20414 Federal Register / Vol. 76, No. 70 / Tuesday, April 12, 2011 / Notices 

8 15 U.S.C. 78s(b)(3)(A)(ii). 

9 17 CFR 240.19b–4. 

10 17 CFR 200.30–3(a)(12). 

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). 

5A Member is any registered broker or dealer that 

has been admitted to membership in the Exchange. 

19(b)(3)(A)(ii) of the Act8 and 

subparagraph (f)(2) of Rule 19b–49

thereunder, because, as provided in 

(f)(2), it changes ‘‘a due, fee or other 

charge applicable only to a member’’ 

(known on the Exchange as an ETP 

Holder). 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. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–NSX–2011–02 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NSX–2011–02. This file 

number should be included on the 

subject line if e-mail 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 

a.m. and 3 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–NSX–2011– 

02 and should be submitted on or before 

May 3, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8630 Filed 4–11–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64211; File No. SR–BATS– 

2011–012] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Related to Fees for Use 

of BATS Exchange, Inc. 

April 6, 2011. 

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 April 1, 

2011, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) 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 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes [sic] amend 

the fee schedule applicable to 

Members 5 and non-members of the 

Exchange pursuant to BATS Rules 

15.1(a) and (c). Changes to the fee 

schedule pursuant to this proposal will 

be effective upon filing. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://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 

‘‘Options Pricing’’ section of its fee 

schedule to: (i) Adopt a definition for 

Total Consolidated Volume (‘‘TCV’’), to 

be used for purposes of the tiered 

pricing structure offered by the BATS 

options market (‘‘BATS Options’’); (ii) 

modify the fees applicable to removing 

liquidity from BATS Options; (iii) 

modify the program that provides a 

rebate specifically for orders that set 

either the national best bid (the ‘‘NBB’’) 

or the national best offer (the ‘‘NBO’’) 

subject to average daily volume 

requirements; and (iv) adopt other 

changes to other definitions used for 

purposes of the fee schedule. 

(i) Definition and Use of Total 

Consolidated Volume for Pricing 

Rather than basing its pricing 

structure on a static number of 

contracts, the Exchange proposes to 

modify its tiered pricing structure such 

that it is based on Total Consolidated 

Volume, or TCV, and is thus variable 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 70 / Tuesday, April 12, 2011 / Notices 20415 

6As currently defined, ADV means average daily 

volume calculated as the number of contracts added 

or removed, combined, per day on a monthly basis. 

ADV does not include contracts routed away from 

the Exchange and executed at a different options 

exchange. 

7An order that is entered at the most aggressive 

price both on the BATS Options book and 

according to then current OPRA data will be 

determined to have set the NBB or NBO for 

purposes of the NBBO Setter Rebate without regard 

to whether a more aggressive order is entered prior 

to the original order being executed. 

8 15 U.S.C. 78f. 

9 15 U.S.C. 78f(b)(4). 

based on overall volumes in the options 

industry. In order to achieve this 

change, the Exchange proposes to adopt 

the definition of TCV as meaning ‘‘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.’’ 

To illustrate the Exchange’s application 

of TCV, if the overall volume of options 

contracts traded as reported by all 

options exchanges is 200 million 

contracts in a given month, this amount 

will be used as the TCV against which 

the Exchange’s tiered pricing will be 

measured for all trading activity during 

the month. The amount of overall TCV 

in the month will be divided by the 

number of trading days to determine 

average TCV; for instance, 200 million 

contracts divided by 20 trading days is 

an average TCV of 10 million contracts 

per day. Using these volumes as an 

example, to reach the Exchange’s 

highest proposed tier, which, as 

described in further detail below will be 

1% or more of average TCV, a Member 

would need to have an ADV of at least 

100,000 contracts traded on BATS 

Options per day. If, in the next month, 

options volumes doubled, and the TCV 

for the month was 400 million contracts, 

then a Member would need to have an 

ADV of at least 200,000 contracts traded 

on BATS Options to have an ADV equal 

to 1% of average TCV. The Exchange 

believes that basing its tiered pricing on 

TCV rather than a specific number of 

contracts is a preferable measure of 

overall activity given the fluctuation of 

volumes in the options industry. 

(ii) Fees To Remove Liquidity 

The Exchange currently charges 

standard fees of $0.28 per contract for 

customer orders and $0.38 per contract 

for Firm and Market Maker orders that 

remove liquidity from BATS Options. 

The Exchange proposes to increase this 

fee to $0.30 per contract for customer 

orders and $0.40 per contract for Firm 

and Market Maker orders that remove 

liquidity from BATS Options, subject to 

potential reduction for any Member 

with an ADV of 0.30% or more of 

average TCV on BATS Options, as 

described below. 

The Exchange currently maintains 

two tiers through which Members can 

realize lower liquidity removal fees. The 

first tier is available for any Member 

with an ADV 6 of 50,000 or more 

contracts; such Members are currently 

charged a fee of $0.25 per contract for 

customer orders and $0.35 per contract 

for Firm and Market Maker orders, and 

thus realize savings of $0.03 per 

contract as compared to the current 

standard fees. The second tier is 

available for any member with an ADV 

of 15,000 or more, but less than 50,000, 

contracts; such Members are currently 

charged a fee of $0.27 per contract for 

customer orders and $0.37 per contract 

for Firm and Market Maker orders, and 

thus realize savings of $0.01 per 

contract as compared to the current 

standard fees. 

The Exchange proposes to modify its 

tiered pricing structure to apply a 

single, reduced liquidity removal rate to 

all Members with an ADV equal to or 

greater than 0.30% of average TCV. For 

Members reaching this volume 

threshold, the Exchange will charge a 

fee of $0.27 per contract for customer 

orders and $0.37 per contract for Firm 

and Market Maker orders. Thus, such 

Members will save $0.03 per contract as 

compared to the standard fee to remove 

liquidity. Using examples set forth 

above, during a month with a total of 

200 million contracts traded, in order to 

receive the discounted removal fee 

based on a requirement of 0.30% of 

average TCV, a Member would be 

required to trade 600,000 contracts on 

BATS Options during the month (an 

ADV requirement of 30,000 contracts). 

(iii) Expansion and Modification of 

NBBO Setter Rebate Program 

The Exchange currently offers a rebate 

upon execution for all orders that add 

liquidity that sets either the NBB or 

NBO (the ‘‘NBBO Setter Rebate’’) 7 so 

long as the Member submitting the order 

achieves either an ADV of between 

15,000 and 49,999 contracts or an ADV 

of 50,000 or more contracts during the 

calendar month. The NBBO Setter 

Rebate currently offered by the 

Exchange to such Members is $0.40 per 

contract and $0.50 per contract, 

respectively. The Exchange proposes to 

modify the threshold to meet the ADV 

requirement for the $0.40 NBBO Setter 

Rebate to 0.30% of average TCV and to 

modify the threshold to meet the ADV 

requirement for the $0.50 NBBO Setter 

Rebate to 1% of average TCV. As 

explained above, assuming a monthly 

TCV of 200 million contracts in a month 

with 20 trading days, a Member would 

need an ADV of at least 30,000 contracts 

to receive the $0.40 NBBO Setter Rebate, 

and an ADV of at least 100,000 contracts 

to receive the $0.50 NBBO Setter Rebate. 

(iv) Other Changes to Definitions 

In addition to the changes described 

above, including adoption of a 

definition for TCV, the Exchange 

proposes to modify other definitions 

contained in the Options Pricing section 

of the fee schedule. First, the Exchange 

proposes to modify the definition of 

ADV to allow affiliated entities to 

aggregate their order flow for purposes 

of the Exchange’s pricing tiers if such 

entities provide prior notice to the 

Exchange. Specifically, to the extent two 

or more affiliated companies maintain 

separate BATS Options memberships 

and can demonstrate their affiliation by 

showing they control, are controlled by, 

or are under common control with each 

other, the Exchange will permit such 

Members to count overall volume of the 

affiliates in calculating ADV. In 

addition, the Exchange proposes to 

capitalize the term ‘‘Member’’ 

throughout the definitions. 

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.8

Specifically, the Exchange believes that 

the proposed rule change is consistent 

with Section 6(b)(4) of the Act,9 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 at a 

particular venue to be excessive. 

The changes to Exchange execution 

fees and rebates proposed by this filing 

are intended to attract order flow to 

BATS Options by continuing to offer 

competitive pricing while also 

permitting the Exchange to avoid 

significant monetary losses. 

The Exchange believes that basing its 

tiered pricing structure on overall TCV, 

rather than a static number irrespective 

of overall options volumes, is a fair and 

equitable approach to pricing. Volumebased discounts such as the liquidity 

removal fee tiers proposed in this filing 

have been widely adopted in the cash 


srobinson on DSKHWCL6B1PROD with NOTICES
20416 Federal Register / Vol. 76, No. 70 / Tuesday, April 12, 2011 / Notices 

10 15 U.S.C. 78s(b)(3)(A)(ii). 

11 17 CFR 240.19b–4(f)(2). 12 17 CFR 200.30–3(a)(12). 

equities markets, and are equitable and 

not unreasonably discriminatory 

because they are open to all members on 

an equal basis and provide 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 introduction of 

higher volumes of orders into the price 

and volume discovery process. 

Accordingly, the Exchange believes that 

the proposal is not unreasonably 

discriminatory because it is consistent 

with the overall goals of enhancing 

market quality. Additionally, the 

Exchange believes that the NBBO Setter 

Rebate, now in place on BATS Options 

for three months, has and will continue 

to incentivize the entry of more 

aggressive orders that will create tighter 

spreads, benefitting both Members and 

public investors. 

The proposed increase in fees to 

remove liquidity will have variable 

affects on Members of BATS Options, 

dependent on the volume of transaction 

activity they conduct on BATS Options. 

The Exchange notes that only a small 

subset of Members currently meeting 

the ADV tier of 15,000 to 49,999 will not 

be impacted by any increase in fees. 

Despite this increase in fees for most 

Members, the Exchange believes that its 

proposed fee structure is fair and 

equitable as the Exchange’s standard 

removal fees (either $0.30 or $0.40 per 

contract) and the reduced removal fees 

(either $0.27 or $0.37 per contract) still 

remain lower than other markets with 

similar fee structures, such as the 

NASDAQ Options Market and NYSE 

Arca in Make/Take Issues. The increase 

in liquidity removal fees so that the 

Exchange is earning a slightly greater fee 

will provide the Exchange with 

additional revenue to both fund the 

NBBO Setter Rebate and to fund its 

operations generally. 

The proposed language permitting 

aggregation of volume amongst 

corporate affiliates for purposes of the 

ADV calculation is intended to avoid 

disparate treatment of firms that have 

divided their various business activities 

between separate corporate entities as 

compared to firms that operate those 

business activities within a single 

corporate entity. By way of example, 

subject to appropriate information 

barriers, many firms that are Members of 

the Exchange operate both a market 

making desk and a public customer 

business within the same corporate 

entity. In contrast, other firms may be 

part of a corporate structure that 

separates those business lines into 

different corporate affiliates, either for 

business, compliance or historical 

reasons. Those corporate affiliates, in 

turn, are required to maintain separate 

memberships with the Exchange in 

order to access BATS Options. Absent 

the proposed policy, such corporate 

affiliates would not receive the same 

treatment as firms operating similar 

business lines within a single entity that 

is a Member of the Exchange. 

Accordingly, the Exchange believes that 

its proposed policy is fair and equitable, 

and not unreasonably discriminatory. In 

addition to ensuring fair and equal 

treatment of its Members, the Exchange 

does not want to create incentives for its 

Members to restructure their business 

operations or compliance functions 

simply due to the Exchange’s pricing 

structure. 

Finally, the Exchange believes that 

the adoption of a definition for TCV will 

help to avoid potential confusion 

regarding the Exchange’s fee schedule. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change imposes any 

burden on competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Pursuant to Section 19(b)(3)(A)(ii) of 

the Act 10 and Rule 19b–4(f)(2) 

thereunder,11 the Exchange has 

designated this proposal as establishing 

or changing a due, fee, or other charge 

applicable to the Exchange’s Members 

and non-members, which renders the 

proposed rule change effective upon 

filing. 

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. 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–BATS–2011–012 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–BATS–2011–012. This file 

number should be included on the 

subject line if e-mail 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 a.m. and 3 p.m. Copies of the 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–BATS– 

2011–012 and should be submitted on 

or before May 3, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8628 Filed 4–11–11; 8:45 am] 

BILLING CODE 8011–01–P 


srobinson on DSKHWCL6B1PROD with NOTICES