[Federal Register Volume 79, Number 209 (Wednesday, October 29, 2014)]
[Notices]
[Pages 64445-64447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25667]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73413; File No. SR-BATS-2014-051]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Related 
to Fees for Use of BATS Exchange, Inc.

October 23, 2014.
    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 October 16, 2014, BATS Exchange, Inc. (the ``Exchange'' or ``BATS 
'') filed with the Securities and Exchange Commission (``Commission'') 
a proposed rule change as described in Items I, II and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \3\ 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.
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    \3\ A Member is defined as ``any registered broker or dealer 
that has been admitted to membership in the Exchange.'' See Exchange 
Rule 1.5(n).
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    The text of the proposed rule change is available at the Exchange's 
Web site at 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
    On April 17, 2014, the Exchange filed a proposal to adopt rules to 
create a Lead Market Maker Program (the ``Program'') on an immediately 
effective basis.\4\ The Exchange then filed a proposal to adopt pricing 
related to the Program on May 28, 2014.\5\ The Program was implemented 
on June 2, 2014.
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    \4\ See Securities Exchange Act Release No. 72020 (April 25, 
2014) 79 FR 24807 (May 1, 2014) (SR-BATS-2014-015).
    \5\ See Securities Exchange Act Release No. 72333 (June 5, 2014) 
79 FR 33630 (June 11, 2014) (SR-BATS-2014-019).
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    The Program provides enhanced rebates to market makers registered 
with the Exchange (``Market Makers'') \6\ that are also registered as a 
lead market maker (``LMM'') in an LMM Security \7\ and meet certain 
minimum quoting standards (``Minimum Performance Standards'') \8\ in 
BATS-listed ETPs \9\ based on the consolidated average daily volume 
(``CADV'') of the security. The annual listing fee for an ETP is also 
based on the CADV of the security and was designed to offset the 
enhanced rebates paid to LMMs in the security. The Program was intended 
to strengthen market quality for BATS-listed ETPs. The Program, 
however, has not been adopted by issuers and market participants as 
readily as the Exchange had originally anticipated and there are 
currently no BATS-listed ETPs participating in the Program. The purpose 
of this filing is to eliminate such enhanced rebates and to make 
corresponding clarifying changes to the fee schedule. In coordination 
with this filing to eliminate the enhanced rebates for LMMs in LMM 
Securities, the Exchange has filed a separate filing to eliminate all 
annual listing fees for BATS-listed ETPs.\10\
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    \6\ See BATS Rule 11.5.
    \7\ As defined in Rule 11.8(e)(1)(C), LMM Security means an ETP 
that has an LMM.
    \8\ As defined in Rule 11.8(e)(1)(D), Minimum Performance 
Standards means a set of standards applicable to an LMM that may be 
determined from time to time by the Exchange.
    \9\ As defined in Rule 11.8(e)(1)(A), ETP means any security 
listed pursuant to Exchange Rule 14.11.
    \10\ See SR-BATS-2014-050, filed October 16, 2014, available at: 
http://www.batstrading.com/regulation/rule_filings/bzx/.
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    The Exchange proposes to modify its pricing for orders that add 
displayed liquidity in LMM Securities entered by LMMs that meet the 
Minimum Performance Standards (a ``Qualified LMM''). The Exchange is 
proposing to eliminate its existing tiered rebate structure that is 
based on the CADV of the LMM Security.\11\ Currently, unless an LMM 
otherwise qualifies for a higher rebate, a Qualified LMM shall receive 
the following rebates for each share of added displayed liquidity: 
where the CADV is 10,000 or less, $0.0070; where the CADV is between 
10,001 and 40,000, $0.0050; where the CADV is between 40,001 and 
80,000, $0.0045; where the CADV is between 80,001 and 150,000, $0.0040; 
and where the CADV is greater than 150,000, $0.0035. While not possible 
under the current pricing structure, in the event that a Qualified LMM 
is ever eligible to receive a higher per share rebate under non-LMM 
pricing, the Qualified LMM will receive such higher non-LMM rebate. As 
currently implemented, LMM rebates are not eligible for additional 
rebates like the NBBO Setter or NBBO Joiner rebates currently offered 
by the Exchange. The Exchange is proposing to eliminate enhanced 
rebates for Qualifying LMMs that add liquidity in LMM securities and 
instead apply the standard fees and rebates to all Members in all 
securities, including BATS-listed securities.
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    \11\ As defined in the proposed fee schedule, ``CADV'' means 
consolidated average daily volume calculated as the average daily 
volume reported for a security by all exchanges and trade reporting 
facilities to a consolidated transaction reporting plan for the 
three calendar months preceding the month for which the fees apply.
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    The Exchange is not proposing to make any other changes to its 
existing price structure. The Exchange is also not proposing to 
terminate operation of the Program. Thus, while LMMs will not receive 
enhanced rebates in BATS-listed ETPs, Market Makers may continue to 
register as LMMs in such BATS-listed ETPs in accordance with BATS Rule 
11.8(e).
Corresponding Changes
    Finally, the Exchange proposes to make several non-substantive 
changes to the fee schedule, including removal of the text of footnote 
3, which defines the term CADV, and reserving the footnote in order to 
maintain the current numbering of footnotes in the fee schedule.
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.\12\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) and 6(b)(5) of the

[[Page 64446]]

Act,\13\ 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 and it does 
not unfairly discriminate between customers, issuers, brokers or 
dealers. 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.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposal to eliminate LMM rebates is 
reasonable, equitable, and not unfairly discriminatory because it will 
result in standard fees and rebates being applied equally to all 
Members of the Exchange. Further, the potential decrease in rebates to 
LMMs in LMM Securities is reasonable, equitable, and not unfairly 
discriminatory because there are not currently any LMM Securities 
listed on the Exchange.
    The Exchange further believes that the proposal, especially when 
considered in conjunction with a separate proposal filed today that 
will eliminate annual listing fees for ETPs listed on the Exchange,\14\ 
will encourage the development of new financial products, provide a 
better trading environment for investors in ETPs, and generally 
encourage greater competition between listing venues by allowing the 
Exchange to provide issuers with a venue on which they are able to list 
ETPs without having to pay annual fees.
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    \14\ See supra note 10.
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    Based on the foregoing, the Exchange believes that the proposed 
amendments to the fee schedule 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 
and it does not unfairly discriminate between customers, issuers, 
brokers or dealers. Further, the Exchange believes that, combined with 
the amendment to eliminate annual listing fees, [sic] will enhance the 
Exchange's ability to compete as a listing venue in ETPs by allowing 
the Exchange to provide listing services without annual fees that it 
would otherwise not be able to provide if it continued to offer 
enhanced rebates. Accordingly, by allowing the Exchange to better 
compete as a listing venue, the Exchange believes that the proposal is 
designed to remove impediments to and perfect the mechanism of a free 
and open market and a national market system, and, in general, to 
protect investors and the public interest. Further, the Exchange 
believes that the proposal will enhance the Exchange's program for 
listing securities on the Exchange, which will, in turn, provide 
issuers with another option for raising capital in the public markets, 
thereby promoting the principles discussed in Section 6(b)(5) of the 
Act.\15\
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    \15\ 15 U.S.C. 78f(b)(5).
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Corresponding Changes
    Finally, the Exchange believes that the clarifying change that 
deletes the text of footnote 3 and designates it as being reserved is 
reasonable as it will help to avoid confusion for those that review the 
Exchange's fee schedule. The Exchange notes that this proposed change 
is not designed to amend any fee or rebate, nor alter the manner in 
which it assesses fees or calculates rebates. The Exchange believes 
that the proposed amendment is intended to make the fee schedule 
clearer and less confusing for investors and eliminate potential 
investor confusion, thereby removing impediments to and perfecting the 
mechanism of a free and open market and a national market system, and, 
in general, protecting investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
Exchange does not believe that the changes burden competition, but 
instead, enhance competition, as they are made in conjunction with the 
elimination of annual fees for ETPs listed on the Exchange,\16\ as 
described above, which the Exchange believes will increase the 
competitiveness of the Exchange's listings program. 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 [sic] deem fee structures to be unreasonable or 
excessive. As such, the proposal is a competitive proposal that is 
intended to enhance the Exchange's ability to compete as a listing 
venue for ETPs, which will, in turn, benefit the Exchange, ETP issuers, 
and all Exchange participants. In addition, the Exchange believes that 
the proposed non-substantive changes to the footnotes on the fee 
schedule would not affect intermarket nor intramarket competition 
because the changes do not alter any fees or rebates on the Exchange or 
the criteria associated therewith.
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    \16\ See supra note 10.
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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 \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d1a3a4bdb4fcb2bebcbcb4bfa5a291a2b4b2ffb6bea7"><span class="__cf_email__" data-cfemail="b6c4c3dad39bd5d9dbdbd3d8c2c5f6c5d3d598d1d9c0">[email protected]</span></a>. Please include 
File Number SR-BATS-2014-051 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-BATS-2014-051. 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

[[Page 64447]]

change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549 on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
such filing also will be available for inspection and copying at the 
principal offices 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-2014-051, and should be submitted on or before 
November 19, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O' Neill,
Deputy Secretary.
[FR Doc. 2014-25667 Filed 10-28-14; 8:45 am]
BILLING CODE 8011-01-P


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