Document ID: SEC-2017-0635-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats EDGA Exchange, Inc.
Posted Date: 2017-04-19T04:00Z

[Federal Register Volume 82, Number 74 (Wednesday, April 19, 2017)]
[Notices]
[Pages 18516-18519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07869]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80448; File No. SR-BatsEDGA-2017-06]

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

April 13, 2017.
    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 March 31, 2017, Bats EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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

[[Page 18517]]

by the Exchange. The Exchange 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 \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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 \5\ and non-members of the Exchange pursuant to EDGA Rules 
15.1(a) and (c).
---------------------------------------------------------------------------

    \5\ 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).
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the Exchange's 
Web site at www.bats.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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its fee schedule for its equity 
platform (``EDGA Equities'') to: (i) Adopt fee code PL, modify fee 
codes PA, PT, and PX, as well as the RMPT Tier under footnote 3 to 
provide fees for the recently implemented RMPL routing strategy; and 
(ii) modify the descriptions of fee codes MM and MT.
Fees for RMPL Routing Strategy
    The Exchange recently implemented a new midpoint routing strategy 
known as RMPL \6\ under which a MidPoint Peg Order \7\ first checks the 
System \8\ for available shares and routes any remaining shares to 
destinations on the System routing table \9\ that support midpoint 
eligible orders. If any shares remain unexecuted after routing, they 
are posted on the EDGA Book \10\ as MidPoint Peg Orders, unless 
otherwise instructed by the User.\11\ As a result of this additional 
functionality, the Exchange proposes to amend its fee schedule to adopt 
fees which would apply to orders routed pursuant to the RMPL routing 
strategy.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 79596 (December 19, 
2016), 81 FR 94454 (December 26, 2016) (SR-BatsEDGA-2016-34) (``RMPL 
Filing'').
    \7\ In sum, a MidPoint Peg Order is a non-displayed Market Order 
or Limit Order with an instruction to execute at the midpoint of the 
NBBO, or, alternatively, pegged to the less aggressive of the 
midpoint of the NBBO or one minimum price variation inside the same 
side of the NBBO as the order. See Exchange Rule 11.8(d).
    \8\ The term ``System'' is defined as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.'' See Exchange Rule 
1.5(cc).
    \9\ The term ``System routing table'' refers to the proprietary 
process for determining the specific trading venues to which the 
System routes orders and the order in which it routes them. See 
Exchange Rule 11.11(g). While the process for determining the 
specific trading venues to which orders are routed is proprietary, 
the Exchange publicly discloses the trading venues associated with 
each routing strategy via its Web site at http://cdn.batstrading.com/resources/features/bats_exchange_routing-strategies.pdf.
    \10\ The term ``EDGA Book'' is defined as the ``System's 
electronic file of orders.'' See Exchange Rule 1.5(d). The Exchange 
also proposed to capitalize the word ``Book'' within Rule 
11.11(g)(13) as the term EDGA Book is a defined term in the 
Exchange's Rules.
    \11\ The term ``User'' is defined as ``any Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3.'' See Exchange Rule 1.5(ee).
---------------------------------------------------------------------------

    Fee Code PL. The Exchange proposes to adopt fee code PL, which 
would apply to orders routed to Bats BZX Exchange, Inc. (``BZX''), Bats 
EDGX Exchange, Inc. (``EDGX''), the New York Stock Exchange, Inc. 
(``NYSE''), NYSE Arca, Inc. (``NYSE Arca''), or Nasdaq Stock Market LLC 
(``Nasdaq'') using a RMPL routing strategy. Orders that yield fee code 
PL would be charged a fee of $0.0030 per share in securities priced at 
or above $1.00 and 0.30% of the trade's total dollar value in 
securities priced below $1.00.
    Fee Codes PA, PT, PX, and RMPT Tier. The RMPT routing strategy 
operates similarly to RMPL in that under both Mid-Point Peg Orders 
check the System for available shares and any remaining shares are then 
sent to destinations on the System routing table that support midpoint 
eligible orders. If any shares remain unexecuted after routing, they 
are posted on the EDGA Book as a Mid-Point Peg Order, unless otherwise 
instructed by the User. While RMPL and RMPT operate in an identical 
manner, the trading venues that each routing strategy routes to and the 
order in which it routes them differ. Due to the identical behavior of 
RMPT and RMPL routing options, the Exchange proposes to amend fee Codes 
PA, PT, PX, and RMPT Tier, all of which set forth fees for the RMPT 
routing strategy, to also provide fees for the RMPL routing strategy. 
Each of these changes are as follows:
     Fee Code PA. Currently, fee code PA only applies to orders 
which add liquidity to the Exchange using a RMPT routing strategy. 
Orders that yield fee code PA are assessed a fee of $0.0008 per share 
in securities priced at or above $1.00 and are not assessed a fee in 
securities below $1.00. The Exchange now proposes modify the 
application of fee code PA not only apply to RMPT, but to also apply 
RMPL. The Exchange does not propose to modify the fee associated with 
PA.
     Fee Code PT. Currently, fee code PT only applies to orders 
which remove liquidity on the Exchange using a RMPT routing strategy. 
Orders that yield fee code PT are assessed a fee of $0.0010 per share 
in securities priced at or above $1.00 and are not assessed a fee in 
securities below $1.00. The Exchange now proposes modify the 
application of fee code PT not only apply to RMPT, but to also apply 
RMPL. The Exchange does not propose to modify the fee associated with 
PT.
     Fee Code PX. Currently, fee code PX only applies to orders 
routed using a RMPT routing strategy. Order that yield fee code PX are 
assessed a fee of $0.0012 per share in securities priced at or above 
$1.00 and 0.30% of the trade's total dollar value in securities priced 
below $1.00. The Exchange now proposes modify the application of fee 
code PX not only apply to RMPT, but to also apply RMPL. However, fee 
code PX would only apply to orders routed to destinations not covered 
by fee code PL using the RMPL routing strategy, as set forth above. The 
Exchange does not propose to modify the fee associated with PX.
     RMPT Tier Under Footnote 3. Currently, the Exchange offers 
one RMPT Tier under which a Member may receive a discounted fee of 
$0.0008 per share for orders yielding fee codes PT or PX where that 
Member adds or removes

[[Page 18518]]

an ADV \12\ greater than or equal to 2,000,000 shares using a the RMPT 
routing strategy. The Exchange now proposes to amend the RMPT Tier to 
allow the Member's ADV to also include shares that use the RMPL routing 
strategy. The Exchange does not propose to modify the fee associated 
with PT.
---------------------------------------------------------------------------

    \12\ ADV is generally defined as average daily volume calculated 
as the number of shares added to, removed from, or routed by, the 
Exchange, or any combination or subset thereof, per day. See the 
Exchange's fee schedule available at http://www.bats.com/us/equities/membership/fee_schedule/edga/.
---------------------------------------------------------------------------

Fee Codes MM and MT
    The Exchange proposes to amend the descriptions of fee code MM and 
MT to align with the description of similar fee codes of its affiliated 
exchanges.\13\ Fee code MM is [sic] applies to Non-Displayed \14\ 
orders that add liquidity at the midpoint of the national best bid and 
offer (``NBBO'') while fee code MT is [sic] applies to Non-Displayed 
orders that remove liquidity at the midpoint of the NBBO. Orders that 
yield fee code MM or MT are charged a fee of $0.00080 per share in 
securities priced at or above $1.00 and 0.08% of the trade's total 
dollar value in securities priced below $1.00. To align the description 
of fee codes MM and MT with similar fee codes of its affiliated 
exchanges,\15\ the Exchange proposes to amend their descriptions as 
follows. Fee code MM would now state that is applies to Non-displayed 
orders that add liquidity using Mid-Point Peg order type. Fee code MT 
would now state that is applies to Non-displayed orders that remove 
liquidity using Mid-Point Peg order type. The proposed changes do not 
alter the types of orders to which the fee codes would apply. The 
Exchange does not propose to modify the fee associated with MM and MT.
---------------------------------------------------------------------------

    \13\ The Exchange's affiliates are Bats EDGX Exchange, Inc. 
(``EDGX''), Bats BYX Exchange, Inc., (``BYX''), and Bats BZX 
Exchange, Inc. (``BZX'').
    \14\ See Exchange Rule 11.6(e)(2).
    \15\ See e.g., fee codes MM and MT on the BYX fee schedule 
available at http://www.bats.com/us/equities/membership/fee_schedule/byx/; and fee code MM on the EDGX fee schedule 
available at http://www.bats.com/us/equities/membership/fee_schedule/edgx/.
---------------------------------------------------------------------------

Implementation Date
    The Exchange proposes to implement the above changes to its fee 
schedule on April 3, 2017.

2. Statutory Basis

    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\16\ in general, and 
furthers the objectives of Section 6(b)(4),\17\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

Fees for RMPL Routing Strategy
    The Exchange believes the proposed fee code PL and the expansion of 
fee codes PA, PT and PX as well as the RMPT Tier to adopt fees for 
orders routed using the options RMPL routing strategy represents an 
equitable allocation of reasonable dues, fees. The proposed fee code 
structure would enable the Exchange to charge a rate reasonably related 
to the rate that Bats Trading, Inc. (``Bats Trading''), the Exchange's 
affiliated routing broker-dealer, would be charged for routing orders 
to destinations described in fee codes PL, PA, PT and PX when it does 
not qualify for a volume tier reduced fee. As a result, when Bats 
Trading is charged a fee when it routes an order which removes 
liquidity from a destination described in fee codes PL, PA, PT and 
PX.\18\ Bats Trading will pass through these rates to the Exchange and 
the Exchange, in turn, will charge the rates under fee codes PL, PA, PT 
and PX, as applicable. The proposed fee under fee codes PL, PA, PT and 
PX for orders routed pursuant to the RMPL routing strategy would enable 
the Exchange to equitably allocate its costs among all Members. 
Further, the Exchange believe that the expansion of the RMPT Tier to 
allow the Member's ADV to also include shares that use the RMPL routing 
strategy is also reasonable and equitable because of the similar 
operation of the RMPL and RMPT routing strategies and results in the 
equal treatment of those orders under the Exchange's tiered pricing 
structure. In addition, the inclusion of the RMPL routing strategy in 
the RMPT Tier should also attract additional midpoint liquidity to the 
Exchange, resulting in increased price improvement opportunities for 
orders seeking an execution at the midpoint of the NBBO on the Exchange 
or elsewhere.
---------------------------------------------------------------------------

    \18\ For example, Nasdaq, NYSE, NYSE Arca, BZX, and EDGX charge 
a fee of $0.0030 per share for orders that remove midpoint 
liquidity. See Nasdaq's fee schedule available at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2; NYSE's price 
list available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf; NYSE Arca's price list available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf; BZX's fee schedule available at 
http://www.bats.com/us/equities/membership/fee_schedule/bzx/; and 
EDGX's fee schedule available at http://www.bats.com/us/equities/membership/fee_schedule/edgx/.
---------------------------------------------------------------------------

    The Exchange notes that routing through Bats Trading is voluntary. 
Members seeking to [sic] midpoint eligible route such orders to BZX, 
EDGX, NYSE, NYSE Arca, and Nasdaq, or to any other destination covered 
by the RMPL routing strategy may connect to those destinations directly 
and be charged the fee or provided the rebate from that destination. 
The Exchange further believes that this pricing structure is non-
discriminatory as it applies equally to all Members.
Fee Codes MM and MT
    The Exchange believes [sic] proposed rule change represents an 
equitable allocation of reasonable dues, fees, and other charges 
because the amended the descriptions of fee code MM and MT to [sic] 
solely intended to align with the description of similar fee codes of 
its affiliated exchanges. Harmonized descriptions should help alleviate 
potential investor confusion for those that send midpoint eligible 
order to the exchange and its affiliates. The proposed changes do not 
alter the types of orders to which the fee codes would apply. Nor does 
the Exchange propose to modify the fees associated with MM and MT. In 
addition, the Exchange also believes that the proposed modifications of 
the descriptions of fee codes MM and MT are non-discriminatory because 
they would apply uniformly to all Members.

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

    This proposed rule change does 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 this change represents a 
significant departure from previous pricing offered by the Exchange or 
from pricing offered by the Exchange's competitors. The proposed rates 
would apply uniformly to all Members, and Members may opt to disfavor 
the Exchange's pricing if they believe that alternatives offer them 
better value. Accordingly, the Exchange does not believe that the 
proposed changes will impair the ability of Members or competing venues 
to maintain their competitive standing in the financial markets. The 
Exchange believes that its proposal to [sic] fees would increase 
intermarket competition by offering customers an alternative means to 
route to destinations covered by fee codes PL, PA, PT and PX. As stated 
above, routing through Bats Trading is voluntary and Members may 
utilize other avenues to route orders to destinations covered by fee 
codes PL, PA, PT and PX, such as connecting to those destinations 
directly. The changes

[[Page 18519]]

to the RMPT Tier to include the RMPL routing strategy as part of the 
tier's ADV calculation should increase competition as it is designed to 
attract additional midpoint order flow to the Exchange. The changes to 
the descriptions of fee codes MM and MT should have no impact on 
competition as they are similar designed to align their descriptions 
with that of similar fee codes offered by the Exchange's affiliates. 
Additionally, Members may opt to disfavor the Exchange's pricing if 
they believe that alternatives offer them better value. Accordingly, 
the Exchange does not believe that the proposed changes will impair the 
ability of Members or competing venues to maintain their competitive 
standing in the financial markets. The Exchange believes that its 
proposal would not burden intramarket competition because the proposed 
rate would apply uniformly to all Members.

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 \19\ and paragraph (f) of Rule 19b-4 
thereunder.\20\ 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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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 No. SR-BatsEDGA-2017-06 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 No. SR-BatsEDGA-2017-06. 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 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 No. SR-BatsEDGA-2017-06, and should be 
submitted on or before May 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2017-07869 Filed 4-18-17; 8:45 am]
 BILLING CODE 8011-01-P