission with respect to the proposed rule Robert W. Errett,
finds that the proposed rule change, as change that are filed with the
Deputy Secretary.
modified by Partial Amendment Nos. 1, Commission, and all written
2 and 3, is consistent with the [FR Doc. 2016–24834 Filed 10–13–16; 8:45 am]
communications relating to the
proposed rule change between the BILLING CODE 8011–01–P
39 In Partial Amendment No. 3, the Exchange Commission and any person, other than
clarified that it would not apply the Trade-at those that may be withheld from the
Prohibition outside of Regular Trading Hours. The SECURITIES AND EXCHANGE
public in accordance with the
Commission notes that this is consistent with the COMMISSION
Plan. See Plan Section I(LL). provisions of 5 U.S.C. 552, will be
40 See also Exchange Rule 4770(c)(3)(D)(iii)(c). available for Web site viewing and [Release No. 34–79070; File No. SR-
41 The Commission notes that the Exchange printing in the Commission’s Public BatsBZX–2016–66]
originally proposed to modify the operation of Post Reference Room, 100 F Street NE.,
to Comply Orders, Non-Displayed Orders, and Post
Washington, DC 20549–1090, on official Self-Regulatory Organizations; Bats
Only Orders entered via OUCH and FLITE for Test BZX Exchange, Inc.; Notice of Filing
Group Three Pilot Securities only. In Partial business days between the hours of
Amendment No. 2, the Exchange proposes to 10:00 a.m. and 3:00 p.m. Copies of such and Immediate Effectiveness of a
remove the proposed functionality. Thus, the filing will also be available for Proposed Rule Change Related to Fees
Commission believes that the proposal, as modified,
inspection and copying at the principal for Use of Bats BZX Exchange, Inc.
is consistent with the Plan. The Exchange has
committed to make the system changes necessary to office of the Exchange. All comments October 7, 2016.
implement Partial Amendment No. 2. If it appears received will be posted without change; Pursuant to Section 19(b)(1) of the
that the system changes will not be completed by the Commission does not edit personal
October 17, 2016, the date on which the Securities Exchange Act of 1934 (the
Participants will begin implementation of Test
identifying information from ‘‘Act’’),1 and Rule 19b–4 thereunder,2
submissions. You should submit only notice is hereby given that on
rmajette on DSK2TPTVN1PROD with NOTICES
Group 3, Nasdaq will file a proposed rule change
with the Commission to propose any necessary information that you wish to make September 30, 2016, Bats BZX
changes to the Exchange’s rules, and provide notice available publicly. All submissions
to market participants sufficiently in advance of
this date to adequately inform market participants
should refer to File Number SR– 46 15 U.S.C. 78s(b)(2).
of the current operation of Nasdaq’s systems. See NASDAQ–2016–126 and should be 47 Id.
Partial Amendment No. 2. 48 17 CFR 200.30–3(a)(12).
42 15 U.S.C. 78f(b)(5). 44 15 U.S.C. 78f(b)(5). 1 15 U.S.C. 78s(b)(1).
43 17 CFR 242.608. 45 17 CFR 242.608. 2 17 CFR 240.19b–4.
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![Federal Register / Vol. 81, No. 199 / Friday, October 14, 2016 / Notices 71147
Exchange, Inc. (the ‘‘Exchange’’ or Professional Penny Pilot Add Volume a Member has an ADAV in Customer
‘‘BZX’’) filed with the Securities and Tiers and Professional Orders equal to or
Exchange Commission (the The Exchange is proposing to add two greater than 0.10% of average TCV.
‘‘Commission’’) the proposed rule new tiers under footnote 9, Professional Thus, in addition to increasing the
change as described in Items I, II, and Penny Pilot Add Volume Tiers,4 Tier 3 rebate this change will align the
III below, which Items have been and Tier 4. Currently, Professional 5 structure of the criteria of Tier 1 with
prepared by the Exchange. The orders that add liquidity in Penny Pilot the structure of existing Tier 2 as well
Commission is publishing this notice to Securities 6 receive a standard rebate of as new proposed Tiers 3 and 4
solicit comments on the proposed rule $0.25 per contract. In addition, described above.
change from interested persons. Members who qualify for Tier 1 and Under Tier 2 the Exchange presently
Tier 2 under footnote 9, Professional provides a rebate of $0.43 for Members
I. Self-Regulatory Organization’s who have a combined ADAV in
Statement of the Terms of the Substance Penny Pilot Add Volume Tier, receive
for such orders a rebate of $0.40 and Customer and Professional orders equal
of the Proposed Rule Change to or greater than 0.20% of average TCV.
$0.43, respectively. Under the proposed
The Exchange filed a proposal to new Tier 3, a Member that has a The Exchange is proposing to increase
amend the fee schedule applicable to combined ADAV 7 in Customer 8 and the rebate under Tier 2 to $0.44. In
Members 3 and non-members of the Professional orders equal to or greater addition, in order to ensure consistent
Exchange pursuant to BZX Rules 15.1(a) than 0.30% of average TCV 9 would terminology throughout footnote 9, the
and (c). receive a $0.46 rebate per contract for Exchange proposes to modify the
The text of the proposed rule change each Professional order that adds description of Tier 2 to eliminate the
is available at the Exchange’s Web site liquidity in Penny Pilot Securities. reference to ‘‘combined’’ such that the
at www.batstrading.com, at the Under the proposed new Tier 4, a Tier will apply when a Member has an
principal office of the Exchange, and at Member that has a combined ADAV in ADAV in Customer and Professional
the Commission’s Public Reference Customer and Professional orders equal orders equal to or greater than 0.20% of
Room. to or greater than 0.50% of average TCV average TCV. The Exchange believes the
would receive a $0.48 rebate per use of the word ‘‘combined’’ in this case
II. Self-Regulatory Organization’s is unnecessary and inconsistent with
contract for each Professional order that
Statement of the Purpose of, and other portions of the fee schedule.11 The
adds liquidity in Penny Pilot Securities.
Statutory Basis for, the Proposed Rule The Exchange is also proposing to Exchange also notes that changes are
Change modify the criteria necessary to qualify required to the Standard Rates table of
In its filing with the Commission, the for the Professional Penny Pilot Add the fee schedule in connection with the
Exchange included statements Volume Tier 1 and to increase the rebate changes to footnote 9 to reflect these
concerning the purpose of and basis for provided under both Professional Penny changes.
the proposed rule change and discussed Pilot Add Volume Tier 1 and Tier 2 NBBO Setter Tiers
any comments it received on the under footnote 9. Currently under Tier
1, a Member must have an ADV 10 equal The Exchange’s NBBO Setter Program
proposed rule change. The text of these
to or greater than 0.25% of average TCV is a program intended to incentivize
statements may be examined at the
in order to receive a rebate of $0.40. The aggressive quoting on BZX Options by
places specified in Item IV below. The
Exchange now proposes an increased providing an additional rebate upon
Exchange has prepared summaries, set
rebate of $0.42 pursuant to Tier 1 when execution for all orders that add
forth in Sections A, B, and C below, of
liquidity that set either the national best
the most significant parts of such
4 In addition to the proposed substantive changes bid (‘‘NBB’’) or national best offer
statements.
to footnote 9, the Exchange proposes to make the (‘‘NBO’’), subject to certain volume
A. Self-Regulatory Organization’s title of the footnote plural, as it currently reads requirements. The Exchange currently
Statement of the Purpose of, and ‘‘Professional Penny Pilot Add Volume Tier’’ even operates four NBBO Setter Tiers that
though there is more than one tier.
Statutory Basis for, the Proposed Rule 5 As set forth in the Exchange’s fee schedule, the
provide an additional rebate of either
Change term ‘‘Professional’’ applies to any transaction $0.02, $0.03 or $0.04 per contract to
identified by a Member as such pursuant to orders from qualifying Members that
1. Purpose Exchange Rule 16.1. submit orders that yield fee codes PA,
6 ‘‘Penny Pilot Securities’’ are those issues quoted
The Exchange proposes to modify its PF, PM, [sic] NA, NF, NM or NN.12
pursuant to Exchange Rule 21.5, Interpretation and
fee schedule applicable to the Policy .01.
The Exchange does not propose to
Exchange’s options platform (‘‘BZX 7 As set forth in the Exchange’s fee schedule, modify the criteria necessary to qualify
Options’’) to: (i) Modify the Professional ‘‘ADAV’’ means average daily volume calculated as for the NBBO Setter Tiers or the rebates
Penny Pilot Add Volume Tiers under the number of contracts added per day. provided thereunder, however the
8 As set forth in the Exchange’s fee schedule, the
footnote 9; (ii) remove fee codes PA and Exchange does propose to limit the
term ‘‘Customer’’ applies to any transaction
NA from footnote 4, NBBO Setter Tiers; identified by a Member for clearing in the Customer
applicability of Tier 1 through Tier 4 to
(iii) modify the criteria for Tier 5 under range at the Options Clearing Corporation (‘‘OCC’’), fee codes PF, PM, PN, NF, NM, and NN.
footnote 1, Customer Penny Pilot Add; excluding any transaction for a Broker Dealer or a Thus, NBBO Setter Tiers rebates would
(iv) modify the criteria for the Tier 1 ‘‘Professional’’ as defined in Exchange Rule 16.1. no longer be provided to orders yielding
9 As set forth in the Exchange’s fee schedule,
under footnote 3, Non-Customer Penny fee codes PA or NA. The Exchange also
‘‘TCV’’ means total consolidated volume calculated
Pilot Take Volume; and (v) modify the as the volume reported by all exchanges to the proposes to eliminate references to
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criteria for Tier 1 under footnote 13, consolidated transaction reporting plan for the
Non-Customer Non-Penny Pilot Take month for which the fees apply, excluding volume 11 See, e.g., footnote 2, Tier 1, which simply refers
on any day that the Exchange experiences an to ADAV in orders representing multiple capacities
Volume. Exchange System Disruption and on any day with (‘‘Away MM/Firm/BD/JBO orders’’).
a scheduled early market close. 12 The Exchange notes that it also offers a fifth
3 The term ‘‘Member’’ is defined as ‘‘any 10 As set forth in the Exchange’s fee schedule, NBBO Setter Tier that provides an additional rebate
registered broker or dealer that has been admitted ‘‘ADV’’ means average daily volume calculated as of $0.05 per contract to orders from qualifying
to membership in the Exchange.’’ See Exchange the number of contracts added or removed, Members that submit orders that yield fee codes PF,
Rule 1.5(n). combined, per day. PM and PN.
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![Federal Register / Vol. 81, No. 199 / Friday, October 14, 2016 / Notices 71149
increased liquidity from this proposal does not believe that the proposed • Send an email to rule-comments@
also benefits all investors by deepening change will impair the ability of sec.gov. Please include File Number SR-
the BZX Options liquidity pool, offering Members or competing venues to BatsBZX–2016–66 on the subject line.
additional flexibility for all investors to maintain their competitive standing in
enjoy cost savings, supporting the the financial markets. Additionally, Paper Comments
quality of price discovery, promoting Members may opt to disfavor the • Send paper comments in triplicate
market transparency and improving Exchange’s pricing if they believe that to Secretary, Securities and Exchange
investor protection. Such pricing alternatives offer them better value.
Commission, 100 F Street NE.,
programs thereby reward a Member’s Accordingly, the Exchange does not
growth pattern on the Exchange and Washington, DC 20549–1090.
believe that the proposed changes to the
such increased volume increases Exchange’s tiered pricing structure All submissions should refer to File
potential revenue to the Exchange, and burdens competition, but instead, Number SR-BatsBZX–2016–66. This file
will allow the Exchange to continue to enhances competition as it is intended number should be included on the
provide and potentially expand the to increase the competitiveness of the subject line if email is used. To help the
incentive programs operated by the Exchange. Also, the Exchange believes Commission process and review your
Exchange. The Exchange believes that that the price changes contribute to, comments more efficiently, please use
the proposal is reasonable, equitably rather than burden competition, as such only one method. The Commission will
allocated and non-discriminatory with changes are broadly intended to post all comments on the Commission’s
respect to such Member based on the incentivize participants to increase their Internet Web site (http://www.sec.gov/
overall benefit to the Exchange resulting participation on the Exchange, which
from the success of BZX Options. As rules/sro.shtml). Copies of the
will increase the liquidity and market submission, all subsequent
noted above, such success allows the quality on the Exchange, which will
Exchange to continue to provide and amendments, all written statements
then further enhance the Exchange’s
potentially expand its existing incentive with respect to the proposed rule
ability to compete with other exchanges.
programs to the benefit of all change that are filed with the
participants on the Exchange. The C. Self-Regulatory Organization’s Commission, and all written
proposed pricing program is also fair Statement on Comments on the communications relating to the
and equitable in that membership in Proposed Rule Change Received From proposed rule change between the
BZX Options is available to all market Members, Participants, or Others Commission and any person, other than
participants which would provide them The Exchange has not solicited, and those that may be withheld from the
with access to the benefits on BZX does not intend to solicit, comments on public in accordance with the
Options provided by the proposed this proposed rule change. The provisions of 5 U.S.C. 552, will be
changes, as described above, even where Exchange has not received any written available for Web site viewing and
a member of BZX Options is not comments from members or other printing in the Commission’s Public
necessarily eligible for the proposed interested parties. Reference Room, 100 F Street NE.,
increased rebates on the Exchange. Washington, DC 20549 on official
Further, the proposed changes will III. Date of Effectiveness of the
business days between the hours of
result in Members receiving either the Proposed Rule Change and Timing for
10:00 a.m. and 3:00 p.m. Copies of such
same or an increased rebate than they Commission Action
filing also will be available for
would currently receive.
The foregoing rule change has become inspection and copying at the principal
B. Self-Regulatory Organization’s effective pursuant to Section 19(b)(3)(A) office of the Exchange. All comments
Statement on Burden on Competition of the Act 17 and paragraph (f) of Rule received will be posted without change;
The Exchange believes the proposed 19b–4 thereunder.18 At any time within the Commission does not edit personal
amendments to its fee schedule would 60 days of the filing of the proposed rule identifying information from
not impose any burden on competition change, the Commission summarily may submissions. You should submit only
that is not necessary or appropriate in temporarily suspend such rule change if information that you wish to make
furtherance of the purposes of the Act. it appears to the Commission that such available publicly. All submissions
To the contrary, the Exchange has action is necessary or appropriate in the should refer to File Number SR–
designed the proposed amendments to public interest, for the protection of BatsBZX–2016–66, and should be
its fee schedule in order to enhance its investors, or otherwise in furtherance of
submitted on or before November 4,
ability to compete with other exchanges. the purposes of the Act.
2016.
Also, the Exchange believes that the IV. Solicitation of Comments
addition of volume-tiered rebates by the For the Commission, by the Division of
Exchange contributes to rather than Interested persons are invited to Trading and Markets, pursuant to delegated
burdens competition, as such changes submit written data, views, and authority.19
are intended to incentivize participants arguments concerning the foregoing, Robert W. Errett,
to increase their participation on the including whether the proposed rule Deputy Secretary.
Exchange. Similarly, the modifications change is consistent with the Act. [FR Doc. 2016–24838 Filed 10–13–16; 8:45 am]
to criteria applicable to existing volume- Comments may be submitted by any of BILLING CODE 8011–01–P
tiered rebates and fees are intended to the following methods:
provide incentives to Members to Electronic Comments
rmajette on DSK2TPTVN1PROD with NOTICES
encourage them to enter orders to the
Exchange, and thus are intended to • Use the Commission’s Internet
enhance competition. comment form (http://www.sec.gov/
Additionally, Members may opt to rules/sro.shtml); or
disfavor the Exchange’s pricing if they
believe that alternatives offer them 17 15 U.S.C. 78s(b)(3)(A).
better value. Accordingly, the Exchange 18 17 CFR 240.19b–4(f). 19 17 CFR 200.30–3(a)(12).
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Document Created: 2016-10-14 00:00:40
Document Modified: 2016-10-14 00:00:40
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 71146 |
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