63880 Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Notices 

17See Securities and Exchange Act Release No. 

62632 (August 3, 2010), 75 FR 47869 (August 3, 

2010) (SR–BX–2010–049). 

18See the ISE schedule of fee as of August 2, 

2010. 

19 15 U.S.C. 78s(b)(3)(A)(ii). 

20The text of the proposed rule change is 

available on the Commission’s Web site at 

http://www.sec.gov/rules/sro.shtml. 

21 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 In Amendment No. 1, the Exchange provided 

additional basis for the proposed rule change in the 

Statutory Basis section. 

4 15 U.S.C. 78s(b)(3)(A)(ii). 

5 17 CFR 240.19b–4(f)(2). 

is both equitable and reasonable for the 

reasons listed hereafter. 

The proposed fees are consistent with 

the equitable price differentials that 

exist today at all option exchanges. For 

example, the fees and rebates assessed 

by the Exchange are similar, and in 

some cases less than, the fees and 

rebates assessed by the Boston Options 

Exchange Group, LLC (‘‘BOX’’) 17 and the 

International Securities Exchange 

(‘‘ISE’’) 18 for orders executed in a price 

improvement mechanism. For example 

a BOX participant could be assessed 

total fees of $0.35 per contract as the 

price improvement period (‘‘PIP’’) 

initiator and receive a rebate for their 

customer PIP order of $0.25 per contract 

(in this example the net fee charged the 

BOX participant would be $0.10), 

whereas the PIP responder could be 

assessed a fee of $0.50 per contract. This 

is a differential of $0.40 per contract 

between two BOX participants for 

participating in the PIP auction, which 

is equal to or less than the differentials 

that exist in the Exchange’s proposal. 

With respect to ISE, the Exchange pays 

a rebate for certain PIXL executions, 

which is similar to the $0.15 rebate ISE 

pays for its price improvement 

mechanism. 

The Exchange operates in a fiercely 

competitive market place in which 

Exchange members and member 

organizations are highly sophisticated 

and highly knowledgeable. As is the 

case, members and member 

organizations readily and swiftly direct 

order flow or post liquidity to 

competing venues if they deem fee 

levels at a particular options exchange 

to be excessive, unfair or unreasonable. 

The Exchange believes the proposal is 

an equitable allocation of fees and not 

unfairly discriminatory for the reasons 

stated above. 

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. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were either 

solicited or received. 

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)(ii) of the Act.19 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–Phlx–2010–130 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–Phlx–2010–130. 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,20 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, 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–Phlx–2010–130 and should 

be submitted on or before November 8, 

2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–26175 Filed 10–15–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63085; File No. SR–BATS– 

2010–026] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change, as Modified by 

Amendment No. 1, Related to Fees for 

Use of BATS Exchange, Inc. 

October 13, 2010. 

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 

September 30, 2010, BATS Exchange, 

Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed 

with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I, II and III below, which Items 

have been prepared by the Exchange. 

On October 12, 2010, the Exchange filed 

Amendment No. 1, which modified the 

original filing.3 BATS 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 4 and Rule 19b–4(f)(2) 

thereunder,5 which renders the 

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Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Notices 63881 

6A Member is any registered broker or dealer that 

has been admitted to membership in the Exchange. 

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

8As proposed to be 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. 9As defined in BATS Rule 21.1(d)(12). 

proposed rule change, as modified by 

Amendment No. 1, 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 6 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 October 1, 2010. 

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, on the 

Commission’s Web site at http://www.

sec.gov, 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 definitions of 

‘‘Customer,’’ ‘‘Firm,’’ and ‘‘Market Maker’’ 

for purposes of routing pricing; (ii) 

modify its pricing for standard best 

execution routing; (iii) implement 

discounted pricing for Destination 

Specific Orders; and (iv) modify its 

pricing for Directed ISOs. In addition, 

the Exchange proposes to modify the fee 

schedule applicable to equities trading 

by changing the reference to the default 

best execution strategy. 

(i) Adoption of Definitions 

The Exchange proposes to distinguish 

pricing for routed orders that are 

executed at away options exchanges 

based on the clearing status of the order 

due to the fact that most other options 

exchanges to which orders are routed 

maintain such distinctions. Accordingly 

the Exchange proposes to adopt 

definitions of ‘‘Customer,’’ ‘‘Firm,’’ and 

‘‘Market Maker’’ for purposes of its fee 

schedule. The proposed definitions state 

that each category applies to 

transactions identified by a Member for 

clearing in the applicable range (i.e., 

Customer, Firm or Market Maker) at the 

Options Clearing Corporation (‘‘OCC’’). 

(ii) Standard Best Execution Routing 

Pricing 

The Exchange currently charges $0.05 

per contract for transactions executed at 

away markets pursuant to its best 

execution routing strategies, and passes 

through, in addition to that fee, all 

destination exchange fees charged to the 

Exchange for executing on away 

markets. The Exchange proposes to 

further simplify its pricing for best 

execution routing strategies by setting 

flat rates for transactions executed at 

away markets pursuant to any of its best 

execution routing strategies (i.e., 

‘‘CYCLE’’, ‘‘RECYCLE’’, ‘‘Parallel D’’ and 

‘‘Parallel 2D’’). As proposed, regardless 

of the best execution strategy selected, 

the charge for a Customer transaction 

executed away will be $0.30 per 

contract and the charge for a Firm or 

Market Maker transaction executed 

away will be $0.50 per contract. 

(iii) Discounted Pricing for Destination 

Specific Orders 

The Exchange proposes to adopt for 

its options platform a pricing model 

similar to a pricing model it offers to 

users of its equities platform. 

Specifically, the Exchange proposes to 

introduce discounted fees for use of its 

Destination Specific Order 7 routing 

strategies. The Exchange proposes to 

charge flat rates for Customer, Firm and 

Market Maker transactions executed at 

away markets pursuant to Destination 

Specific routing, which rates will vary 

depending on the venue at which 

transactions execute, as described in 

further detail below. 

The Exchange proposes to charge for 

Destination Specific Orders that are 

executed at away options exchanges that 

are divided into three categories. The 

Exchange proposes to adopt pricing for 

two distinct categories of options 

exchanges with ‘‘Make/Take’’ pricing.8

The first category of Make/Take pricing 

is proposed to apply to Destination 

Specific Orders executed at the 

International Stock Exchange (‘‘ISE’’) or 

NASDAQ OMX PHLX (‘‘PHLX’’) in 

issues for which Make/Take pricing 

applies. The fee for this first category of 

Make/Take markets is proposed as $0.20 

per contract for Customer transactions 

and $0.50 per contract for Firm or 

Market Maker transactions. The second 

category of Make/Take pricing is 

proposed to apply to Destination 

Specific Orders executed at NYSE Arca 

Options (‘‘NYSE Arca’’) in issues for 

which Make/Take pricing applies or the 

NASDAQ Options Market (‘‘NOM’’). The 

fee for the second category of Make/ 

Take markets is proposed as $0.40 per 

contract for Customer transactions and 

$0.50 per contract for Firm or Market 

Maker transactions. Finally, the 

Exchange proposes to categorize options 

exchanges as ‘‘Classic’’ to the extent such 

options exchanges do not have a Make/ 

Take pricing structure or do not apply 

Make/Take pricing to certain 

transactions. For executions that occur 

at Classic venues, including the 

American Stock Exchange (‘‘AMEX’’), 

Boston Options Exchange (‘‘BOX’’) and 

Chicago Board Options Exchange 

(‘‘CBOE’’) as well as the ISE, PHLX and 

NYSE Arca Options in non-Make/Take 

issues, the Exchange proposes to charge 

$0.05 per contract for Customer 

transactions and $0.50 per contract for 

Firm or Market Maker transactions. 

The Exchange believes that the 

proposed Destination Specific Order 

pricing in most instances will result in 

lower execution fees at away venues in 

each category than if orders were routed 

directly by a Member to such venues. To 

the extent any anomalies exist or away 

options exchanges modify pricing such 

that the Destination Specific fee is not, 

in fact, a discount from pricing that the 

Member may pay directly, the Exchange 

believes that Members will benefit from 

the simplicity of the pricing structure. 

(iv) Directed ISO Pricing 

The Exchange currently charges $0.10 

per contract for routed Directed ISOs 

executed at away markets,9 and passes 

through, in addition to that fee, all 

destination exchange fees charged to the 

Exchange for executing on away 

markets. 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. As 

proposed, the charge for a Customer 

Directed ISO transaction will be $0.50 

per contract and the charge for a Firm 

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63882 Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Notices 

10The Exchange’s routing strategies are defined in 

BATS Rule 11.13 

11 15 U.S.C. 78f(b). 

12 15 U.S.C. 78f(b)(4). 

13 15 U.S.C. 78s(b)(3)(A)(ii). 

14 17 CFR 240.19b–4(f)(2). 15 17 CFR 200.30–3(a)(12). 

or Market Maker Directed ISO 

transaction will be $0.60 per contract. 

(v) Equities Best Execution Routing 

In the ‘‘Equities Pricing’’ portion of the 

fee schedule the Exchange currently 

reflects its default best execution 

routing strategy as ‘‘DRT + CYCLE’’. 

Effective October 1, 2010, the 

Exchange’s default best execution 

routing strategy will be ‘‘DRT + Parallel 

D.’’ 10 The Exchange proposes to modify 

the reference to the default strategy in 

light of this change. 

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.11

Specifically, the Exchange believes that 

the proposed rule change is consistent 

with Section 6(b)(4) of the Act,12 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 and that the 

changes the Exchange has proposed will 

simplify the Exchange’s pricing model. 

The various routing fees proposed by 

this filing, including fees for destination 

specific orders and best execution 

routing strategies offered by the 

Exchange, are intended to attract order 

flow to BATS Options by offering 

competitive and easy to understand 

rates to Exchange Members, especially 

those representing order flow that clears 

in the Customer range at the OCC. 

Accordingly, some of the changes the 

Exchange has proposed will result in 

reduced fees that will benefit Members 

due to the obvious economic savings 

those Members will receive and the 

potential of increased available liquidity 

at the Exchange. In addition, the 

Exchange believes that the simplicity 

and certainty of its fee schedule will be 

a benefit to some Members. 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 further simplifying its 

routing fees. The Exchange believes that 

its proposed flat routing rates are, on 

average, better than or equal to the fees 

a market participant would pay if 

routing directly to certain market 

centers, especially with respect to 

Customer orders. 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 13 and Rule 19b–4(f)(2) 

thereunder,14 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–2010–026 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–2010–026. 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– 

2010–026 and should be submitted on 

or before November 8, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–26176 Filed 10–15–10; 8:45 am] 

BILLING CODE 8011–01–P 

mstockstill on DSKH9S0YB1PROD with NOTICES