Document ID: SEC-2015-0362-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2015-02-27T05:00Z

[Federal Register Volume 80, Number 39 (Friday, February 27, 2015)]
[Notices]
[Pages 10735-10738]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-04068]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74352; File No. SR-BATS-2015-13]

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.

February 23, 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 February 10, 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 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 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\ 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 in order to: (1) 
remove the reference to ROLF from fee code BO; (2) make certain changes 
to Cross-Asset Step-Up Tier 3; and (3) make certain non-substantive 
clean-up changes to the fee schedule.
Deleting Reference to ROLF
    The Exchange proposes to amend its fee schedule to remove the 
reference to

[[Page 10736]]

ROLF from fee code BO. Fee code BO currently provides that the Exchange 
will charge $0.0030 per share for any order routed using ROLF or 
Destination Specific routing strategy unless otherwise specified. Under 
the ROLF routing strategy, an order will check the Exchange for 
available shares and then will be sent to LavaFlow ECN (``LavaFlow''). 
This change is being proposed in response to LavaFlow's announcement 
that it will cease market operations and its last day of trading will 
be Friday, January 30, 2015. As such, beginning on February 2, 2015, 
the Exchange will no longer route orders to LavaFlow. As proposed, the 
Exchange would continue to charge $0.0030 per share for orders routed 
using a Destination Specific routing strategy.
Step-Up Add TCV Definition
    The Exchange is also proposing to make a non-substantive change to 
the definition of ``Step-Up Add TCV'' in its fee schedule. Currently, 
Step-Up Add TCV means ADAV \6\ as a percentage of TCV \7\ in January 
2014 subtracted from current ADAV as a percentage of TCV. In order to 
add an additional month to use as a baseline for calculating Step-Up 
Add TCV, as further described below, the Exchange is proposing to amend 
the fee schedule such that Step-Up Add TCV means ADAV as a percentage 
of TCV in the relevant baseline month subtracted from current ADAV as a 
percentage of TCV. The Exchange is also proposing to make a 
corresponding non-substantive change to footnote 2, titled ``Step-Up 
Tiers,'' such that the criteria to qualify for the tiers is described 
as the ``Member's Step-Up TCV from January 2014 is equal to or greater 
than'' instead of ``Member's Step-Up TCV is equal to or greater than.'' 
This change is non-substantive because the Exchange is not proposing to 
amend any fees, rebates, or the calculation thereof, but rather making 
the requisite change in order for the rebate and the criteria 
associated with meeting the tiers to remain the same in conjunction 
with the proposed changes to the definition of Step-Up Add TCV outlined 
above.
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    \6\ ``ADAV'' means average daily volume calculated as the number 
of shares added per day on a monthly basis.
    \7\ ``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.
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Cross-Asset Step-Up Tiers
    The Exchange is also proposing to amend the criteria for meeting 
Tier 3 in the Cross-Asset Step-Up Tiers. Specifically, the Exchange is 
proposing to make two changes: to base the tier calculation on a 
Member's Step-Up Add TCV from December 2014; and to lower the threshold 
required to meet Tier 3 from 0.20% to 0.15%. Currently, in order to 
meet Tier 3 of the Cross-Asset Step-Up Tier and receive a $0.0032 
rebate per share that adds liquidity: (i) a Member's ADAV as a 
percentage of TCV must be equal to or greater than 0.20%; and (ii) the 
Member's Options Step-Up Add TCV \8\ must be equal to or greater than 
0.60%. The Exchange is not proposing to amend requirement (ii). The 
Exchange is proposing to amend requirement (i) such that a Member must 
have a Step-Up Add TCV from December 2014 of at least 0.15% instead of 
an ADAV as a percentage of TCV of at least 0.20%, which will encourage 
increased participation on the Exchange by requiring that a Member 
increases its participation on the Exchange as compared to December 
2014, rather than maintaining a static ADAV as a percentage of TCV.
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    \8\ ``Options Step-Up Add TCV'' means ADAV as a percentage of 
TCV in January 2014 subtracted from current ADAV as a percentage of 
TCV, using the definitions of ADAV and TCV as provided under the 
Exchange's fee schedule for BATS Options.
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    The Exchange proposes to implement the amendments to its fee 
schedule effective February 10, 2015.
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.\9\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Sections 6(b)(4) of the Act and 6(b)(5) of the Act,\10\ 
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 at a particular venue to be excessive.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that its proposal to eliminate ROLF from fee 
code BO represents an equitable allocation of reasonable dues, fees, 
and other charges among Members and other persons using its facilities. 
The proposed change is in response to LavaFlow's announcement that it 
will cease market operations and its last day of trading will be 
Friday, January 30, 2015. The Exchange notes that the proposed change 
is not designed to amend any fee or rebate, nor alter the manner in 
which the Exchange assesses fees and rebates. As of February 2, 2015, 
the Exchange will no longer route orders to LavaFlow and, therefore, 
proposes to remove ROLF from the fee schedule, which will make the fee 
schedule clearer and less confusing for investors as well as help to 
eliminate potential investor confusion, thereby removing impediments to 
and perfecting the mechanism of a free and open market and a national 
market system, and, in general, protecting investors and the public 
interest.
    The Exchange also believes that the proposed non-substantive change 
to the definition of Step-Up Add TCV and the corresponding non-
substantive change to the Step-Up Tiers are reasonable, fair, and 
equitable because they are designed to make the fee schedule easier to 
comprehend in light of the decision to add an additional baseline 
month, as described above. The Exchange notes that neither of the 
proposed changes are designed to amend any fee or rebate, nor alter the 
manner in which the Exchange assesses fees and rebates. These non-
substantive changes to the fee schedule are intended to make the fee 
schedule clearer and less confusing for investors and eliminate 
potential investor confusion, thereby removing impediments to and 
perfecting the mechanism of a free and open market and a national 
market system, and, in general, protecting investors and the public 
interest.
    The Exchange also believes that the proposed change to measure the 
Member's Step-Up Add TCV from December 2014 instead of ADAV as a 
percentage of TCV is reasonable, fair, and equitable because it will 
incentive Members to increase their participation on the Exchange as 
compared to December 2014, rather than maintaining a static ADAV as a 
percentage of TCV. The Exchange further believes that the proposal is 
reasonable, fair, and equitable because the increased liquidity from 
incentivizing Members to increase their participation on the Exchange 
will benefit all investors by deepening the liquidity pool on the 
Exchange, supporting the quality of price discovery, promoting market 
transparency, and improving investor protection. The Exchange also 
believes that lowering the threshold to meet the requirement from 0.20% 
to 0.15% is reasonable, fair, and equitable because the measurement is 
changing from a measure of total added volume (ADAV

[[Page 10737]]

as a percentage of TCV) into a measure of the increase of added volume 
as compared to December 2014 (Step-Up Add TCV from December 2014) and 
the reduction will make it easier for Members to achieve Cross-Asset 
Step-Up Tier 3. The Exchange believes that step-up pricing programs 
such as that proposed herein reward a Member's growth pattern and that 
such increased volume increases the potential revenue to the Exchange, 
which will allow the Exchange to continue to provide and potentially 
expand the incentive programs operated by the Exchange. Such pricing 
programs are also fair and equitable in that they are available to all 
Members. Further, volume-based rebates and fees such as the ones 
maintained by the Exchange, including those amendments 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 
that the Cross-Asset Step-Up Tiers will provide such enhancements in 
market quality on the Exchange by incentivizing increased participation 
by Members attempting to meet Tier 3. Accordingly, the Exchange 
believes that the proposed amendments to the Cross-Asset Step-Up Tiers 
and the incentives associated therewith are not unfairly discriminatory 
because they will apply uniformly to all Members and are consistent 
with the overall goals of enhancing market quality on the Exchange.

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. To 
the contrary, the Exchange believes that the proposed changes to the 
Cross-Asset Step-Up Tiers will allow the Exchange to compete more ably 
with other execution venues by drawing additional volume to the 
Exchange, thereby making it a more desirable destination venue for its 
customers. Further, the Exchange does not believe that these proposed 
changes represent 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 also believes that its proposal to remove ROLF from 
fee code BO would not affect intermarket nor intramarket competition 
because the change is not designed to amend any fee or rebate or to 
alter the manner in which the Exchange assesses fees or calculates 
rebates. It is simply proposed in response to LavaFlow's announcement 
that it will cease market operations following the close of business on 
Friday, January 30, 2015.
    The Exchange believes that the non-substantive and organizational 
changes to the fee schedule would not affect intermarket nor 
intramarket competition because none of the proposed changes are 
designed to amend any fee or rebate or to alter the manner in which the 
Exchange asses fees or rebates. The changes are intended to make the 
fee schedule as clear and concise as possible.
    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 they 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 \11\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\12\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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 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-2015-13 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-2015-13. 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 also will 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 Number SR-BATS-2015-13 and should be 
submitted on or before March 20, 2015.

[[Page 10738]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-04068 Filed 2-26-15; 8:45 am]
BILLING CODE 8011-01-P