Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices 14191 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

As noted above, however, the 

Contributor did not disclose the 

Contribution to the Applicants and the 

Applicants had no knowledge of the 

Contribution when the Contributor 

received approval for the May 31, 2012 

contribution for the recall general 

election. 

Applicant’s Legal Analysis 

1. Rule 206(4)–5(a)(1) under the 

Advisers Act prohibits a registered 

investment adviser from providing 

investment advisory services for 

compensation to a government entity 

within two years after a contribution to 

an official of the government entity is 

made by the investment adviser or any 

covered associate of the investment 

adviser. Each Client is a ‘‘government 

entity,’’ as defined in rule 206(4)–5(f)(5), 

the Contributor is a ‘‘covered associate’’ 

as defined in rule 206(4)–5(f)(2), and the 

Official is an ‘‘official’’ as defined in 

rule 206(4)–5(f)(6). Rule 206(4)–5(c) 

provides that when a government entity 

invests in a covered investment pool, 

the investment adviser to that covered 

investment pool is treated as providing 

advisory services directly to the 

government entity. The RICs and the 

Funds are ‘‘covered investment pools,’’ 

as defined in rule 206(4)–5(f)(3). 

2. Section 206A of the Advisers Act 

grants the Commission the authority to 

‘‘conditionally or unconditionally 

exempt any person or transaction . . . 

from any provision or provisions of [the 

Advisers Act] or of any rule or 

regulation thereunder, if and to the 

extent that such exemption is necessary 

or appropriate in the public interest and 

consistent with the protection of 

investors and the purposes fairly 

intended by the policy and provisions of 

[the Advisers Act].’’ 

3. Rule 206(4)–5(e) provides that the 

Commission may exempt an investment 

adviser from the prohibition under Rule 

206(4)–5(a)(1) upon consideration of the 

factors listed below, among others: 

(1) Whether the exemption is 

necessary or appropriate in the public 

interest and consistent with the 

protection of investors and the purposes 

fairly intended by the policy and 

provisions of the Advisers Act; 

(2) Whether the investment adviser: 

(i) Before the contribution resulting in 

the prohibition was made, adopted and 

implemented policies and procedures 

reasonably designed to prevent 

violations of the rule; and (ii) prior to or 

at the time the contribution which 

resulted in such prohibition was made, 

had no actual knowledge of the 

contribution; and (iii) after learning of 

the contribution: (A) Has taken all 

available steps to cause the contributor 

involved in making the contribution 

which resulted in such prohibition to 

obtain a return of the contribution; and 

(B) has taken such other remedial or 

preventive measures as may be 

appropriate under the circumstances; 

(3) Whether, at the time of the 

contribution, the contributor was a 

covered associate or otherwise an 

employee of the investment adviser, or 

was seeking such employment; 

(4) The timing and amount of the 

contribution which resulted in the 

prohibition; 

(5) The nature of the election (e.g., 

federal, state or local); and 

(6) The contributor’s apparent intent 

or motive in making the contribution 

which resulted in the prohibition, as 

evidenced by the facts and 

circumstances surrounding such 

contribution. 

4. The Applicants request an order 

pursuant to section 206A and rule 

206(4)–5(e), exempting them from the 

two-year prohibition on compensation 

imposed by rule 206(4)–5(a)(1) with 

respect to investment advisory services 

provided to the Clients within the twoyear period following the Contribution. 

5. The Applicants submit that the 

exemption is necessary and appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. The 

Applicants further submit that the other 

factors set forth in Rule 206(4)–5 

similarly weigh in favor of granting an 

exemption to the Applicants to avoid 

consequences disproportionate to the 

violation. The Applicants note that 

causing the Advisers to serve without 

compensation for a two-year period 

could result in a financial loss that is 

approximately 24,000 times the amount 

of the Contribution. 

6. The Applicants represent that 

neither the Advisers nor the Contributor 

sought to interfere with the Clients’ 

merit-based selection process for 

advisory services, nor did they seek to 

negotiate higher fees or greater ancillary 

benefits than would be achieved in 

arms’-length transactions. The 

Applicants note that the Advisers’ 

relationship with the Clients pre-date 

the Contribution, and that one Client 

divested its investment in the Fund 

shortly after the Contribution. The 

Applicants represent that they have no 

reason to believe that the Contribution 

undermined the integrity of the market 

for advisory services or resulted in a 

violation of the public trust in the 

process for awarding contracts. 

7. The Applicants note that the 

Advisers adopted and implemented 

pay-to-play policies and procedures on 

the Rule’s effective date, March 14, 2011 

that are fully compliant with the Rule’s 

requirements. The Applicants further 

note that the Advisers began developing 

compliance testing that includes 

random searches of public campaign 

databases for contributions by 

employees. The Applicants represent 

that at no time did any employees of the 

Advisers other than the Contributor 

have any actual knowledge that the 

Contribution had been made prior to its 

discovery by the Advisers in March 

2014. The Applicants further represent 

that the Advisers and the Contributor 

obtained the Official’s agreement to 

return the Contribution, which was 

subsequently returned, and the Advisers 

established an escrow account for all 

fees attributable to the Clients’ 

relationships with the Advisers accrued 

between February 5, 2012 and February 

26, 2014. 

8. The Applicants state that the 

Contributor’s apparent intent in making 

the Contribution was not to influence 

the selection or retention of the 

Advisers, and that the Contribution was 

consistent with prior political donations 

made by the Contributor in support of 

other candidates who share the political 

views of the Official. 

9. The Applicants represent that the 

Contributor has had no direct contact or 

involvement with any of the Clients, 

and that the Contributor’s only indirect 

involvement with one of the Clients was 

through a single meeting at which a 

research analyst who reported to the 

Contributor met with the Client. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–06110 Filed 3–17–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74484; File No. SR–BATS– 

2015–20] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Related to Fees for Use 

of BATS Exchange, Inc. 

March 12, 2015. 

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 March 2, 

2015, BATS Exchange, Inc. (the 

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14192 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices 

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

4 17 CFR 240.19b–4(f)(2). 

5The 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). 

6 ‘‘Customer’’ applies to any transaction identified 

by a Member for clearing in the Customer range at 

the Options Clearing Corporation (‘‘OCC’’), 

excluding any transaction for a ‘‘Professional’’ as 

defined in Exchange Rule 16.1. 

7 ‘‘Penny Pilot Securities’’ are those issues quoted 

pursuant to Exchange Rule 21.5, Interpretation and 

Policy .01. 

8 ‘‘ADV’’ means average daily volume calculated 

as the number of contracts added or removed, 

combined, per day. 

9 ‘‘TCV’’ means 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, excluding 

volume on any day that the Exchange experiences 

an Exchange System Disruption and on any day 

with a scheduled early market close. 

10 ‘‘Professional’’ applies to any transaction 

identified by a Member as such pursuant to 

Exchange Rule 16.1. 

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

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

12 ‘‘Options Step-up Add TCV’’ means ADAV as 

a percentage of TCV in the relevant baseline month 

subtracted from current ADAV as a percentage of 

TCV. 

13 15 U.S.C. 78f. 

14 15 U.S.C. 78f(b)(4). 

‘‘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 filed a proposal to 

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 are 

effective upon filing. 

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 

‘‘Options Pricing’’ section of its fee 

schedule effective immediately, in order 

to modify pricing charged by the 

Exchange’s options platform (‘‘BATS 

Options’’) including adjusting the 

rebates associated with Customer Penny 

Pilot Add Volume Tier 1 and 

Professional and Firm Penny Pilot Add 

Volume Tiers 1 and 2, as further 

described below. 

The Exchange proposes to adjust the 

rebate for Customer 6 orders in Penny 

Pilot Securities 7 that add liquidity and 

meet Customer Add Volume Tier 1 from 

$0.45 per contract to $0.40 per contract. 

Currently, the Exchange offers a $0.45 

rebate for Customer orders that add 

liquidity and meet Customer Add 

Volume Tier 1, which requires that the 

Member has an ADV 8 equal to or greater 

than 0.05% of average TCV.9 The 

Exchange notes that such change will be 

reflected in both the Standard Rates 

table and the Customer Penny Pilot Add 

Tiers under footnote 1 of the fee 

schedule. 

The Exchange also proposes to adjust 

the rebate for Professional 10 and Firm 11

orders in Penny Pilot Securities that add 

liquidity and meet Professional/Firm 

Step-up Add Volume Tier 1 and Tier 2 

from $0.44 per contract to $0.42 per 

contract. The Exchange currently offers 

a $0.44 rebate for Professional and Firm 

orders that add liquidity and meet 

Professional/Firm Step-Up Add Volume 

Tier 1 or Tier 2. Meeting Professional/ 

Firm Step-up Add Volume Tier 1 

requires that a Member has an Options 

Step-up Add TCV 12 from June 2014 

baseline that is equal to or greater than 

0.50%. Meeting Professional/Firm Stepup Add Volume Tier 2 requires that a 

Member has an Options Step-up Add 

TCV from September 2014 baseline 

equal to or greater than 0.30% and an 

ADV equal to or greater than 0.40% of 

average TCV. The Exchange is not 

proposing to amend the requirements 

for meeting Professional/Firm Step-up 

Add Volume Tier 1 or Tier 2. The 

Exchange notes that such changes will 

be reflected in both the Standard Rates 

table and the Professional and Firm 

Penny Pilot Add Volume Tiers under 

footnote 2 of the fee schedule. 

The Exchange proposes to implement 

the amendments to its fee schedule 

effective immediately. 

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.13

Specifically, the Exchange believes that 

the proposed rule change is consistent 

with Section 6(b)(4) of the Act,14 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 to be 

excessive. 

Volume-based rebates and fees such 

as the ones currently maintained on 

BATS Options 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 patterns, and introduction of 

higher volumes of orders into the price 

and volume discovery processes. The 

Exchange believes the proposed 

reduction of the rebate for orders that 

add liquidity for Customers that meet 

Customer Add Volume Tier 1 is a 

reasonable, fair and equitable, and not 

unfairly discriminatory allocation of 

fees and rebates because it will provide 

Members with a greater incentive to 

increase their participation on BATS 

Options in order to receive a higher 

rebate by meeting a higher Customer 

Add Volume Tier. Currently, the 

difference between the rebate received 

for orders that qualify for Customer Add 

Volume Tier 1 and those that qualify for 

Customer Add Volume Tier 2 is only 

$0.03 per contract, but as proposed, the 

difference would be $0.08 per contract. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices 14193 

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

16 17 CFR 240.19b–4(f). 

17 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

As such, the Exchange believes that 

increasing the difference in the rebates 

between the tiers will act to incentivize 

Members to increase their ADV as a 

percentage of TCV to 0.30% in order to 

qualify for Customer Add Volume Tier 

2 and receive a rebate of $0.48 per 

contract. Such increased participation 

on BATS Options will result in higher 

levels of liquidity provision and 

introduction of higher volumes of orders 

into the price and volume discovery 

processes, which will benefit all 

participants on BATS Options. 

The Exchange also believes that the 

proposed reduction of the rebates for 

Professional/Firm Step-up Add Volume 

Tier 1 and Tier 2 is a reasonable, fair 

and equitable, and not unfairly 

discriminatory allocation of fees and 

rebates because, as stated above, the 

Exchange’s tiered pricing structure is 

designed such that fees and rebates are 

related to the value of market quality 

associated with higher levels of market 

activity, such as higher levels of 

liquidity provision and/or growth 

patterns, and introduction of higher 

volumes of orders into the price and 

volume discovery processes. As such, 

the Exchange believes that it is 

reasonable, fair, and equitable to lower 

the rebates associated with Professional/ 

Firm Step-up Add Volume Tier 1 and 

Tier 2. In this same light, the Exchange 

notes that the proposed amendments 

would bring the rebate for Professional/ 

Firm Step-up Add Volume Tier 1 and 

Tier 2 in line with that of the Market 

Maker Add Volume Tier. The Exchange 

also notes that Professional and Firm 

orders can continue to receive further 

enhanced rebates through the NBBO 

Setter Tiers and that any order that 

qualifies for either Professional/Firm 

Step-Up Add Volume Tier 1 or Tier 2 

will also qualify for NBBO Setter Tier 1 

where the order sets the national best 

bid or offer. 

The Exchange reiterates 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 to be 

excessive. 

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. With respect 

to the proposed new rebates in 

Customer Add Volume Tier 1 and 

Professional/Firm Step-Up Tier 1 and 

Tier 2, the Exchange does not believe 

that any such changes burden 

competition, but instead, that they 

enhance competition, as they are 

intended to increase the 

competitiveness of and draw additional 

volume to BATS Options. As stated 

above, the Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues if the deem fee structures to be 

unreasonable or excessive. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any written 

comments from members or other 

interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 15 and paragraph (f) of Rule 

19b–4 thereunder.16 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 email to rule-comments@

sec.gov. Please include File Number SR– 

BATS–2015–20 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BATS–2015–20. 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 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– 

2015–20 and should be submitted on or 

before April 8, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–06124 Filed 3–17–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74487; File No. SR–CHX– 

2015–02] 

Self-Regulatory Organizations; 

Chicago Stock Exchange, Inc.; Notice 

of Filing and Immediate Effectiveness 

of a Proposed Rule Change 

Concerning the CHX Routing Services 

March 12, 2015. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on March 4, 

2015, the Chicago Stock Exchange, Inc. 

(‘‘CHX’’ or the ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

mstockstill on DSK4VPTVN1PROD with NOTICES