Document ID: SEC-2016-0697-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc.
Posted Date: 2016-04-21T04:00Z

[Federal Register Volume 81, Number 77 (Thursday, April 21, 2016)]
[Notices]
[Pages 23533-23536]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09204]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77632; File No. SR-BatsBZX-2016-06]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify 
the Fee Schedule Applicable to the Exchange's Options Platform

 April 15, 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 April 7, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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)

[[Page 23534]]

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 filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-Members of the Exchange pursuant to BZX Rules 
15.1(a) and (c).
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    \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).
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    The text of the proposed rule change is available at the Exchange's 
Web site at 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 its fee schedule applicable to the 
Exchange's options platform (``BZX Options'') to: (i) Replace 
references to ``NBMM'' (i.e., Non-Bats Market Maker) with the term 
``Away MM'' (i.e., Away Market Maker); (ii) adopt a new Quoting 
Incentive Program Tier under footnote 5; (iii) amend the criteria 
necessary to meet the Firm, Broker Dealer, and Joint Back Office Penny 
Pilot Add Volume Tier 3 under footnote 2; and (iv) amend the criteria 
necessary to meet the Away Market Maker Penny Pilot Add Volume Tier 2 
under footnote 10.
Replace References to ``NBMM'' With ``Away MM''
    In February 2016, the Exchange amended its fee schedule to rename 
the defined term ``Non-BATS Market Maker'' as ``Away Market Maker'' to 
be consistent with terminology used on the options fee schedule of the 
Exchange's affiliate, Bats EDGX Exchange, Inc.\6\ In light of that 
change, the Exchange now proposes to replace references to ``NBMM'' 
(i.e., Non-Bats Market Maker) with the term ``Away MM'' (i.e. Away 
Market Maker) under footnotes 2, 4, 8 and 10 in order to use consistent 
terminology through the fee schedule. With this change, the Exchange 
does not propose to amend the criteria necessary to meet the tier or 
the amount of the rebate provided.
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    \6\ See Securities Exchange Act Release No. 77307 (March 7, 
2016), 81 FR 12996 (March 11, 2016) (Notice of Filing and Immediate 
Effectiveness of SR-BATS-2016-25).
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Quoting Incentive Program (``QIP'') Tier 3
    The Exchange currently offers two QIP tiers which provide an 
additional rebate per contract for an order that adds liquidity to the 
BZX Options Book \7\ in options classes in which a Member is a Market 
Maker registered on BZX Options pursuant to Rule 22.2. The Market Maker 
must be registered with BZX Options in an average of 20% or more of the 
associated options series in a class in order to qualify for QIP 
rebates for that class. Under QIP Tier 1, a Market Maker will receive 
an additional rebate of $0.02 per contract where that Market Maker has 
an ADV \8\ equal to or greater than 0.30% of average TCV.\9\ Under QIP 
Tier 2, a Market Maker will receive an additional rebate of $0.04 per 
contract where that Market Maker has an ADV equal to or greater than 
1.00% of average TCV. The Exchange now proposes to add QIP Tier 3 under 
which a Market Maker may receive an additional rebate of $0.06 per 
contract where the Member has an ADV equal to or greater than 2.5% of 
average TCV.
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    \7\ See Exchange Rule 16.1(a)(9).
    \8\ As defined in the Exchange's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/bzx/.
    \9\ Id.
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Firm, Broker Dealer, and Joint Back Office Penny Pilot Add Volume Tier 
3
    The Exchange proposes to amend the criteria necessary to meet and 
receive the rebate associated with the Firm, Broker Dealer, and Joint 
Back Office Penny Pilot Add Volume Tier 3 under footnote 2, which 
currently provides Members with a rebate of $0.46 per contract for 
Firm,\10\ Broker Dealer,\11\ and Joint Back Office \12\ orders that add 
liquidity in Penny Pilot Securities \13\ where the Member has an: (i) 
ADAV \14\ in Firm, Broker-Dealer, or Joint Back Office orders in Penny 
Pilot Securities (yielding Fee Code PF) \15\ equal to or greater than 
0.25% of average TCV; and (ii) ADV equal to or greater than 1.50% of 
average TCV. Specifically, the Exchange proposes to amend the Firm, 
Broker Dealer, and Joint Back Office Penny Pilot Add Volume Tier 3 to 
now require that the Member have an ADAV in Away Market Maker \16\ 
orders, in addition to Firm, Broker-Dealer, or Joint Back Office orders 
equal to or greater than 0.80%, rather than 0.25%, of average TCV. 
While the rebate would continue to be available only to Firm, Broker-
Dealer, or Joint Back Office orders in Penny Pilot Securities, the 
requirement that the Member have an ADAV equal to or greater than 0.80% 
of average TCV would no longer be limited to orders in Penny Pilot 
Securities. The tier would continue to require that Members also have 
an ADV equal to or greater than 1.50% of average TCV.
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    \10\ Id.
    \11\ As defined in the Exchange's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/bzx/.
    \12\ Id.
    \13\ Id.
    \14\ Id.
    \15\ Fee code PF is yielding to Firm, Broker-Dealer, and Joint 
Back Office orders that add liquidity in Penny Pilot Securities. See 
the Exchange's fee schedule available at http://www.batsoptions.com/support/fee_schedule/bzx/.
    \16\ As defined in the Exchange's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/bzx/.
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Away Market Maker Penny Pilot Add Volume Tier 2
    The Exchange proposes to amend the criteria necessary to meet and 
receive the rebate associated with the Away Market Maker Penny Pilot 
Add Volume Tier 2 under footnote 10, which currently provides a Member 
that acts as an Away Market Maker a rebate of $0.46 per contract for 
Away Market Maker orders that add liquidity in a Penny Pilot Security 
where the Member has an: (i) ADAV in Firm, Broker-Dealer, and/or Joint 
Back Office orders in Penny Pilot Securities (yielding Fee Code PF) 
equal to or greater than 0.25% of average TCV; and (ii) ADV equal to or 
greater than 1.50% of average TCV. Specifically, the Exchange proposes 
to amend the Away Market Maker Penny Pilot Add Volume Tier 2 to now 
require that the Member have an ADAV in Away Market Maker \17\ orders, 
in addition to Firm, Broker-Dealer, or Joint Back Office orders equal 
to or greater than 0.80%, rather than 0.25%, of average TCV. While the 
rebate would continue to be available only to

[[Page 23535]]

Firm, Broker-Dealer, or Joint Back Office orders in Penny Pilot 
Securities, the requirement that the Member have an ADAV equal to or 
greater than 0.80% of average TCV would no longer be limited to orders 
in Penny Pilot Securities. The Exchange notes that this change is 
similar to that proposed for the Firm, Broker Dealer, and Joint Back 
Office Penny Pilot Add Volume Tier 3 discussed above. The tier would 
continue to require that Members also have an ADV equal to or greater 
than 1.50% of average TCV.
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    \17\ As defined in the Exchange's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/bzx/.
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Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule immediately.\18\
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    \18\ The Exchange initially filed the proposed change on April 
1, 2016 (SR-BatsBZX-2016-05). On April 7, 2016, the Exchange 
withdrew SR-BatsBZX-2016-05 and submitted this filing.
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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.\19\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\20\ 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 if they deem fee levels to be 
excessive.
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    \19\ 15 U.S.C. 78f.
    \20\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates such as those currently maintained on the 
Exchange have been widely adopted by equities and options exchanges and 
are equitable because they are open to all Members on an equal basis 
and provide additional benefits or discounts that are reasonably 
related to the value to an exchange's market quality associated with 
higher levels of market activity, such as higher levels of liquidity 
provision and/or growth patterns, and introduction of higher volumes of 
orders into the price and volume discovery processes.
    Specifically, the Exchange believes the changes to the Firm, Broker 
Dealer, and Joint Back Office Penny Pilot Add Volume Tier 3 and Away 
Market Maker Penny Pilot Add Volume Tier 2 are reasonable, fair and 
equitable and non-discriminatory, for the reasons set forth above with 
respect to volume-based pricing generally, because such change will 
apply equally to all participants, and because the change will 
incentivize such participants to further contribute to market quality 
on the Exchange. Moreover, the proposed changes will provide Members 
with an increased incentive to add liquidity in Away Market Maker 
orders, which the Exchange not only believes will enhance market 
quality for all market participants, but will also encourage increased 
participation of other orders wanting to interact with such Away Market 
Maker orders, further to the benefit of all market participants. The 
Exchange also believes that the proposed changes to the tiers remain 
consistent with pricing previously offered by the Exchange as well as 
competitors of the Exchange and does not represent a significant 
departure from the Exchange's general pricing structure.
    The Exchange believes that its proposal to add a new QIP Tier 3 
under footnote 5 is reasonable, fair and equitable and non-
discriminatory, for the reasons set forth above with respect to volume-
based pricing generally. In addition, the Exchange believes the amount 
of the proposed rebate offered under QIP Tier 3 is equitable and 
reasonable because of the increased criteria required to satisfy QIP 
Tier 3 compared to the rebates offered and the criteria required by QIP 
Tiers 1 and 2. The Exchange also notes that although registration as a 
Market Maker is required to qualify for QIP, such registration is 
available to all Members on an equal basis. The Exchange also believes 
that the proposed tier is reasonable, fair and equitable, and non-
discriminatory because it, like the QIP generally, is aimed to 
incentivize active market making on the Exchange.
    Lastly, the Exchange believes that replacing references to ``NBMM'' 
with ``Away MM'' is reasonable, fair and equitable and non-
discriminatory because it is non-substantive designed to make the fee 
schedule as clear and easily understandable as possible. The proposed 
changes would enable the Exchange to use consistent terminology 
throughout the fee schedule. With this change, the Exchange does not 
propose to amend the criteria necessary to meet the tier or the amount 
of the rebate provided.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the 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. To the contrary, 
the Exchange has designed the proposed amendments to its fee schedule 
in order to enhance its ability to compete with other exchanges. 
Rather, the proposal as a whole is a competitive proposal that is 
seeking to further the growth of the Exchange. Also, the Exchange 
believes that the increase to certain thresholds necessary to meet 
tiers offered by the Exchange contributes to rather than burdens 
competition, as such changes are intended to incentivize participants 
to increase their participation on the Exchange. Similarly, the 
introduction of a new QIP Tier is intended to provide incentives to 
Market Makers to encourage them to enter orders to the Exchange, and 
thus is again intended to enhance competition.
    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 change will impair the 
ability of Members or competing venues to maintain their competitive 
standing in the financial markets. 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 to the Exchange's tiered pricing structure burdens 
competition, but instead, enhances competition as it is intended to 
increase the competitiveness of the Exchange. Also, the Exchange 
believes that the price changes contribute to, rather than burden 
competition, as such changes are broadly intended to incentivize 
participants to increase their participation on the Exchange, which 
will increase the liquidity and market quality on the Exchange, which 
will then further enhance the Exchange's ability to compete with other 
exchanges.

(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)

[[Page 23536]]

of the Act \21\ and paragraph (f) of Rule 19b-4 thereunder.\22\ 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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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-BatsBZX-2016-06 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 Number SR-BatsBZX-2016-06. 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 Number SR-BatsBZX-2016-06 and should 
be submitted on or before May 12, 2016.
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    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
Brent J. Fields,
Secretary.
[FR Doc. 2016-09204 Filed 4-20-16; 8:45 am]
 BILLING CODE 8011-01-P