Document ID: SEC-2008-1714-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2008-12-22T05:00Z

[Federal Register: December 22, 2008 (Volume 73, Number 246)]
[Notices]
[Page 78409-78411]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22de08-140]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59095; File No. SR-BATS-2008-012]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Related to
Fees for Use of the Exchange

December 12, 2008.
    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 December 9, 2008, BATS Exchange, Inc. (``BATS'' or the ``Exchange'')
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. BATS 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 to modify its fee schedule applicable to use
of the Exchange effective December 12, 2008 in order to (i) implement
new pricing for orders routed away from the Exchange that are executed
at dark liquidity venues as part of the Exchange's routing strategies,
and (ii) substitute the current fee schedule with a fee schedule in a
revised format.
    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

[[Page 78410]]

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 its fee schedule in order to
implement new pricing for orders routed away from the Exchange that are
executed at dark liquidity venues as part of the Exchange's routing
strategies. In addition, the Exchange proposes to reformat the fee
schedule to better reflect the routing charges applicable to Members.
(a) Orders Routed to and Executed at Dark Liquidity Venues
    The Exchange recently amended its Rule 11.13 to provide additional
flexibility to the Exchange's affiliated routing broker-dealer, BATS
Trading, Inc. (the ``Outbound Router'') in making routing
determinations.\5\ This rule change was primarily made to permit the
Outbound Router to send orders to Trading Centers (as defined in
Exchange Rule 2.11),\6\ without limiting the permissible destinations
to execution venues with ``protected quotations'' (as defined in Rule
600(b)(58) of the Act).\7\ Such Trading Centers may include execution
venues known as dark liquidity venues, which do not publish quotations.
Because dark liquidity venues provide the possibility of executions at
reduced rates, the Exchange is proposing to charge Members $0.0020 per
share executed at such a dark liquidity venue. The Exchange will
continue to charge $0.0029 per share executed at any other Trading
Center. The proposed fee schedule also notes, consistent with the
Exchange's technical specifications, that the default best execution
routing strategy first attempts to route to dark liquidity venues
(``DART'' routing) and then to other Trading Centers (``CYCLE''
routing).
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    \5\ See Securities Exchange Act Release No. 34-58776 (October
14, 2008), 73 FR 63529 (October 24, 2008) (SR-BATS-2008-007).
    \6\ The Exchange's definition of Trading Center, contained in
Rule 2.11, is consistent with the definition of ``trading center''
contained in Rule 600(b)(78) of Regulation NMS.
    \7\ 17 CFR 242.600(b)(58).
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(b) Non-Substantive, Structural Changes
    In addition to the proposed change above related to orders routed
to and executed at dark liquidity venues, the Exchange is proposing to
make certain non-substantive, structural changes to its fee schedule.
First, the Exchange is proposing to restructure its fee schedule to
distinguish between its standard routing charges (i.e., those charges
for orders routed away by the Outbound Router under its best execution
strategies) and non-standard routing charges imposed for specific order
types and securities (e.g., Destination Specific Orders, odd lot orders
and securities priced below $1.00 per share). In addition, the Exchange
proposes to consolidate into one list certain Destination Specific
Orders \8\ which were previously listed separately, as such order types
are each charged the same fee.\9\ The Exchange believes that the
revised format of the fee schedule is more transparent and easy to
understand with respect to fees charged for routed orders.
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    \8\ As defined in BATS Rule 11.9(c)(10).
    \9\ The Exchange charges $0.0029 per share for Destination
Specific Orders routed to the NASDAQ Stock Market, the International
Securities Exchange, and the National Securities Exchange.
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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.\10\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\11\ 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. The Exchange believes that its fees
and credits are competitive with those charged by other venues, and
that reduced transaction fees for shares executed at dark liquidity
venues will benefit market participants. Also, although routing options
are available to all Members, Members are not required to use the
Exchange's Outbound Router for routing to other Trading Centers. The
Exchange also believes that the reformatted fee schedule sets forth the
fees applicable to routed orders in a more transparent manner. Finally,
the Exchange believes that the proposed rates are equitable in that
they apply uniformly to all Members.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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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

    The foregoing proposed rule change has been designated as a fee
change pursuant to Section 19(b)(3)(A)(ii) of the Act \12\ and Rule
19b-4(f)(2) thereunder,\13\ because it establishes or changes a due,
fee or other charge imposed on members by the Exchange. Accordingly,
the proposal is effective upon filing with the Commission.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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 e-mail to rule-comments@sec.gov. Please include
File Number SR-BATS-2008-012 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-2008-012. This file

[[Page 78411]]

number should be included on the subject line if e-mail 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 inspection and
copying in the Commission's Public Reference Room, on official business
days between the hours of 10 a.m. and 3 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
makeavailable publicly. All submissions should refer to File Number SR-
BATS-2008-012 and should be submitted on or before January 12, 2009.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Florence E. Harmon,
Acting Secretary.
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    \14\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E8-30318 Filed 12-19-08; 8:45 am]

BILLING CODE 8011-01-P