Document ID: SEC-2012-0191-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2012-02-03T05:00Z

[Federal Register Volume 77, Number 23 (Friday, February 3, 2012)]
[Notices]
[Pages 5588-5590]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-2393]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66273; File No. SR-BATS-2012-003]

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.

January 30, 2012.

    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 January 24, 2012 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.
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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 proposes [sic] 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 
will be 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.

[[Page 5589]]

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 recently proposed and received approval of rules 
governing auctions conducted on the Exchange for securities listed on 
the Exchange (``Exchange Auctions'').\6\ Specifically, the Exchange 
adopted rules for conducting an opening auction on the Exchange 
(``Opening Auction''), a closing auction on the Exchange (``Closing 
Auction''), an auction in the event of an initial public offering 
(``IPO'') or a halt of trading in the security (``IPO Auction'' or 
``Halt Auction,'' respectively). In preparation for commencement of its 
listings business, and in turn, the commencement of Exchange Auctions, 
the Exchange proposes pricing for executions that occur in Exchange 
Auctions, as set forth below.
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    \6\ See Securities Exchange Act Release No. 65619 (October 25, 
2011), 76 FR 67238 (October 31, 2011) (SR-BATS-2011-032).
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    The Exchange proposes to charge fees of $0.0005 per share that 
executes in an Opening Auction, IPO Auction or Halt Auction and $0.0010 
per share that executes in a Closing Auction. These rates are 
equivalent to the fees assessed by the NASDAQ Stock Market LLC 
(``NASDAQ'') for executions that occur in crosses on NASDAQ.\7\
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    \7\ See NASDAQ Rule 7018(d)-(f).
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    Also similar to NASDAQ, the Exchange proposes to exempt certain 
executions from fees, specifically any executions in an Exchange 
Auction of any Continuous Book,\8\ Late-Limit-On-Open (``LLOO'') \9\ or 
Late-Limit-On-Close (``LLOC'') \10\ orders as defined in BZX Exchange 
Rule 11.23(a). Accordingly, excluding LLOOs and LLOCs, the Exchange 
will assess fees of either $0.0005 per share or $0.0010 per share 
(depending on the applicable Exchange Auction) for all ``Eligible 
Auction Orders,'' which term includes Market-On-Open,\11\ Limit-On-
Open,\12\ Market-On-Close,\13\ Limit-On-Close,\14\ any Regular Hours 
Only \15\ order prior to the Opening Auction, and any limit or market 
order not designated to exclusively participate in the Opening Auction 
or Closing Auction entered during the Quote-Only Period \16\ of an IPO 
Auction or Halt Auction.
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    \8\ A ``Continuous Book Order'' is defined in Rule 11.23(a) as 
all orders on the Exchange's order book that are not Eligible 
Auction Orders.
    \9\ The term ``Late-Limit-On-Open'' or ``LLOO'' is defined in 
Rule 11.23(a) as a ``BATS limit order that is designated for 
execution only in the Opening Auction.'' Users may only submit LLOO 
orders between 9:28 a.m. and 9:30 a.m. Eastern Time. A ``User'' is 
defined in Rule 1.5(cc) as any Member or sponsored participant with 
access to the Exchange.
    \10\ The term ``Late-Limit-On-Close'' or ``LLOC'' is defined in 
Rule 11.23(a) as a ``BATS limit order that is designated for 
execution only in the Closing Auction.'' Users may only submit LLOC 
orders between 3:55 p.m. and 4 p.m. Eastern Time.
    \11\ A ``Market-On-Open'' order is defined in Rule 11.23(a) as a 
``BATS market order that is designated for execution only in the 
Opening Auction.''
    \12\ A ``Limit-On-Open'' order is defined in Rule 11.23(a) as a 
``BATS limit order that is designated for execution only in the 
Opening Auction.''
    \13\ A ``Market-On-Close'' order is defined in Rule 11.23(a) as 
a ``BATS market order that is designated for execution only in the 
Closing Auction.''
    \14\ A ``Limit-On-Close'' order is defined in Rule 11.23(a) as a 
``BATS limit order that is designated for execution only in the 
Closing Auction.''
    \15\ A ``Regular Hours Only'' order is defined in Rule 11.23(a) 
as a ``BATS order that is designated for execution only during 
Regular Trading Hours, which includes the Opening Auction, the 
Closing Auction, and IPO/Halt Auctions.'' ``Regular Trading Hours'' 
is defined in Rule 1.5(w) as ``the time between 9:30 a.m. and 4 p.m. 
Eastern Time.''
    \16\ The ``Quote Only Period'' is defined in Rule 11.23(a) as 
``a designated period of time prior to a Halt Auction or an IPO 
during which Users may submit orders to the Exchange for 
participation in the auction.''
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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.\17\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\18\ 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 at a 
particular venue to be excessive.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed fees for executions of 
Eligible Auction Orders that occur in Exchange Auctions (other than 
LLOOs and LLOCs) are reasonable in that they are equivalent to the fees 
charged by at least one of the Exchange's competitors, as described 
above. The Exchange also believes that the proposed fees are fair and 
equitable and not unreasonably discriminatory in that they apply 
equally to all Exchange participants. The Exchange believes that 
excluding Continuous Book orders from fee liability in Exchange 
Auctions is reasonable because such orders, if already posted to the 
Exchange's order book, would be eligible for rebates provided by the 
Exchange, and would not be assessed fees. Accordingly, while the 
Exchange does not propose to provide a rebate for any execution that 
occurs in an Exchange Auction, the Exchange believes it is reasonable 
to provide executions of Continuous Book orders free of charge. 
Similarly, the Exchange believes that excluding LLOOs and LLOCs from 
fee liability in Exchange Auctions is reasonable because such orders 
are late arriving orders that are likely to improve the execution 
quality received by other orders submitted to the Auction. Accordingly, 
the Exchange believes that the proposal is not unfairly discriminatory 
because it is consistent with the overall goals of enhancing market 
quality. As is true for the fees to be assessed on executions that 
occur in Exchange Auctions, the exclusion of fees for Continuous Book 
orders, LLOOs and LLOCs is fair and equitable and not unreasonably 
discriminatory because this fee treatment is equally available to all 
Exchange Users.
    The Exchange notes that NASDAQ also excludes its equivalent of 
Continuous Book orders from fee liability in the NASDAQ opening and 
closing crosses.\19\ While the Exchange does not have a direct 
equivalent to the NASDAQ ``imbalance only'' order, which are also 
executed free of charge by NASDAQ in the NASDAQ opening and closing 
crosses,\20\ the Exchange's LLOOs and LLOCs are analogous in some ways 
in that LLOOs and LLOCs are late arriving limit orders that are likely 
to provide additional liquidity against which Eligible Auction Orders 
will be able to execute.
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    \19\ See NASDAQ Rule 7018(d) and (e).
    \20\ Id.

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[[Page 5590]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change imposes 
any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to Section 19(b)(3)(A)(ii) of the Act \21\ and Rule 19b-
4(f)(2) thereunder,\22\ the Exchange has designated this proposal as 
establishing or changing a due, fee, or other charge applicable to the 
Exchange's Members and non-members, which renders the proposed rule 
change effective upon filing.
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    \21\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \22\ 17 CFR 240.19b-4(f)(2).
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    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.

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-2012-003 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-2012-003. 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 
a.m. and 3 p.m. Copies of the filing will also 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-2012-003 and should be 
submitted on or before February 24, 2012.
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    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-2393 Filed 2-2-12; 8:45 am]
BILLING CODE 8011-01-P