Document ID: SEC-2015-1197-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2015-07-17T04:00Z

[Federal Register Volume 80, Number 137 (Friday, July 17, 2015)]
[Notices]
[Pages 42569-42571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17492]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75437; File No. SR-BATS-2015-53]

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.

July 13, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 6, 2015, BATS Exchange, Inc. (``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 filed a proposal to amend its fees and rebates 
applicable to Members \5\ and non-Members of the Exchange pursuant to 
BZX Rule 15.1(a) and (c) (``Fee Schedule'') to modify its fees for 
physical connectivity. Changes to the fee schedule pursuant to this 
proposal are effective upon filing.
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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.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 to amend its Fee Schedule to modify its fees 
for physical connectivity. A physical port is utilized by a Member or 
non-Member to connect to the Exchange at the data centers where the 
Exchange's servers are located. The Exchange currently maintains a 
presence in two third-party data centers: (i) The primary data center 
where the Exchange's business is primarily conducted on a daily basis, 
and (ii) a secondary data center, which is predominantly maintained for 
business continuity purposes. The Exchange currently assesses the 
following physical connectivity fees for Members and non-Members on a 
monthly basis: $1,000 per physical port that connects to the System \6\ 
via 1 gigabyte circuit; and $2,500 per physical port that connects to 
the System via 10 gigabyte circuit.
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    \6\ The term ``System'' is defined as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.'' See Exchange Rule 
1.5(cc).
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    The Exchange now proposes to amend its physical connectivity fees 
to align the Exchange's fees with its affiliates.\7\ The Exchange 
proposes to increase the fee per physical port that connects to the 
System via: (i) 1 gigabyte circuit from $1,000 per month to $2,000 per 
month; and (ii) 10 gigabyte circuit from $2,500 per month to $4,000 per 
month.
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    \7\ The Exchange's affiliates are EDGX Exchange, Inc. 
(``EDGX''), EDGA Exchange, Inc. (``EDGA'') and BATS Y-Exchange, Inc. 
(``BYX'', together with the Exchange, EDGA and EDGX, the ``BATS 
Exchanges''). The Exchange notes that each of its affiliates has 
also filed or will also file proposed rule changes with Commission 
to adopt similar physical connectivity fees.
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Implementation Date
    The Exchange proposes to implement this amendment to its Fee 
Schedule immediately.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with

[[Page 42570]]

the objectives of Section 6 of the Act,\8\ in general, and furthers the 
objectives of Section 6(b)(4),\9\ 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 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.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposal represents an equitable 
allocation of reasonable dues, fees, and other charges as its fees for 
physical connectivity are reasonably constrained by competitive 
alternatives. If a particular exchange charges excessive fees for 
connectivity, affected Members and non-Members may opt to terminate 
their connectivity arrangements with that exchange, and adopt a 
possible range of alternative strategies, including routing to the 
applicable exchange through another participant or market center or 
taking that exchange's data indirectly. Accordingly, if the Exchange 
charges excessive fees, it would stand to lose not only connectivity 
revenues but also revenues associated with the execution of orders 
routed to it, and, to the extent applicable, market data revenues. The 
Exchange believes that this competitive dynamic imposes powerful 
restraints on the ability of any exchange to charge unreasonable fees 
for connectivity.
    Furthermore, the proposed rule change is also an equitable 
allocation of reasonable dues, fees, and other charges as the Exchange 
believes that the increased fees obtained will enable it to cover its 
increased infrastructure costs associated with establishing physical 
ports to connect to the Exchange's Systems. The additional revenue from 
the increased fees will also enable the Exchange to continue to 
maintain and improve its market technology and services. The Exchange 
believes that the proposed fees for 1 gigabyte circuit of $2,000 per 
month and for 10 gigabyte circuit of $4,000 per month are reasonable in 
that they are less than analogous fees charged by the Nasdaq Stock 
Market LLC (``Nasdaq''), which are $2,500 per month for 1 gigabyte 
connectivity and range from $10,000--$15,000 per month for 10 gigabyte 
circuits.\10\ In addition, the Exchange proposed physical connectivity 
fees are designed to align the Exchange's fees with its affiliates.\11\
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    \10\ See Nasdaq Rule 7034(b).
    \11\ See supra note 7.
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    Finally, the Exchange believes that the proposed rates are 
equitable and non-discriminatory in that they apply uniformly to all 
Members and non-Members. Members and non-Members will continue to 
choose whether they want more than one physical port and choose the 
method of connectivity based on their specific needs. All Exchange 
Members that voluntarily select various service options will be charged 
the same amount for the same services. As is true of all physical 
connectivity, all Members and non-Members have the option to select any 
connectivity option, and there is no differentiation with regard to the 
fees charged for the service.

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. As discussed above, the 
Exchange believes that fees for connectivity are constrained by the 
robust competition for order flow among exchanges and non-exchange 
markets. Further, excessive fees for connectivity, including port fee 
access, would serve to impair an exchange's ability to compete for 
order flow rather than burdening competition. The proposal to increase 
the fees for physical connectivity would bring the fees charged by the 
Exchange closer to similar fees charged for physical connectivity by 
other exchanges.\12\
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    \12\ See supra note 10.
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    In addition, the proposed rule change does not impose any burden on 
intramarket competition as the fees are uniform for all Members and 
non-Members. The Exchange notes that Members and non-Members also have 
the ability to obtain access to these services without the need for an 
independent physical port connection, such as through alternative means 
of financial extranets and service bureaus that act as a conduit for 
orders entered by Members and non-Members.

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 \13\ and paragraph (f) of Rule 19b-4 
thereunder.\14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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-2015-53 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 Number SR-BATS-2015-53. 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

[[Page 42571]]

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-2015-53 and should be submitted on or before August 
7, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-17492 Filed 7-16-15; 8:45 am]
 BILLING CODE 8011-01-P