Document ID: SEC-2015-1188-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2015-07-16T04:00Z

[Federal Register Volume 80, Number 136 (Thursday, July 16, 2015)]
[Notices]
[Pages 42141-42146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17395]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75422; File No. SR-BATS-2015-52]

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.

July 10, 2015.
    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 July 1, 2015, 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 filed a proposal to amend its fees and rebates 
applicable to Members \5\ of the Exchange pursuant to Rule 15.1(a) and 
(c).
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    \5\ A 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 the ``Options Pricing'' section of 
its fee schedule, effective immediately, in order to modify pricing 
charged by the Exchange's options platform (``BATS Options'') 
including: (i) Amend footnote 2 to remove Professional \6\ orders from 
the Professional and Firm Penny Pilot Add Volume Tiers related to the 
pricing for Professional and Firm \7\ orders that add liquidity in 
Penny Pilot Securities; \8\ (ii) further amend footnote 2 to change the 
standards for meeting Tiers 1 and 2, changing the rebate for Tier 2, 
and adding a new Tier 3; (iii) amend the standard rebate associated 
with Fee Code PF for Firm orders that add liquidity in Penny Pilot 
Securities; (iv) create a new Fee Code NF for Firm orders that add 
liquidity in non-Penny Pilot Securities; (v) create a new footnote 8 
titled ``Firm Non-Penny Pilot Add Volume Tiers;'' (vi) add a new Tier 3 
to the Market Maker Penny Pilot Add Volume Tiers; (vii) amend the fees 
that the Exchange charges for orders routed by the Exchange for 
execution at other venues, including those associated with Fee Codes 
2C, CC, CF, HF, and OF; and (viii) amend the Options Physical 
Connection Fees for both 1G and 10G physical ports.
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    \6\ ``Professional'' applies to any transaction identified by a 
Member as such pursuant to Exchange Rule 16.1.
    \7\ ``Firm'' applies to any transaction identified by a Member 
for clearing in the Firm range at the OCC.
    \8\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01.
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Professional Orders in Penny Pilot Securities
    The Exchange proposes to remove Professional orders from inclusion 
in the Professional and Firm Penny Pilot

[[Page 42142]]

Add Volume Tiers, which apply to fee codes PA and PF. Currently, the 
Exchange provides a standard rebate of $0.40 per contract under Fee 
Code PA for Professional orders that add liquidity in Penny Pilot 
Securities and an enhanced rebate of $0.42 per contract for each 
Professional or Firm order that adds liquidity in Penny Pilot 
Securities and meets the requirements for either Tier 1 or Tier 2 of 
the Professional and Firm Penny Pilot Add Volume Tiers. Specifically, 
the Exchange is proposing to eliminate Professional orders from the 
Professional and Firm Penny Pilot Add Volume Tiers such that 
Professional orders subject to Fee Code PA would not be eligible for 
enhanced rebates under footnote 2. Such orders would remain eligible to 
receive enhanced rebates under footnotes 4 (NBBO Setter Tiers) and 5 
(Quoting Incentive Program Tiers).
Firm Orders That Add Liquidity in Penny Pilot Add Volume Tiers
    The Exchange is proposing to make several changes to the Firm Penny 
Pilot Add Volume Tiers. First, the Exchange is proposing to change the 
standard rebate associated with Fee Code PF for Firm orders that add 
liquidity in Penny Pilot Securities from $0.40 per contract to $0.36 
per contract. The Exchange is also proposing to change the rebate for 
Firm orders in Penny Pilot Securities for Members that meet Tier 1 of 
the Firm Penny Pilot Add Volume Tiers from $0.42 per contract to $0.40 
per contract.
    The Exchange is also proposing to amend the standards required to 
meet Tiers 1 and 2 of the Firm Penny Pilot Add Volume Tiers. Currently, 
a Member qualifies for Tier 1 where the Member has an Options Step-up 
Add TCV \9\ from June 2014 baseline equal to or greater than 0.50% and 
qualifies for Tier 2 where the Member has: (i) An Options Step-Up Add 
TCV from September 2014 baseline equal to or greater than 0.30%; and 
(ii) an ADV \10\ equal to or greater than 0.40% of average TCV.\11\ 
Specifically, the Exchange is proposing to change the Tier 1 required 
criteria such that a Member qualifies for Tier 1 where the Member has 
an ADV equal to or greater than 0.30% of average TCV. The Exchange is 
also proposing to change the Tier 2 required criteria such that a 
Member qualifies for Tier 2 where the Member has an ADV equal to or 
greater than 1.00% of average TCV.
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    \9\ ``Options Step-Up Add TCV'' means ADAV as a percentage of 
TCV in the relevant baseline month subtracted from current ADAV as a 
percentage of TCV.
    \10\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day.
    \11\ ``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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    The Exchange is also proposing to add an additional tier to the 
Firm Penny Pilot Add Volume Tier under footnote 2 of the fee schedule. 
As described above, the Exchange currently offers two tiers under the 
Firm Penny Pilot Add Volume Tiers. The Exchange is proposing to add 
Tier 3 under which Members would receive a $0.43 per contract rebate 
for Firm orders that add liquidity in Penny Pilot Securities where the 
Member: (i) Has an ADAV \12\ in Firm orders in Penny Pilot Securities 
equal to or greater than 0.35% of average TCV; and (ii) has an ADV 
equal to or greater than 1.00% of average TCV.
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    \12\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added per day.
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Firm Orders That Add Liquidity in Non-Penny Pilot Securities
    The Exchange is proposing to make two changes to its fee schedule 
regarding Firm orders that add liquidity in non-Penny Pilot Securities. 
First, the Exchange is proposing to create a new Fee Code NF which 
would apply to Firm orders that add liquidity in non-Penny Pilot 
Securities and for which the standard pricing would be a $0.40 rebate 
per contract. As part of this change, the Exchange is also proposing to 
delete the reference to ``Firm'' in Fee Code NA, which currently 
applies to both Professional and Firm orders that add liquidity in non-
Penny Pilot Securities, which are subject to a standard rebate of $0.65 
per contract. Like Fee Code NA, as proposed, orders yielding Fee Code 
NF would be eligible for enhanced rebates under the NBBO Setter Tiers 
and the Quoting Incentive Program Tiers.
    The Exchange is also proposing to add a new footnote 8 titled 
``Firm Non-Penny Pilot Add Volume Tiers'' under which there would be 
three new tiers offering enhanced rebates for Firm orders that add 
liquidity in non-Penny Pilot Securities. Specifically, as proposed, the 
tiers would provide the following rebates under the following 
conditions for Firm orders that add volume in non-Penny Pilot 
Securities: Tier 1 would provide a $0.50 rebate per contract to a 
Member that has an ADV equal to or greater than 0.05% of average TCV; 
Tier 2 would provide a $0.60 rebate per contract to a Member that has 
an ADV equal to or greater than 0.15% of average TCV; and Tier 3 would 
provide a $0.65 rebate per contract to Member that has an ADV equal to 
or greater than 0.25% of average TCV.
Market Maker Penny Pilot Add Volume Tiers
    The Exchange is proposing to add a new Tier 3 to the Market Maker 
Penny Pilot Add Volume Tiers in order to provide another means for 
Market Maker orders in Penny Pilot Securities to receive a rebate of 
$0.42 per contract. Currently, the standard rebate for Market Maker 
orders in Penny Pilot Securities is $0.36 per contract. Such orders can 
receive an enhanced rebate of $0.40 by meeting Tier 1 of the Market 
Maker Penny Pilot Add Volume Tiers or $0.42 by meeting Tier 2 of such 
Tiers. The Exchange is proposing to add a new Tier 3 under which a 
Member would receive $0.42 per contract where: (i) The Member has an 
ADAV in Firm orders in Penny Pilot Securities (orders that yield Fee 
Code PF) equal to or greater than 0.35% of average TCV; and (ii) the 
Member has an ADV equal to or greater than 1.00% of average TCV.
Routing Fee Changes
    The Exchange currently charges certain flat rates for routing to 
other options exchanges based on the approximate cost of routing to 
such venues. Such flat rates for routing to such options exchanges is 
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''). To address different fees at various other options 
exchanges, the Exchange differentiates its flat rates depending on 
whether they are for Customer orders or for Professional, Firm, and 
Market Maker \13\ orders (collectively, ``non-Customer orders'').
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    \13\ As defined on the Exchange's fee schedule, the terms 
``Firm'' and ``Market Maker'' apply to any transaction identified by 
a member for clearing in the Firm or Market Maker range, 
respectively, at the Options Clearing Corporation (``OCC'').
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    As noted previously and as set forth above, the Exchange's current 
approach to routing fees is to set forth in a simple manner certain 
flat fees that approximate the cost of routing to other options 
exchanges. The Exchange then monitors the fees charged as compared to 
the costs of its routing services, as well as monitoring for specific 
fee changes by other options exchanges, and adjusts its flat routing 
fees and/or groupings to ensure that the Exchange's fees do indeed 
result in a rough approximation of overall Routing Costs, and are not 
significantly higher or lower

[[Page 42143]]

in any area. Over the last several months, due to various increases in 
fees assessed by other options exchanges, the Exchange's overall 
Routing Costs have increased. As a result, and in order to avoid 
subsidizing routing to away options exchanges and to continue providing 
quality routing services, the Exchange proposes various increases to 
the charges assessed for most orders routed to most options exchanges, 
as set forth below.
    The Exchange is proposing to amend the fees that the Exchange 
charges for orders routed by the Exchange for execution at other 
venues, including those associated with Fee Codes 2C, CC, CF, HF, and 
OF. The Exchange is proposing to amend the fees for those Fee Codes as 
follows: From $0.00 to $0.47 per contract for orders yielding Fee Code 
2C, which are Customer orders routed to C2 Options Exchange, Inc. 
(``C2''); from $0.12 to $0.13 per contract for orders yielding Fee Code 
CC, which are Customer orders routed to Chicago Board Options Exchange 
(``CBOE''); from $0.65 to $0.75 per contract for orders yielding Fee 
Code CF, which are Professional, Firm, or Market Maker orders routed to 
CBOE; from $0.65 to $0.70 per contract for orders yielding Fee Code HF, 
which are Professional, Firm, or Market Maker orders routed to NASDAQ 
OMX PHLX LLC (``PHLX''); and from $0.65 to $0.99 for orders yielding 
Fee Code OF, which are Professional, Firm, or Market Maker orders 
routed to BOX Options Exchange, LLC (``BOX''). The Exchange notes that 
certain of the above changes are being proposed in order to maintain a 
simple, flat fee structure for routing to other venues in both Penny 
Pilot Securities and non-Penny Pilot Securities.
Physical Connection Fees
    The Exchange proposes to amend its fee schedule to modify its fees 
for physical connectivity. A physical port is utilized by a Member or 
non-Member to connect to the Exchange at the data centers where the 
Exchange's servers are located. The Exchange currently maintains a 
presence in two third-party data centers: (i) The primary data center 
where the Exchange's business is primarily conducted on a daily basis, 
and (ii) a secondary data center, which is predominantly maintained for 
business continuity purposes. The Exchange currently assesses the 
following physical connectivity fees for Members and non-Members on a 
monthly basis: $1,000 per physical port that connects to the System 
\14\ via 1 gigabyte circuit; and $2,500 per physical port that connects 
to the System via 10 gigabyte circuit.
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    \14\ The term ``System'' is defined as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.'' See Exchange Rule 
1.5(cc).
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    The Exchange now proposes to amend its physical connectivity fees 
to align its fees with its affiliates.\15\ The Exchange proposes to 
increase the fee per physical port that connects to the System via: (i) 
1 gigabyte circuit from $1,000 per month to $2,000 per month; and (ii) 
10 gigabyte circuit from $2,500 per month to $4,000 per month.
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    \15\ For purposes of this filing, the Exchange's affiliates are 
EDGX Exchange, Inc. (``EDGX''), EDGA Exchange, Inc. (``EDGA''), the 
Exchange's equity exchange (``BATS Equities'') and BATS Y-Exchange, 
Inc. (``BYX'', together with BATS Equities, EDGA and EDGX, the 
``BATS Exchanges''). The Exchange notes that each of its affiliates 
will also file proposed rule changes with Commission to adopt 
similar physical connectivity fees to be effective July 1, 2015.
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Effectiveness Date
    As noted above, 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 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.\16\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with section 6(b)(4) of the Act,\17\ 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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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
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    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.
Professional Orders in Penny Pilot Securities
    The Exchange believes the proposed removal of Professional orders 
in Penny Pilot Securities that add liquidity from the Professional and 
Firm Penny Pilot Add Volume Tiers is a reasonable, fair and equitable, 
and not unfairly discriminatory allocation of fees and rebates because, 
while Members entering such orders will not be eligible for the $0.02 
per contract enhanced rebate that they would have potentially been 
eligible to receive under the tiers ($0.42 per contract vs. $0.40 per 
contract standard rebate for Fee Code PA), such Members will still be 
eligible for enhanced rebates through both the NBBO Setter Tiers (up to 
an additional $0.04 per contract) and the Quoting Incentive Program 
Tiers (also up to an additional $0.04 per contract). Further, such a 
reduction in rebates will allow the Exchange to allocate fees and 
rebates to other orders in order to encourage increased participation 
on BATS Options, which the Exchange believes will result in higher 
levels of liquidity provision and introduction of higher volumes of 
orders into the price and volume discovery processes, which will 
benefit all participants on BATS Options.
Firm Orders That Add Liquidity in Penny Pilot Add Volume Tiers
    The Exchange also believes that the proposed amendments to the fee 
schedule related to Firm orders in Penny Pilot Securities related to 
the standard rebate under Fee Code PF and the proposed amendments to 
footnote 2, including to reduce the rebate for Tier 1, add a new tier, 
and amend the standards for Tiers 1 and 2 is a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and 
rebates because it will provide Members entering Firm orders with the 
opportunity to receive higher rebates while simultaneously encouraging 
greater participation on BATS Options, which, as described above the 
Exchange believes will result in higher levels of liquidity provision 
and introduction of higher volumes of orders into the price and volume 
discovery processes, which will benefit all participants on BATS 
Options. Specifically, the Exchange believes that the reduction of the 
standard rebate associated with Fee Code PF combined with the amended 
and lowered standard for meeting Tier 1 of the Firm Penny Pilot Add 
Volume Tiers is a reasonable, fair and equitable, and not unfairly 
discriminatory

[[Page 42144]]

allocation of fees and rebates because, in conjunction, they will both 
provide Members with a reasonably achievable threshold for receiving 
the same rebate as they do today while at the same time encouraging and 
rewarding higher levels of participation on the Exchange overall. The 
Exchange also believes that amending the standard for meeting Tier 2 is 
a reasonable, fair and equitable, and not unfairly discriminatory 
allocation of fees and rebates because it will similarly encourage 
increased participation on the Exchange by offering a rebate that 
applies equally to all Members without regard to prior trading volumes. 
Such rebate will encourage greater general participation on the 
Exchange, which will result in higher levels of liquidity provision and 
introduction of higher volumes of orders into the price and volume 
discovery processes, which will benefit all participants on BATS 
Options. Finally, the Exchange believes that proposed Tier 3 is a 
reasonable, fair and equitable, and not unfairly discriminatory 
allocation of fees and rebates because the second of its two 
requirements (that a Member has an ADV equal to or greater than 1.00% 
of average TCV) is identical to the only requirement for meeting Tier 
2, meaning that any Member that meets Tier 2 will only need to meet the 
additional requirement that a Member has an ADAV in Firm orders in 
Penny Pilot Securities equal to or greater than 0.35% of average TCV in 
order to receive the enhanced rebate. This will provide a direct 
incentive for any Member that meets Tier 2 to further increase 
participation in Firm orders in Penny Pilot Securities and, as with 
each of the proposed changes mentioned in this paragraph, will 
encourage greater participation on the Exchange, which will result in 
higher levels of liquidity provision and introduction of higher volumes 
of orders into the price and volume discovery processes, which will 
benefit all participants on BATS Options.
Firm Orders That Add Liquidity in Non-Penny Pilot Securities
    The Exchange believes that the amendments for Firm orders that add 
liquidity in non-Penny Pilot Securities mark a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and 
rebates because while the new Fee Code NF and the associated standard 
rebate marks a reduction in rebate (from $0.65 per contract to $0.40 
per contract), under the new Firm Non-Penny Pilot Add Volume Tiers, 
Members will be eligible to receive an enhanced rebate ($0.50 per 
contract) by meeting a relatively low threshold of ADV as a percentage 
of TCV (0.05%), will receive a further enhanced rebate ($0.60 per 
contract) by meeting Tier 2 (0.15% ADV as a percentage of TCV), or 
receive the same rebate that they currently receive ($0.65 per 
contract) by meeting Tier 3 (0.25% of average TCV). Further, the 
proposed standard rebate is still higher than those offered at NOM and 
NYSE Arca, Inc., which each charge fees for Firm orders that add 
liquidity in non-Penny Pilot Securities. The Exchange believes that 
such a fee structure will provide Members with the ability to receive 
reasonable rebates while strongly encouraging Members to increase their 
participation on the Exchange. Such increased participation on BATS 
Options will result in higher levels of liquidity provision and 
introduction of higher volumes of orders into the price and volume 
discovery processes, which will benefit all participants on BATS 
Options.
Market Maker Penny Pilot Add Volume Tiers
    The Exchange believes that the addition of Tier 3 to the Market 
Maker Penny Pilot Add Volume Tiers is a reasonable, fair and equitable, 
and not unfairly discriminatory allocation of fees and rebates because 
it provides an opportunity for Market Maker orders that add liquidity 
in Penny Pilot Securities with an alternate means of achieving the 
current maximum rebate of $0.42 per contract and only represents a 
potential increase in rebates for such orders. The inclusion of the 
requirement that a Member has an ADAV in Firm orders in Penny Pilot 
Securities equal to or greater than 0.35% is designed to incentivize 
Members to increase their participation on the Exchange in 
organizational order flow beyond just Market Maker orders. Further, 
this enhanced rebate will incentivize increased participation on BATS 
Options both through the enhanced rebate itself and the required 
criteria for a Member to become eligible for the enhanced rebate. Such 
increased participation on BATS Options will result in higher levels of 
liquidity provision and introduction of higher volumes of orders into 
the price and volume discovery processes, which will benefit all 
participants on BATS Options.
Routing Fee Changes
    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 modify fees is fair, equitable 
and reasonable because the fees are generally an approximation of the 
cost to the Exchange for routing orders to such exchanges, and the 
proposal is in response to various increases in fees assessed by other 
options exchanges. Accordingly, the Exchange believes that the proposed 
increases are fair, equitable and reasonable because they will help the 
Exchange to avoid subsidizing routing to away options exchanges and to 
continue providing quality routing services. 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 groups of 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 slight loss for orders 
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 
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.
Physical Connection Fees
    The Exchange believes that the proposal represents an equitable 
allocation of reasonable dues, fees, and other charges as its fees for 
physical connectivity are reasonably constrained by competitive 
alternatives. If a particular exchange charges excessive fees for 
connectivity, affected Members and non-Members may 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 participant or market center or 
taking that exchange's data indirectly. Accordingly, if the Exchange 
charges excessive fees, it would stand to lose not only connectivity 
revenues but also revenues associated with the execution of orders 
routed to it, 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.
    Furthermore, the proposed rule change is also an equitable 
allocation of

[[Page 42145]]

reasonable dues, fees, and other charges as the Exchange believes that 
the increased fees obtained will enable it to cover its increased 
infrastructure costs associated with establishing physical ports to 
connect to the Exchange's Systems. The additional revenue from the 
increased fees will also enable the Exchange to continue to maintain 
and improve its market technology and services. The Exchange believes 
that the proposed fees for 1 gigabyte circuit of $2,000 per month and 
for 10 gigabyte circuit of $4,000 per month are reasonable in that they 
are less than analogous fees charged by the Nasdaq Stock Market LLC 
(``Nasdaq''), which are $2,500 per month for 1 gigabyte connectivity 
and range from $10,000-$15,000 per month for 10 gigabyte circuits.\18\ 
In addition, the Exchange proposed physical connectivity fees are 
designed to align the Exchange's fees with its affiliates.\19\
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    \18\ See Nasdaq Rule 7034(b).
    \19\ See supra note 15.
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    Finally, the Exchange believes that the proposed rates are 
equitable and non-discriminatory in that they apply uniformly to all 
Members and non-Members. Members and non-Members will continue to 
choose whether they want more than one physical port and choose the 
method of connectivity based on their specific needs. All Exchange 
Members that voluntarily select various service options will be charged 
the same amount for the same services. As is true of all physical 
connectivity, all Members and non-Members have the option to select any 
connectivity option, and there is no differentiation with regard to the 
fees charged for the service.
    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.

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. With respect to the proposed 
changes to fees for Professional and Firm orders that add liquidity in 
Penny Pilot Securities, including the proposed changes to the 
Professional and Firm Penny Pilot Add Volume Tiers, the Exchange does 
not believe that any such changes burden competition, but instead, that 
they enhance competition, as they are intended to increase the 
competitiveness of and draw additional volume to BATS Options.
    Similarly, with respect to the proposed new fees for Firm orders 
that add liquidity in non-Penny Pilot Securities, including both new 
Fee Code NF and new Firm Non-Penny Pilot Add Volume Tiers, the Exchange 
does not believe that any such changes burden competition, but instead, 
that they enhance competition, as they are intended to increase the 
competitiveness of and draw additional volume to BATS Options.
    With respect to the proposed new Tier 3 of the Market Maker Penny 
Pilot Add Volume Tiers, the Exchange similarly believes that the 
changes do not burden competition, but rather allow the Exchange to 
better compete and are intended to draw additional volume to BATS 
Options.
    As it relates to the proposed routing fee changes, the proposed 
changes will assist the Exchange in recouping costs for routing orders 
to other options exchanges on behalf of its participants in a manner 
that is a better approximation of actual costs than is currently in 
place and that reflects pricing changes by various options exchanges as 
well as increases to other Routing Costs incurred by the Exchange. The 
Exchange also notes that Members may choose to mark their orders as 
ineligible for routing to avoid incurring routing fees.\20\
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    \20\ 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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    Finally, as it relates to physical connection fees, the Exchange 
believes that fees for connectivity are constrained by the robust 
competition for order flow among exchanges and non-exchange markets. 
Further, excessive fees for connectivity, including port fee access, 
would serve to impair an exchange's ability to compete for order flow 
rather than burdening competition. The proposal to increase the fees 
for physical connectivity would bring the fees charged by the Exchange 
closer to similar fees charged for physical connectivity by other 
exchanges.\21\ In addition, the proposed rule change does not impose 
any burden on intramarket competition as the fees are uniform for all 
Members and non-Members. The Exchange notes that Members and non-
Members also have the ability to obtain access to these services 
without the need for an independent physical port connection, such as 
through alternative means of financial extranets and service bureaus 
that act as a conduit for orders entered by Members and non-Members.
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    \21\ See supra note 18.
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    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 the deem fee structures to be 
unreasonable or excessive.

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 \22\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\23\ 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. If 
the Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule should be approved 
or disapproved.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(2).
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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-2015-52 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-2015-52. This file 
number should be included on the subject line if email is used. To help 
the

[[Page 42146]]

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 will also 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-2015-52 and should be 
submitted on or before August 6, 2015.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-17395 Filed 7-15-15; 8:45 am]
BILLING CODE 8011-01-P