Document ID: SEC-2014-0644-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Y-Exchange, Inc.
Posted Date: 2014-04-17T04:00Z

[Federal Register Volume 79, Number 74 (Thursday, April 17, 2014)]
[Notices]
[Pages 21825-21826]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08689]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71936; File No. SR-BYX-2014-006]

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

April 11, 2014.
    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 April 8, 2014, BATS Y-Exchange, Inc. (the ``Exchange'' or 
``BYX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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 the 
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 BYX 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 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 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 its fee schedule applicable to use 
of the Exchange in order to modify the way that, for purposes of tiered 
pricing, the Exchange calculates ADAV and average daily TCV (as such 
terms are defined below). Currently, the Exchange determines the 
liquidity adding fee that it charges Members pursuant to the Exchange's 
tiered pricing structure by excluding from the calculation of ADAV \6\ 
and average daily TCV \7\ any day that an Exchange Outage occurs. An 
Exchange Outage is defined as any day that trading is not available on 
the Exchange for more than sixty (60) minutes during regular trading 
hours \8\ but continues on other markets during such time.\9\ The 
Exchange proposes to modify the definition of Exchange Outage to 
include situations where the Exchange experiences a systems disruption 
that lasts for more than 60 minutes during regular trading hours, even 
if such disruption would not be categorized as a complete outage of the 
Exchange's system, and to rename it as an ``Exchange System 
Disruption.'' \10\ As an example, an Exchange System Disruption may 
occur where a certain group of securities (i.e., securities in a select 
symbol range such as A through C) traded on the Exchange is unavailable 
for trading due to an Exchange system issue. Similarly, the Exchange 
may be able to perform certain functions with respect to accepting and 
processing orders, but may have a failure to another significant 
process, such as routing to other market centers, that would lead 
Members that rely on such process to avoid utilizing the Exchange until 
the Exchange's entire system was operational.
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    \6\ As provided in the fee schedule, ``ADAV'' means average 
daily volume calculated as the number of shares added per day on a 
monthly basis; routed shares are not included in ADAV calculation.
    \7\ As provided in the fee schedule, ``TCV'' means total 
consolidated volume calculated as the volume reported by all 
exchanges and trade reporting facilities to a consolidated 
transaction reporting plan for the month for which the fees apply.
    \8\ The term ``regular trading hours'' means the ``time between 
9:30 a.m. and 4:00 p.m. Eastern Time.'' See Exchange Rule 1.5(w).
    \9\ The Exchange notes that it also excludes the last Friday of 
June from the calculation of ADAV and average daily TCV. The last 
day of June is the day that Russell Investments reconstitutes its 
family of indexes (``Russell Reconstitution''), resulting in 
particularly high trading volumes, much of which the Exchange 
believes derives from market participants who are not generally as 
active entering the market to rebalance their holdings in-line with 
the Russell Reconstitution.
    \10\ See SR-BATS-2014-010 (proposing to exclude Exchange System 
Disruptions from the definitions of ADAV, ADV and average TCV).
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    The Exchange believes that this modification is reasonable because 
the intent of the current Exchange Outage exclusion has always been to 
avoid penalizing Members that might otherwise qualify for certain 
tiered pricing but that, because of a significant Exchange system 
problem, did not participate on the Exchange to the extent that they 
might have otherwise participated. The Exchange believes that certain 
systems disruptions could preclude some Members from submitting orders 
to the Exchange even if such issue is not actually a complete systems 
outage. The Exchange notes that it is not proposing to modify any of 
the existing fees or the percentage thresholds at which a Member may 
qualify for certain fee reductions pursuant to the tiered pricing 
structure. Rather, as mentioned above, the Exchange is proposing to 
modify its fee schedule to exclude trading activity occurring on any 
day that the Exchange experiences an Exchange System Disruption.
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.\11\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\12\ in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members and other

[[Page 21826]]

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 at a particular venue to be 
excessive.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal is reasonable because, as 
explained above, it will help provide Members with a greater level of 
certainty as to their level of costs for trading in any month where the 
Exchange experiences an Exchange System Disruption on one or more 
trading days. The Exchange is not proposing to amend the thresholds a 
Member must achieve to become eligible for, or the dollar value 
associated with, the Exchange's tiered fees. By eliminating the 
inclusion of a trading day on which an Exchange System Disruption 
occurs the Exchange would almost certainly be excluding a day that 
would otherwise lower a Member's ADAV as a percentage of average daily 
TCV. Thus, the proposed change will make the majority of Members more 
likely to meet the minimum or higher tier thresholds, incentivizing 
Members to increase their participation on the Exchange in order to 
meet the next highest tier. In addition, the Exchange believes that the 
proposed changes to its fee schedule are equitably allocated among 
Exchange constituents and not unfairly discriminatory as the 
methodology for calculating ADAV and TCV will apply equally to all 
Members. While, although unlikely, certain Members may have a higher 
ADAV as a percentage of average daily TCV with their activity included 
from days where the Exchange experiences an Exchange System Disruption, 
the proposal will make all Members' cost of trading on the Exchange 
more predictable, regardless of how the proposal affects their ADAV as 
a percentage of average daily TCV.
    Volume-based tiers such as the liquidity adding tiers maintained by 
the Exchange have been widely adopted, and are equitable and not 
unfairly discriminatory because they are open to all members on an 
equal basis and provide higher rebates or lower fees 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 introduction of higher volumes of orders 
into the price and volume discovery process. Accordingly, the Exchange 
believes that the proposal is equitably allocated and not unfairly 
discriminatory because it is consistent with the overall goals of 
enhancing market quality. Further, the Exchange believes that a tiered 
pricing model not significantly altered by a day of atypical trading 
behavior which allows Members to predictably calculate what their costs 
associated with trading activity on the Exchange will be is reasonable, 
fair and equitable and not unreasonably discriminatory as it is uniform 
in application amongst Members and should enable such participants to 
operate their business without concern of unpredictable and potentially 
significant changes in expenses.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
proposed change will help to promote intramarket competition by 
avoiding a penalty to Members for days when trading on the Exchange is 
disrupted for a significant portion of the day. 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 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 \13\ and paragraph (f) of Rule 19b-4 
thereunder.\14\ 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.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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-BYX-2014-006 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-BYX-2014-006. 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-BYX-2014-006 and should be 
submitted on or before May 8, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-08689 Filed 4-16-14; 8:45 am]
BILLING CODE 8011-01-P