Document ID: SEC-2017-1027-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc.
Posted Date: 2017-06-19T04:00Z

[Federal Register Volume 82, Number 116 (Monday, June 19, 2017)]
[Notices]
[Pages 27917-27919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12584]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80912; File No. SR-BatsBZX-2017-42]

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

June 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 June 1, 2017, 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) 
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.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 applicable to its 
equities trading platform (``BZX Equities'') to: (i) Modify the rates 
associated with fee codes AA, BJ and RA; (ii) adopt new fee code IX; 
and (iii) increase the condition necessary to qualify for the enhanced 
rebate provided by the Step-Up tier under footnote 2. The Exchange 
notes that Bats EDGA Exchange, Inc. (``EDGA'') is implementing certain 
pricing changes effective June 1, 2017, including modification of 
various fees and rebates to add and remove liquidity with a displayed 
or IOC order to a flat

[[Page 27918]]

fee of $0.0003 per share to add or remove liquidity with a displayed or 
IOC order.\6\ The proposed changes to AA, BJ, and RA are proposed in 
light of these changes.
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    \6\ See Press Release, Bats Announces Fee Overhaul of EDGA 
Equities Exchange (May 30, 2017), available at http://ir.cboe.com/press-releases/2017/05-30-2017.aspx.
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Fee Code AA
    The Exchange proposes to modify the rate associated with orders 
yielding fee code AA, which results from an order routed to EDGA using 
ALLB routing strategy,\7\ from a $0.0002 per share rebate to a fee of 
$0.0003 per share for securities priced at or above $1.00. The Exchange 
does not propose to modify the rate for orders yielding fee code AA for 
securities priced below $1.00, which are currently not charged a fee 
nor provided a rebate.
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    \7\ ALLB is a routing option under which the order checks the 
System for available shares and is then sent to the Bats BYX 
Exchange, Inc. (``BYX''), EDGA, and Bats EDGX Exchange, Inc. 
(``EDGX'' collectively with the Exchange, BYX, and EDGA, the ``BGM 
Affiliated Exchanges''). See the Exchange's routing strategies 
available at http://cdn.batstrading.com/resources/features/bats_exchange_routing-strategies.pdf. See also Exchange Rule 
11.13(b)(3).
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Fee Code BJ
    The Exchange proposes to modify the rate associated with orders 
yielding fee code BJ, which result from an order routed to EDGA using 
TRIM or TRIM2 routing strategies,\8\ from a rebate of $0.0002 per share 
to a fee of $0.0003 per share for all securities (i.e., those priced at 
or above $1.00 and those priced below $1.00).
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    \8\ The TRIM and TRIM2 routing strategies focus on seeking 
execution of orders while minimizing execution costs by routing only 
to certain low cost execution venues on the Exchange's System 
routing table. Id.
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Fee Code RA
    The Exchange proposes to decrease the fee associated with orders 
yielding fee code RA, which results from an order routed to EDGA which 
adds liquidity, from a fee of $0.0005 per share to a fee of $0.0003 per 
share for securities priced at or above $1.00. The Exchange does not 
propose to modify the rate for orders yielding fee code RA for 
securities priced below $1.00, which are currently not charged a fee 
nor provided a rebate.
Fee Code IX
    The Exchange proposes to adopt new fee code IX, which would be 
appended to all orders that are routed to the Investors Exchange, Inc. 
(``IEX'') using the using TRIM or TRIM2 routing strategies. Orders 
yielding fee code IX will be charged a fee of $0.0010 per share for all 
securities (i.e., those priced at or above $1.00 and those priced below 
$1.00). The Exchange notes that it has not previously included IEX on 
the routing tables for TRIM and TRIM2 but plans to do so effective June 
1, 2017, and thus, that the proposed change is necessary to account for 
executions at IEX through such routing strategies.
Single MPID Investor Tier
    The Exchange currently offers two Single MPID Investor Tiers under 
footnote 4, which provides an enhanced rebate of $0.0031 or $0.0027 per 
share for qualifying orders which yield fee codes B,\9\ V,\10\ or 
Y.\11\ The distinction between the tiers under footnote 4 and other 
tiers offered by the Exchange, is that the volume measured to determine 
whether a Member qualifies is performed on an MPID by MPID basis. The 
Exchange proposes to modify the criteria necessary to achieve the Step-
Up Add Tier as described below.
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    \9\ Fee code B is appended to displayed orders which add 
liquidity to Tape B and is provided a rebate of $0.0025 per share.
    \10\ Fee code V is appended to displayed orders which add 
liquidity to Tape A and is provided a rebate of $0.0020 per share.
    \11\ Fee code Y is appended to displayed orders which add 
liquidity to Tape C and is provided a rebate of $0.0020 per share.
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    Currently, under the Step-Up Add Tier a Member may receive an 
enhanced rebate of $0.0027 per share where the MPID has a Step-Up ADAV 
\12\ from November 2016, greater than or equal to 500,000 shares. As 
amended a Member may receive an enhanced rebate of $0.0027 per share 
where the MPID has a Step-Up ADAV from November 2016, greater than or 
equal to 750,000 shares.
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    \12\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV. See the Exchange's fee schedule 
available at http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
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Implementation Date
    The Exchange proposes to implement the above changes to its fee 
schedule on June 1, 2017.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ 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. The Exchange also 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 at a particular 
venue to be excessive or incentives to be insufficient. Furthermore, 
the Exchange notes that routing through the Exchange's affiliate, Bats 
Trading, is voluntary.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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Modification of the MPID Investor Step-Up Add Tier
    The Exchange believes that the proposed modification to the tiered 
pricing structure is reasonable, fair and equitable, and non-
discriminatory. The Exchange operates in a highly competitive market in 
which market participants may readily send order flow to many competing 
venues if they deem fees at the Exchange to be excessive or incentives 
provided to be insufficient. The proposed structure remains intended to 
attract order flow to the Exchange by offering market participants a 
competitive pricing structure. The Exchange believes it is reasonable 
to offer and incrementally modify incentives intended to help to 
contribute to the growth of the Exchange.
    Volume-based pricing such as that proposed herein have been widely 
adopted by exchanges, including the Exchange, 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: (i) The value to 
an exchange's market quality; (ii) associated higher levels of market 
activity, such as higher levels of liquidity provisions and/or growth 
patterns; and (iii) introduction of higher volumes of orders into the 
price and volume discovery processes.
    The proposed modification of the Single MPID Step-Up Add Tier 
reinforces the purpose of the Single MPID Investor Tier by 
incentivizing Members to send additionally higher level of orders to 
the Exchange than was previously required. By applying the tier on a 
single MPID rather than across a Member's entire trading activity, the 
Exchange is also allowing more Members to potentially receive the 
enhanced rebates for their trading activity related to liquidity 
provision. Thus, the Exchange believes that the proposed modification 
to the tiered pricing structure under footnote 4 is a reasonable, 
equitable, and not an unfairly discriminatory allocation of fees and 
rebates because it will provide Members with an incentive to reach a 
higher thresholds on the Exchange by contributing a meaningful amount 
of order flow. The proposed modification is non-discriminatory because 
it applies and is available to all Members.

[[Page 27919]]

Fee Codes AA, BJ, and RA
    As noted above, EDGA is implementing certain pricing changes 
effective June 1, 2017, including modification of various fees and 
rebates to and remove liquidity with a displayed or IOC order to a flat 
fee of $0.0003 per share to add or remove liquidity with a displayed or 
IOC order.\15\ The changes to fee codes AA, BJ, and RA are proposed in 
light of these changes and reflect a pass-through of the pricing 
provided by EDGA. As the pricing in securities priced at or above $1.00 
reflects the same pricing a Member would receive for participation on 
EDGA directly and the pricing in securities priced below $1.00 is based 
on the current pricing model applied by the Exchange, the Exchange 
believes the proposed fees are reasonable and equitably allocated. The 
Exchange further believes the proposed fees are non-discriminatory 
because they apply uniformly to all Members.
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    \15\ See supra, note 6.
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Fee Code IX
    As of August 19, 2016, IEX began charging a fee of $0.0009 per 
share for orders which remove liquidity against non-displayed orders 
and no fee for orders that remove liquidity against displayed 
order.\16\ Because the Exchange is not be able to control whether the 
order it routes to IEX executes against displayed or non-displayed 
liquidity, it therefore, believes it is equitable and reasonable to 
charge a fee for orders that yield fee code IX based on IEX's rates for 
removing non-displayed interest. The Exchange further believes that its 
proposal to charge a fee of $0.0010 per share is equitable and 
reasonable because it accounts for the prices charged by IEX plus the 
additional operation expenses that would be incurred by the Exchange in 
routing orders to IEX. Furthermore, the Exchange notes that routing 
through Bats Trading is voluntary and Members may utilize other avenues 
to route orders to IEX, such as connecting to IEX directly. Lastly, the 
Exchange also believes that the proposed fee code is non-discriminatory 
because it applies uniformly to all Members.
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    \16\ See IEX fee schedule available at https://iextrading.com/trading/#fee-schedule (effective August 19, 2016). See also IEX 
Trading Alert #2016-036, Investors Exchange Fee Schedule Effective 
August 19, 2016, available at https://iextrading.com/trading/alerts/2016/036/.
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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 Exchange does not believe 
that any of the proposed changes to the Exchange's routing pricing 
burden competition, as they are based on the pricing on other venues. 
Similarly, the Exchange does not believe that the proposed change to 
the Exchange's tiered pricing structure burden competition, but 
instead, that they enhance competition as they are intended to increase 
the competitiveness of BZX by modifying pricing incentives in order to 
attract order flow and incentivize participants to increase their 
participation on the Exchange. 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 structures to be 
unreasonable or excessive. The Exchange does not believe the proposed 
amendments would burden intramarket competition as they would be 
available to all Members uniformly.

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 \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 No. SR-BatsBZX-2017-42 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-BatsBZX-2017-42. 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-BatsBZX-2017-42, and should be 
submitted on or before July 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12584 Filed 6-16-17; 8:45 am]
BILLING CODE 8011-01-P