Document ID: SEC-2012-0316-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2012-02-24T05:00Z

[Federal Register Volume 77, Number 37 (Friday, February 24, 2012)]
[Notices]
[Pages 11179-11181]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-4283]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66422; File No. SR-BATS-2012-010]

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

 February 17, 2012.
    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 February 8, 2012, BATS Exchange, Inc. (the ``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 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to institute a fee change applicable to 
securities listed on the Exchange. Changes to the Exchange's fees 
pursuant to this proposal will be 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

[[Page 11180]]

the most significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On August 30, 2011, the Exchange received approval of rules 
applicable to the qualification, listing and delisting of companies on 
the Exchange.\5\ The Exchange proposes to modify Rule 14.13, entitled 
``Company Listing Fees'' to: (i) Adopt specified pricing for certain 
exchange traded products (``ETPs'') listed on the Exchange pursuant to 
Rule 14.11; (ii) provide an exemption from annual listing fees for any 
security listed on the Exchange that has a consolidated average daily 
volume (``CADV'') equal to or greater than 2 million shares per day for 
the prior two (2) calendar months; and (iii) apply all annual fees on 
the anniversary date of a security's listing on the Exchange and make 
other clarifying changes.
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    \5\ See Securities Exchange Act Release No. 65225 (August 30, 
2011), 76 FR 55148 (September 6, 2011).
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Listing Fees for ETPs
    The Exchange currently has in place specified fees for listing of 
Tier I and Tier II securities on the Exchange, including both initial 
and annual listing fees. The Exchange proposes to amend Rule 14.13(b) 
to adopt initial and annual fees for ETPs listed pursuant to Rule 
14.11. The Exchange proposes to commence its listings business by 
charging Initial Listing Fees of $10,000 for all ETPs. This initial 
primary listing fee will include a $5,000 non-refundable application 
fee. The Exchange also proposes to charge an annual fee of $35,000 for 
ETPs, provided, however, that ETPs with CADV equal to or greater than 2 
million shares per day for the prior two (2) calendar months will not 
be assessed an annual fee, as described below. The Exchange also 
proposes to re-number the remainder of Rule 14.13(b) following the 
insertion of the proposed fees for ETPs.
Waiver of Annual Listing Fees for Certain Listed Securities
    In order to incentivize larger, more established companies and ETP 
sponsors to list securities on the Exchange and to incentivize 
companies that list on the Exchange and grow to be more established 
companies to maintain their listings on the Exchange, the Exchange 
proposes to waive the annual listing fee for any security that is 
listed on the Exchange and has had a CADV equal to or greater than 2 
million shares per day for the prior two (2) calendar months. This fee 
waiver will apply equally to securities that transfer from another 
listings market and become listed on the Exchange as well as those 
securities already listed on the Exchange when the annual listing fee 
becomes due (upon the anniversary of the security's listing, as 
described below).
Billing of Annual Fees and Additional Clarifying Changes
    The Exchange proposes to modify its intended billing of annual 
fees, which the Exchange originally intended to assess on a pro-rated 
basis. The Exchange proposes to make clear that unless otherwise 
specified, the Exchange will assess all annual fees set forth in Rule 
14.13(b)(2) upon a security's initial listing and then on each 
anniversary of a security's listing on the Exchange. The Exchange 
believes that billing each issuer on an annual basis from the date the 
applicable security is first listed on the Exchange is a more 
straightforward billing process than billing on a calendar year basis, 
which requires pro-rating of annual listing fees in the initial billing 
cycle.
    The Exchange also proposes to delete current paragraphs (F) and (G) 
of Rule 14.13(b)(2), as such paragraphs are duplicative of existing 
paragraphs (C) and (D) (which the Exchange proposes to re-number as (D) 
and (E)).
    Finally, the Exchange proposes to correct and expand an internal 
cross-reference set forth in Rule 14.13(b)(2)(E) (proposed to be re-
numbered as sub-paragraph (b)(2)(F)). As currently in effect, BATS Rule 
14.13(b)(2)(E), states that the Exchange will not apply the standard 
annual fee for a dually-listed security but will instead charge an 
annual fee of $15,000. Although this was intended and described as 
applicable to both Tier I and Tier II securities in the Exchange's rule 
filing that proposed rules applicable to Exchange-listed securities,\6\ 
the rule text inaccurately limits this dual-listings fee to Tier I 
securities. The Exchange proposes to expand the cross-reference to 
include Tier II securities as well as the newly added provision setting 
forth annual listing fees for ETPs.
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    \6\ See Securities Exchange Act Release No. 64546 (May 25, 
2011), 76 FR 31660 (June 1, 2011) (SR-BATS-2011-018); see also id.
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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.\7\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Sections 6(b)(4) and (b)(5) of the Act,\8\ in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among issuers, and it does not unfairly discriminate 
between customers, issuers, brokers or dealers. As proposed, consistent 
with pricing already in place for Tier I and Tier II securities, the 
Exchange is proposing a clear-cut and simple pricing structure for ETPs 
that is not variable based on the number of shares or other metrics. 
The proposed fees applicable to ETPs are therefore equitable and non-
discriminatory because they will apply equally to all ETPs listed on 
the Exchange. Further, the Exchange believes its proposed pricing for 
ETPs is reasonable, as the Exchange has not proposed additional fees 
that issuers incur at other exchanges, including fees for issuance of 
additional shares, name changes and other corporate actions. Finally, 
the Exchange notes that its proposed pricing, while not necessarily 
cheaper for all issuers at all other markets, is in many cases roughly 
equivalent or less than issuers would pay at other exchanges. For 
instance, derivative securities products and structured products listed 
on the NYSE Arca are assessed fees between $5,000 and $45,000 initially 
(depending on the type of product and number of shares) and between 
$5,000 and $55,000 annually, compared to proposed Exchange fees for ETP 
listings of $10,000 initially and $35,000 annually. Also, as noted 
above, most other listings markets charge multiple other fees 
applicable to additional shares issued by listed companies, corporate 
actions and related activities of issuers, whereas the Exchange's 
proposed fees do not include such additional fees.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4) and (b)(5).
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    The Exchange believes it is equitable, reasonable and non-
discriminatory to waive the annual fee for issuers that have 
consolidated average daily volume (``CADV'') equal to or greater than 2 
million shares per day for the prior two (2) calendar months. As a 
general matter, listed companies that are better known and well-
established are frequently more actively traded, liquid securities. The 
Exchange believes that the benefits to both the Exchange and other 
Exchange constituents of attracting and retaining such companies to 
list on the Exchange justifies the Exchange waiving annual listing fees 
for

[[Page 11181]]

these issuers. As it relates to other issuers, the ability of the 
Exchange to attract well-known, recognizable companies to list on the 
Exchange will help the Exchange to establish its status and reputation 
as a primary listing market. The Exchange's reputation as a primary 
listing market, in turn, will positively impact all issuers that are 
listed on the Exchange. Further, the Exchange believes that additional 
revenue generated from the Exchange's auction processes for actively 
traded Exchange-listed securities will offset the cost of operating a 
program for listed companies on the Exchange. Because issuers with 
higher CADV are likely to generate additional revenue for the Exchange, 
the Exchange believes it is reasonable to waive annual listing fees for 
such issuers. Based on the foregoing, the Exchange believes that waiver 
of annual listing fees to companies with certain CADV is a fair and 
equitable allocation of fees to issuers.
    Finally, the Exchange believes it is reasonable and equitable to 
assess annual fees as of a security's initial listing date, rather than 
pro-rating annual fees and billing on a calendar basis. In particular, 
the Exchange believes that this annual billing will provide for more 
certainty to issuers than a billing model that requires proration.

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

    Pursuant to Section 19(b)(3)(A)(ii) of the Act \9\ and Rule 19b-
4(f)(2) thereunder,\10\ the Exchange has designated this proposal as 
establishing or changing a due, fee, or other charge applicable to the 
Exchange's Members and non-members, which renders the proposed rule 
change effective upon filing.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
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    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-2012-010 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-2012-010. 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 
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-2012-010 and should be 
submitted on or before March 16, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Kevin M. O'Neill,
Deputy Secretary.
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    \11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2012-4283 Filed 2-23-12; 8:45 am]
BILLING CODE 8011-01-P