Document ID: SEC-2015-1375-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2015-08-18T04:00Z

[Federal Register Volume 80, Number 159 (Tuesday, August 18, 2015)]
[Notices]
[Pages 50061-50064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-20281]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75678; File No. SR-BATS-2015-58]

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.

August 12, 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 August 3, 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 the fee schedule applicable 
to Members \5\ and non-members of the Exchange pursuant to BATS Rules 
15.1(a) and (c) (``Fee Schedule'') to: (i) Modify the rebate structure 
for certain routing strategies that route to NASDAQ OMX BX, Inc. 
(``Nasdaq BX''); and (ii) adopt a new Cross-Asset Step-Up Tier.
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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: (i) Modify the rebate structure for 
certain routing strategies that route to Nasdaq BX; and (ii) adopt a 
new Cross-Asset Step-Up Tier.
Amended Fee Code C
    The Exchange currently provides: (i) A rebate of $0.0010 per share 
for Members' orders that yield fee code TV, applicable to orders routed 
to Nasdaq BX using the TRIM2 or TRIM3 routing

[[Page 50062]]

strategy; \6\ and (ii) a rebate of $0.0013 per share for Members' 
orders that yield fee code TX, applicable to orders routed to Nasdaq BX 
using the TRIM routing strategy. The Exchange proposes to amend its Fee 
Schedule to provide a standard rebate of $0.0010 per share for Members' 
orders that yield fee code TV, which would apply to all TRIM routing 
strategies. Thus, fee code TV would continue to include TRIM2 and TRIM3 
routing to Nasdaq BX as well as routing to Nasdaq BX using the TRIM 
routing strategy. The Exchange would, in turn, eliminate fee code TX. 
The Exchange notes that the $0.0010 per share rebate provided pursuant 
to the proposed change may still be a higher rebate for an order routed 
to Nasdaq BX that a Member may obtain when routing directly to Nasdaq 
BX, depending on the applicable tier for which such Member may qualify. 
Nasdaq BX currently provides a standard rebate to remove liquidity of 
$0.0006 per share, with various tiers providing rebates up to $0.0017 
per share.\7\
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    \6\ The TRIM routing strategies are defined in Rule 
11.13(b)(3)(G).
    \7\ See the Nasdaq BX fee schedule available at: http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing.
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Cross-Asset Step-Up Tiers
    Currently, with respect to the Exchange's equities trading platform 
(``BATS Equities''), the Exchange determines the liquidity adding 
rebate that it will provide to Members using the Exchange's tiered 
pricing structure, which is based on the Member meeting certain volume 
tiers based on their ADAV \8\ as a percentage of TCV \9\ or ADV \10\ as 
a percentage of TCV. Included amongst the volume tiers offered by the 
Exchange are two Cross-Asset Step-Up Tiers for purposes of BATS 
Equities pricing, which require participation on the Exchange's options 
platform (``BATS Options''). The current Cross-Asset Step-Up Tiers 
provide rebates of $0.0027 per share and $0.0028 per share for Tier 1 
and Tier 2, respectively. To qualify for Tier 1, a Member must have an 
Options Step-Up Add TCV that is equal to or greater than 0.30%. To 
qualify for Tier 2, a Member must have an Options Step-Up Add TCV that 
is equal to or greater than 0.40%.
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    \8\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``ADAV'' means average daily added volume 
calculated as the number of shares added per day on a monthly basis; 
neither routed shares nor shares added on any day that the 
Exchange's system experiences a disruption that lasts for more than 
60 minutes during regular trading hours (``Exchange System 
Disruption'') and on the last Friday in June (the ``Russell 
Reconstitution Day'') are included in ADAV calculation.
    \9\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``TCV'' means total consolidated volume calculated 
as the volume reported by all exchanges and trade reporting 
facilities to a 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 or the Russell 
Reconstitution Day.
    \10\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``ADV'' means average daily volume calculated as 
the number of shares added or removed, combined, per day on a 
monthly basis; neither routed shares nor shares added or removed on 
any day that the Exchange experiences an Exchange System Disruption 
and the Russell Reconstitution Day are included in ADV calculation.
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    The Exchange proposes to adopt a new tier, Tier 3, as well as a new 
definition of ``Options Add TCV'' and a new definition of ``Step-Up 
ADAV'' in connection with such tier. As proposed, ``Options Add TCV'' 
for the purposes of BATS Equities pricing would mean ADAV as a 
percentage of TCV, using the definitions of ADAV and TCV as provided 
under the Exchange's fee schedule for BATS Options. This definition is 
similar to existing definitions used for cross-asset tiers on the 
Exchange but is different from such definitions as it does not depend 
on the participant's capacity on BATS Options (as does the definition 
of Options Market Maker Add TCV) nor does it require additional volume 
levels over and above a certain baseline (as does the definition of 
Options Step-Up Add TCV). ``Step-Up Add TCV'' for the purposes of BATS 
Equities pricing would mean ADAV in the relevant baseline month 
subtracted from current ADAV. Thus, this definition would be similar to 
the existing definition of Step-Up Add TCV but, in contrast, would not 
be calculated as a percentage of TCV.
    Using these definitions, under proposed Tier 3, the Exchange would 
provide a rebate of $0.0029 per share to a Member with an Options Add 
TCV that is equal to or greater than 0.30% and a Step-Up ADAV from June 
2015 that is equal to or greater than 1,000,000 shares.
    In addition to the changes proposed above, the Exchange proposes to 
clarify the definition of ADAV to make clear that volume is calculated 
``per day'' on a monthly basis. Further, in order to incorporate Tier 3 
into the current table and account for the new definitions, the 
Exchange proposes non-substantive structural changes to the chart.
Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule immediately.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\11\ in general, and 
furthers the objectives of Section 6(b)(4),\12\ 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 proposed rule change reflects a competitive 
pricing structure designed to incent market participants to direct 
their order flow to the Exchange. The Exchange believes that the 
proposed rates are equitable and non-discriminatory in that they apply 
uniformly to all Members. The Exchange believes the fees and credits 
remain competitive with those charged by other venues and therefore 
continue to be reasonable and equitably allocated to Members.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to modify the rebate for 
Members' orders that utilize the TRIM routing strategy and receive 
executions of orders routed to Nasdaq BX by eliminating fee code TX and 
applying fee code TV represents an equitable allocation of reasonable 
dues, fees, and other charges among Members and other persons using its 
facilities. The Exchange notes that this proposal will not result in 
any change to Members using the TRIM2 or TRIM3 routing strategies. 
Though the proposed change will result in a lower rebate for Members 
using the TRIM routing strategy, the Exchange notes that the rebate 
provided for routing to Nasdaq BX through the Exchange is still higher 
than the rebate provided by Nasdaq BX unless a Member would otherwise 
qualify for certain higher rebate tiers at Nasdaq BX. Therefore, the 
Exchange believes that the proposed change to fee code TV and the 
elimination of fee codes TX is equitable and reasonable. The Exchange 
notes that routing through the Exchange is voluntary. Lastly, the 
Exchange also believes that the proposed amendment is non-
discriminatory because it applies uniformly to all Members.
    Volume-based rebates and fees such as the proposed Cross-Asset 
Step-Up Tier 3 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

[[Page 50063]]

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 Step-Up Tier 3 
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 
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 on the 
Exchange 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 market participants 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.

(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. The Exchange 
does not believe that the proposed changes represent 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. The 
Exchange does not believe that its proposal would burden intramarket 
competition because the proposed rebate for all TRIM routing strategies 
would apply uniformly to all Members.
    With respect to the proposed new tier, the Exchange does not 
believe that the proposal burdens competition, but instead, enhances 
competition, as it is intended to increase the competitiveness of and 
draw additional volume to both BATS Equities 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 the [sic] 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.

(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 unsolicited 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 \13\ and paragraph (f) of Rule 19b-4 
thereunder.\14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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-2015-58 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BATS-2015-58. 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 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-2015-58 and should be 
submitted on or before September 8, 2015.

[[Page 50064]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Brent J. Fields,
Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-20281 Filed 8-17-15; 8:45 am]
 BILLING CODE 8011-01-P