Document ID: SEC-2015-2150-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.,
Posted Date: 2015-12-28T05:00Z

[Federal Register Volume 80, Number 248 (Monday, December 28, 2015)]
[Notices]
[Pages 80844-80847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32534]

[[Page 80844]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76706; File No. SR-BATS-2015-116]

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

December 21, 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 December 9, 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 its fee schedule applicable to the 
Exchange's options platform to: (i) Bifurcate Market Maker \6\ and Non-
BATS Market Maker \7\ pricing; and (ii) to modify the criteria 
necessary to meet the Customer Penny Pilot Add Volume Tier 6 and the 
Non-Customer Penny Pilot Take Volume Tier 3.
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    \6\ ``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). See the Exchange's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/bzx/.
    \7\ ``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. Id.
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Market Maker/Non-BATS Market Maker Pricing
    The Exchange proposes to bifurcate Market Maker and Non-BATS Market 
Maker pricing within the fee schedule. To do so, the Exchange proposes 
to amend: (i) The Standard Rates table; (ii) the Fee Codes and 
Associated Fees table to (A) modify fee codes NM and PM; and (B) add 
new fee codes NN and PN; (iii) the NBBO Setter tiers under footnote 4 
to reference fee codes NN and PN; (iv) footnote 6 to remove references 
to Non-BATS Market Maker pricing and copy Tier 1 and relocate Tier 3 
and the Step-Up Tier to new footnote 10; and (v) footnote 7 to remove 
references to Non-BATS Market Maker Pricing and copy Tiers 1 and 2 to 
new footnote 11. The Exchange notes, other than as proposed herein, 
pricing for Non-BATS Market Maker transactions are the same as Market 
Maker transactions. The proposed rule change generally bifurcates the 
existing pricing for Market Makers and Non-BATS Market Makers.
Standard Rates and Fee Codes and Associated Fee Tables
    First, the Exchange proposes to amend the Fee Codes and Associated 
Fee table to amend fee codes NM and PM to remove references to Non-BATS 
Market Maker Pricing. Pricing for Non-BATS Market Makers would be set 
forth under new fee codes NN and PN. Under current fee code NM, Market 
Makers and Non-BATS Market Makers that add liquidity in non-Penny Pilot 
Securities \8\ receive a rebate of $0.42 per contract. Under proposed 
fee code NN, Non-BATS Market Makers that add liquidity in non-Penny 
Pilot Securities would receive a rebate of $0.36 per contract. Fee code 
NN would also include references to footnotes 4 and 11, discussed 
below.
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    \8\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01. Id.
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    Under current fee code PM, Market Makers and Non-BATS Market Makers 
that add liquidity in Penny Pilot Securities receive a rebate of $0.35 
per contract. Under proposed fee code PN, Non-BATS Market Makers that 
add liquidity in Penny Pilot Securities would receive a rebate of $0.30 
per contract. Fee code PN would also include references to footnotes 4 
and 10, discussed below.
    Second, the Exchange proposes to amend the Standard Rates table to 
add a row to delineate pricing for Non-BATS Market Makers. Non-BATS 
Market Maker orders that yield new fee code PN would receive a rebate 
of $0.30 per contract if they do not qualify for an enhanced rebates 
under the Exchange's tiered pricing structure. The Exchange does not 
proposes to amend the enhanced rebates, which are either $0.40, $0.43, 
or $0.46 per contract depending on the tier that the Non-BATS Market 
Maker qualifies for. Likewise, Non-BATS Market Maker orders that yield 
new fee code NN would receive a rebate of $0.36 per contract if they do 
not qualify for an enhanced rebates under the Exchange's tiered pricing 
structure. The Exchange does not propose to amend the enhanced rebates, 
which are either $0.45 or $0.52 per contract depending on the tier that 
the Non-BATS Market Maker qualifies for.
    The Exchange believes it is reasonable to provide Market Makers 
with improved rates than Non-BATS Market Makers as the proposed 
differentiation recognizes the differing contributions made to the 
liquidity and trading environment on the Exchange by these market 
participants.
Footnote 4, NBBO Setter Tiers.
    The Exchange proposes to amend the NBBO Setter tiers under footnote 
4 to reference fee codes NN and PN. In addition to fee codes PA, PF, 
PM, NA, NF, and NM, the Exchange proposes to state that NBBO Setter 
Tiers 1, 2, and 3 are applicable to fee codes PN and NN.

[[Page 80845]]

NBBO Setter Tier 4 would be applicable to fee code PN, in addition to 
PF and PM. All of the fee codes referenced in footnote 4 are applicable 
to orders that add liquidity.
Footnotes 6 and 10, Market Maker and Non-BATS Market Maker Penny Pilot 
Add Volume Tiers
    The Exchange proposes to bifurcate the Market Maker and Non-Market 
Maker pricing in Penny Pilot Securities under footnote 6 by removing 
references to Non-BATS Market Maker pricing and copy Tier 1 and 
relocate Tier 3 and the Step-Up Tier to new footnote 10. Footnote 6 
would be amended to remove references to Non-BATS Market Makers as the 
tiers under footnote 6 would only apply to Market Maker activity in 
Penny Pilot Securities. The criteria for Tier 2 under footnote 6 would 
continue to reference Non-BATS Market Makers as liquidity a Market 
Maker adds in a non-market making capacity would continue to be applied 
towards the tier's requirements.
    Tiers applicable to Non-BATS Market Maker activity in Penny Pilot 
Securities would be set forth under new footnote 10. Fee code PN would 
be applicable to the tiers listed under footnote 10. Under Tier 1, a 
Non-BATS Market Maker would receive a rebate of $0.40 per contract 
where they have an ADV \9\ equal to or greater than 0.30% of average 
TCV.\10\ This is identical to Tier 1 under footnote 6 for Market 
Makers. Tier 3 and the Step-Up Tier would be deleted from footnote 6 
relocated to new footnote 10 without change. Tier 3 from footnote 6 
would be listed a Tier 2 under footnote 10. As they do today, a Non-
BATS Market Maker would receive a rebate of $0.46 per contract under 
Tier 2 where they have an ADAV \11\ in Firm/BD/JBO \12\ orders in Penny 
Pilot Securities (yielding Fee Code PF) equal to or greater than 0.25% 
of average TCV or an ADV equal to or greater than 1.50% of average TCV. 
Likewise, under the Step-Up Tier under footnote 10, a Non-BATS Market 
Maker would receive a rebate of $0.43 per contract where they have an 
Options Step-Up Add TCV \13\ in Non-Customer orders from March 2015 
baseline equal to or greater than 0.15% or an ADAV in Non-BATS Market 
Maker/Firm/BD/JBO orders equal to or greater than 0.30% of average TCV.
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    \9\ As defined in the Exchange's fee schedule.
    \10\ Id.
    \11\ Id.
    \12\ Id.
    \13\ As defined in the Exchange's fee schedule.
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Footnotes 7 and 11, Market Maker and Non-BATS Market Maker Non-Penny 
Pilot Add Volume Tiers
    The Exchange proposes to bifurcate the Market Maker and Non-Market 
Maker pricing in non-Penny Pilot Securities under footnote 7 by 
removing references to Non-BATS Market Maker pricing and coping Tiers 1 
and 2 to new footnote 11. Footnote 7 would be amended to remove 
references to Non-BATS Market Makers as the tiers under footnote 7 
would only apply to Market Maker activity in non-Penny Pilot 
Securities.
    Tiers applicable to Non-BATS Market Maker activity in non-Penny 
Pilot Securities would be set forth under new footnote 11. Tiers 1 and 
2 under footnote 7 would be replicated under new footnote 11 without 
change. Under Tier 1, a Non-BATS Market Maker would continue to receive 
a rebate of $0.45 per contract where they have an ADV equal to or 
greater than 0.30% of average TCV. Under Tier 2, a Non-BATS Market 
Maker would continue to receive a rebate of $0.52 per contract where 
they have an ADV equal to or greater than 1.00% of average TCV. Fee 
code NN would be applicable to the tiers listed under footnote 11.
Customer Penny Pilot Add Volume Tier 6
    The Exchange currently offers a total of eight Customer \14\ Penny 
Pilot Add Volume Tiers that provide enhanced rebates for Customer 
orders in Penny Pilot Securities that add liquidity under fee code PY. 
Under the Customer Add Volume Tier 6, the Member would receive a rebate 
of $0.53 per contract where they have an ADAV in Customer orders equal 
to or greater than 1.80% of average TCV. The Exchange proposes to ease 
the criteria necessary to qualify for the Customer Penny Pilot Add 
Volume Tier 6 by requiring an ADAV in Customer orders equal to or 
greater than 1.60%, rather than 1.80% of average TCV.
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    \14\ Id.
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Non-Customer Penny Pilot Take Volume Tier 3
    The Exchange currently offers a total of three Non-Customer \15\ 
Penny Pilot Take Volume Tiers that provide discounted fees for Non-
Customer orders in Penny Pilot Securities that remove liquidity under 
fee code PP. Under the Non-Customer Take Volume Tier 3, the Member 
would be charged a discounted fee of $0.46 per contract where they have 
an ADAV in Non-Customer orders equal to or greater than 1.80% of 
average TCV. The Exchange proposes to ease the criteria necessary to 
qualify for the Non-Customer Penny Pilot Take Volume Tier 3 by 
requiring an ADAV in Customer orders equal to or greater than 1.60%, 
rather than 1.80% of average TCV.
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    \15\ Id.
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Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule immediately.\16\
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    \16\ The Exchange initially filed the proposed fee change on 
November 30, 2015 (SR-BATS-2015-107). On December 9, 2015, the 
Exchange withdrew that filing and submitted filing SR-BATS-2015-116.
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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.\17\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\18\ 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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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
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Market Maker/Non-BATS Market Maker Pricing
    The Exchange also believes it is equitable, reasonable and not 
unfairly discriminatory to bifurcate Market Maker and Non-BATS Market 
Maker pricing within the fee schedule. The Exchange notes, other than 
as proposed herein, pricing for Non-BATS Market Maker transactions are 
the same as Market Maker transactions. The proposed rule change 
generally bifurcates the existing pricing for Market Makers and Non-
BATS Market Makers. The proposed rule change would serve to clearly 
delineate within the fee schedule the fees, rebates and tiers available 
to Market Makers and Non-BATS Market Makers; thereby, avoiding Members 
confusion regarding the applicable fees and rebates.
    The Exchange also believes it is equitable, reasonable and not 
unfairly discriminatory to provide Market Makers with improved rates 
than Non-BATS Market Makers. The proposed

[[Page 80846]]

differentiation between Market Makers and Non-BATS Market Makers 
recognizes the differing contributions made to the liquidity and 
trading environment on the Exchange by these market participants. 
Market Makers, unlike Non-BATS Market Makers, have obligations on the 
Exchange and regulatory requirements,\19\ which do not apply to Non-
BATS Market Makers. A Market Maker on the Exchange has the obligation 
to make continuous markets, engage in course of dealings reasonably 
calculated to contribute to the maintenance of a fair and orderly 
market, and not make bids or offers or enter into transactions that are 
inconsistent with such course of dealings. On the other hand, Non-BATS 
Market Makers, do not have such obligations on the Exchange.
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    \19\ See Exchange Rule 22.5, Obligations of Market Makers.
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Customer Penny Pilot Add and Remove Tier Amendments
    Volume-based rebates and fees such as the ones 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. 
Easing the criteria for the Customer Penny Pilot Add Volume Tier 6 and 
Non-Customer Penny Pilot Take Volume Tier 3 are intended to incentivize 
Members to send additional orders to the Exchange in an effort to 
qualify for the enhanced rebate or discounted fee available by the 
respective tier.
    The Exchange believes that these changes are reasonable, fair and 
equitable and non-discriminatory, for the reasons set forth with 
respect to volume-based pricing generally and because such changes will 
either incentivize participants to further contribute to market quality 
on the Exchange or will allow the Exchange to earn additional revenue 
that can be used to offset the addition of new pricing incentives. The 
Exchange also believes that the proposed fees and rebates remain 
consistent with pricing previously offered by the Exchange as well as 
competitors of the Exchange and do not represent a significant 
departure from the Exchange's general pricing structure.

(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. The Exchange 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. 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 maintain their competitive standing in the financial markets. The 
Exchange does not believes its bifurcation of Market Maker and Non-BATS 
Market Maker pricing would burden competition as they are intended to 
simply clearly delineate within the fee schedule the fees, rebates and 
tiers available to Market Makers and Non-BATS Market Makers; thereby, 
avoiding Members confusion regarding the applicable fees and rebates. 
The Exchange also does not believe that providing Market Makers with 
improved rates than Non-BATS Market Makers would burden competition as 
the proposed differentiation recognizes the differing contributions 
made to the liquidity and trading environment on the Exchange by these 
market participants.
    The Exchange also does not believe that any of the proposed changes 
to the Exchange's tiered pricing structure burden competition, but 
instead, that they enhance competition as they are intended to increase 
the competitiveness of the Exchange by easing the criteria necessary to 
qualify for certain tiers. Also, the Exchange believes that the 
decrease to these thresholds necessary to meet the respective tiers 
contributes to, rather than burdens competition, as such changes are 
intended to incentivize participants to increase their participation on 
the Exchange.

(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 \20\ and paragraph (f) of Rule 19b-4 
thereunder.\21\ 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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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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-2015-116 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-2015-116. 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 80847]]

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-2015-116 and should be 
submitted on or before January 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-32534 Filed 12-24-15; 8:45 am]
BILLING CODE 8011-01-P