Document ID: SEC-2011-0197-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2011-02-11T05:00Z

[Federal Register Volume 76, Number 29 (Friday, February 11, 2011)]
[Notices]
[Pages 7891-7893]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-3035]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63857; File No. SR-BATS-2011-004]

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.

February 7, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on January 31, 2011, 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 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 modify its fee schedule applicable to 
Members \5\ and non-members of the Exchange pursuant to BATS Rules 
15.1(a) and (c). While changes to the fee schedule pursuant to this 
proposal will be effective upon filing, the changes will become 
operative on February 1, 2011.
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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 its fee schedule effective February 
1, 2011, in order to: (i) Adjust fees for ``logical'' ports used for 
order entry or receipt of Exchange data; and (ii) adjust the fees for 
orders executed at other options exchanges through Exchange-offered 
routing strategies in order to more closely reflect the Exchange's cost 
of executing orders at such away markets.

[[Page 7892]]

(i) Fees for Logical Ports
    The Exchange proposes to raise the fee for each pair \6\ of logical 
ports from $250 each month to $400 each month. A logical port is also 
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 PITCH 
data receipt.
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    \6\ Each pair of ports consists of one port at the Exchange's 
primary data center and one port at the Exchange's secondary data 
center.
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    The proposed fee increase for each pair of logical ports is 
designed to help offset increasing infrastructure costs associated with 
the implementation of internally developed real-time latency monitoring 
on all FIX order entry ports. The latency monitoring offered by the 
Exchange beginning February 1, 2011 will be similar to that provided by 
other exchanges through outside vendors, except that the Exchange does 
not currently propose to charge any additional fees for latency 
monitoring on FIX ports.
    As proposed, the change applies to Members that obtain ports for 
direct access to the Exchange, Sponsored Participants \7\ sponsored by 
Members to receive direct access to the Exchange, non-member service 
bureaus that act as a conduit for orders entered by Exchange Members 
that are their customers, and market data recipients. While the 
proposal would represent an increase in the monthly fee assessed by the 
Exchange for all logical ports (including logical ports unaffected by 
the Exchange's offering of latency monitoring on FIX ports), the 
Exchange's overall connectivity fees remain lower than those of its 
primary competitors.
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    \7\ A ``Sponsored Participant'' is as a firm that is sponsored 
by a Member of the Exchange to access the Exchange and that meets 
the criteria of Exchange Rule 11.3.
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(ii) Routing Pricing
    The Exchange proposes to adjust its fees for options order routing. 
Rather than continuing to subsidize its Members' routing strategies, 
the Exchange proposes to adjust routing fees to more closely reflect 
the Exchange's cost of executing those orders at away markets. 
Specifically, the Exchange proposes to assess the following per 
contract fees for Customer orders that are routed to the named away 
exchange: $0.06 for all orders in non-``Make/Take'' issues,\8\ if 
applicable, routed to NYSE Amex, NYSE Arca, the Boston Options 
Exchange, the Chicago Board Options Exchange, the International 
Securities Exchange, or NASDAQ OMX PHLX; $0.30 for all orders routed to 
the Chicago Board Options Exchange 2, the International Securities 
Exchange in Make/Take issues, or NASDAQ OMX PHLX in Make/Take issues; 
and $0.50 for all orders routed to Nasdaq Options Market or NYSE Arca 
in Make/Take issues. The Exchange also proposes to assess a routing fee 
of $0.55 per contract for all Firm and Market Maker orders that are 
routed to any away exchange pursuant to the order routing strategies 
offered by the Exchange.
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    \8\ As defined on the fee schedule, Make/Take pricing refers to 
executions at the identified Exchange under which ``Post Liquidity'' 
or ``Maker'' rebates (``Make'') are credited by that exchange and 
``Take Liquidity'' or ``Taker'' fees (``Take'') are charged by that 
exchange.
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    The Exchange believes that the proposed routing fees are 
competitive, fair and reasonable, and non-discriminatory in that they 
approximate the cost to the Exchange of executing routed orders at an 
away market and are similar to those fees charged by other exchanges.
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.\9\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\10\ 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.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
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    With respect to the increase in logical port fees, 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 at a particular venue to be excessive. The Exchange 
believes that its fees are competitive with those charged by other 
venues, and that its fees for connectivity are still less expensive 
than its primary competitors. In addition, at the same time as the 
Exchange is increasing its fee per logical port, the Exchange is making 
available to its Members real-time latency monitoring without any 
additional fee. Accordingly, the Exchange believes that the increase to 
port fees will help the Exchange to continue to maintain and improve 
its infrastructure, while also encouraging Exchange customers to 
request and enable only the ports that are necessary for their 
operations related to the Exchange.
    With respect to the increase in routing fees for BATS Options, 
although routing options are available to all Members, Members are not 
required to use the Exchange's routing services, but instead, the 
Exchange's routing services are completely optional. Members can manage 
their own routing to different options exchanges or can utilize a 
myriad of other routing solutions that are available to market 
participants. Finally, the Exchange believes that the proposed rates 
are equitable in that they apply uniformly to all Members and non-
members.

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

    The Exchange does not believe that the proposed rule change imposes 
any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to Section 19(b)(3)(A)(ii) of the Act \11\ and Rule 19b-
4(f)(2) thereunder,\12\ the Exchange has designated this proposal as 
establishing or changing a due, fee, or other charge applicable to the 
Exchange's Members and non-members, which renders the proposed rule 
change effective upon filing.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
    \13\ See Section 916 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act of 2010, which amended paragraph (A) of 
Section 19(b)(3) of the Act by inserting the phrase ``on any person, 
whether or not the person is a member of the self-regulatory 
organization'' after ``due, fee or other charge imposed by the self-
regulatory organization.'' As a result, all SRO rule proposals 
establishing or changing dues, fees, or other charges are 
immediately effective upon filing regardless of whether such dues, 
fees, or other charges are imposed on members of the SRO, non-
members, or both.
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    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

[[Page 7893]]

investors, or otherwise in furtherance of the purposes of the Act.

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BATS-2011-004 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-2011-004. This file 
number should be included on the subject line if e-mail 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 
a.m. and 3 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-2011-004 and should be 
submitted on or before March 4, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-3035 Filed 2-10-11; 8:45 am]
BILLING CODE 8011-01-P