Federal Register / Vol. 79, No. 209 / Wednesday, October 29, 2014 / Notices 64445 

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

2 17 CFR 240.19b–4. 

3A Member is defined as ‘‘any registered broker 

or dealer that has been admitted to membership in 

the Exchange.’’ See Exchange Rule 1.5(n). 

4See Securities Exchange Act Release No. 72020 

(April 25, 2014) 79 FR 24807 (May 1, 2014) (SR– 

BATS–2014–015). 

5See Securities Exchange Act Release No. 72333 

(June 5, 2014) 79 FR 33630 (June 11, 2014) (SR– 

BATS–2014–019). 

6See BATS Rule 11.5. 

7As defined in Rule 11.8(e)(1)(C), LMM Security 

means an ETP that has an LMM. 

8As 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. 

9As defined in Rule 11.8(e)(1)(A), ETP means any 

security listed pursuant to Exchange Rule 14.11. 

10See SR–BATS–2014–050, filed October 16, 

2014, available at: http://www.batstrading.com/ 

regulation/rule_filings/bzx/. 

11As 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. 

12 15 U.S.C. 78f. 

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. 

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. 

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. 

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

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. 

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 

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64446 Federal Register / Vol. 79, No. 209 / Wednesday, October 29, 2014 / Notices 

13 15 U.S.C. 78f(b)(4) and (5). 

14See supra note 10. 

15 15 U.S.C. 78f(b)(5). 

16See supra note 10. 

17 15 U.S.C. 78s(b)(3)(A). 

18 17 CFR 240.19b–4(f). 

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. 

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. 

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

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. 

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. 

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 rulecomments@sec.gov. Please include File 

Number SR–BATS–2014–051 on the 

subject line. 

Paper Comments 

• 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 

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Federal Register / Vol. 79, No. 209 / Wednesday, October 29, 2014 / Notices 64447 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3This filing is substantially the same to the one 

establishing the RPI pilot by The NASDAQ Stock 

Market LLC (‘‘NASDAQ’’). The NASDAQ pilot 

program expires on December 31, 2014. See 

Securities Exchange Act Release No. 68937 

(February 15, 2013), 78 FR 12397 (February 22, 

2013) (‘‘RPI Approval Order’’) (SR–NASDAQ–2012– 

129). 

4The term Protected Quotation is defined in 

Chapter XII, Sec. 1(19) and has the same meaning 

as is set forth in Regulation NMS Rule 600(b)(58). 

The Protected NBBO is the best-priced protected 

bid and offer. Generally, the Protected NBBO and 

the national best bid and offer (‘‘NBBO’’) will be the 

same. However, a market center is not required to 

route to the NBBO if that market center is subject 

to an exception under Regulation NMS Rule 

611(b)(1) or if such NBBO is otherwise not available 

for an automatic execution. In such case, the 

Protected NBBO would be the best-priced protected 

bid or offer to which a market center must route 

interest pursuant to Regulation NMS Rule 611. 

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

Kevin M. O’ Neill, 

Deputy Secretary. 

[FR Doc. 2014–25667 Filed 10–28–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73410; File No. SR–BX– 

2014–048] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

of a Proposed Rule Change To 

Establish the Retail Price Improvement 

Program on a Pilot Basis Expiring 

Twelve Months From the Date of 

Implementation 

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 

17, 2014, NASDAQ OMX BX, Inc. (‘‘BX’’ 

or the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) a proposed 

rule change that would adopt new BX 

Rule 4780 to establish a Retail Price 

Improvement (‘‘RPI’’) Program (the 

‘‘Program’’ or ‘‘proposed rule change’’) 

to attract additional retail order flow to 

the Exchange while also providing the 

potential for price improvement to such 

order flow. 

The Exchange has designated 

December 1, 2014 as the date the 

proposed rule change becomes effective. 

The text of the proposed rule change 

is available from the Exchange’s Web 

site at http://

nasdaqomxbx.cchwallstreet.com/

Filings/, at the Exchange’s principal 

office, 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 aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Background 

The Exchange is proposing a one-year 

pilot program that would add new BX 

Rule 4780 to establish an RPI Program 

to attract additional retail order flow to 

the Exchange while also providing the 

potential for price improvement to such 

order flow.3 Under the proposed rule 

change, the Exchange would create a 

new class of market participant called a 

Retail Member Organization (‘‘RMO’’), 

which would be eligible to submit 

certain retail order flow (‘‘Retail 

Orders’’) to the Exchange. As proposed, 

BX members (‘‘Members’’) will be 

permitted to provide potential price 

improvement for Retail Orders in the 

form of non-displayed interest that is 

priced more aggressively than the 

Protected National Best Bid or Offer 

(‘‘Protected NBBO’’).4

Definitions 

The Exchange proposes to adopt the 

following definitions under proposed 

BX Rule 4780. First, the term ‘‘Retail 

Member Organization’’ (or ‘‘RMO’’) 

would be defined as a Member (or a 

division thereof) that has been approved 

by the Exchange to submit Retail 

Orders. 

Second, the term ‘‘Retail Order’’ 

would be defined as an agency order, or 

riskless principal order that satisfies the 

criteria of FINRA Rule 5320.03, that 

originates from a natural person and is 

submitted to the Exchange by an RMO, 

provided that no change is made to the 

terms of the order with respect to price 

(except in the case of a market order 

being changed to a marketable limit 

order) or side of market and the order 

does not originate from a trading 

algorithm or any other computerized 

methodology. The criteria set forth in 

FINRA Rule 5320.03 adds additional 

precision to the definition of ‘‘Retail 

Order’’ by clarifying that an RMO may 

enter Retail Orders on a riskless 

principal basis, provided that (i) the 

entry of such riskless principal orders 

meet the requirements of FINRA Rule 

5320.03, including that the RMO 

maintains supervisory systems to 

reconstruct, in a time-sequenced 

manner, all Retail Orders that are 

entered on a riskless principal basis; 

and (ii) the RMO submits a report, 

contemporaneously with the execution 

of the facilitated order, that identifies 

the trade as riskless principal. 

The term ‘‘Retail Price Improvement 

Order’’ or ‘‘RPI Order’’ or collectively 

‘‘RPI interest’’ would be defined as nondisplayed liquidity on the Exchange that 

is priced more aggressively than the 

Protected NBBO by at least $0.001 and 

that is identified as an RPI Order in a 

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