Document ID: SEC-2016-0698-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats EDGX Exchange, Inc.
Posted Date: 2016-04-21T04:00Z

[Federal Register Volume 81, Number 77 (Thursday, April 21, 2016)]
[Notices]
[Pages 23529-23531]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09203]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77631; File No. SR-BatsEDGX-2016-09]

Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change Related 
to Fees as They Apply to the Equities Options Platform

April 15, 2016.
    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 April 7, 2016, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 Exchange 
Rules 15.1(a) and (c).
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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 amend its fee schedule for its equity 
options platform (``EDGX Options'') to add a new tier to its existing 
tiered pricing structure, as further described below.\6\
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    \6\ The Exchange initially filed the proposed change on April 1, 
2016 (SR-BatsEDGX-2016-08). On April 7, 2016, the Exchange withdrew 
SR-BatsEDGX-2016-08 and submitted this filing).
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    The Exchange currently offers two pricing tiers under footnotes 1 
and 2 of the fee schedule, Customer Volume Tiers and Market Maker 
Volume Tiers, respectively. Under the tiers, Members that achieve 
certain volume criteria may qualify for reduced fees or enhanced 
rebates for Customer \7\ and Market Maker \8\ orders. The Exchange 
proposes to add an additional Customer Volume Tier to footnote 1.
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    \7\ The term ``Customer'' applies to any transaction identified 
by a Member for clearing in the Customer range at the Options 
Clearing Corporation (``OCC''), excluding any transaction for a 
Broker Dealer or a ``Professional'' as defined in Exchange Rule 
16.1.
    \8\ The term ``Market Maker'' applies to any transaction 
identified by a Member for clearing in the Market Maker range at the 
OCC, where such Member is registered with the Exchange as a Market 
Maker as defined in Rule 16.1(a)(37).
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    Fee code PC and NC are currently appended to all Customer orders in 
Penny Pilot Securities \9\ and Non-Penny Pilot Securities,\10\ 
respectively and result in a standard rebate of $0.01 per contract. The 
Customer Volume Tiers in footnote 1 consist of five separate tiers, 
each providing an enhanced rebate to a Member's Customer orders that 
yield fee codes PC or NC upon satisfying monthly volume criteria 
required by the respective tier. For instance, pursuant to Customer 
Volume Tier 1, the lowest volume tier, a Member will receive a rebate 
of $0.05 per contract where the Member has an ADV \11\ in Customer 
orders equal to or greater than 0.10% of average TCV.\12\ Pursuant to 
Customer Volume Tier 5, the highest volume tier, a Member will receive 
a rebate of $0.25 per contract where the Member has an ADV in Customer 
orders equal to or greater than 0.80% of average TCV. To encourage the 
entry of additional orders to EDGX Options, the Exchange proposes to 
adopt a new Tier 6 with different qualifying criteria. Specifically, 
under new Tier 6, the Exchange proposes to provide a rebate of $0.21 
per contract where: (1) The Member has an ADV in Customer orders equal 
to or greater than 0.25% of average TCV; and (2) the Member has an ADV 
in Market Maker Orders equal to or greater than 0.25% of average TCV.
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    \9\ The term ``Penny Pilot Security'' applies to those issues 
that are quoted pursuant to Exchange Rule 21.5, Interpretation and 
Policy .01.
    \10\ The term ``Non-Penny Pilot Security'' applies to those 
issues that are not Penny Pilot Securities quoted pursuant to 
Exchange Rule 21.5, Interpretation and Policy .01.
    \11\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day.
    \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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    The Exchange notes that the rebate of $0.21 per contract is the 
same rebate as Tier 4, which is provided where the Member has an ADV in 
Customer orders equal to or greater than 0.50% of average TCV. By 
introducing Tier 6, the

[[Page 23530]]

Exchange is providing an additional mechanism for a Member to achieve 
this enhanced rebate. The Exchange also notes that the proposed rebate 
is intended to encourage the entry of both Customer orders and Market 
Maker orders by providing a hybrid tier that rewards the entry of both. 
Although the qualifying criteria includes Market Maker orders, as noted 
above, the proposed enhanced rebate of $0.21 per contract would only be 
awarded to a Member's Customer orders that yield fee codes PC or NC 
upon satisfying the monthly volume criteria (and not such Member's 
Market Maker orders). Under the Exchange's existing pricing structure, 
however, a Member qualifying for the tier would qualify for at least 
Market Maker Volume Tier 3 with respect to such Member's Market Maker 
orders (resulting in a reduced fee of $0.10 per contract), as the 
criteria for such tier require an ADV in Market Maker orders equal to 
or greater than 0.20%.
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.\13\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\14\ 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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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes its proposed fees and rebates are reasonable, 
fair and equitable, and non-discriminatory. The Exchange operates in a 
highly competitive market in which market participants may readily send 
order flow to many competing venues if they deem fees at the Exchange 
to be excessive. As a new options exchange, the proposed fee structure 
remains intended to attract order flow to the Exchange by offering 
market participants a competitive yet simple pricing structure. At the 
same time, the Exchange believes it is reasonable to incrementally 
adopt incentives intended to help to contribute to the growth of the 
Exchange.
    Volume-based rebates such as those currently maintained on the 
Exchange have been widely adopted by 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 of 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 proposed additional Customer 
Volume Tier is intended to incentivize Members to send additional 
Customer orders and Market Maker orders to the Exchange in an effort to 
qualify for the enhanced rebate made available by the tier.
    The Exchange believes that the proposed tier is reasonable, fair 
and equitable, and non-discriminatory, for the reasons set forth with 
respect to volume-based pricing generally and because such change will 
incentivize participants to further contribute to market quality. The 
proposed tier will provide an additional way for market participants to 
qualify for enhanced rebates. The Exchange also believes that the 
proposed tiered pricing structure is consistent with pricing previously 
offered by the Exchange as well as other options exchanges and does not 
represent a significant departure from such pricing structures.\15\
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    \15\ See, e.g., Bats BZX Options Fee Schedule, Footnote 1, Tier 
5, which provides an enhanced rebate to Customer orders on BZX 
Options based on both Customer volume and Market Maker volume. The 
BZX Options Fee Schedule is available at: http://www.batsoptions.com/support/fee_schedule/bzx/.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed amendments to its Fee Schedule 
would not 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 change represents a significant 
departure from previous pricing offered by the Exchange or other 
options exchanges.\16\ Rather, the proposal is a competitive proposal 
that is seeking to further the growth of the Exchange. The Exchange has 
structured the proposed fees and rebates to attract additional volume 
in Market Maker and Customer orders, however, the Exchange believes 
that its pricing for all capacities is competitive with that offered by 
other options exchanges. 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.
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    \16\ Id.
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(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 \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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-BatsEDGX-2016-09 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-BatsEDGX-2016-09. 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

[[Page 23531]]

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 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-BatsEDGX-2016-09 and should be submitted on or before 
May 12, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-09203 Filed 4-20-16; 8:45 am]
 BILLING CODE 8011-01-P