Document ID: SEC-2014-0473-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2014-03-25T04:00Z

[Federal Register Volume 79, Number 57 (Tuesday, March 25, 2014)]
[Notices]
[Pages 16412-16414]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-06460]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71746; File No. SR-BATS-2014-006]

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

March 19, 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 March 7, 2014, 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

[[Page 16413]]

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 this proposed rule change is to implement pricing, 
effective immediately, applicable to the Exchange's options platform 
(``BATS Options'') with respect to executions that occur as part of the 
modifications to the market opening procedures as described in Rule 
20.7 [sic] (the ``Market Opening Procedures''), which was approved on 
March 15 [sic], 2014.\6\ Under the Market Opening Procedures, the 
Exchange will accept orders and quotes for queuing in a series of 
options prior to the opening of trading in that series of options. As 
such and as further described in Rule 20.7 [sic], executions might 
occur in a series as part of the Market Opening Procedures as the 
series is being opened for trading. The Exchange is proposing that for 
executions occurring as part of the Market Opening Procedures, the 
Exchange will neither charge a fee nor provide a rebate.
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    \6\ See Securities Exchange Act Release No. 71651 (March 5, 
2014), (SR-BATS-2014-003) (proposal to modify the BATS Options 
Opening Process, which was approved on March 5, 2014).
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    Currently, all orders executed on BATS Options are subject to 
standard pricing, which includes variable fees and/or rebates based on 
whether the order adds or removes liquidity, the capacity of the order 
(Professional,\7\ Firm, Market Maker,\8\ or Customer \9\ orders), a 
Member's average daily trading volume, and whether the issue is a penny 
pilot issue, among others. In addition to standard rebates, the 
Exchange does not charge a fee nor does it provide a rebate for 
executions in Mini Options.\10\ Finally, orders that add liquidity may 
be eligible for additional rebates upon execution of orders that 
originally set a new NBBO \11\ as well as executions that qualify for 
the Exchange's quoting incentive program.\12\
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    \7\ The term ``Professional'' is defined in Exchange Rule 16.1 
to mean any person or entity that (A) is not a broker or dealer in 
securities, and (B) places more than 390 orders in listed options 
per day on average during a calendar month for its own beneficial 
account(s).
    \8\ As defined on the Exchange's fee schedule, the terms 
``Firm'' and ``Market Maker'' apply to any transaction identified by 
a member for clearing in the Firm or Market Maker range, 
respectively, at the Options Clearing Corporation (``OCC'').
    \9\ As defined on the Exchange's fee schedule, a ``Customer 
order'' refers to an order identified by a Member for clearing in 
the Customer range at the OCC, excluding any transaction for a 
``Professional'' as defined in Exchange Rule 16.1.
    \10\ Mini Options are options that overlie 10 equity or ETF 
shares, rather than the standard 100 shares. See Securities Exchange 
Act Release No. 69018 (March 1, 2013), 78 FR 15090 (March 8, 2013) 
(notice of filing and immediate effectiveness allowing Mini Options 
to be listed and traded on BATS Options) (SR-BATS-2013-013).
    \11\ As defined in Exchange Rule 27.1(11), the term ``NBBO'' is 
defined to mean the national best bid and offer in an option series 
as calculated by an Eligible Exchange.
    \12\ See Securities Exchange Act Release No. 69079 (March 8, 
2013), 78 FR 16306 (March 14, 2013) (SR-BATS-2013-017) (notice of 
filing and immediate effectiveness of proposed rule change related 
to fees for use of BATS Options).
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    The Exchange is proposing that for executions occurring as part of 
the Market Opening Procedures, the Exchange will neither charge a fee 
nor provide a rebate. Specifically, executions in the Market Opening 
Procedures will not be eligible for any rebate, including the NBBO 
setter liquidity rebate or the quoting incentive program liquidity 
rebates. It should be noted, however, that executions in the Market 
Opening Procedures will be counted in calculations of ADV \13\ and TCV 
\14\ for purposes of calculating other rebates and fees.
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    \13\ As defined on the Exchange's fee schedule, ADV means 
average daily volume calculated as the number of contracts added or 
removed, combined, per day on a monthly basis; routed contracts are 
not included in ADV calculation; with prior notice to the Exchange, 
a Member may aggregate ADV with other Members that control, are 
controlled by, or are under common control with such Member.
    \14\ As defined on the Exchange's fee schedule, 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.
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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. 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act, 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.
    The introduction of pricing for the Market Opening Procedures, as 
described above and proposed by this filing, is intended to allow the 
Exchange to begin allowing executions to occur as part of the Market 
Opening Procedures without charging any fees or providing any rebates 
for such executions. The Exchange believes that this is a reasonable, 
fair and equitable approach to pricing, particularly because the 
Exchange does not have any specific advanced knowledge of how market 
participants will react to the introduction of the Market Opening 
Procedures. Further, the Exchange believes that the proposal is 
reasonable because a high level of fees for executions occurring in the 
Market Opening Procedures would discourage participants from entering 
orders to participate in the Market Opening Procedures. In addition, 
the Exchange believes that this structure is a fair and equitable 
approach to pricing because it provides certainty for market 
participants with respect to execution costs across all trades 
occurring as part of the Market Opening Procedures. Lastly, the 
Exchange also believes that the proposed pricing for executions 
occurring as part of the Market Opening Procedures is non-
discriminatory because it will apply equally to all Members.
    The Exchange notes that this proposal is not increasing fees or 
decreasing rebates for any products traded on or routed by BATS 
Options, but rather, the proposal only proposes to introduce a pricing 
structure for executions occurring as part of the Market Opening 
Procedures.

[[Page 16414]]

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. To the contrary, the Exchange 
notes that this rule change is being proposed as a competitive offering 
at a time when many other options exchanges are already offering 
similar processes for opening their respective markets. As a result of 
the competitive environment, market participants will have various 
pricing and execution models to choose from in making determinations on 
where to enter orders prior to the opening of trading in a series of 
options. 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 levels to be 
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 \15\ and paragraph (f) 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.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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 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-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 Number SR-BATS-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 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-2014-006 and should be 
submitted on or before April 15, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-06460 Filed 3-24-14; 8:45 am]
BILLING CODE 8011-01-P