Document ID: SEC-2015-1629-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2015-10-09T04:00Z

[Federal Register Volume 80, Number 196 (Friday, October 9, 2015)]
[Notices]
[Pages 61253-61256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-25697]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76070; File No. SR-BATS-2015-82]

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.

October 5, 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 September 30, 2015, BATS Exchange,

[[Page 61254]]

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange filed a proposal to amend its fees and rebates 
applicable to Members \5\ of the Exchange pursuant to Rule 15.1(a) and 
(c) (``Fee Schedule'') applicable to the use of the Exchange's equities 
trading platform (``BZX Equities'') to: (i) Adopt a new Step-Up Tier 4 
under footnote 2; and (ii) amend the Tape B Volume Tier under footnote 
13 to: (A) Adopt a new Tape B Volume Tier to be named ``Tier 1''; and 
(B) rename the existing Tape B Volume Tier as ``Tier 2''.
---------------------------------------------------------------------------

    \5\ A Member is defined as ``any registered broker or dealer 
that has been admitted to membership in the Exchange.'' See Exchange 
Rule 1.5(n).
---------------------------------------------------------------------------

    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 amend [sic] the BZX Equities Fee Schedule to: 
(i) Adopt a new Step-Up Tier 4 under footnote 2; and (ii) amend the 
Tape B Volume Tier under footnote 13 to: (A) Adopt a new Tape B Volume 
Tier to be named ``Tier 1''; and (B) rename the existing Tape B Volume 
Tier as ``Tier 2''. As is the case with any other rebates on the Fee 
Schedule, to the extent that a Member qualifies for higher rebates than 
those provided under the proposed tiers, the higher rebates shall 
apply.
Step-Up Tier 4
    Currently, 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 \6\ as a percentage of TCV \7\ or ADV \8\ as a 
percentage of TCV. Under such pricing structure, a Member will receive 
an adding rebate of anywhere between $0.0020 and $0.0032 per share 
executed, depending on the volume tier for which such Member qualifies. 
The Exchange also maintains additional Step-Up Tiers in addition to the 
volume tiers described above. The Step-Up Tiers provide Members with 
additional ways to qualify for enhanced rebates.
---------------------------------------------------------------------------

    \6\ 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; 
the Exchange excludes from the ADAV calculation routed shares as 
well as 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''), on any day 
with a scheduled early market close and on the last Friday in June 
(the ``Russell Reconstitution Day'').
    \7\ 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, on any with a 
scheduled early market close and the Russell Reconstitution Day.
    \8\ 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; the Exchange excludes from the ADV calculation routed 
shares, and shares added on any day that the Exchange's system 
experiences an Exchange System Disruption, on any day with a 
scheduled early market close and on the Russell Reconstitution Day.
---------------------------------------------------------------------------

    The Exchange currently offers three Step-Up Tiers under footnote 2 
of its Fe [sic] Schedule. Under Tier 1, a Members [sic] receives a 
rebate of $0.0025 per share where their Step-Up Add TCV \9\ from 
January 2014 is equal to or greater than 0.07%. Under Tier 2, a Members 
[sic] receives a rebate of $0.0029 per share where their Step-Up Add 
TCV from January 2014 is equal to or greater than 0.10%. Lastly, under 
Tier 3, a Members [sic] receives a rebate of $0.0030 per share where 
their Step-Up Add TCV from January 2014 is equal to or greater than 
0.15%. The Exchange proposes to add a fourth tier under footnote 2. 
Under proposed Tier 4, a Members [sic] would receive a rebate of 
$0.0030 per share where their Step-Up Add TCV from August 2015 is equal 
to or greater than 0.08%; and (2) Member's ADAV as a percentage of TCV 
is equal to or greater than 0.35%.
---------------------------------------------------------------------------

    \9\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``Step-Up Add TCV'' means ADAV as a percentage of 
TCV in the relevant baseline month subtracted from current ADAV as a 
percentage of TCV.
---------------------------------------------------------------------------

Tape B Volume Tiers
    Currently, the Exchange offers a rebate of $0.0020 per share as the 
standard rebate for orders with fee code B, which applies to orders 
that add liquidity to the Exchange in Tape B securities. The Exchange 
also offers a Tape B Volume Tier that provide Members with the 
opportunity to earn a higher rebate by meeting certain volume metrics. 
Specifically, the Tape B Volume Tier provides a rebate of $0.0027 per 
share to a Member's orders with fee code B for which the Member's Tape 
B ADAV as a percentage of TCV is equal to or greater than 0.08%. The 
Exchange proposes to adopt a new Tape B Volume Tier to be named ``Tier 
1'' under footnote 13 and rename the existing Tape B Volume Tier as 
``Tier 2''. Under proposed Tier 1, a rebate of $0.0025 per share would 
be provided to a Member's orders with a fee code of B for which the 
Member's Tape B ADAV as a percentage of TCV is equal to or greater than 
0.05%.
Implementation Date
    The Exchange proposes to implement this amendment to its Fee 
Schedule on October 1, 2015.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\10\ in general, and 
furthers the objectives of Section 6(b)(4),\11\ 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

[[Page 61255]]

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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Volume-based rebates and fees such as those proposed herein 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 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 
proposed tiers are a reasonable, fair and equitable, and not unfairly 
discriminatory allocation of fees and rebates because they will provide 
Members with an additional incentive to reach certain thresholds on the 
Exchange.
    Further, the Exchange believes that the proposed tiers will provide 
such enhancements in market quality on the Exchange by incentivizing 
participation. The Exchange notes that it is not proposing to modify 
any of the existing Step-Up Tiers or the Tape B Volume Tier (other than 
to rename the existing Tape B Volume Tier as Tier 2), but rather to add 
two new tiers that will provide Members with additional ways to receive 
higher rebates. Accordingly, under the proposal a Member will receive 
either the same or a higher rebate than they would receive today. 
Accordingly, the Exchange believes that the proposed additions to the 
Exchange's tiered pricing structure and incentives are not unfairly 
discriminatory because they will apply uniformly to all Members and are 
consistent with the overall goals of enhancing market quality on the 
Exchange.
    In particular, the Exchange believes the addition of a second Tape 
B Volume Tier is a reasonable means to encourage Members to increase 
their liquidity in Tape B securities. The Exchange also believes 
providing a rebate of $0.0025 per share where a Member's Tape B ADAV as 
a percentage of TCV is equal to or greater than 0.05% is also equitable 
and reasonable. The Exchange notes that it currently provides a rebate 
of $0.0027 per share to Member's Tape B ADAV as a percentage of TCV is 
equal to or greater than 0.08%. Such pricing programs thereby reward a 
Member's growth pattern in Tape B securities 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. The Exchange also believes that the 
rebate amount provided by proposed Tier 1 is equitable and reasonable 
as compared to the existing Tape B Volume Tier because it reflects the 
lower criteria necessary to achieve the tier.
    The Exchange believes that providing additional financial 
incentives to Members that demonstrate an increase over their August 
2015 Step-Up Add TCV through the new proposed Step-Up Tier 4 offers 
additional, flexible ways to achieve financial incentives from the 
Exchange and encourage Members to add liquidity to the Exchange. The 
Exchange believes that these incentives are reasonable, fair and 
equitable because the liquidity from each of these proposals also 
benefits all investors by deepening the Exchange's liquidity pool, 
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 and such increased volume 
increase [sic] potential revenue to the Exchange, and will allow the 
Exchange to continue to provide and potentially expand the incentive 
programs operated by the Exchange. These pricing programs are also fair 
and equitable in that they are available to all Members and will result 
in Members receiving either the same or an increased rebate than they 
would currently receive.
    The Exchange also believes proposing a baseline eligibility for the 
proposed Step-Up Tier 4 is equitable and reasonable. The Exchange notes 
that current Tier 3 provides the same rebate as that proposed for Tier 
4, $0.0030 per share. However, Tier 3 calculates a Member's Step-Up Add 
TCV from a January 2014 baseline, while proposed Tier 4 would calculate 
a Member's Step-Up Add TCV from an August 2015 baseline. The primary 
objective of differing baseline eligibility criteria for the Step-Up 
Tiers is to increase the number of Members who may be eligible to 
achieve either the [sic] tier and receives [sic] the same $0.0030 per 
share rebate. The choice of baseline criteria will enhance the value of 
the Step-Up Tiers to Members whose market participation was higher in 
January 2014 than August 2015, thereby encouraging them to increase 
their volume on the Exchange over such baseline. It also provides 
Members with additional means to achieve the $0.0030 per share rebate 
that may not satisfy the current baseline criteria set forth in Tier 3 
that is based on a Step-Up Add TCV from January 2014. Such increased 
volume would increase potential revenue to the Exchange and allow the 
Exchange to spread its administrative and infrastructure costs over a 
greater number of shares, which would result in lower per share costs. 
The Exchange may then pass on these savings to Members in the form of 
reduced fees. The increased liquidity would also benefit all investors 
by deepening the Exchange's liquidity pool, offering additional 
flexibility for all investors to enjoy cost savings, supporting the 
quality of price discovery, promoting market transparency and improving 
investor protection.
    Lastly, the Exchange believes that it is reasonable and equitable 
to offer an enhanced rebate to Members who satisfy a certain baseline 
eligibility because the Exchange believes that such Members are most 
likely to provide consistent liquidity during periods of market stress 
and to manage their quotes/orders in a coordinated manner that promotes 
price discovery and market stability.

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 the proposed new tiers would 
burden competition, but instead, enhances [sic] competition, as they 
are intended to increase the competitiveness of and

[[Page 61256]]

draw additional volume to the Exchange. 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 
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 tiers would 
burden intramarket competition as they would apply to all Members 
uniformly.

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 \12\ and paragraph (f) of Rule 19b-4 
thereunder.\13\ 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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2015-82 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-2015-82. 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-2015-82, and should be 
submitted on or before October 30, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-25697 Filed 10-8-15; 8:45 am]
BILLING CODE 8011-01-P