Document ID: SEC-2016-2001-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats EDGX Exchange, Inc.
Posted Date: 2016-11-16T05:00Z

[Federal Register Volume 81, Number 221 (Wednesday, November 16, 2016)]
[Notices]
[Pages 80705-80706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27468]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79273; File No. SR-BatsEDGX-2016-62]

Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change to Fees 
for Use of the Exchange's Equity Options Platform

November 9, 2016.
    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 November 1, 2016, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission (the 
``Commission'') the 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 the 
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 EDGX Rules 
15.1(a) and (c).
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    \3\ The 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).
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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 amend its fee schedule to specify in new 
footnote 5 that when Customer \4\ orders are submitted with a 
Designated Give Up, as defined below, the applicable rebates for such 
orders when executed on the Exchange (yielding fee code NC or PC) \5\ 
are provided to the Member who routed the order to the Exchange.
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    \4\ As defined in the Exchange's fee schedule available at 
http://www.bats.com/us/options/membership/fee_schedule/edgx/.
    \5\ Fee codes NC and PC are appended to Customer orders in Non-
Penny Pilot and Penny Pilot Securities, respectively. Id.
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    The Exchange recently amended Rule 21.12 (Clearing Member Give Up) 
to expand upon the procedure related to the ``give up'' of a Clearing 
Member \6\ by Users \7\ on the Exchange.\8\ As amended, Rule 21.12 
provides that, in addition to its own Clearing Member (or itself, if 
the firm is self-clearing), a User may identify to the Exchange a 
Designated Give Up, as that term is defined in the Rule. Specifically, 
amended Rule 21.12(b)(1) defines the term Designated Give Up as any 
Clearing Member that a User (other than a Market Maker \9\) identifies 
to the Exchange, in writing, as a Clearing Member the User requests the 
ability to give up. With this change, a Member acting as an options 
routing firm on behalf of one or more other Exchange Members (a 
``Routing Firm'') is able to route orders to the Exchange and to 
immediately give up the party (a party other than the Routing Firm 
itself or the Routing Firm's own clearing firm) who will accept and 
clear any resulting transaction. Because the Routing Firm is 
responsible for the decision to route the order to the Exchange, the 
Exchange believes that such Member should be provided the rebate when 
orders that yield fee code NC or PC are executed. In connection with 
this change, the Exchange proposes to append new footnote 5 to fee 
codes NC and PC in the Fee Codes and Associated Fees table of the fee 
schedule.
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    \6\ A Clearing Member is defined as ``an Options Member that is 
self-clearing or an Options Member that clears EDGX Options 
Transactions for other Members of EDGX Options.'' See Exchange Rule 
16.1(a)(15). An Option Member is defined as ``a firm, or 
organization that is registered with the Exchange pursuant to 
Chapter XVII of these Rules for purposes of participating in options 
trading on EDGX Options as an `Options Order Entry Firm' or `Options 
Market Maker.''' See Exchange Rule 16.1(a)(38).
    \7\ A User is defined as ``any Options Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3 (Access).'' See Exchange Rule 16.1(a)(63).
    \8\ See Securities Exchange Act Release No. 79184 (October 28, 
2016) (SR-BatsEDGX-2016-58).
    \9\ For purposes of this filing, Market Maker refers to Members 
acting in the capacity of Market Maker and includes all Exchange 
Market Maker capacities e.g., Primary Market Makers.
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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.\10\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\11\ 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.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange notes that the U.S. options markets are highly 
competitive, and the proposed fee structure is intended to provide an 
incentive for Members utilizing the Exchange's new give up procedure to 
direct orders to the Exchange. The proposal would only apply to fee 
codes NC and PC, related to Customer orders, because these are the 
primary rebates in place on the Exchange \12\ and reflect the primary 
liquidity that the Exchange is seeking to attract from Routing Firms 
that are likely to utilize the give up procedure.
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    \12\ The Exchange notes that Market Maker orders yielding fee 
codes NM and PM do indeed receive rebates to the extent a Member 
qualifies for Market Maker Volume Tier 6 pursuant to footnote 2 of 
the fee schedule. The Exchange, however, again notes that Market 
Makers are expressly excluded from utilizing the give up procedure.
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    The Exchange believes that the proposed amendments to its fee

[[Page 80706]]

schedule will enhance the Exchange's competitive position and will 
result in increased liquidity on the Exchange, to the benefit of all 
Exchange participants. Therefore, the Exchange believes that providing 
rebates is equitable and reasonable and not unfairly discriminatory as 
it would allow the Exchange, in the context of the new give up 
procedure described above, to provide a rebate directly to the party 
making the routing decision to direct Customer orders to the Exchange 
(i.e., the Routing Firm), which is consistent with both the Exchange's 
historic practice and the purpose behind a rebate (i.e., to incentivize 
the order being directed to the Exchange).

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

    The Exchange believes its proposed amendments to its fee schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange or its 
competitors. Additionally, Members may opt to disfavor the Exchange's 
pricing if they believe that alternatives offer them better value. The 
Exchange believes that its proposal to incentivize Routing Firms that 
are utilizing the new give up procedure to direct Customer orders to 
the Exchange, and will enhance the Exchange's competitive position by 
resulting in increased liquidity on the Exchange, thereby providing 
more of an opportunity for customers to receive best executions.

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 \13\ and paragraph (f) of Rule 19b-4 
thereunder.\14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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

     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-BatsEDGX-2016-62 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-BatsEDGX-2016-62. 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 such 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-BatsEDGX-2016-62, and should 
be submitted on or before December 7, 2016.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Brent J. Fields,
Secretary.
[FR Doc. 2016-27468 Filed 11-15-16; 8:45 am]
 BILLING CODE 8011-01-P