Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Notices 1205 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(2). 

11 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. 

6As defined on the Exchange’s fee schedule, the 

term ‘‘Customer’’ applies to any transaction 

identified by a member for clearing in the Customer 

range at the OCC. 

necessary or appropriate in furtherance 

of purposes of the Act. 

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 with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change is effective 

upon filing pursuant to Section 

19(b)(3)(A) 9 of the Act and 

subparagraph (f)(2) of Rule 19b–4 10

thereunder, because it establishes a due, 

fee, or other charge imposed by CBOE 

on any person in that the subsidy 

arrangement relates to fees charged by 

certain order routing system providers 

for use of their routing systems. 

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–CBOE–2010–117 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–CBOE–2010–117. 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–CBOE– 

2010–117 and should be submitted on 

or before January 28, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–92 Filed 1–6–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63632; File No. SR–BATS– 

2010–038] 

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. 

January 3, 2011 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that, on December 

21, 2010, 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 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to modify its 

fee schedule applicable to Members 5 of 

the Exchange pursuant to BATS Rules 

15.1(a) and (c). While changes to the fee 

schedule pursuant to this proposal will 

be effective upon filing, the changes will 

become operative on January 3, 2011. 

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) Modify its pricing for 

Customer 6 orders by decreasing the fee 

for removing liquidity from the 

Exchange and increasing the rebate for 

adding liquidity to the Exchange; (ii) 

add a rebate specifically for orders that 

set either the national best bid (the 

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

‘‘NBO’’) where the Member meets certain 


jdjones on DSK8KYBLC1PROD with NOTICES
1206 Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Notices 

7As defined on the Exchange’s fee schedule, the 

term ‘‘Firm’’ applies to any transaction identified by 

a member for clearing in the Firm range at the OCC. 

8As defined on 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. 

9As defined in BATS Rule 21.1(d)(12). 

10The Exchange’s routing strategies are defined in 

BATS Rule 21.9(a)(2). 

11As defined in BATS Rule 21.1(d)(7). 

12An 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. 

13See Securities Exchange Act Release No. 61869 

(April 7, 2010), 75 FR 19449 (April 14, 2010) (SR– 

ISE–2010–25)(notice of filing and immediate 

effectiveness to amend fees applicable to the 

International Securities Exchange, including 

providing increased rebates to market makers for 

being on the NBB or NBO for at least 80% during 

a given month); Securities Exchange Act Release 

No. 61987 (April 27, 2010), 75 FR 24771 (May 5, 

2010) (SR–C2–2010–001)(notice of filing and 

immediate effectiveness to establish fees applicable 

to C2 Options Exchange, including providing 

Preferred Market Makers with participation 

entitlements when they are at the NBBO, regardless 

of time priority). The Commission notes that 

Securities Exchange Act Release No. 61987 did not 

establish any new fees. 

14See Securities Exchange Act Release No. 57253 

(February 1, 2008), 73 FR 7352 (February 7, 2008) 

(SR–Phlx–2008–08)(notice of filing and immediate 

effectiveness to amend fees applicable to the 

Philadelphia Stock Exchange, including adopting a 

tiered floor broker options subsidy based on 

meeting specified trading volume requirements). 

15The Exchange notes that its proposed 

amendment to Rule 21.1 from Securities Exchange 

Act Release No. 63403 (December 1, 2010) (SR– 

BATS–2010–34) to add directed orders will not be 

subject to the proposed Firm and Market Maker 

Pricing. The Exchange intends to file a separate fee 

filing upon approval of the proposed amendment to 

implement directed order pricing. 

16See Securities Exchange Act Release No. 57253 

(February 1, 2008), 73 FR 7352 (February 7, 2008) 

(SR–Phlx–2008–08)(notice of filing and immediate 

effectiveness to amend fees applicable to the 

Philadelphia Stock Exchange, including adopting a 

tiered subsidy that does not apply to Customer-toCustomer transactions). 

average daily volume requirements; (iii) 

modify its pricing for Firm 7 and Market 

Maker 8 orders by increasing the fee for 

all orders that remove liquidity while 

also increasing the rebate for orders that 

add liquidity by either $0.05 or $0.15 

per contract depending on the capacity 

of the remover of the liquidity; (iv) 

modify its pricing for Customer Directed 

ISO 9 orders; and (v) establish fees that 

will apply to all best execution routing 

strategies offered by the Exchange 10 and 

to Destination Specific Order 11 routing 

strategies in order to eliminate the 

disparate pricing between the two types 

of routing. 

(i) Customer Pricing 

The Exchange currently charges $0.30 

per contract for all orders that remove 

liquidity from the BATS Exchange 

options market (‘‘BATS Options’’) and 

pays $0.20 per contract for all orders 

that add liquidity to BATS Options. The 

Exchange proposes to both lower the fee 

for removing liquidity to $0.25 per 

contract and raise the rebate for adding 

liquidity to $0.25 for Customer orders. 

The Exchange believes that this change 

will generate an increase in Customer 

order flow and will provide more 

liquidity on the Exchange. 

(ii) NBBO Setter Rebate 

The Exchange proposes to adopt for 

its options platform a $0.50 per contract 

rebate upon execution for all orders that 

add liquidity that sets either the NBB or 

NBO (the ‘‘NBBO Setter Rebate’’) 12 so 

long as the Member submitting the order 

achieves an average daily volume of 

20,000 contracts executed on the BATS 

Options book for the calendar month. 

Average daily volume will be calculated 

by taking the total number of contracts 

traded on the Exchange (which excludes 

routed orders) during the calendar 

month by the Member divided by the 

number of trading days in the month. 

For example, in January of 2011, a 

month with twenty (20) trading days, a 

Member must trade at least 400,000 

contracts (20 trading days multiplied by 

20,000 contracts per day) in the month 

to be eligible for the NBBO Setter 

Rebate. If a Member meets this volume 

requirement, all of the Member’s orders 

that set the NBB or NBO that were 

executed in January would be eligible 

for the NBBO Setter Rebate. The NBBO 

Setter Rebate supersedes any other 

applicable liquidity rebates. 

The Exchange believes that the 

proposed NBBO Setter Rebate is 

analogous to similar proposals designed 

to encourage market participants to 

submit aggressively priced orders 

previously implemented at other 

options exchanges.13 The Exchange also 

believes that its proposed use of a 

volume threshold to qualify for the 

rebate is substantively identical to tiered 

pricing structures that are in place at 

other exchanges.14 Additionally, the 

Exchange believes that the proposed 

NBBO Setter Rebate will incentivize the 

entry of more aggressive orders which 

will create tighter spreads, benefitting 

both Members and public investors. 

(iii) Firm and Market Maker Pricing 

As mentioned above, the Exchange 

currently charges $0.30 per contract for 

orders that remove liquidity and pays 

$0.20 per contract for orders that add 

liquidity. The Exchange proposes to 

raise the fee for removing liquidity to 

$0.35 for Firm and Market Maker orders. 

The Exchange also proposes to increase 

the rebate for Firm and Market Maker 

orders that are removed by Customer 

orders to $0.25 per contract and to 

increase the rebate for orders that are 

removed by Firm or Market Maker 

orders to $0.35 per contract. The 

removing Member’s fee will be 

determined without regard to the 

capacity of the adding party. 

The Exchange believes that the 

proposed change to the Firm and Market 

Maker pricing will encourage Firms and 

Market Makers to add more liquidity to 

the Exchange. The Exchange also 

believes that, because Members can 

neither see the capacity of orders in the 

Exchange’s order book nor determine 

the capacity of the Member that removes 

an order,15 the proposal will not 

disadvantage public investors or 

Members. Lastly, the Exchange believes 

that the proposed change to the fee 

schedule is substantively similar to a 

pricing plan in place at NASDAQ OMX 

PHLX.16

(iv) Directed ISO Pricing 

The Exchange currently charges $0.50 

per contract for a Customer Directed ISO 

transaction and $0.60 per contract for 

Firm and Market Maker Directed ISO 

transactions. The Exchange proposes to 

further simplify its pricing for Directed 

ISOs by setting flat rates for Directed 

ISOs that bypass the Exchange’s order 

book and execute at away venues, 

regardless of capacity. As proposed, the 

charge for all Directed ISO transactions 

will be $0.60 per contract. 

(v) Routing Pricing 

The Exchange proposes to adjust its 

fees for options order routing and 

simplify its routing pricing by 

eliminating the different pricing 

between Destination Specific Orders 

and Standard Best Execution Routing. 

Currently, the Exchange charges a flat 

fee per contract for standard routing and 

a fee based on the pricing model of the 

destination exchange for Destination 

Specific Orders. In most instances, the 

pricing for Destination Specific Orders 

results in Members being charged lower 

execution fees than if the orders were 

routed directly by the Member to an 

away venue. Rather than continuing to 

subsidize its Members’ routing 

strategies, the Exchange proposes to 

adjust routing fees to more closely 

reflect the Exchange’s cost of executing 

those orders at the away markets. 

Specifically, the Exchange proposes to 

assess a routing fee of $0.54 per contract 

for all Firm and Market Maker orders 

that are routed to any away exchange 

pursuant to Standard Best Execution 

Routing or Destination Specific Order 


jdjones on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Notices 1207 

17As defined on the fee schedule, Make/Take 

pricing refers to executions at the identified 

Exchange under which ‘‘Post Liquidity’’ or ‘‘Maker’’ 

rebates (‘‘Make’’) are credited by that exchange and 

‘‘Take Liquidity’’ or ‘‘Taker’’ fees (‘‘Take’’) are 

charged by that exchange. 

18 15 U.S.C. 78f(b). 

19 15 U.S.C. 78f(b)(4). 

20 15 U.S.C. 78s(b)(3)(A)(ii). 

21 17 CFR 240.19b–4(f)(2). 

routing. The Exchange proposes to 

assess the following per contract fees for 

Customer orders that are routed to the 

named away exchange: $0.05 for all 

orders in non-‘‘Make/Take’’ issues,17 if 

applicable, routed to NYSE Amex, 

NYSE Arca, the Boston Options 

Exchange, the Chicago Board Options 

Exchange, the International Stock 

Exchange, or NASDAQ OMX PHLX; 

$0.20 for all orders routed to the 

Chicago Board Options Exchange 2; 

$0.25 for all orders routed to the 

International Stock Exchange in Make/ 

Take issues; $0.29 for all orders routed 

to NASDAQ OMX PHLX in Make/Take 

issues; $0.48 for all orders routed to 

NASDAQ Options Market; and $0.49 for 

all orders routed to NYSE Arca in Make/ 

Take issues. 

The Exchange believes that the 

proposed routing fees are competitive, 

fair and reasonable, and nondiscriminatory in that they approximate 

the cost to the Exchange of executing 

routed orders at an away market and are 

similar to those fees charged by other 

exchanges. The Exchange also believes 

that Members will benefit from the 

simplicity of the pricing structure. 

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(b) of the 

Act.18 Specifically, the Exchange 

believes that the proposed rule change 

is consistent with Section 6(b)(4) 19 of 

the Act, 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. As described below, the 

Exchange believes that its fees and 

credits are competitive with those 

charged by other venues. 

The various changes to Exchange 

execution fees, execution rebates and 

routing fees proposed by this filing are 

intended to attract order flow to BATS 

Options by offering competitive pricing, 

especially for those who add liquidity 

that sets the NBB or NBO. Most of the 

changes the Exchange has proposed to 

its execution fees and rebates will result 

in reduced fees or increased payments 

that will benefit Members due to the 

obvious economic savings and increased 

revenue those Members will receive and 

the potential of increased available 

liquidity at the Exchange. The Exchange 

notes that it does not currently operate 

any auctions through which orders are 

held and broadcast to its membership, 

nor does the Exchange engage in any 

payment for order flow practices. 

Rather, the Exchange is proposing to 

enhance its transparent market structure 

with an easy to understand and 

transparent pricing structure by adding 

incentives for aggressive quoting. The 

Exchange believes that its proposed 

routing rates are, on average, better than 

or equal to the fees a market participant 

would pay if routing through another 

market center. 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. Also, 

although routing options are available to 

all Members, Members are not required 

to use the Exchange’s routing services, 

but instead, the Exchange’s routing 

services are completely optional. 

Members can manage their own routing 

to different options exchanges or can 

utilize a myriad of other routing 

solutions that are available to market 

participants. 

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 

The foregoing proposed rule change 

has been designated as a fee change 

pursuant to Section 19(b)(3)(A)(ii) of the 

Act 20 and Rule 19b–4(f)(2) 

thereunder,21 because it establishes or 

changes a due, fee or other charge 

imposed on members by the Exchange. 

Accordingly, the proposal is effective 

upon filing with the Commission. 

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–2010–038 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–2010–038. 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– 

2010–038 and should be submitted on 

or before January 28, 2011. 


jdjones on DSK8KYBLC1PROD with NOTICES
1208 Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Notices 

22 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. 

6Each pair of ports consists of one port at the 

Exchange’s primary data center and one port at the 

Exchange’s secondary data center. 

7See Securities Exchange Act Release Nos. 62663 

(August 9, 2010), 75 FR 49543 (August 13, 2010) 

(SR–NASDAQ–2010–077) (order approving fees for 

both 1G and 10G non-co-located port connections); 

Securities Exchange Act Release No. 62681 (August 

10, 2010), 75 FR 50020 (August 16, 2010) (SR– 

EDGA–2010–06) (order approving fees for both 1G 

and 10G port connections). 

8 15 U.S.C. 78f(b)(4). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–93 Filed 1–6–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63630; File No. SR–BATS– 

2010–039] 

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. 

January 3, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

22, 2010, 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 to modify its 

fee schedule applicable to Members 5

and non-members of the Exchange 

pursuant to BATS Rules 15.1(a) and (c). 

Pursuant to the proposed rule change, 

the Exchange will commence charging 

fees to Members and non-members for 

10G direct circuit connections, change 

pricing for certain other physical ports, 

and begin passing through in full certain 

hardware expenses incurred by the 

Exchange that are directly related to 

completing a cross-connect. While 

changes to the fee schedule pursuant to 

this proposal will be effective upon 

filing, the changes will become 

operative on January 3, 2011. 

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 purpose of the proposed rule 

change is to establish fees for direct 10G 

circuit connections, to raise the monthly 

fees for ‘‘physical’’ ports into the 

Exchange at the data centers where the 

Exchange’s servers are located, and to 

pass through in full any hardware costs 

or connectivity fees incurred by the 

Exchange that are directly related to 

completing a cross-connect where the 

cost or fee exceeds $1,000. The 

Exchange already provides Members 

and non-Members four pairs 6 of 1G 

physical ports free of charge and charges 

$2,000 per month for each additional 

single physical port. 

The Exchange proposes to provide the 

option to connect directly with the 

Exchange via 10G physical ports to any 

Member or non-member that has been 

approved to connect to the Exchange. 

Due to the infrastructure costs 

associated with providing the additional 

bandwidth for 10G physical ports, the 

Exchange proposes to charge $2,500 per 

month for each single physical 10G port 

provided by the Exchange to any 

Member or non-member in any data 

center. The Exchange’s proposal is 

intended to permit those Members and 

non-members that require additional 

bandwidth and wish to establish 10G 

physical ports to do so if such 

constituent is willing to pay for such 

ports. The Exchange notes that other 

market centers provide similar services 

to their Members and non-members.7

The Exchange also proposes to 

increase the fee for each 1G physical 

port used by Members and nonmembers in excess of the four ports 

provided free of charge from $2,000 per 

port each month to $2,500 per port each 

month. The proposal is intended to 

account for increasing infrastructure 

costs associated with providing physical 

ports while at the same time permitting 

those Members and non-members that 

wish to establish additional physical 

ports do so if such constituents are 

willing to pay for such ports. Based on 

the proposal, the change applies to all 

Exchange constituents with 1G physical 

connections, including Members that 

obtain ports for direct access to the 

Exchange, non-member service bureaus 

that act as a conduit for orders entered 

by Exchange Members that are their 

customers, Sponsored Participants, and 

market data recipients. There are zero 

non-members and very few Members 

that currently require more than four 

physical ports for their operations 

related to the Exchange and thus, the 

proposal should not affect many of the 

Exchange’s constituents. 

Lastly, the Exchange proposes to pass 

through in full any hardware costs or 

connectivity fees incurred that are 

directly related to completing a crossconnect where the expense to the 

Exchange billed by a third party exceeds 

$1,000. The Exchange proposes to pass 

through the expense as an alternative to 

the flat installation fees charged by the 

Exchange’s primary competitors. The 

Exchange does not anticipate that 

passing through these expenses will 

affect many of the Exchange’s 

constituents, because the majority of 

cross-connect completions cost less than 

$1,000. For this reason, the Exchange 

proposes to pass-through the charges 

associated with cross-connect 

completions that cost more than $1,000 

rather than to subsidize these expensive 

completions by charging an installation 

fee for all completions regardless of 

their cost. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b)(4) of the Act,8 in that it 


jdjones on DSK8KYBLC1PROD with NOTICES