Document ID: SEC-2017-0459-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc.
Posted Date: 2017-03-20T04:00Z

[Federal Register Volume 82, Number 52 (Monday, March 20, 2017)]
[Notices]
[Pages 14410-14412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05407]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80242; File No. SR-BatsBZX-2017-19]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees

March 14, 2017.
    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 March 8, 2017, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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 filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-members of the Exchange pursuant to BZX 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.bats.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 applicable to its 
equities trading platform (``BZX Equities'') to: (i) Modify the 
criteria required to meet the Market Depth Tier; (ii) add a new Cross-
Asset Add Volume Tier 2 under footnote 1; and (iii) delete the 
alternate criteria to meet Tiers 1 through 6 under footnote 1.
Modifications to Market Depth Tier
    The Exchange proposes to modify the required criteria for Market 
Depth Tier under footnote 1 of the fee schedule. The Exchange currently 
offers enhanced rebates ranging from $0.0025 to $0.0032 per share under 
eight Add Volume Tiers set forth in footnote 1 of the fee schedule. 
Under the Market Depth Tier, qualifying Members earn a rebate per share 
of $0.0032 on displayed orders that add liquidity and yield fee codes 
B, V, or Y.\6\ Currently, to qualify for this tier a Member must: (i) 
Add an ADV \7\ greater than or equal to 1.00% of the TCV; \8\ and (ii) 
add an ADV greater than or equal to 0.10% of the TCV in non-displayed 
orders that yield fee codes HA \9\ or HI.\10\ The Exchange now proposes 
to decrease the first prong of the tier's criteria while increasing the 
second prong of the criteria for this tier, thus keeping the difficulty 
of achieving the tier the same while adjusting to current market 
dynamics. Specifically, to receive a rebate of $0.0032 per share under 
the Market Depth Tier a Member must now: (i) Add an ADV greater than or 
equal to 0.70% of the TCV; and (ii) add an ADV greater than or equal to 
0.12% of the TCV in non-displayed orders that yield fee codes HA or HI.
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    \6\ Fee codes B, V, and Y are appended to displayed orders that 
add liquidity in tape B, A, or C, respectively. See the Exchange's 
fee schedule available at http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
    \7\ ``ADV'' means average daily volume calculated as the number 
of shares added or removed, combined, per day, and is calculated on 
a monthly basis. Id.
    \8\ ``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. Id.
    \9\ Fee code HA is appended to non-displayed orders which add 
liquidity on the Exchange and receive a rebate of $0.0017 per share. 
Id.
    \10\ Fee code HI is appended to non-displayed orders which 
receive price improvement and add liquidity. Orders that yield fee 
code HI are charged no fee nor do they receive a rebate. Id.
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Proposed Cross-Asset Add Volume Tier 2
    The Exchange proposes to offer an additional Cross-Asset Add Volume 
Tier under footnote 1 of the fee schedule. Included amongst the volume 
tiers offered by the Exchange under footnote 1 is a Cross-Asset Add 
Volume Tier which requires participation on the Exchange's equity 
options platform (``BZX Options''). Under the Exchange's current Cross-
Asset Add Volume Tier, a Member's order that yield fee codes B, V, or Y 
may receive an enhanced rebate of $0.0028 per share where that Member 
has an: (i) ADAV \11\ as a percentage of TCV greater than or equal to 
0.15%; and (ii) Options Customer Add TCV \12\ greater than or equal to 
0.10%. Under proposed tier to be called the ``Cross-Asset Add Volume 
Tier 2'',\13\ a Member's orders that yield fee codes B, V or Y may 
receive an enhanced rebate of $0.0030 per share where the Member: (i) 
Has on BZX Options an ADAV in Customer \14\ orders greater than or 
equal to 0.60% of average TCV; (ii) has on BZX Options an ADAV in 
Market Maker \15\ orders greater than or equal to

[[Page 14411]]

0.25% of average TCV; and (iii) Member has an ADAV greater than or 
equal to 0.30% of average TCV.
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    \11\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added and ``ADV'' means average daily volume 
calculated as the number of contracts added or removed, combined, 
per day. See the Exchange's fee schedule available at http://www.bats.com/us/options/membership/fee_schedule/bzx/.
    \12\ ``Options Customer Add TCV'' means, for purposes of 
equities pricing, ADAV resulting from Customer orders as a 
percentage of TCV, using the definitions of ADAV, Customer and TCV 
as provided under the Exchange's fee schedule for BZX Options. Id.
    \13\ The Exchange proposes to rename the current Cross-Asset Add 
Volume Tier as ``Cross-Asset Add Volume Tier 1''.
    \14\ ``Customer'' applies to any transaction identified by a 
Member for clearing in the Customer range at the OCC, excluding any 
transaction for a Broker Dealer or a ``Professional'' as defined in 
Exchange Rule 16.1. See the BZX Options fee schedule available at 
http://www.bats.com/us/options/membership/fee_schedule/bzx/.
    \15\ ``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). Id.
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Deletion of Alternate Criteria To Meet Tiers 1 Through 6 Under Footnote 
1
    The Exchange proposes to delete the alternate criteria to meet 
Tiers 1-6 under footnote 1 of the fee schedule. The Exchange currently 
offers enhanced rebates ranging from $0.0025 to $0.0032 per share under 
Tiers 1 through 6 in footnote 1 of the fee schedule for Members that 
have an ADAV as a percentage of TCV greater than or equal to a certain 
percentage or an ADV as a percentage of TCV greater than a certain 
percentage. The Exchange now proposes to delete the second alternate 
criteria under Tiers 1 through 6 where a Member may have an ADV as a 
percentage of TCV greater than a certain percentage to receive the 
enhanced rebate provided by the tier.
     Under Tier 1, a Member may receive a rebate of $0.0025 per 
share where they have an: (i) ADAV as a percentage of TCV greater than 
or equal to 0.10%; or (ii) ADV as a percentage of TCV greater than or 
equal to 0.25%. As amended, the second alternate criteria will be 
removed and Members would no longer qualify for the tier where they 
have an ADV as a percentage of TCV greater than or equal to 0.25%.
     Under Tier 2, a Member may receive a rebate of $0.0028 per 
share where they have an: (i) ADAV as a percentage of TCV greater than 
or equal to 0.20%; or (ii) ADV as a percentage of TCV greater than or 
equal to 0.50%. As amended, the second alternate criteria will be 
removed and Members would no longer qualify for the tier where they 
have an ADV as a percentage of TCV greater than or equal to 0.50%.
     Under Tier 3, a Member may receive a rebate of $0.0029 per 
share where they have an: (i) ADAV as a percentage of TCV greater than 
or equal to 0.30%; or (ii) ADV as a percentage of TCV greater than or 
equal to 0.75%. As amended, the second alternate criteria will be 
removed and Members would no longer qualify for the tier where they 
have an ADV as a percentage of TCV greater than or equal to 0.75%.
     Under Tier 4, a Member may receive a rebate of $0.0030 per 
share where they have an: (i) ADAV as a percentage of TCV greater than 
or equal to 0.50%; or (ii) ADV as a percentage of TCV greater than or 
equal to 1.00%. As amended, the second alternate criteria will be 
removed and Members would no longer qualify for the tier where they 
have an ADV as a percentage of TCV greater than or equal to 1.00%.
     Under Tier 5, a Member may receive a rebate of $0.0031 per 
share where they have an: (i) ADAV as a percentage of TCV greater than 
or equal to 1.00%; or (ii) ADV as a percentage of TCV greater than or 
equal to 1.40%. As amended, the second alternate criteria will be 
removed and Members would no longer qualify for the tier where they 
have an ADV as a percentage of TCV greater than or equal to 1.40%.
     Under Tier 6, a Member may receive a rebate of $0.0032 per 
share where they have an: (i) ADAV as a percentage of TCV greater than 
or equal to 1.25%; or (ii) ADV as a percentage of TCV greater than or 
equal to 1.75%. As amended, the second alternate criteria will be 
removed and Members would no longer qualify for the tier where they 
have an ADV as a percentage of TCV greater than or equal to 1.75%.
Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule immediately.\16\
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    \16\ The Exchange initially filed the proposed amendments to its 
fee schedule on March 1, 2017 (SR-BatsBZX-2017-16). On March 8, 
2017, the Exchange filed and withdrew SR-BatsBZX-2017-18 and then 
subsequently submitted this filing (SR-BatsBZX-2017-19).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\17\ in general, and 
furthers the objectives of Section 6(b)(4),\18\ 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 believes that the proposed modification to the 
tiered pricing structure is 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. The proposed 
fee structure remains intended to attract order flow to the Exchange by 
offering market participants a competitive pricing structure. The 
Exchange believes it is reasonable to offer and incrementally modify 
incentives intended to help to contribute to the growth of the 
Exchange.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates such as that proposed herein have been widely 
adopted by exchanges, including the Exchange, 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: (i) The value to 
an exchange's market quality; (ii) associated higher levels of market 
activity, such as higher levels of liquidity provisions and/or growth 
patterns; and (iii) introduction of higher volumes of orders into the 
price and volume discovery processes.
Modifications to Market Depth Tier
    The modification proposed herein is also intended to incentivize 
additional Members to send orders to the Exchange in an effort to 
qualify for the enhanced rebate made available by the tiers, contribute 
to the growth of the Exchange, or will allow the Exchange to earn 
additional revenue that can be used to offset the addition of new 
pricing incentives. The Exchange believes decreasing the first prong of 
the tier's criteria by 0.30%, while increasing the second prong of the 
criteria by 0.02%, ensures the difficulty of achieving the tier remains 
the same, while adjusting to reflect current market dynamics. The 
second prong of the criteria is a subset of the first prong. Due to 
market trend of decreased volatility in 2017, this tier has become more 
difficult to achieve. By decreasing the overall ADV required by the 
first prong while slightly increasing the ADV required in certain non-
displayed orders by the second prong, the effect of the tier, to 
incentivize orders which add depth to the order book, remains in place, 
while adjusting for current market volatility. The result is that the 
difficulty of achieving the tier remains relatively similar. The 
Exchange does not proposed to modify the rebate offered in this tier as 
the difficulty is relatively unchanged. The Exchange as well as 
competitors of the Exchange and do not represent a significant 
departure from the Exchange's general pricing structure.
Proposed Cross-Asset Add Volume Tier 2
    The Exchange believes that the proposed Cross-Asset Add Volume Tier 
2 is a reasonable, 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 BZX Equities 
and BZX Options. The increased liquidity from this proposal also 
benefits all investors by deepening the BZX Equities and BZX 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

[[Page 14412]]

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 BZX Equities but not 
on BZX 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 BZX 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 BZX Options or not. The proposed rebate 
provided by the proposed tier is also equitable and reasonable because 
it reflects the increased criteria necessary to achieve the tier as 
compare to the existing Cross-Asset Add Volume Tier. The proposed tier 
is also fair and equitable in that membership in BZX Options is 
available to all market participants which would provide them with 
access to the benefits on BZX Options provided by the proposed changes, 
as described above, even where a member of BZX 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.
Deletion of Alternate Criteria To Meet Tiers 1 Through 6 Under Footnote 
1
    The Exchange believes that the proposed deletions of the alternate 
criteria for Tiers 1 through 6 under footnote 1 are reasonable, 
equitable, and not unfairly discriminatory allocation of fees and 
rebates. The alternate criteria available under these tier has not 
affected Members' behavior in the manner originally conceived by the 
Exchange as most all Members that qualify for Tier 1 through 6 do so by 
meeting the tier's first criteria, which the Exchange does not proposes 
to modify of delete. Therefore, the alternate criteria the Exchange 
proposes to delete for each tier would have a minimal impact on 
Member's ability to qualify for a particular tier. The Exchange also 
believes that the proposed elimination of the alternate criteria for 
Tiers 1 through 6 would be non-discriminatory in that it currently 
applies equally to all Members and, upon elimination, would no longer 
be available to any Members. Further, their elimination will allow the 
Exchange to explore other pricing mechanisms in which it may enhance 
market quality for all Members.

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. The Exchange does not believe 
that any of the proposed change to the Exchange's tiered pricing 
structure burden competition, but instead, that it enhances competition 
as it is intended to increase the competitiveness of BZX by modifying 
pricing incentives in order to attract order flow and incentivize 
participants to increase their participation on the Exchange. 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 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. The Exchange does not believe the proposed 
amendments would burden intramarket competition as they would be 
available to all Members uniformly.

B. 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 \19\ and paragraph (f) of Rule 19b-4 
thereunder.\20\ 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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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 No. SR-BatsBZX-2017-19 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 No. SR-BatsBZX-2017-19. 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 No. SR-BatsBZX-2017-19, and should be 
submitted on or before April 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-05407 Filed 3-17-17; 8:45 am]
 BILLING CODE 8011-01-P