Document ID: SEC-2015-0715-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2015-04-24T04:00Z

[Federal Register Volume 80, Number 79 (Friday, April 24, 2015)]
[Notices]
[Pages 23060-23064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09498]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74767; File No. SR-BATS-2015-33]

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

April 20, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 23061]]

notice is hereby given that on April 16, 2015, BATS Exchange, Inc. (the 
``Exchange'' or ``BATS'') filed with the Securities and Exchange 
Commission (``SEC'' or ``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 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\ 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 in order to: (1) 
Adopt a Cross-Asset Tape B Tier; and (2) amend the fees charged for and 
description of the logical ports \6\ offered by the Exchange.
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    \6\ A logical port is commonly referred to as a TCP/IP port, and 
represents a port established by the Exchange within the Exchange's 
system for trading and billing purposes. Each logical port 
established is specific to a Member or non-member and grants that 
Member or non-member the ability to operate a specific application, 
such as FIX order entry or Multicast PITCH data receipt.
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Cross-Asset Tape B Tier
    Currently, the Exchange offers a rebate of $0.0020 per share as the 
standard rebate for orders with fee code B, which applies to orders 
that add liquidity to the Exchange in Tape B securities. The Exchange 
also offers various tiers that provide Members with the opportunity to 
earn higher rebates by meeting certain volume metrics. The Exchange is 
proposing to adopt a new tier in footnote 12 titled ``Cross-Asset Tape 
B Tier.'' Under the Cross-Asset Tape B Tier, the Exchange is proposing 
to provide a $0.0031 per share rebate to a Member's orders with a fee 
code of B for which the Member: (1) Has a Tape B Step-Up Add TCV \7\ 
from February 2015 that is equal to or greater than 0.06%; and (2) has 
an Options Market Maker Add TCV \8\ that is equal to or greater than 
0.75% on the Exchange's options platform (``BATS Options''). As such, 
where a Member increases their ADAV \9\ in Tape B securities as a 
percentage of TCV by at least .06% as compared to February 2015 and has 
at least 0.75% ADAV \10\ of Market Maker \11\ orders as a percentage of 
TCV \12\ on BATS Options, the Member will be eligible to receive the 
$0.0031 per share rebate associated with the Cross-Asset Tape B Tier. 
As is the case with any other rebates on the fee schedule, to the 
extent that a Member qualifies for higher rebates than those provided 
under the proposed Cross-Asset Tape B Tier, the higher rebates shall 
apply.
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    \7\ The Exchange is proposing that ``Tape B Step-Up Add TCV'' 
means ADAV in Tape B securities as a percentage of TCV in the 
relevant baseline month subtracted from current ADAV in Tape B 
securities as a percentage of TCV.
    \8\ The Exchange is proposing that ``Options Market Maker Add 
TCV'' for purposes of equities pricing means ADAV resulting from 
Market Maker orders as a percentage of TCV, using the definitions of 
ADAV, Market Maker and TCV as provided under the Exchange's fee 
schedule for BATS Options.
    \9\ ``ADAV'' means average daily volume calculated as the number 
of shares added per day.
    \10\ As defined in the BATS Options fee schedule, ``ADAV'' means 
average daily added volume calculated as the number of contracts 
added per day.
    \11\ As defined in the BATS Options fee schedule, ``Market 
Maker'' applies to any transaction identified by a Member for 
clearing in the Market Maker range at the OCC.
    \12\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges to the consolidated transaction 
reporting plan for the month for which the fees apply, excluding 
volume on any day that the Exchange experiences an Exchange System 
Disruption and on any day with a scheduled early market close.
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Logical Port Fees
    Currently, the Exchange maintains logical ports for order entry, 
drop copies and the receipt of market data for which it currently 
charges $400 per month per port with the exception of Multicast PITCH 
Spin Server Ports and GRP Ports.\13\ Multicast PITCH Spin Server Ports 
and GRP Ports are used to request and receive a retransmission of data 
from the Exchange's Multicast PITCH data feed. The Exchange does charge 
$400 per month for such ports, however, the Exchange separately 
delineates such fees because of various details related to the use of 
such ports. Specifically, Multicast PITCH Spin Server Ports are offered 
as a complete set, including one logical port for each channel of the 
Exchange's Multicast PITCH data feed, and can be taken for either of 
the Exchange's primary Multicast PITCH data feeds.\14\ Similarly, 
Multicast PITCH GRP Ports can be taken for either of the Exchange's 
primary Multicast PITCH data feeds. The Exchange offers Multicast PITCH 
Spin Server Ports for a fee of $400 per month for a set of primary 
ports (A or C feed) and Multicast PITCH GRP Ports for a fee of $400 per 
month per primary port (A or C feed). The Exchange offers and will 
continue to offer for free the ports necessary to receive the 
Exchange's redundant Multicast ``B feed'' and ``D feed'', as well as 
all ports made available in the Exchange's secondary data center.
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    \13\ FIX and BOE ports are the only ports that may be used to 
send orders and related instructions to the Exchange. All other port 
types, including the Multicast PITCH Spin Server Port and GRP Port, 
permit Members and non-members to receive information from the 
Exchange.
    \14\ The Exchange's primary Multicast PITCH data feeds are 
identified as the ``A feed'' and the ``C feed'' and contain the same 
information. The A feed and the C feed differ only in the way such 
feeds are received. The Exchange also offers two redundant feeds, 
identified as the ``B feed'' and the ``D feed''.
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    In early 2014, the Exchange and its affiliate, BATS Y-Exchange, 
Inc. (``BYX''), received approval to effect a merger (the ``Merger'') 
of the Exchange's parent company, BATS Global Markets, Inc., with 
Direct Edge Holdings LLC, the indirect parent of EDGX and EDGA 
(together with the Exchange, BYX and EDGX, the ``BGM Affiliated

[[Page 23062]]

Exchanges'').\15\ In the context of the Merger, the BGM Affiliated 
Exchanges are working to align certain system and regulatory 
functionality, retaining only intended differences between the BGM 
Affiliated Exchanges. This includes migrating the BGM Affiliated 
Exchanges, which are currently located in different data centers, into 
a single data center. As part of the data center migration and the 
integration of the BGM Affiliated Exchanges, the Exchange is proposing 
to increase the fees charged from $400 per month to $500 per month for 
all categories of logical ports, including sets of Multicast PITCH Spin 
Server Ports for the A feed and the C feed, individual GRP Ports for 
the A feed and the C feed, and all other logical ports. The Exchange 
notes that EDGA and EDGX currently charge $500 per month for most 
logical ports.\16\ The Exchange communicated to Members and non-Members 
regarding these changes via a trading notice issued on October 7, 
2014.\17\
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    \15\ See Securities Exchange Act Release No. 71375 (January 23, 
2014), 79 FR 4771 (January 29, 2014) (SR-BATS-2013-059; SR-BYX-2013-
039).
    \16\ The Exchange notes that BYX intends to file a proposal very 
similar to this proposal that will align its logical port fees 
across each of the BGM Affiliated Exchanges. The Exchange also notes 
that EDGA and EDGX also intend to file a proposal to charge $500 per 
month for all types of logical ports as well as to change the 
descriptions used for logical port fees to mirror the descriptions 
used by the Exchange and BYX.
    \17\ See BATS Global Markets Access Fee Changes for 2015, 
available at http://cdn.batstrading.com/resources/fee_schedule/2015/BATS-Global-Markets-Access-Services-Fee-Changes-for-2015.pdf (issued 
October 7, 2014).
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    In addition to increasing the port fees charged by the Exchange, 
the Exchange proposes to add the words ``Multicast PITCH'' before GRP 
Ports to mirror the description of fees for Multicast PITCH Spin Server 
Ports. As noted above, the separate fees for Spin Server Ports and GRP 
Ports both relate to the Exchange's Multicast PITCH data feed.
Implementation Date
    The Exchange proposes to implement the amendments to its fee 
schedule effective immediately.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\18\ in general, and 
furthers the objectives of Section 6(b)(4),\19\ 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. The Exchange believes that the proposed rates 
are equitable and non-discriminatory in that they apply uniformly to 
all Members.
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    \18\ 15 U.S.C. 78f.
    \19\ 15 U.S.C. 78f(b)(4).
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Cross-Asset Tape B Tier
    Volume-based rebates and fees such as the ones currently maintained 
on BATS Options 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. 
The Exchange believes that the proposal to add a Cross-Asset Tape B 
Tier is a reasonable, fair and equitable, and not unfairly 
discriminatory allocation of fees and rebates because it will provide 
Members with an additional incentive to reach certain thresholds on 
both the Exchange in Tape B securities and BATS Options. The increased 
liquidity from this proposal also benefits all investors by deepening 
the Exchange and BATS Options liquidity pools, offering additional 
flexibility for all investors to enjoy cost savings, supporting the 
quality of price discovery, promoting market transparency and improving 
investor protection. Such pricing programs thereby reward a Member's 
growth pattern in Tape B securities and such increased volume increases 
potential revenue to the Exchange, and will allow the Exchange to 
continue to provide and potentially expand the incentive programs 
operated by the Exchange. To the extent a Member participates on the 
Exchange but not on BATS Options, the Exchange does believe that the 
proposal is still reasonable, equitably allocated and non-
discriminatory with respect to such Member based on the overall benefit 
to the Exchange resulting from the success of BATS Options. As noted 
above, such success allows the Exchange to continue to provide and 
potentially expand its existing incentive programs to the benefit of 
all participants on the Exchange, whether they participate on BATS 
Options or not. The proposed pricing program is also fair and equitable 
in that membership in BATS Options is available to all members which 
would provide them with access to the benefits on BATS Options provided 
by the proposed changes, as described above, even where a member of 
BATS Options is not necessarily eligible for the proposed increased 
rebates on the Exchange. Further, the proposed changes will result in 
Members receiving either the same or an increased rebate than they 
would currently receive. The Exchange also notes that the proposed 
cross-asset step up tiers are similar to pricing tiers already employed 
by the Exchange as well as on other exchanges, including EDGX Exchange, 
Inc. (``EDGX''), which maintains a Tape B Step Up tier to incentivize 
added liquidity in Tape B securities.\20\
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    \20\ See EDGX fee schedule, footnote 2.
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Logical Port Fees
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(4) of the Act,\21\ 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 its proposed 
changes, combined with the planned filings for EDGA, EDGX and BZX 
[sic],\22\ would allow the BGM Affiliated Exchanges to provide 
consistent logical port offerings across each of the BGM Affiliated 
Exchanges. Consistent offerings, in turn, will simplify the 
connectivity requirements for Members of the Exchange that are also 
participants on EDGA, BZX [sic] and/or BYX. The proposed rule change 
would result in greater uniformity and less burdensome and more 
efficient understanding of Exchange connectivity requirements.
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    \21\ 15 U.S.C. 78f(b)(4).
    \22\ See supra note 16.
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    The Exchange believes that the increase of fees for logical ports 
represents an equitable allocation of reasonable dues, fees and other 
charges. The Exchange operates in a highly competitive market in which 
exchanges offer connectivity services as a means to facilitate the 
trading activities of members and other participants. Accordingly, fees 
charged for connectivity are constrained by the active competition for 
the order flow of such participants as well as demand for market data 
from the Exchange. If a particular exchange charges excessive fees for 
connectivity, affected members will opt to terminate their connectivity 
arrangements with that exchange, and adopt a possible range of 
alternative strategies, including routing to the applicable exchange 
through another

[[Page 23063]]

participant or market center or taking that exchange's data indirectly. 
Accordingly, the exchange charging excessive fees would stand to lose 
not only connectivity revenues but also revenues associated with the 
execution of orders routed to it by affected members, and, to the 
extent applicable, market data revenues. The Exchange believes that 
this competitive dynamic imposes powerful restraints on the ability of 
any exchange to charge unreasonable fees for connectivity. Lastly, the 
Exchange believe [sic] its proposed fees are reasonable because the 
Nasdaq Stock Market LLC (``Nasdaq'') and the NYSE Arca, Inc. (``NYSE 
Arca'') charge comparable rates for logical ports to access such 
markets.\23\ As noted above, EDGA and EDGX also charge the same rate 
for access to most logical ports.
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    \23\ See Nasdaq Rule 7015 (providing no FIX or non-Trading FIX 
ports free of charge) and the NYSE Arca fee schedule available at 
https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf (dated February 26, 2015). The 
Exchange recognizes that some participants may be charged the lower 
rate of $200 per month to the extent such participants maintain a 
low number of ports with NYSE Arca. The Exchange nonetheless 
believes that its proposed fees are comparable despite the fact that 
it does not propose a lower fee for such participants.
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    The Exchange believes that its proposed changes to logical port 
fees are reasonable in light of the benefits to Exchange participants 
of direct market access and receipt of data. In addition, the Exchange 
believes that its fees are equitably allocated among Exchange 
constituents based upon the number of access ports that they require to 
access and receive data from the Exchange. The Exchange also believes 
that its fees for access services will enable it to better cover its 
infrastructure costs and to improve its market technology and services.
    Lastly, the Exchange also believes that the proposed amendments to 
its fee schedule are non-discriminatory because they will apply 
uniformly to all Members. All Members that voluntarily select various 
service options will be charged the same amount for the same services. 
All Members have the option to select any connectivity option, and 
there is no differentiation among Members with regard to the fees 
charged for the services offered by the Exchange.

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

    The Exchange does not believe its proposed amendments to its fee 
schedule would impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act.
Cross-Asset Tape B Tier
    The Exchange does not believe that its proposal to add a new cross-
asset step-up tier would burden competition, but instead, enhance 
competition, as it is intended to increase the competitiveness of and 
draw additional volume to both the Exchange and BATS Options. 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 structures to be unreasonable or 
excessive. The proposed changes are generally intended to enhance the 
rebates for liquidity added to the Exchange, which is intended to draw 
additional liquidity to the Exchange. As such, the proposal is a 
competitive proposal that is intended to add additional liquidity to 
the Exchange, which will, in turn, benefit the Exchange and all 
Exchange participants.
Logical Port Fees
    The Exchange does not believe that the proposed change to logical 
port fees represents a significant departure from previous pricing 
offered by the Exchange or pricing offered by the Exchange's 
competitors. 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.

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 \24\ and paragraph (f) of Rule 19b-4 
thereunder.\25\ 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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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 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-BATS-2015-33 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-BATS-2015-33. 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 such filing also will be available 
for inspection and copying at the principal offices 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-2015-33, 
and should be submitted on or before May 15, 2015.

[[Page 23064]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-09498 Filed 4-23-15; 8:45 am]
 BILLING CODE 8011-01-P