Document ID: SEC-2014-2113-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2014-12-16T05:00Z

[Federal Register Volume 79, Number 241 (Tuesday, December 16, 2014)]
[Notices]
[Pages 74794-74796]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29364]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73809; File No. SR-BATS-2014-064]

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.

December 10, 2014.
    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 1, 2014, 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 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 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 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 Exchange proposes to modify the ``Options Pricing'' section of 
its fee schedule effective immediately, in order to modify pricing 
charged by the Exchange's options platform (``BATS Options'') including 
a new September Options Step-Up Add TCV tier that will apply to certain 
orders executed on the Exchange, as further described below.
    Currently, the Exchange charges $0.48 per contract for a 
Professional,\6\ Firm,\7\ or Market Maker \8\ order in a Penny Pilot 
Security \9\ that removes liquidity from BATS Options generally, or, 
where the Member has an ADV \10\ equal to or greater than 1.00% of 
average TCV,\11\ $0.47 per contract for a Professional, Firm, or Market 
Maker order in a Penny Pilot Security that removes liquidity from BATS 
Options. The Exchange offers rebates of $0.40 per share for Market 
Maker orders in Penny Pilot Securities that add liquidity to BATS 
Options and, as further discussed below, such orders are also eligible 
for additional rebates via the Quoting Incentive Program (``QIP''). The 
Exchange offers rebates of $0.40 to Professional and Firm orders in 
Penny Pilot Securities that add liquidity to BATS Options and offers an 
enhanced $0.44 rebate for Professional and Firm orders that add 
liquidity to BATS Options in Penny Pilot Securities where the Member 
has an Options Step-Up Add TCV \12\ of equal to or greater than 
0.50%.\13\ The Exchange also offers NBBO setter liquidity rebates in 
all securities such that: (i) A Member will receive an additional $0.02 
per contract for a Professional, Firm, or Market Maker order that adds 
liquidity to the BATS Options order book that sets a new national best 
bid or offer where the Member has an ADV equal to or greater than 0.30% 
of average TCV but less than 1.00% of average TCV; and (ii) a Member 
will receive an additional $0.04 per contract for a Professional, Firm, 
or Market Maker order that adds liquidity to the BATS Options order 
book that sets a new national best bid or offer where the Member has an 
ADV equal to or greater than 1.00% of average TCV.
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    \6\ ``Professional'' applies to any transaction identified by a 
Member as such pursuant to Exchange Rule 16.1.
    \7\ ``Firm'' applies to any transaction identified by a Member 
for clearing in the Firm range at the OCC.
    \8\ ``Market Maker'' applies to any transaction identified by a 
Member for clearing in the Market Maker range at the OCC.
    \9\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01.
    \10\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day.
    \11\ ``TCV'' means 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, excluding 
volume on any day that the Exchange experiences an Exchange System 
Disruption and on any day with a scheduled early market close.
    \12\ ``Options Step-Up Add TCV'' means ADAV as a percentage of 
TCV in June 2014 subtracted from current ADAV as a percentage of 
TCV.
    \13\ See Exchange Act Release No. 72128 (May 8, 2014), 79 FR 
27666 (May 14, 2014) (SR-BATS-2014-017).
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    The Exchange is proposing to add the definition of ``September 
Options Step-Up Add TCV'' to its fee schedule along with three new fees 
and rebates associated with this new defined term. Specifically, the 
Exchange is proposing to define September Options Step-Up Add TCV as a 
Member's ADAV \14\ as a percentage of TCV in September 2014 subtracted 
from current ADAV as a percentage of TCV. Based on this definition, the 
Exchange is proposing to add an additional tier to fees charged to 
Professional, Firm, and Market Maker orders in Penny Pilot Securities 
such that the Exchange will charge $0.47 per contract for a 
Professional, Firm, or Market Maker order that removes liquidity from 
the BATS Options order book where the Member has a September Options 
Step-Up Add TCV equal to or greater than 0.30% and an ADV equal to or 
greater than 0.40% of average TCV. Similarly, the Exchange is proposing 
to add an additional tier to liquidity rebates for Professional and 
Firm orders in Penny Pilot Securities such that the Exchange will 
provide a $0.44 rebate per contract for a Professional or Firm order 
that adds liquidity to the BATS Options order book where the Member has 
a September Options Step-Up Add TCV equal to or greater than 0.30% and 
an

[[Page 74795]]

ADV equal to or greater than 0.40% of average TCV. Finally, the 
Exchange is proposing to add an additional tier to the NBBO Setter 
Liquidity Rebates, which apply to all securities, such that a 
Professional, Firm, or Market Maker order that adds liquidity to BATS 
Options that sets a new NBBO where the Member has a September Options 
Step-Up Add TCV equal to or greater than 0.30% and an ADV equal to or 
greater than 0.40% of average TCV will receive an additional $0.04 per 
contract added.
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    \14\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added.
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    The Exchange proposes to implement the amendments to its fee 
schedule effective immediately.
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.\15\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\16\ 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 or providers of routing services 
if they deem fee levels to be excessive.
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    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates and fees such as the ones maintained on BATS 
Options and the new September Options Step-Up Add TCV tiers 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. Further, the 
Exchange believes the proposed amendments are reasonable and equitable 
allocations of fees and rebates because the September Options Step-Up 
Add TCV tiers, combined with the requirement that a Member achieve an 
ADV of equal to or greater than 0.40% of average TCV, will provide such 
enhancements in market quality on BATS Options by incentivizing 
increased participation on BATS Options as compared to September 2014, 
especially as it relates to incentivizing Members to add orders that 
will set the NBBO on BATS Options. The Exchange notes that it is not 
proposing to modify any existing tiers, but rather to add new tiers 
that will provide Members with additional ways to receive higher 
rebates or pay lower fees. As such, under the proposal a Member will 
receive either the same or a higher rebate or be charged either the 
same or a lower fee than they would 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, except as noted below, apply uniformly to all Members and are 
consistent with the overall goals of enhancing market quality on BATS 
Options. The Exchange notes that it believes that restricting the 
availability of the proposed rebates in Penny Pilot Securities 
associated with the September Options Step-Up tier to Professional and 
Firm orders is reasonable and equitably allocated as well as not 
unreasonably discriminatory because Market Maker orders are already 
afforded an opportunity to receive QIP rebates of up to an additional 
$0.04 per contract, a rebate which is not available to Professional and 
Firm orders. Professional and Firm orders can receive the same maximum 
rebate that Market Maker orders can receive via QIP under the existing 
Options Step-Up Add TCV but, pursuant to the proposal, the Exchange is 
proposing to add an additional way for Professional and Firm orders to 
achieve such rebate via the proposed new tier. The Exchange notes that 
Market Maker orders will be eligible for both the reduced fees and NBBO 
Setter tiers proposed as part of the September Options Step-Up Add TCV 
tiers.
    The Exchange reiterates 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 or providers 
of routing services if they deem fee levels to be excessive.

(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. With respect to the proposed 
new tiered rebates, the Exchange does not believe that any such changes 
burden competition, but instead, enhance competition, as they are 
intended to increase the competitiveness of and draw additional volume 
to BATS Options. The Exchange also believes the proposed step-up tiers 
would enhance competition because they are similar to pricing tiers 
currently available on both the Exchange and other exchanges. 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.

(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 \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 proposal 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 No. SR-BATS-2014-064 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.

[[Page 74796]]

All submissions should refer to File No. SR-BATS-2014-064. 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 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 No. SR-BATS-2014-064 and should be 
submitted on or before January 6, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29364 Filed 12-15-14; 8:45 am]
BILLING CODE 8011-01-P