Document ID: SEC-2013-2215-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2013-12-26T05:00Z

[Federal Register Volume 78, Number 248 (Thursday, December 26, 2013)]
[Notices]
[Pages 78460-78462]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30761]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71140; File No. SR-BATS-2013-063]

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

December 19, 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 December 9, 2013, BATS Exchange, Inc. (the

[[Page 78461]]

``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 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 BATS Rules 
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal 
are effective upon filing.
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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 purpose of the proposed rule change is to modify the ``Equities 
Pricing'' section of its fee schedule effective December 9, 2013, in 
order to temporarily amend the way that the Exchange calculates rebates 
for adding liquidity to the Exchange. Specifically, the Exchange is 
proposing to exclude odd lot executions from the calculation of average 
daily TCV, as defined below, as it relates to ``Equities Pricing'' 
until February 1, 2014.
    The Exchange currently offers a tiered structure for determining 
the rebates that Members receive for executions that add liquidity to 
the Exchange. Under the tiered pricing structure, the Exchange provides 
different rebates to Members based on a Member's ADAV or ADV \6\ as a 
percentage of average daily TCV,\7\ as well as a possible additional 
rebate where a Member's order sets or joins the NBBO and that Member 
meets or exceeds a certain threshold of ADAV or ADV as a percentage of 
average daily TCV. The Exchange notes that it is not proposing to 
modify any of the existing rebates or the percentage thresholds at 
which a Member may qualify for certain rebates. Rather, as mentioned 
above, the Exchange is proposing to modify the ``Equities Pricing'' 
section of its fee schedule in order to temporarily exclude odd lot 
executions from the calculation of average daily TCV.
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    \6\ As provided in the ``Equities Pricing'' section of the fee 
schedule, ``ADAV'' means average daily added volume calculated as 
the number of shares added and ``ADV'' means average daily volume 
calculated as the number of shares added or removed, combined, per 
day. ADAV and ADV are calculated on a monthly basis, excluding 
shares added or removed on any day that trading is not available on 
the Exchange for more than 60 minutes during regular trading hours 
but continues on other markets during such time (``Exchange 
Outage'') and on the last Friday in June (the ``Russell 
Reconstitution Day''). Routed shares are not included in ADAV or ADV 
calculation. With prior notice to the Exchange, a Member may 
aggregate ADAV or ADV with other Members that control, are 
controlled by, or are under common control with such Member (as 
evidenced on such Member's Form BD).
    \7\ As provided in the ``Equities Pricing'' section of the fee 
schedule, ``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 any day that the Exchange experiences an 
Exchange Outage and the Russell Reconstitution Day.
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    The Exchange is proposing to exclude odd lot executions from the 
calculation of average daily TCV through January 31, 2014 because 
recent amendments to the Consolidated Tape Association and NASDAQ UTP 
Plans \8\ require that odd lots be reported to the consolidated tape. 
Beginning on December 9, 2013, exchanges and trade reporting facilities 
are required to report odd lot executions to the consolidated 
transaction reporting plan and, as currently defined, odd lots would be 
included in the calculation of TCV. As such, the Exchange is proposing 
to amend the definition of TCV in order to exclude odd lots from the 
calculation of TCV until January 31, 2014. When calculating ADAV or ADV 
as a percentage of TCV, the Exchange has historically included odd lots 
in the Member's ADV and ADAV, but excluded them from TCV since they 
have not been included in the trades reported to consolidated 
transaction reporting plans. Accordingly, the proposal intends to 
exclude odd lots from TCV for the first two billing cycles in which odd 
lots are reported to the consolidated transaction reporting plans in 
order to create a period during which odd lot reporting behavior can be 
observed without affecting the rebates for which a Member will qualify. 
The Exchange believes that excluding such odd lots will help to 
eliminate uncertainty faced by Members as to their monthly ADAV or ADV 
as a percentage of average daily TCV because of the additional reported 
volume and the rebates that this percentage will qualify for, providing 
Members with an increased certainty as to their monthly cost for trades 
executed on the Exchange. Further, excluding such odd lots through 
January 31, 2014 will allow the Exchange to evaluate the impact that 
odd lot orders would have on Member rebates.
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    \8\ Securities Exchange Act Release No. 70794 (October 31, 
2013), 78 FR 66789 (November 6, 2013) (SR-CTA-2013-05); Securities 
Exchange Act Release No. 70793 (October 31, 2013), 78 FR 66788 
(November 6, 2013) (File No. S7-24-89).
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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.\9\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\10\ 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 structures at a 
particular venue to be unreasonable and/or excessive.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
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    With respect to the proposed changes to the tiered pricing 
structure for adding liquidity to the Exchange, the Exchange believes 
that its proposal is reasonable because, as explained above, it will 
help provide Members with a greater level of certainty as to their 
level of rebates for

[[Page 78462]]

December and January. The Exchange also believes that its proposal is 
reasonable because it is not changing the thresholds to become eligible 
or the dollar value associated with the rebates and, moreover, by 
continuing to exclude odd lots from the calculation of average daily 
TCV, Members will be more likely to meet the minimum or higher tier 
thresholds for December and January, which will provide additional 
incentive to Members to increase their participation on the Exchange in 
order to meet the next tier. In addition, the Exchange believes that 
the proposed changes to fees are equitably allocated among Exchange 
constituents as the methodology for calculating ADV and TCV will apply 
equally to all Members.
    Volume-based tiers such as the liquidity adding tiers maintained by 
the Exchange have been widely adopted in the equities markets, and are 
equitable and not unfairly discriminatory because they are open to all 
members on an equal basis and provide rebates 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 introduction of higher volumes of orders into the price 
and volume discovery process. Accordingly, the Exchange believes that 
the proposal is equitably allocated and not unfairly discriminatory 
because it is consistent with the overall goals of enhancing market 
quality.

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 proposed changes will help 
the Exchange to continue to incentivize higher levels of liquidity at a 
tighter spread while providing more stable and predictable costs to its 
Members. 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 they 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 neither solicited nor received written comments on 
the proposed rule change.

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 \11\ and paragraph (f) of Rule 19b-4 
thereunder.\12\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2013-063 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-BATS-2013-063. 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-BATS-2013-063 and should be 
submitted on or before January 16, 2014.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30761 Filed 12-24-13; 8:45 am]
BILLING CODE 8011-01-P