Document ID: SEC-2015-1438-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2015-08-31T04:00Z

[Federal Register Volume 80, Number 168 (Monday, August 31, 2015)]
[Notices]
[Pages 52532-52534]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-21402]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75754; File No. SR-BATS-2015-63]

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.

August 25, 2015.
    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 August 12, 2015, 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).
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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 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: (i) To add definitions of Broker Dealer, Joint Back Office, 
and Non-BATS Market Maker; (ii) to update the definitions of Customer 
and Market Maker; (iii) to make certain corresponding changes 
associated with these new and updated definitions; and (iv) to create a 
new Professional Penny Pilot Add Volume Tier.
    The Exchange is proposing to add the definitions of Broker Dealer, 
Joint Back Office, and Non-BATS Market Maker to the BATS Options fee 
schedule. More specifically, the Exchange is proposing to add the 
following definitions: (i) ``Broker Dealer'' applies to any order for 
the account of a broker dealer, including a foreign broker dealer, that 
clears in the Customer range at the Options Clearing Corporation 
(``OCC''); (ii) ``Joint Back Office'' applies to any transaction 
identified by a Member for clearing in the Firm Range at the OCC that 
is identified with an origin code as Joint Back Office. A Joint Back 
Office participant is a Member that maintains a Joint Back Office 
arrangement with a clearing broker-dealer; and (iii) ``Non-BATS Market 
Maker'' applies to any transaction identified by a Member for clearing 
in the Market Maker range at the OCC, where such Member is not 
registered with the Exchange as a Market Maker, but is registered as a 
market maker on another options exchange. In conjunction with the 
proposed new defined terms above, the Exchange proposes to amend the 
fee schedule in multiple places (including the Standard Rates and Fee 
Codes and Associated Fees tables along with Footnotes 2, 3, 4, 6, 7, 
and 8) such that pricing for Broker Dealer and Joint Back Office 
transactions is the same as for Firm transactions and Non-BATS Market 
Maker transactions is the same as Market Maker transactions. In certain 
places, this includes using the term ``Non-Customer'' in order to 
capture pricing that relates to Professional, Firm, Market Maker, 
Broker Dealer, Joint Back Office, and Non-BATS Market Maker 
transactions.
    In conjunction with these proposed additions, the Exchange is also 
proposing to amend the current definitions of Customer, Market Maker, 
and Firm on the BATS Options fee schedule. Currently, the fee schedule 
states that ``Customer'' applies to any transaction identified by a 
Member for clearing in the Customer range at the OCC, excluding any 
transaction for a ``Professional'' as defined in Exchange Rule 16.1; 
``Market Maker'' applies to any transaction identified by a Member for 
clearing in the Market Maker range at the OCC; and ``Firm'' applies to 
any transaction identified by a Member for clearing in the Firm range 
at the OCC. In order to make these definitions work with proposed new 
definitions for Broker Dealer, Non-BATS Market Maker, and Joint Back 
Office described above, the Exchange is proposing that the definitions 
should read as follows: (i) ``Customer'' applies to any transaction 
identified by a Member for clearing in the Customer range at the

[[Page 52533]]

OCC, excluding any transaction for a Broker Dealer or a 
``Professional'' as defined in Exchange Rule 16.1; (ii) ``Market 
Maker'' applies to any transaction identified by a Member for clearing 
in the Market Maker range at the OCC, where such Member is registered 
with the Exchange as a Market Maker as defined in Rule 16.1(a)(37); and 
(iii) ``Firm'' applies to any transaction identified by a Member for 
clearing in the Firm range at the OCC, excluding any Joint Back office 
transaction.
    Finally, the Exchange is proposing to add a new ``Professional 
Penny Pilot Add Volume Tier''. Currently, Professional orders that add 
liquidity in Penny Pilot Securities receive a standard $0.40 rebate. 
Under the proposed new tier, a Member that has a combined ADAV \6\ in 
Customer, as proposed to be defined above, and Professional \7\ orders 
equal to or greater than 0.20% of average TCV \8\ would receive a $0.43 
rebate per contract for each Professional order that adds liquidity in 
Penny Pilot Securities.\9\
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    \6\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added per day.
    \7\ ``Professional'' applies to any transaction identified by a 
Member as such pursuant to Exchange Rule 16.1.
    \8\ ``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.
    \9\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01.
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Implementation Date
    As noted above, 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.\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 to be 
excessive.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates and fees such as the ones currently maintained 
on BATS Options 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.
    The Exchange believes that the proposed addition of the 
Professional Penny Pilot Add Volume Tier is a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and 
rebates because it marks an increased rebate (from $0.40 per contract 
to $0.43 per contract) available to all Members where the Member has a 
combined ADAV in Customer and Professional orders equal to or greater 
than 0.20% of average TCV. Such an increased rebate will provide 
Members entering Professional orders with the opportunity to receive 
higher rebates while simultaneously encouraging greater participation 
on BATS Options in both Professional and Customer orders, which the 
Exchange believes will result in higher levels of liquidity provision 
and introduction of higher volumes of orders into the price and volume 
discovery processes, which will benefit all participants on BATS 
Options.
    The Exchange believes that the proposed additional definitions, 
amendments to the existing definitions, and the corresponding changes 
throughout the fee schedule represent a reasonable, fair and equitable, 
and not unfairly discriminatory allocation of fees and rebates because 
the amendments are designed to allow Members to more precisely mark the 
capacity of orders entered on the Exchange. The proposed changes to the 
definitions will not affect fees or rebates and the corresponding 
changes are designed to make this clear. Further, the additional order 
capacities will bring the Exchange generally in line with industry 
standards and Member expectations, making the Exchange's pricing easier 
to understand.
    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.

(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 Professional Penny Pilot Add Volume Tier, the Exchange does not 
believe that the change burdens competition, but instead, that it 
enhances competition, as it is intended to increase the competitiveness 
of and draw additional volume to BATS Options.
    With respect to the proposed changes to the definitions and the 
corresponding changes throughout the fee schedule, the Exchange does 
not believe that any such changes burden competition, but instead, that 
they enhance competition by bringing the Exchange's fee schedule and 
capacities generally in line with industry standards which will make it 
easier for Members to understand.
    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 \12\ and paragraph (f) of Rule 19b-4 
thereunder.\13\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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,

[[Page 52534]]

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-2015-63 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 No. SR-BATS-2015-63. 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-2015-63 and should be 
submitted on or before September 21, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-21402 Filed 8-28-15; 8:45 am]
BILLING CODE 8011-01-P