Document ID: SEC-2016-0453-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc. f/k/a BATS Exchange, Inc.
Posted Date: 2016-03-15T04:00Z

[Federal Register Volume 81, Number 50 (Tuesday, March 15, 2016)]
[Notices]
[Pages 13861-13864]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-05751]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77330; File No. SR-BATS-2016-26]

Self-Regulatory Organizations; Bats BZX Exchange, Inc. f/k/a BATS 
Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc.

March 9, 2016.
    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 1, 2016, Bats BZX Exchange, Inc. f/k/a BATS Exchange, 
Inc. (the ``Exchange'' or ``BZX'') 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 BZX Rules 
15.1(a) and (c).
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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 modify its fee schedule applicable to the 
Exchange's options platform to: (i) Modify the standard fees for both

[[Page 13862]]

Customer \6\ and Non-Customer \7\ orders that remove liquidity in Non-
Penny Pilot Securities; \8\ (ii) modify the standard fees for Customer 
orders that remove liquidity in Penny Pilot Securities; \9\ (iii) amend 
the criteria necessary to meet and the rebate associated with the 
Customer Add Volume Tier 4; (iv) amend the criteria necessary to meet 
the Customer Step-Up Volume Tier; (v) add a new footnote 12 entitled 
Customer Non-Penny Pilot Add Volume Tier; and (vi) add a new Non-
Customer Take Volume Tier under footnote 3.
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    \6\ As defined in the Exchange's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/bzx/.
    \7\ Id.
    \8\ Id.
    \9\ Id.
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Removing Liquidity in Non-Penny Pilot Securities
    The Exchange is proposing to modify the standard fees for both 
Customer and Non-Customer orders that remove liquidity in Non-Penny 
Pilot Securities under fee codes NC and NP, respectively. Specifically, 
the Exchange is proposing to increase the standard fee for Customer 
orders that remove liquidity in Non-Penny Pilot Securities under fee 
code NC from $0.84 to $0.85 per contract and the standard fee for Non-
Customer orders that remove liquidity in Non-Penny Pilot Securities 
under fee code NP from $0.89 to $0.94 per contract.
Customer Orders That Remove Liquidity in Penny Pilot Securities
    The Exchange is proposing to modify the standard fees for Customer 
orders that remove liquidity in Penny Pilot Securities under fee code 
PC. Specifically, the Exchange is proposing to increase the standard 
fee for Customer orders that remove liquidity in Penny Pilot Securities 
under fee code PC from $0.46 to $0.48 per contract.
Customer Add Volume Tier 4
    The Exchange is proposing to amend the criteria necessary to meet 
and the rebate associated with the Customer Add Volume Tier 4 under 
footnote 1, which currently provides Members with a rebate of $0.50 per 
contract for Customer orders that add liquidity in Penny Pilot 
Securities where the Member has an ADAV \10\ equal to or greater than 
0.85% of average TCV.\11\ Specifically, the Exchange is proposing to 
amend Customer Add Volume Tier 4 such that a Member will receive a 
$0.52 rebate for Customer orders that add liquidity in Penny Pilot 
Securities where the Member has an ADAV in Customer orders equal to or 
greater than 1.00% of average TCV.
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    \10\ Id.
    \11\ Id.
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Customer Step-Up Volume Tier
    The Exchange is proposing to amend the criteria necessary to meet 
the Customer Step-Up Volume Tier, which currently provides Members with 
a rebate of $0.53 per contract where the Member has an Options Step-Up 
Add TCV \12\ in Customer orders from September 2015 baseline equal to 
or greater than 0.35%. Specifically, the Exchange is proposing to 
continue offering a rebate of $0.53 per contract where the Member has 
an Options Step-Up Add TCV in Customer orders from September 2015 
baseline equal to or greater than 0.40%.
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    \12\ Id.
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Customer Non-Penny Pilot Add Volume Tier
    The Exchange is proposing to create a new footnote 12 entitled 
``Customer Non-Penny Pilot Add Volume Tier,'' which would apply to 
orders that receive fee code NY. Under the proposed new tier, Customer 
orders that add liquidity in Non-Penny Pilot Securities would receive 
$1.00 per contract where the Member has an ADAV in Customer orders 
equal to or greater than 0.70% of average TCV.
New Non-Customer Take Volume Tier
    The Exchange is proposing to add a new Non-Customer Take Volume 
Tier under footnote 3. Under the new Non-Customer Take Volume Tier 3, 
the Exchange would charge $0.47 per contract for a Non-Customer order 
to remove liquidity in Penny Pilot Securities where the Member has an 
ADAV in Customer orders equal to or greater than 1.00% of average TCV. 
In conjunction with this proposed change, the Exchange is proposing to 
change current Non-Customer Take Volume Tier 3 to Non-Customer Take 
Volume Tier 4.
Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule on March 1, 2016.
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.\13\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\14\ 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.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates such as those currently maintained on the 
Exchange 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.
Removing Liquidity in Non-Penny Pilot Securities
    The Exchange believes that its proposal to change the standard fee 
charged for Customer orders that remove liquidity in Non-Penny Pilot 
Securities from $0.84 to $0.85 per contract and the standard fee for 
Non-Customer orders that remove liquidity in Non-Penny Pilot Securities 
under fee code NP from $0.89 to $0.94 per contract is reasonable, fair 
and equitable and non-discriminatory, for the reasons set forth above 
with respect to volume-based pricing generally, because the change will 
apply equally to all participants, and because, while the change marks 
an increase in fees for orders in Non-Penny Pilot Securities, such 
proposed fees remain consistent with pricing previously offered by the 
Exchange as well as competitors of the Exchange and does not represent 
a significant departure from the Exchange's general pricing structure 
and will allow the Exchange to earn additional revenue that can be used 
to offset the addition of new pricing incentives, including those 
introduced as part of this proposal.
Customer Orders That Remove Liquidity in Penny Pilot Securities
    The Exchange believes that its proposal to increase the standard 
fees for Customer orders that remove liquidity in Penny Pilot 
Securities from $0.46 to $0.48 per contract is

[[Page 13863]]

reasonable, fair and equitable and non-discriminatory, for the reasons 
set forth above with respect to volume-based pricing generally, because 
such change will apply equally to all participants, and because, while 
the change marks an increase in fees for such orders, such proposed 
fees remain consistent with pricing previously offered by the Exchange 
as well as competitors of the Exchange and does not represent a 
significant departure from the Exchange's general pricing structure and 
will allow the Exchange to earn additional revenue that can be used to 
offset the addition of new pricing incentives, including those 
introduced as part of this proposal.
Customer Add Volume Tier 4
    The Exchange believes that its proposal to amend Customer Add 
Volume Tier 4 such that a Member will receive a $0.52 rebate for 
Customer orders that add liquidity in Penny Pilot Securities where the 
Member has an ADAV in Customer orders equal to or greater than 1.00% of 
average TCV is reasonable, fair and equitable and non-discriminatory, 
for the reasons set forth above with respect to volume-based pricing 
generally and because such change will apply equally to all 
participants and will incentivize such participants to further 
contribute to market quality on the Exchange. Moreover, the proposed 
change will provide Members with an increased incentive (increasing the 
rebate from $0.50 to $0.52 per contract) to add liquidity in Customer 
orders, which the Exchange not only believes will enhance market 
quality for all market participants, but will also encourage increased 
participation of Non-Customer orders wanting to interact with such 
Customer orders, further to the benefit of all market participants. The 
Exchange also believes that the proposed rebate remains consistent with 
pricing previously offered by the Exchange as well as competitors of 
the Exchange and does not represent a significant departure from the 
Exchange's general pricing structure.
Customer Step-Up Volume Tier
    The Exchange believes that its proposal to increase the Options 
Step-Up Add TCV in Customer orders from September 2015 baseline to 
0.40% in order to receive a rebate of $0.53 is reasonable, fair and 
equitable and non-discriminatory, for the reasons set forth above with 
respect to volume-based pricing generally and because such change will 
apply equal to all participants and incentivize such participants to 
further contribute to market quality on the Exchange. While the change 
will require Members to further increase their participation as 
compared to the September 2015 baseline in order to receive the same 
rebate, the Exchange believes that such proposed rebates remain 
consistent with pricing previously offered by the Exchange as well as 
competitors of the Exchange and does not represent a significant 
departure from the Exchange's general pricing structure and will act to 
incentivize such Members to increase participation on the Exchange, 
thereby enhancing liquidity and market quality on the Exchange for all 
participants. The Exchange also believes that the proposed rebate 
remains consistent with pricing previously offered by the Exchange as 
well as competitors of the Exchange and does not represent a 
significant departure from the Exchange's general pricing structure.
Customer Non-Penny Pilot Add Volume Tier
    The Exchange believes that its proposal to create a new tier under 
which Customer orders that add liquidity in Non-Penny Pilot Securities 
would receive $1.00 per contract where the Member has an ADAV in 
Customer orders equal to or greater than 0.70% of average TCV is 
reasonable, fair and equitable and non-discriminatory, for the reasons 
set forth above with respect to volume-based pricing generally, because 
such change will apply equally to all participants, and because the 
change will incentivize such participants to further contribute to 
market quality on the Exchange. Moreover, the proposed change will 
provide Members with an increased incentive to add liquidity in 
Customer orders, which the Exchange not only believes will enhance 
market quality for all market participants, but will also encourage 
increased participation of Non-Customer orders wanting to interact with 
such Customer orders, further to the benefit of all market 
participants. The Exchange also believes that the proposed rebate 
remains consistent with pricing previously offered by the Exchange as 
well as competitors of the Exchange, in particular those of Nasdaq 
Options Market LLC, which currently offers a rebate of up to $1.00 for 
Customer orders in Non-Penny Pilot Securities, and does not represent a 
significant departure from the Exchange's general pricing structure.
New Non-Customer Take Volume Tier
    The Exchange believes that its proposal to add a new tier under 
footnote 3 under which the Exchange would charge $0.47 per contract for 
a Non-Customer order to remove liquidity in Penny Pilot Securities 
where the Member has an ADAV in Customer orders equal to or greater 
than 1.00% of average TCV is reasonable, fair and equitable and non-
discriminatory, for the reasons set forth above with respect to volume-
based pricing generally, because such change will apply equally to all 
participants, and because the change will incentivize such participants 
to further contribute to market quality on the Exchange. Moreover, the 
proposed enhanced rebate will provide Members with an increased 
incentive to add liquidity in Customer orders, which the Exchange not 
only believes will enhance market quality for all market participants, 
but will also encourage increased participation of Non-Customer orders 
wanting to interact with such Customer orders, further to the benefit 
of all market participants. The Exchange also believes that the 
proposed fee remains consistent with pricing previously offered by the 
Exchange as well as competitors of the Exchange and does not represent 
a significant departure from the Exchange's general pricing structure. 
The Exchange also believes that the clarifying numbering change 
associated with this change is reasonable, fair and equitable and non-
discriminatory because it is non-substantive and is designed to make 
sure that the fee schedule is as clear and easily understandable as 
possible.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed amendments to its fee schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange has designed the proposed amendments to its fee schedule 
in order to enhance its ability to compete with other exchanges. 
Rather, the proposal as a whole is a competitive proposal that is 
seeking further the growth of the Exchange. The Exchange has structured 
the proposed fees and rebates to attract certain additional volume in 
both Customer and certain Non-Customer orders, however, the Exchange 
believes that its pricing for all capacities is competitive with that 
offered by other options exchanges. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. Accordingly, the Exchange does not believe that the 
proposed change will impair the ability of Members or competing venues 
to

[[Page 13864]]

maintain their competitive standing in the financial markets. 
Additionally, Members may opt to disfavor the Exchange's pricing if 
they believe that alternatives offer them better value. Accordingly, 
the Exchange does not believe that the proposed changes to the 
Exchange's tiered pricing structure burdens competition, but instead, 
enhances competition as it is intended to increase the competitiveness 
of the Exchange. Also, the Exchange believes that the price changes 
contribute to, rather than burden competition, as such changes are 
broadly intended to incentivize participants to increase their 
participation on the Exchange, which will increase the liquidity and 
market quality on the Exchange, which will then further enhance the 
Exchange's ability to compete with other exchanges.

(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 \15\ and paragraph (f) of Rule 19b-4 
thereunder.\16\ 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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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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-2016-26 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-2016-26. 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 Number SR-BATS-2016-26 and should be 
submitted on or before April 5, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-05751 Filed 3-14-16; 8:45 am]
 BILLING CODE 8011-01-P