Document ID: SEC-2013-0618-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2013-04-01T04:00Z

[Federal Register Volume 78, Number 62 (Monday, April 1, 2013)]
[Notices]
[Pages 19559-19561]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07471]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69237; File No. SR-BATS-2013-021]

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.

March 26, 2013.
    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 18, 2013, 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 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.
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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 amend the fee schedule applicable to 
Members \5\ 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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    \5\ A Member is any registered broker or dealer that has been 
admitted to membership in the Exchange.
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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
    The Exchange proposes to modify pricing applicable to the 
Exchange's options platform (``BATS Options'') with respect to orders 
in Mini Options routed by the Exchange and executed at an away options 
exchange. Mini Options overlie 10 equity or ETF shares, rather than the 
standard 100 shares.\6\ Mini Options are currently approved on the 
following five (5) underlying securities: SPDR S&P 500 ETF (``SPY''), 
Apple Inc. (``AAPL''), SPDR Gold Trust (``GLD''), Google Inc. 
(``GOOG''), and Amazon.com, Inc. (``AMZN''). BATS

[[Page 19560]]

Options will begin allowing trading in Mini Options on March 18, 
2013.\7\
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    \6\ See Securities Exchange Act Release No. 69018 (March 1, 
2013), 78 FR 15090 (March 8, 2013) (Notice of filing and immediate 
effectiveness allowing Mini Options to be listed and traded on BATS 
Options) (SR-BATS-2013-013).
    \7\ The three classes are the Nasdaq-100 Index Tracking Stock 
(``QQQQ''), SPY, and the iShares Russell 2000 Index Fund (``IWM''). 
QQQQ, SPY, and IWM are quoted in $0.01 for all options series.
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    In conjunction with the beginning of trading in Mini Options on 
March 18, 2013, the Exchange is proposing to implement pricing for 
routing orders in Mini Options to other options exchanges. The Exchange 
is proposing to introduce simple pricing in which the Exchange will 
charge one of two possible fees for routed orders in Mini Options: one 
flat rate for all orders in Mini Options that are directed intermarket 
sweep orders (``Directed ISOs'') that execute at an away options 
exchange and a separate flat rate for all orders in Mini Options that 
are not Directed ISOs that are routed to and executed at an away 
options exchange. The Exchange is proposing to charge these flat rates 
for routing orders in Mini Options to away options exchanges based on 
the approximate cost of routing to such venues. These fees are based on 
the cost of transaction fees assessed by each venue as well as costs to 
the Exchange for routing (i.e., clearing fees, connectivity and other 
infrastructure costs, membership fees, etc.) (collectively, ``Routing 
Costs'').
    Based on applicable Routing Costs, the Exchange is proposing to: 
(i) charge $0.15 per contract for all orders in Mini Options that are 
Directed ISOs that are routed to and executed at away options 
exchanges; and (ii) charge $0.10 per contract for all other orders in 
Mini Options that are routed to and executed at away options exchanges. 
Notices distributed by other options exchanges indicate that removal 
fees will range from free to $0.12 per contract executed in Mini 
Options. In order to provide certainty around execution costs for 
participants, the Exchange is proposing to introduce these flat routing 
fees that approximate the Exchange's Routing Costs.
    The Exchange is not proposing to modify fees for any of its 
existing routing services.
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.\8\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\9\ 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. The Exchange notes that it operates in a 
highly competitive market in which market participants can readily 
direct order flow to competing venues or providers of routing services 
if they deem fee levels to be excessive.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    As explained above, the Exchange generally attempts to approximate 
the cost of routing to other options exchanges, including other 
applicable costs to the Exchange for routing. The Exchange believes 
that a pricing model based on approximate Routing Costs is a 
reasonable, fair and equitable approach to pricing. Specifically, the 
Exchange believes that its proposal to implement fees for routing Mini 
Options is fair, equitable and reasonable because the fees are 
generally an approximation of the cost to the Exchange for routing 
orders to such exchanges. The Exchange believes that its flat fee 
structure for orders routed to various venues is a fair and equitable 
approach to pricing, as it provides certainty with respect to execution 
fees at away options exchanges. Under its flat fee structure, taking 
all costs to the Exchange into account, the Exchange may operate at a 
slight gain or a slight loss for orders in Mini Options routed to and 
executed at away options exchanges. As a general matter, the Exchange 
believes that the proposed fees will allow it to recoup and cover its 
costs of providing routing services to such exchanges. The Exchange 
also believes that the proposed fee structure for orders in Mini 
Options routed to and executed at these away options exchanges is fair 
and equitable and not unreasonably discriminatory in that it applies 
equally to all Members.
    The Exchange reiterates 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 to be excessive or providers 
of routing services if they deem fee levels to be excessive. Finally, 
the Exchange notes that it constantly evaluates its routing fees, 
including profit and loss attributable to routing, as applicable, in 
connection with the operation of a flat fee routing service, and would 
consider future adjustments to the proposed pricing structure to the 
extent it was recouping a significant profit from routing to another 
options exchange.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed changes will 
assist the Exchange in recouping costs for routing orders to other 
options exchanges on behalf of its participants. The Exchange also 
notes that Members may choose to mark their orders as ineligible for 
routing to avoid incurring routing fees.\10\ 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 they deem fee levels to be excessive or providers of routing 
services if they deem fee levels to be excessive.
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    \10\ See BATS Rule 21.1(d)(8) (describing ``BATS Only'' orders 
for BATS Options) and BATS Rule 21.9(a)(1) (describing the BATS 
Options routing process, which requires orders to be designated as 
available for routing).
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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 \11\ and paragraph (f) of Rule 19b-4 
thereunder.\12\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 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 proposal is 
consistent with the Act. Comments may be submitted by any of the 
following methods:

[[Page 19561]]

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-2013-021 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-2013-021. 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 Number SR-BATS-2013-021 and should be 
submitted on or before April 22, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-07471 Filed 3-29-13; 8:45 am]
BILLING CODE 8011-01-P