82 FR 49431 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Transaction Fees for the Exchange's Equity Platform

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 205 (October 25, 2017)

Page Range		49431-49433
FR Document		2017-23119
Federal Register, Volume 82 Issue 205 (Wednesday, October 25, 2017)
[Federal Register Volume 82, Number 205 (Wednesday, October 25, 2017)]
[Notices]
[Pages 49431-49433]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-23119]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81906; File No. SR-BatsBZX-2017-67]


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

October 19, 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 October 10, 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 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\ 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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    The text of the proposed rule change is available at the Exchange's 
Web site at www.bats.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 amend its fee schedule applicable to its 
equities trading platform (``BZX Equities'') to amend the criteria for 
Cross-Asset Add Volume Tier 3 under footnote 1. The Exchange currently 
offers four Cross-Asset Add Volume tiers under footnote 1 that provide 
an enhanced rebate ranging from $0.0028 to $0.0030 per share for orders 
that yield fee codes B,\6\ V,\7\ and Y \8\ upon a Member achieving each 
tier's required criteria. Currently, under Cross-Asset Add Volume Tier 
3, Members receives an enhanced rebate of $0.0028 per share where they 
have on the Exchange's equity options platform (``BZX Options'') an 
ADAV greater than or equal to 2.00% of average OCV.\9\ The Exchange now 
proposes to amend the criteria necessary to receive the enhanced rebate 
provided by Cross-Asset Tier 3. As amended, Cross-Asset Add Volume Tier 
3 would require that the Member have on BZX Options an Options Market 
Maker Add OCV \10\ equal to or greater than 1.85% of average OCV and 
that Member must also add an ADV \11\ equal to or greater than 0.10% of 
TCV.\12\ The Exchange proposes to implement these amendments to its fee 
schedule immediately.\13\
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    \6\ Fee code B is appended to displayed orders that add 
liquidity to BZX (Tape B) and is provided a standard rebate of 
$0.0025 per share. See the Exchange's fee schedule available at 
http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
    \7\ Fee code V is appended to displayed orders that add 
liquidity to BZX (Tape A) and is provided a standard rebate of 
$0.0020 per share. Id.
    \8\ Fee code Y is appended to displayed orders that add 
liquidity to BZX (Tape C) and is provided a standard rebate of 
$0.0020 per share. Id.
    \9\ ``OCV'', for purposes of equities pricing means the total 
equity and ETF options volume that clears in the Customer range at 
the Options Clearing Corporation (``OCC'') 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, using the definition of Customer as 
provided under the Exchange's fee schedule for BZX Options. See the 
Exchange's fee schedule available at http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
    \10\ ``Options Market Maker Add OCV'' for purposes of equities 
pricing means ADAV resulting from Market Maker orders as a 
percentage of OCV, using the definitions of ADAV, Market Maker and 
OCV as provided under the Exchange's fee schedule for BZX Options. 
Id.
    \11\ ``ADV'' means average daily volume calculated as the number 
of shares added or removed, combined, per day. Id.
    \12\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply. Id.
    \13\ The Exchange initially filed the proposed rule change on 
September 29, 2017 (SR-BatsBZX-2017-64). On October 10, 2017, the 
Exchange withdrew SR-BatsBZX-2017-64 and submitted this filing.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\14\ in general, and 
furthers the objectives of Section 6(b)(4),\15\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. The Exchange also 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 at a particular 
venue to be excessive. The proposed rule change reflects a competitive 
pricing structure designed to incent market participants to direct 
their order flow to the Exchange. The Exchange believes the rates 
remain competitive with those charged by other venues and, therefore, 
reasonable and equitably allocated to Members.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates and fees such as the proposed Cross-Asset Add 
Volume Tier 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

[[Page 49432]]

patterns, and introduction of higher volumes of orders into the price 
and volume discovery processes.
    The Exchange believes that the proposal to modify the criteria for 
Cross-Asset Add Volume Tier 3 is a reasonable, fair and equitable, and 
not unfairly discriminatory allocation of fees and rebates because it 
will provide Members with an additional incentive to reach certain 
thresholds on both BZX Equities and BZX Options. The revised criteria 
continues to be reasonably related to the rebate provided by the tier. 
The Exchange believes decreasing the first prong of the tier's criteria 
to 1.85% but limiting it to Options Market Maker Add OCV, and adding 
the second prong requiring that the Member add an ADV equal to or 
greater than 0.10% of TCV ensures the difficulty of achieving the tier 
remains relatively the same, while adjusting it to reflect current 
market dynamics. The potential increased liquidity from this proposal 
also benefits all investors by deepening the BZX Equities and BZX 
Options liquidity pools, 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. To 
the extent a Member participates on the Exchange but not on BZX 
Options, the Exchange does believe that the proposal is still 
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, 
whether they participate on BZX Options or not.
    Lastly, the Exchange believes that limiting one prong of the tier's 
required criteria to Options Market Makers is not unfairly 
discriminatory because it is intended to increase Market Maker 
participation on BZX Options. Market Makers have affirmative 
obligations to maintain fair and orderly markets and to maintain a two-
sided market in those options series in which it is registered.\16\ 
Encouraging Market Maker's [sic] to achieve certain volume criteria on 
BZX Options in order to receive the tier's enhanced rebate, therefore, 
benefits all market participants by increasing the depth of the BZX 
Options liquidity pool and improving the market quality of the 
Exchange. The Exchange notes that the proposed criteria is not only 
limited to the Member's Options Market Making on BZX Options. The 
proposed criteria also requires that the Member meet certain volume 
requirements on BZX Equities and does require [sic] the Member be 
registered as a Market Maker to satisfy the tier.
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    \16\ See Exchange Rule 22.5(a).
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    (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. The Exchange does not believe 
that any of the proposed change [sic] to the Exchange's tiered pricing 
structure burden competition, but instead, that they enhance 
competition as they are intended to increase the competitiveness of the 
Exchange by modifying pricing incentives in order to attract order flow 
and incentivize participants to increase their participation on the 
Exchange. 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 structures to be unreasonable or 
excessive. The proposed changes are generally intended to enhance the 
rebates for liquidity added to the Exchange, which is intended to draw 
additional liquidity to the Exchange, and to eliminate a rebate that 
has not achieved its desired result. The Exchange does not believe the 
proposed amendments would burden intramarket competition as they would 
be available to all Members uniformly.

(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 \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.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 proposal 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-BatsBZX-2017-67 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-2017-67. 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 No. SR-BatsBZX-2017-67 and should be 
submitted on or before November 15, 2017.


[[Page 49433]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23119 Filed 10-24-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 205 / Wednesday, October 25, 2017 / Notices 49433

For the Commission, by the Division of letters on the proposed rule change, provide comparative data regarding the
Trading and Markets, pursuant to delegated including a response from the effect of LEAD on market quality, for
authority.19 Exchange.5 On May 22, 2017, the each security per trading day and for
Eduardo A. Aleman, Commission instituted proceedings each period of exceptional volatility
Assistant Secretary. under Section 19(b)(2)(B) of the (‘‘PEV’’) range (‘‘PEV Range’’), for the
[FR Doc. 2017–23119 Filed 10–24–17; 8:45 am]
Exchange Act 6 to determine whether to six months immediately preceding the
approve or disapprove the proposed implementation of the pilot program
BILLING CODE 8011–01–P
rule change.7 Thereafter, the and for the duration of the pilot
Commission received seven more program; (2) matched trade difference
SECURITIES AND EXCHANGE comment letters, including a response statistics, designed to compare the
COMMISSION from the Exchange.8 On August 17, reliability of CHX quotes with and
2017, pursuant to Section 19(b)(2) of the without the LEAD, for each security
[Release No. 34–81913; File No. SR–CHX– Exchange Act,9 the Commission assigned to a LEAD MM (‘‘LEAD MM
2017–04] designated a longer period for Security’’) per trading day and per PEV
Commission action on proceedings to Range, for the duration of the pilot
Self-Regulatory Organizations; determine whether to disapprove the
Chicago Stock Exchange, Inc.; Notice program; (3) volume statistics, designed
proposed rule change.10
of Filing of Amendments No. 1 and No. On September 19, 2017, the Exchange to measure the impact of LEAD on
2 and Order Granting Accelerated filed Amendment No. 1 to the proposed execution volume in LEAD MM
Approval of a Proposed Rule Change, rule change. In Amendment No. 1, the Securities for the duration of the pilot
as Modified by Amendments No. 1 and Exchange proposed to implement the program; (4) variable processing delay
No. 2, To Adopt the CHX Liquidity proposed rule change as a 24-month statistics, designed to provide
Enhancing Access Delay on a Pilot pilot program, during which time the comparative data regarding the variable
Basis Exchange would collect and publicly delay 11 between the initial receipt of an
disclose (following the sixth month of order and the time that the order is
October 19, 2017. eligible to be matched by CHX’s
the pilot program) the following data:
I. Introduction (1) Quote quality statistics, designed to matching system for the duration of the
pilot program; and (5) effective spread
On February 10, 2017, the Chicago 5 See letters from: Ryan Hitch, Head of Equities statistics, designed to measure the
Stock Exchange, Inc. (‘‘CHX’’ or Trading, XR Securities LLC, dated February 24, impact of the LEAD on CHX and
‘‘Exchange’’) filed with the Securities 2017 (‘‘XR Securities Letter’’); Douglas A. Cifu, national market system (‘‘NMS’’)
and Exchange Commission Chief Executive Officer, Virtu Financial LLC, dated
effective spreads for the duration of the
(‘‘Commission’’), pursuant to Section February 27, 2017 (‘‘Virtu Letter’’); Joanna Mallers,
Secretary, FIA Principal Traders Group, dated pilot program.12 On October 18, 2017,
19(b)(1) of the Securities Exchange Act March 13, 2017 (‘‘FIA PTG Letter’’); Adam Nunes, the Exchange filed Amendment No. 2 to
of 1934 (‘‘Exchange Act’’) 1 and Rule Head of Business Development, Hudson River the proposed rule change.13 This order
19b–4 thereunder,2 a proposed rule Trading LLC, dated March 13, 2017 (‘‘Hudson River
approves the proposed rule change, as
change to adopt the CHX Liquidity Trading Letter’’); R.T. Leuchtkafer, dated March 14,
2017 (‘‘Leuchtkafer Letter’’); Stephen John Berger,
Enhancing Access Delay (‘‘LEAD’’), Managing Director, Government & Regulatory 11 The variable delay does not include the 350-
which would require all new incoming Policy, Citadel Securities, dated March 14, 2017 microsecond intentional access delay. The variable
orders, cancel, and cancel/replace (‘‘Citadel Letter’’); Tyler Gellasch, Executive delay will depend on factors including, but not
Director, Healthy Markets Association, March 17,
messages to be subject to a 350- 2017 (‘‘Healthy Markets Letter’’); Elizabeth K. King,
limited to, messaging volume and system
microsecond intentional access delay processing. See Amendment No. 1, infra note 12, at
General Counsel and Corporate Secretary, New 28.
except for: (1) Orders that would York Stock Exchange, dated March 20, 2017 12 In Amendment No. 1, the Exchange also
provide liquidity submitted by a LEAD (‘‘NYSE Letter’’); James G. Ongena, Executive Vice
supplemented its rationale for the proposed rule
President and General Counsel, CHX, dated March
Market Maker (‘‘LEAD MM’’ or 24, 2017 (‘‘CHX Letter’’); Steve Crutchfield, Head of
change, provided additional discussion related to
‘‘LMM’’), a new class of CHX market the market quality enhancements that it believes
Market Structure, CTC Trading Group, LLC, dated
would be realized from the proposal, corrected
maker with heightened quoting and April 4, 2017 (‘‘CTC Trading Letter’’); and Theodore
certain errors in the examples set forth in the
trading obligations (referred to R. Lazo, Managing Director and Associate General
proposal, and corrected a misstatement by the
Counsel, Securities Industry and Financial Markets
collectively as the ‘‘minimum Association, dated May 17, 2017 (‘‘SIFMA Letter’’).
Exchange in one of its comment letters.
performance standards’’); and (2) cancel Amendment No. 1 is available at https://
All comments on the proposed rule change are
www.sec.gov/comments/sr-chx-2017-04/chx201704-
messages originating from a LEAD MM’s available at https://www.sec.gov/comments/sr-chx-
2583844-161106.pdf.
trading account. The proposed rule 2017-04/chx201704.htm. 13 In Amendment No. 2, the Exchange: (1)
6 15 U.S.C. 78s(b)(2)(B).
change was published for comment in Amended the proposal so that the LEAD would
7 See Securities Exchange Act Release No. 80740,
the Federal Register on February 21, 82 FR 24412 (May 26, 2017) (‘‘OIP’’). In the OIP,
apply only during the regular trading session; (2)
2017.3 On April 3, 2017, the revised the definition of ‘‘Qualified Executions’’ to
the Commission specifically requested comment on measure executions during the regular trading
Commission designated a longer period thirteen questions. See id. at 24416. session only; (3) modified its description of its
within which to approve the proposed 8 See letters from: R.T. Leuchtkafer, dated June
review for compliance with the minimum
rule change, disapprove the proposed 15, 2017 (‘‘Leuchtkafer Letter 2’’); Stephen Berger, performance standards to provide that the Exchange
Managing Director, Government and Regulatory would review LEAD MM quoting and trading
rule change, or institute proceedings to Policy, Citadel Securities, dated June 16, 2017 activity on a monthly basis, and that trading days
determine whether the proposed rule (‘‘Citadel Letter 2’’); Joanna Mallers, Secretary, FIA on which a LEAD MM was prohibited by CHX rules
change should be disapproved.4 The Principal Traders Group, dated June 16, 2017 (‘‘FIA from submitting orders from its trading account
Commission received eleven comment PTG Letter 2’’); James G. Ongena, Executive Vice would be excluded from such review; (4) modified
sradovich on DSK3GMQ082PROD with NOTICES

President, General Counsel, CHX, dated June 30, its description of the data that will be published on
2017 (‘‘CHX Letter 2’’); R.T. Leuchtkafer, dated July its Web site; (5) modified its description of the PEV
19 17 CFR 200.30–3(a)(12). 7, 2017 (‘‘Leuchtkafer Letter 3’’); R.T. Leuchtkafer, data that will be collected; and (6) clarified its
1 15 U.S.C. 78s(b)(1). dated July 10, 2017 (‘‘Leuchtkafer Letter 4’’); and description of one of the order origin categories into
2 17 CFR 240.19b–4. R.T. Leuchtkafer, dated October 7, 2017 which the variable processing delay statistics will
3 See Securities Exchange Act Release No. 80041 (‘‘Leuchtkafer Letter 5’’). be divided and amended and added delay ranges
(February 14, 2017), 82 FR 11252 (‘‘Notice’’). 9 15 U.S.C. 78s(b)(2).
for which data will be collected. Amendment No.
4 See Securities Exchange Act Release No. 80364, 10 See Securities Exchange Act Release No. 81415, 2 is available at https://www.sec.gov/comments/sr-
82 FR 17065 (April 7, 2017). 82 FR 40051 (August 23, 2017). chx-2017-04/chx201704-2643435-161294.pdf.

VerDate Sep<11>2014 22:06 Oct 24, 2017 Jkt 244001 PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 E:\FR\FM\25OCN1.SGM 25OCN1
Document Created: 2017-10-25 01:17:39
Document Modified: 2017-10-25 01:17:39
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		82 FR 49431