81 FR 90011 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of the Exchange's Equities Options Platform

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 239 (December 13, 2016)

[Federal Register Volume 81, Number 239 (Tuesday, December 13, 2016)]
[Notices]
[Pages 90011-90012]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-29802]



[[Page 90011]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79497; File No. SR-BatsEDGX-2016-69]


Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change Related 
to Fees for Use of the Exchange's Equities Options Platform

December 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 November 30, 2016, Bats EDGX Exchange, Inc. (the ``Exchange'' 
or ``EDGX'') 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 
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 the 
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 EDGX Rules 
15.1(a) and (c).
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange.'' See 
Exchange Rule 1.5(n).
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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 amend its fee schedule for its equity 
options platform (``EDGX Options'') to modify the Exchange's routing 
fee code RR, as further described below. The Exchange currently charges 
flat rate routing fees for executions at away options exchanges \6\ 
that have been placed into groups based on the approximate cost of 
routing to such venues. The grouping of away 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'').
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    \6\ Other options exchanges to which the Exchange routes 
include: Bats BZX Exchange, Inc. (``BZX Options''), BOX Options 
Exchange LLC (``BOX''), Chicago Board Options Exchange, Inc. 
(``CBOE''), C2 Options Exchange, Inc. (``C2''), International 
Securities Exchange, Inc. (``ISE''), ISE Gemini, LLC (``ISE 
Gemini''), ISE Mercury, LLC (``ISE Mercury''), Miami International 
Securities Exchange, LLC (``MIAX''), Nasdaq Options Market LLC 
(``NOM''), Nasdaq OMX BX LLC (``BX Options''), Nasdaq OMX PHLX LLC 
(``PHLX''), NYSE Arca, Inc. (``ARCA''), and NYSE MKT LLC (``AMEX'').
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    With respect to Customer orders in Non-Penny Pilot Securities, the 
Exchange applies one of two fee codes: (1) Fee code RP, which results 
in a fee of $0.25 per contract and applies to all Customer orders 
(including orders in Penny Pilot Securities) routed to and executed at 
AMEX, BOX, BX Options, CBOE, ISE Mercury, MIAX or PHLX; or (2) fee code 
RR, which results in a fee of $1.00 per contract and applies to all 
Customer orders in Non-Penny Pilot Securities routed to and executed at 
ARCA, BZX Options, C2, ISE, ISE Gemini or NOM. The Exchange proposes to 
increase the fee under fee code RR from $1.00 per contract to $1.10 per 
contract to account for additional Routing Costs incurred by the 
Exchange. The Exchange does not propose any change to fee code RP.
    As set forth above, the Exchange's approach to routing fees is to 
set forth through the use of 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 intends to adjust 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 in any 
area. The increase is proposed primarily in order to account for 
increased Routing Costs incurred by the Exchange.
Implementation Date
    The Exchange proposes to implement this amendment to its fee 
schedule on December 1, 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.\7\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\8\ 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.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).
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    With respect to the proposed increase under the Exchange's routing 
structure, the Exchange notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues or providers of routing services if they deem fee 
levels to be excessive. As explained above, the Exchange seeks to 
approximate the cost of routing to other options exchanges, including 
other applicable costs to the Exchange for routing, in order to provide 
a simplified and easy to understand pricing model. 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. The Exchange 
believes that its flat fee structure for orders routed to various 
venues is a fair and equitable approach to pricing, as it will provide 
certainty with respect to execution fees at groups of away options 
exchanges. In order to achieve its flat fee structure, taking all costs 
to the Exchange into account, the Exchange will in some instances 
charge a higher premium to route to certain options exchanges than to 
others. As a general matter, the Exchange believes that the proposed 
fee will allow it to recoup and

[[Page 90012]]

cover its costs of providing routing services to such exchanges and to 
make some additional profit in exchange for the services it provides. 
The Exchange also believes that the proposed increase to the 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. Finally, the Exchange notes 
that it intends to consistently evaluate its routing fees, including 
profit and loss attributable to routing, as applicable, in connection 
with the operation of a flat fee routing service, and would consider 
future adjustments to the proposed pricing structure to the extent it 
was recouping a significant profit or loss from routing to away options 
exchanges.

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. Rather, the 
proposal is a competitive proposal that is seeking to further the 
growth of the Exchange and to update the Exchange's fees for routing 
orders to away options exchanges based on Routing Costs. Additionally, 
Members may opt to disfavor the Exchange's pricing, including pricing 
for transactions on the Exchange as well as routing fees, if they 
believe that alternatives offer them better value. In particular, with 
respect to routing services, such services are available to Members 
from other broker-dealers as well as other options exchanges. The 
Exchange also notes that Members may choose to mark their orders as 
ineligible for routing to avoid incurring routing fees.\9\ 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.
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    \9\ See Exchange Rule 21.1(d)(7) (describing ``Book Only'' 
orders) and Exchange Rule 21.9(a)(1) (describing the Exchange's 
routing process, which requires orders to be designated as available 
for routing).
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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 \10\ and paragraph (f) of Rule 19b-4 
thereunder.\11\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to r[email protected]. Please include 
File Number SR-BatsEDGX-2016-69 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-BatsEDGX-2016-69. 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-BatsEDGX-2016-69, and should 
be submitted on or before January 3, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-29802 Filed 12-12-16; 8:45 am]
 BILLING CODE 8011-01-P