Document ID: SEC-2013-1626-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Y-Exchange, Inc.
Posted Date: 2013-09-18T04:00Z

[Federal Register Volume 78, Number 181 (Wednesday, September 18, 2013)]
[Notices]
[Pages 57422-57424]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22653]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70386; File No. SR-BYX-2013-030]

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

September 12, 2013.
    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 30, 2013, BATS Y-Exchange, Inc. (the ``Exchange'' or 
``BYX'') 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the fee schedule applicable to 
Members \5\ and non-members of the Exchange pursuant to BYX Rules 
15.1(a) and (c). While changes to the fee schedule pursuant to this 
proposal will be effective upon filing, the proposed changes will 
become operative on September 3, 2013.
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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 
September 3, 2013, in order to amend the fee structure related to its 
Retail Price Improvement (``RPI'') program with respect to executions 
in securities priced below $1.00.
    Currently, pursuant to the RPI program the Exchange provides a 
$0.0025 rebate per share for any Retail Order \6\ that removes 
liquidity from the BYX order book (except for a Retail Order that 
removes displayed liquidity, which is subject to standard rebates and 
fees). The Exchange currently charges a $0.0025 fee per share for any 
Retail

[[Page 57423]]

Price Improving Order \7\ that adds liquidity to the Exchange order 
book and is removed by a Retail Order. Finally, the Exchange currently 
charges at $0.0010 fee per share for any non-displayed order that adds 
liquidity to the Exchange order book and is removed by a Retail Order.
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    \6\ As defined in BYX Rule 11.24(a)(2), a ``Retail Order'' is an 
agency order that originates from a natural person and is submitted 
to the Exchange by a Retail Member Organization, provided that no 
change is made to the terms of the order with respect to price or 
side of market and the order does not originate from a trading 
algorithm or any other computerized methodology.
    \7\ As defined in BYX Rule 11.24(a)(3), a ``Retail Price 
Improvement Order'' consists of non-displayed interest on the 
Exchange that is priced better than the Protected NBB or Protected 
NBO by at least $0.001 and that is identified as such.
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    The fees and rebates described above are applied without regard to 
the price of the security for which an order is executed (i.e., RPI 
rebates apply in all cases to Retail Orders other than those that 
remove displayed liquidity and RPI fees apply to all Retail Price 
Improving Orders that add liquidity and are removed by Retail Orders). 
In contrast, with respect to executions of orders on the Exchange 
outside of the RPI program, the Exchange charges different rates and 
has a different rebate structure depending on whether an execution is 
in a security priced below $1.00 or a security priced $1.00 and above. 
Consistent with this structure, the Exchange proposes to limit the 
rebates and fees of the RPI program to executions in securities priced 
$1.00 or above and to apply its standard fee structure to all 
executions in securities priced below $1.00, even in executions related 
to the RPI program. Accordingly, in any security priced below $1.00, 
the Exchange proposes to charge 0.10% charge of the total dollar value 
of the execution to remove liquidity from the Exchange's order book, 
including all instances where a Retail Order removes liquidity from the 
Exchange in connection with the RPI program. Also, in all instances for 
any execution of a security priced below $1.00 the Exchange proposes to 
provide such execution free of charge, but also without any liquidity 
rebate, to the party that added liquidity to the Exchange's order book. 
Accordingly, this no-rebate and no-fee model to add liquidity will 
apply to all executions of securities priced below $1.00 on the 
Exchange, including those related to the RPI program. The Exchange does 
not propose to change any pricing related to securities priced $1.00 or 
above in connection with this proposal.
    The Exchange believes the current structure, providing significant 
rebates to incoming Retail Orders and charging liquidity providers 
interacting with such orders, in securities priced below $1.00 may act 
to discourage liquidity providers from adding meaningful liquidity in 
such securities. Accordingly, the proposal is intended to encourage 
liquidity in securities priced below $1.00 while otherwise maintaining 
the benefits of the RPI program.
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.\8\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act \9\ 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 at a 
particular venue to be excessive.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to modify the fee schedule 
related to the RPI program is reasonable because it applies a fee model 
to the RPI program with respect to securities priced below $1.00 that 
is consistent with all other executions on the Exchange. As noted 
above, the Exchange believes the current structure, providing rebates 
to incoming Retail Orders and charging liquidity providers interacting 
with such orders, in securities priced below $1.00 may act to 
discourage liquidity providers from adding meaningful liquidity in such 
securities. Accordingly, the Exchange believes the proposal is 
reasonable because it is intended to encourage liquidity in securities 
priced below $1.00 while otherwise maintaining the benefits of the RPI 
program.
    The Exchange also believes that this proposal is equitably 
allocated and not unfairly discriminatory because it will be applied 
equally to all participants. While the Exchange acknowledges that 
certain executions for Retail Orders will be charged fees under the 
proposal, where such orders currently receive a rebate, the Exchange 
believes that such costs are offset by the benefits of continued 
liquidity in securities priced below $1.00. Additionally, such costs 
are offset by the fact that all other executions of Retail Orders under 
the current RPI program will continue to receive the current rebates 
provided by the Exchange. The Exchange again 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. Accordingly, the Exchange believes 
that it is reasonable, equitable, and not unfairly discriminatory to 
apply its standard Exchange pricing to all orders that are executed as 
part of the RPI program in securities priced below $1.00.

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

    Because the market for order execution is extremely competitive, 
Members may choose to preference other market centers ahead of the 
Exchange if they believe that they can receive better fees or rebates 
elsewhere. The Exchange does not believe that the proposed rule change 
will result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
Exchange believes that its pricing for the RPI program is appropriately 
competitive vis-[agrave]-vis the Exchange's competitors. Further, the 
Exchange believes that providing a consistent pricing structure for all 
securities priced below $1.00 will encourage liquidity provision in 
such securities, which fosters intra-market competition to the benefit 
of all market participants that enter orders on the Exchange, including 
Members that submit Retail Orders.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and paragraph (f) of Rule 19b-4 
thereunder.\11\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 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

[[Page 57424]]

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-BYX-2013-030 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-BYX-2013-030. 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 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-BYX-2013-030 and should be 
submitted on or before October 9, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22653 Filed 9-17-13; 8:45 am]
BILLING CODE 8011-01-P