82 FR 30916 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Logical Ports on the Bats Equity Options Platform

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 126 (July 3, 2017)

[Federal Register Volume 82, Number 126 (Monday, July 3, 2017)]
[Notices]
[Pages 30916-30918]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-13901]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81032; File No. SR-BatsBZX-2017-43]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees for Logical Ports on the Bats Equity Options Platform

June 27, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 16, 2017 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 its fees and rebates 
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 the fee schedule applicable to the 
Exchange's options platform (``BZX Options'') to amend the fees for 
logical ports. A logical port represents a port established by the 
Exchange within the Exchange's system for trading and billing purposes. 
Each logical port established is specific to a Member or non-Member and 
grants that Member or non-Member the ability to operate a specific 
application, such as FIX order entry or PITCH data receipt. The 
Exchange's Multicast PITCH data feed is available from two primary 
feeds, identified as the ``A feed'' and the ``C feed'', which contain 
the same information but differ only in the way such feeds are 
received. The Exchange also offers two redundant fees, identified as 
the ``B feed'' and the ``D feed.'' The Exchange also offers a bulk-
quoting interface which allows Users \6\ of BZX Options to submit and 
update multiple bids and offers in one message through logical ports 
enabled for bulk-quoting.\7\ The bulk-quoting application for BZX 
Options is a particularly useful feature for Users that provide 
quotations in many different options. Logical port fees are limited to 
logical ports in the Exchange's primary data center and no logical port 
fees are assessed for redundant secondary data center ports. The 
Exchange assesses the monthly per logical port fees for all of a Member 
and non-Member logical ports.
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    \6\ A User on BZX Options is either a member of BZX Options or a 
sponsored participant who is authorized to obtain access to the 
Exchange's system pursuant to BZX Rule 11.3. See Exchange Rule 
16.1(a)(63).
    \7\ See Securities Exchange Act Release Nos. 65133 (August 15, 
2011), 76 FR 52032 (August 19, 2011) (SR-BATS-2011-029) and 65307 
(September 9, 2011), 76 FR 57092 (September 15, 2011) (SR-BATS-2011-
034).
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    The Exchange currently charges for logical ports (including 
Multicast PITCH Spin Server and GRP ports) a fee $650 per port per 
month. The Exchange now proposes to amend the fees for logical ports, 
Multicast PITCH Spin Server Ports for a set of primary ports (A or C 
feed), and GRP Ports for a set of primary ports (A or C feed) to $750 
per month.\8\

[[Page 30917]]

The Exchange will continue to offer for free the ports necessary to 
receive the Exchange's redundant Multicast ``B feed'' and ``D feed'', 
as well as all ports made available in the Exchange's secondary data 
center.
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    \8\ The Exchange does not propose to amend the monthly fee for 
purge ports.
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    The Exchange also proposes to amend the monthly fee for ports with 
bulk quoting capabilities. The Exchange currently charges $1,500 per 
month for the User's first five logical ports with bulk quoting 
capabilities. Each logical port with bulk quoting capabilities in 
excess of five logical ports is subject to a fee of $2,000 per month. 
The Exchange will continue to charge $1,500 per month for the User's 
first and second logical ports. However, any logical port with bulk 
quoting capabilities in excess of two logical ports would be subject to 
a fee of $2,500 per month.
Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule on July 3, 2017.
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.\9\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange operates in a highly competitive market in which 
exchanges offer connectivity services as a means of facilitating the 
trading activities of Members and other participants. Accordingly, fees 
charged for connectivity are constrained by the active competition for 
the order flow of such participants as well as demand for market data 
from the Exchange. If a particular exchange charges excessive fees for 
connectivity, affected members will 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, the exchange charging excessive fees 
would stand to lose not only connectivity revenues but also revenues 
associated with the execution of orders routed to it by affected 
members, 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.
    The Exchange believes that the proposed fees for logical ports are 
equitably allocated, reasonable, and not unfairly discriminatory in 
that the proposed fees will help the Exchange to cover increasing 
infrastructure costs associated with offering and maintaining logical 
ports connections. The Exchange also notes its proposed fees are only 
modestly higher than those currently charged by the Nasdaq Stock Market 
LLC (``Nasdaq'').\11\ In addition, the Exchange believes that the 
proposed fees for logical ports with bulk quoting capabilities are also 
equitably allocated, reasonable, and not unfairly discriminatory. The 
proposal will help the Exchange to cover increasing infrastructure 
costs associated with offering and continuing to offer bulk-quoting 
capabilities to BZX Options Users. The Exchange notes that the use of 
such ports is optional and that market participants can continue to 
access BZX Options through other logical ports for $750 per month. At 
the same time, the Exchange believes that its fees for bulk-quoting 
ports are reasonable, given the benefits and added efficiencies Users 
of BZX Options realize through such ports. The Exchange notes that 
charging different fees based on the number of ports a User subscribes 
to is designed to encourage Users to become more efficient, and reduce 
the number of ports used, thereby resulting in a corresponding increase 
in the efficiency that the Exchange would be able to realize with 
respect to managing its own infrastructure.
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    \11\ See Nasdaq Options Pricing, Chapter XV, Section 3(b) 
(charging a monthly fee of $650 order entry ports).
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    Lastly, the Exchange also believes that the proposed amendments to 
its fee schedule are non-discriminatory because they will apply 
uniformly to all Members. All Members that voluntarily select various 
service options will be charged the same amount for the same services. 
All Members have the option to select any connectivity option, and 
there is no differentiation among Members with regard to the fees 
charged for the services offered by the Exchange.

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

    The Exchange believes its proposed amendments to its fee schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. Accordingly, the Exchange does not believe that the 
proposed change will impair the ability of Members or competing venues 
to maintain their competitive standing in the financial markets.
    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 logical 
port fees, would serve to impair an exchange's ability to compete for 
order flow rather than burdening competition. The Exchange also does 
not believe the proposed rule change would impact intramarket 
competition as it would apply to all Members and non-Members equally.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from Members or other interested 
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and paragraph (f) of Rule 19b-4 
thereunder.\13\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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 30918]]

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-2017-43 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-2017-43. 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-201-43 and should be 
submitted on or before July 24, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-13901 Filed 6-30-17; 8:45 am]
 BILLING CODE 8011-01-P