Document ID: SEC-2013-0950-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2013-05-21T04:00Z

[Federal Register Volume 78, Number 98 (Tuesday, May 21, 2013)]
[Notices]
[Pages 29805-29807]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12039]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69585; File No. SR-BATS-2013-026]

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.

May 15, 2013.
    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 May 7, 2013, 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). Changes to the fee schedule pursuant to this proposal 
are effective upon filing.
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    \5\ A Member is any registered broker or dealer that has been 
admitted to membership in the Exchange.
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    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 purpose of the proposed to modify fees applicable to Members 
and non-members in order to encourage use of connectivity that provides 
redundant access to the Exchange by eliminating any potential fees for 
logical ports \6\ in

[[Page 29806]]

connection with such redundant access. The Exchange proposes to modify 
its fee schedule related to logical ports for BATS Equities and to make 
necessary changes so that the logical port fee sections of its fee 
schedule applicable to BATS Options is identical.\7\
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    \6\ A logical port is commonly referred to as a TCP/IP port, and 
represents a port established by the Exchange within the Exchange's 
system for trading and billing purposes. Each logical port 
established is specific to a Member or non-member and grants that 
Member or non-member the ability to operate a specific application, 
such as FIX order entry or Multicast PITCH data receipt.
    \7\ BATS Equities is the Exchange's platform for trading cash 
equity securities whereas BATS Options is the Exchange's platform 
for trading equity options.
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    The Exchange currently charges a monthly fee for ports used to 
enter orders in the Exchange's trading system and to receive data from 
the Exchange. With respect to BATS Equities, the Exchange currently 
charges $400.00 per month per ``pair'' of any port type other than a 
Multicast PITCH Spin Server Port or a GRP Port.\8\ Each pair of ports 
consists of one port at the Exchange's primary data center and one port 
at the Exchange's secondary data center. With respect to BATS Options, 
the Exchange also charges $400 per month for any port other than a 
Multicast PITCH Spin Server Port, GRP Port or logical port with bulk-
quoting capabilities,\9\ and $1,500 for a port with bulk-quoting 
capabilities. The Exchange recently began offering connectivity to the 
Exchange at its secondary data center, enabling BATS Options 
participants to obtain redundant connectivity, and has not commenced 
billing for any such connectivity.
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    \8\ Thus, the charges apply to all BATS Equities FIX, FIXDROP, 
BOE, DROP, TCP PITCH, and TOP ports.
    \9\ Thus, the charges apply to all BATS Options FIX, FIXDROP, 
BOE, and DROP ports.
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    Rather than stating that the fee for logical ports with respect to 
BATS Equities or BATS Options is per ``pair'', the Exchange proposes to 
simplify the fee schedule by adding a footnote that states that logical 
port fees are limited to logical ports in the Exchange's primary data 
center and that no logical port fees will be assessed for redundant 
secondary data center ports. Although this change to fee schedule 
language will not result in any substantive change to Members or non-
members, as the Exchange is already providing secondary data center 
ports free of charge, the Exchange believes that this is a simpler way 
to bill for ports rather than billing in pairs. Further, this will 
allow the Exchange to include the concept of a ``primary'' Multicast 
PITCH data feed, as described below, without confusion as related to 
the Exchange's primary data center.
    In addition, the Exchange proposes to modify the description of the 
billing for ports related to the Exchange's Multicast PITCH data 
feed.\10\ The Exchange currently provides 32 pairs of Multicast PITCH 
Spin Server Ports free of charge and, if such ports are used, one free 
pair of GRP Ports.\11\ The Exchange charges customers $400.00 per month 
per additional set of 32 Multicast PITCH Spin Server Ports or 
additional pair of GRP Ports. Consistent with the change described 
above, the Exchange proposes to eliminate the concept of port ``pairs'' 
and instead maintain a fee schedule that imposes fees only for logical 
ports at the Exchange's primary data center. Thus, for both BATS 
Equities and BATS Options the Exchange will continue to provide at the 
Exchange's primary data center 32 Multicast PITCH Spin Server Ports 
free of charge and, if such ports are used, one free GRP Port and all 
redundant Multicast PITCH Spin Server Ports and GRP Ports at the 
secondary data center will be free of charge. Again, although not a 
substantive change for Members and non-members, the Exchange believes 
that this change simplifies the fee schedule and also indicates the 
Exchange's support for Members and non-members to establish sufficient 
connectivity for business continuity purposes.
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    \10\ The Multicast PITCH data feed with respect to BATS Equities 
is defined in Rule 11.22(c) as ``an uncompressed data feed that 
offers depth of book quotations and execution information based on 
equity orders entered into the System.'' The Multicast PITCH data 
feed with respect to BATS Options is defined in Rule 21.15.as 
``uncompressed data feed that offers depth of book quotations and 
execution information based on options orders entered into the 
System.''
    \11\ The Exchange notes that its fees for Multicast PITCH 
customers, including the current provision of certain ports free of 
charge, are designed to encourage use of the Exchange's Multicast 
PITCH data feed because the Exchange believes that the feed is its 
most efficient feed, and thus, will reduce infrastructure costs for 
both the Exchange and those who utilize the feed. Any Member or non-
member that has entered into the appropriate agreements with the 
Exchange is permitted to receive Multicast PITCH Spin Server Ports 
and GRP Ports from the Exchange.
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    Similarly, the Exchange proposes to modify its fee schedule in 
order to allow Members and non-members to take redundant Multicast 
PITCH data feeds from the Exchange. The Exchange's Multicast PITCH data 
feed for both BATS Equities and BATS Options is currently offered 
through two primary feeds, identified as the ``A feed'' and the ``C 
feed'', which contain the same information but differ only in the way 
such feeds are received. The Exchange is in the process of commencing 
to offer redundant versions of the Multicast PITCH data feed and does 
not intend for Members and non-members that connect to such feeds to 
incur additional port fees. As such, the Exchange is proposing to 
modify its description of Multicast PITCH logical port fees so that 
only ports necessary to take a primary feed (either A or C), and not 
redundant versions of such feed, are subject to logical port fees. 
Again, the Exchange wishes to encourage Members and non-members to 
establish connectivity for business continuity purposes, including in 
the event the Exchange's data center is fully operational but a 
specific version of an Exchange data feed becomes unavailable.
    Based on the proposal, the change applies to Members that obtain 
ports for direct access to the Exchange, Sponsored Participants 
sponsored by Members to receive direct access to the Exchange, non-
member service bureaus that act as a conduit for orders entered by 
Exchange Members that are their customers, and market data recipients.
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.\12\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\13\ 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.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposed changes to logical port 
fees are reasonable in light of the fact that all such changes are 
intended to ensure that Members and non-members are able to establish 
redundant connections to the Exchange without incurring additional 
logical port fees. In addition, the Exchange believes that the proposed 
changes to fees are equitably allocated among Exchange constituents as 
the cost savings for redundant connectivity will be available to all 
such constituents. The Exchange reiterates that the change to limit 
logical port fess [sic] to logical port fees at the primary data center 
is not a substantive change in that Exchange constituents currently 
receive without charge a corresponding port at the secondary data 
center for any port established at the primary data center.
    The Exchange also believes that providing financial incentives to 
use Exchange technology that the Exchange believes is the most 
technologically

[[Page 29807]]

efficient for the Exchange and its constituents is a fair and equitable 
approach to pricing. Accordingly, the Exchange believes that promotion 
of its Multicast PITCH data feed through the continued offering of free 
logical ports is fair and equitable. The Multicast PITCH data feed is 
available to all Members, and as such, all Members have the ability to 
receive applicable Multicast PITCH ports free of charge. Further, the 
Exchange believes that promoting the use of redundant connectivity is 
reasonable, fair and equitable and not unreasonably discriminatory as 
it is uniform in application amongst Members and non-members and should 
enable such participants to enhance their business continuity planning.

(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. As discussed above, the 
Exchange believes that fees for connectivity are constrained by the 
robust competition for order flow among exchanges and non-exchange 
markets. Further, excessive fees for connectivity, including logical 
port fees, would serve to impair an exchange's ability to compete for 
order flow rather than burdening competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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\14\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(2).
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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-2013-026 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-BATS-2013-026. 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 changes 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-2013-026 and should be 
submitted on or before June 11, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12039 Filed 5-20-13; 8:45 am]
BILLING CODE 8011-01-P