Document ID: SEC-2013-0623-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2013-04-01T04:00Z

[Federal Register Volume 78, Number 62 (Monday, April 1, 2013)]
[Notices]
[Pages 19555-19556]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07473]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69238; File No. SR-BATS-2013-020]

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.

March 26, 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 March 18, 2013, BATS Exchange, 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 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 BATS Rules 
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal 
are effective upon filing.
---------------------------------------------------------------------------

    \5\ A Member is any registered broker or dealer that has been 
admitted to membership in the Exchange.
---------------------------------------------------------------------------

    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 this proposed rule change is to implement pricing 
applicable to the Exchange's options platform (``BATS Options'') with 
respect to executions in Mini Options. Mini Options are options that 
overlie 10 equity or ETF shares, rather than the standard 100 
shares.\6\ Specifically, the Exchange is proposing that executions in 
Mini Options will be free for both orders that add to and orders that 
remove liquidity from the BATS Options book.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 69018 (March 1, 
2013), 78 FR 15090 (March 8, 2013) (Notice of filing and immediate 
effectiveness allowing Mini Options to be listed and traded on BATS 
Options) (SR-BATS-2013-013). The Exchange expects to begin listing 
and trading Mini Options on March 18, 2013.
---------------------------------------------------------------------------

    Currently, all orders executed on BATS Options are subject to 
standard pricing, which includes variable fees and/or rebates based on 
whether the order adds or removes liquidity, the capacity of the order 
(Professional,\7\ Firm, Market Maker,\8\ or Customer \9\ orders), a 
Member's average daily trading volume, the amount that a Member 
increases its total trading volume from month to month, and whether the 
issue is a penny pilot issue, among others. In addition to standard 
rebates, orders that add liquidity may be eligible for additional 
rebates upon execution of orders that originally set a new NBBO \10\ as 
well as executions that qualify for the Exchange's quoting incentive 
program.\11\
---------------------------------------------------------------------------

    \7\ The term ``Professional'' is defined in Exchange Rule 16.1 
to mean any person or entity that (A) is not a broker or dealer in 
securities, and (B) places more than 390 orders in listed options 
per day on average during a calendar month for its own beneficial 
account(s).
    \8\ As defined on the Exchange's fee schedule, the terms 
``Firm'' and ``Market Maker'' apply to any transaction identified by 
a member for clearing in the Firm or Market Maker range, 
respectively, at the Options Clearing Corporation (``OCC'').
    \9\ As defined on the Exchange's fee schedule, a Customer order 
refers to an order identified by a Member for clearing in the 
Customer range at the OCC, excluding any transaction for a 
``Professional'' as defined in Exchange Rule 16.1.
    \10\ As defined in Exchange Rule 27.1(11), the term ``NBBO'' is 
defined to mean the national best bid and offer in an option series 
as calculated by an Eligible Exchange.
    \11\ See Securities Exchange Act Release No. 69079 (March 8, 
2013) (SR-BATS-2013-017) (notice of filing and immediate 
effectiveness of proposed rule change related to fees for use of 
BATS Options).
---------------------------------------------------------------------------

    The Exchange is proposing that executions in Mini Options will be 
free for both orders that add to and orders that remove liquidity from 
the BATS Options book and that no executions in Mini Options will be 
eligible for additional liquidity rebates. Specifically, executions in 
Mini Options will not be eligible for any rebate, including the NBBO 
setter liquidity rebate or the quoting incentive program liquidity 
rebates. It should be noted, however, that executions in Mini Options 
will be counted in calculations of ADV \12\ and TCV \13\ for purposes 
of calculating other rebates and fees.
---------------------------------------------------------------------------

    \12\ As defined on the Exchange's fee schedule, ADV is average 
daily volume calculated as the number of contracts added or removed, 
combined, per day on a monthly basis. The fee schedule also provides 
that routed contracts are not included in ADV calculation.
    \13\ As defined on the Exchange's fee schedule, TCV is 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.
---------------------------------------------------------------------------

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.\14\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\15\ 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 to be 
excessive.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The introduction of pricing for Mini Options, as described above 
and proposed by this filing, is intended to allow the Exchange to begin 
trading in Mini Options without charging any fees

[[Page 19556]]

or providing any rebates for executions in Mini Options. The Exchange 
believes that this is a reasonable, fair and equitable approach to 
pricing, particularly because the Exchange does not have any specific 
advanced knowledge of how market participants will react to the 
introduction of Mini Options products. Further, the Exchange believes 
that the proposal is reasonable because a high level of fees for the 
execution of Mini Options could negate the viability of such products 
given the other execution costs market participants will bear, 
including, but not limited to, clearing fees. In addition, the Exchange 
believes that this structure is a fair and equitable approach to 
pricing because it provides certainty for market participants with 
respect to execution costs across all trades in Mini Options on the 
Exchange. Lastly, the Exchange also believes that the proposed pricing 
for Mini Options is non-discriminatory because it will apply equally to 
all Members.
    The Exchange notes that this proposal is not increasing fees or 
decreasing rebates for any existing products traded on or routed by 
BATS Options, but rather, the proposal only propose to introduce a 
pricing structure for Mini Options, which will be available to trade on 
BATS Options on March 18, 2013.

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. To the contrary, the Exchange 
notes that this rule change is being proposed as a competitive offering 
at a time when many other options exchanges are commencing trading of 
Mini Options. As a result of the competitive environment, market 
participants will have various pricing models to choose from in making 
determinations on where to execute transactions in Mini Options. 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 levels to be excessive 
if they deem fee levels to be excessive.

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 \16\ and paragraph (f) of Rule 19b-4 
thereunder.\17\ 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 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-2013-020 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-2013-020. 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 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-BATS-2013-020 and should be 
submitted on or before April 22, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-07473 Filed 3-29-13; 8:45 am]
BILLING CODE 8011-01-P