Document ID: SEC-2015-0121-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2015-01-21T05:00Z

[Federal Register Volume 80, Number 13 (Wednesday, January 21, 2015)]
[Notices]
[Pages 2987-2989]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00837]

[[Page 2987]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74052; File No. SR-BATS-2015-02]

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.

January 14, 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 January 2, 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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 
adding a new tier within the Professional, Firm, and Market Maker Penny 
Pilot Add Volume Tiers, a new Market Maker Penny Pilot Add Volume Tier, 
and several corresponding changes, as further described below.
    The Exchange proposes to add a new Non-Customer Take Volume Tier. 
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 under fee code 
PP, or, where the Member meets the requirements of the existing Non-
Customer Take Volume Tier under footnote 3, i.e. 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 proposes to add 
an additional Non-Customer Take Volume Tier to footnote 3 of the fee 
schedule that will charge $0.45 per contract for Professional, Firm, 
and Market Maker orders in a Penny Pilot Security that removes 
liquidity from BATS Options where the Member: (1) Has an ADAV \12\ 
equal to or greater than 1.00% of average TCV; and (2) has an ADV equal 
to or greater than 2.00% of average TCV.
---------------------------------------------------------------------------

    \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\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added.
---------------------------------------------------------------------------

    The Exchange is also proposing to add a new Market Maker Penny 
Pilot Add Volume Tier. Currently, the Exchange provides a $0.40 per 
contract rebate for a Market Maker order in a Penny Pilot Security that 
adds liquidity to BATS Options under fee code PM. The Exchange proposes 
to add a Market Maker Penny Pilot Tier under footnote 6 of the fee 
schedule that will provide a $0.42 per contract rebate for Market Maker 
orders in a Penny Pilot Security that adds liquidity to BATS Options 
where the Member: (1) Has an ADAV equal to or greater than 1.00% of 
average TCV; and (2) has an ADV equal to or greater than 2.00% of 
average TCV.
    Finally, the Exchange proposes to make several corresponding 
changes to the fee schedule to reflect the proposed changes above. 
Specifically, the Exchange is proposing to add the fee and rebate 
proposed above to the Standard Rates chart on the fee schedule, to add 
footnote six to fee code PM, and to title the current Non-Customer Take 
Volume Tier in footnote 3 as ``Non-Customer Take Volume Tier 1'' in 
order to reflect the addition of the second tier proposed 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.\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 or providers of routing services 
if they deem fee levels to be excessive.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Volume-based rebates and fees such as the ones currently maintained 
on BATS Options as well as the new Non-Customer Take Volume Tier 2 and 
the

[[Page 2988]]

new Market Maker Penny Pilot Add Volume Tier 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 Non-Customer Take Volume Tier 2 is a reasonable and 
equitable allocation of fees and rebates because the requirement that 
the Member has an ADAV equal to or greater than 1.00% of average TCV 
combined with the requirement that a Member achieve an ADV of equal to 
or greater than 2.00% of average TCV will provide such enhancements in 
market quality on BATS Options by incentivizing increased participation 
on BATS Options. This is especially true as compared to Non-Customer 
Take Volume Tier 1, which has no ADAV component, meaning that Non-
Customer Take Volume Tier 2 will act to incentivize Members to add 
liquidity on BATS Options in order to receive further reduced fees. 
Similarly, the Exchange believes that the new Market Maker Penny Pilot 
Add Volume Tier is a reasonable and equitable allocation of fees and 
rebates it will incentivize Members to both add and remove liquidity 
from the Exchange in order to meet the ADV and ADAV thresholds required 
to receive the enhanced rebates.
    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 which also benefits all 
Members. The Exchange believes that restricting the availability of the 
proposed rebates in Penny Pilot Securities associated with the Market 
Maker Add Volume Tier to Market Maker orders is reasonable and 
equitably allocated as well as not unreasonably discriminatory because 
Market Makers are subject to additional regulatory requirements not 
applicable for Professional and Firm orders and such Market maker 
orders are not currently eligible for certain enhanced rebate tiers 
available to Professional and Firm orders under the Professional and 
Firm Penny Pilot Add Volume Tiers. The Exchange notes that all non-
Customer orders (i.e., Professional, Firm and Market Maker orders) will 
be eligible for the reduced fees proposed as under the Non-Customer 
Take Volume Tier 2.
    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 tiers would 
further 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 \15\ and paragraph (f)(2) 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. If 
the Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule should be approved 
or disapproved.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2015-02 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.

All submissions should refer to File Number SR-BATS-2015-02. 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

[[Page 2989]]

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-2015-02 and should be 
submitted on or before February 11, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-00837 Filed 1-20-15; 8:45 am]
BILLING CODE 8011-01-P