Document ID: SEC-2014-2125-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2014-12-17T05:00Z

[Federal Register Volume 79, Number 242 (Wednesday, December 17, 2014)]
[Notices]
[Pages 75197-75200]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29492]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73813; File No. SR-BATS-2014-063]

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.

December 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 December 1, 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 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 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 effective 
immediately in order to adopt pricing for ROOC orders, to adopt pricing 
for orders that execute pursuant to Rule 11.24, titled ``Opening 
Process for Non-BATS-Listed Securities,'' to adjust the requirements to 
achieve Tier 3 of the Cross-Asset Step-Up Tiers, and to amend pricing 
for and add two additional tiers to the NBBO Setter program, as 
described below.
ROOC
    The Exchange recently filed a rule change to adopt a new routing 
strategy, ROOC, which provides that orders entered on the Exchange may 
be designated for participation in the opening, re-opening (following a 
halt suspension or pause), or closing process (collectively, an 
``Auction'') of a primary listing market other than the Exchange if 
received before the opening/re-

[[Page 75198]]

opening/closing time of such market.\6\ As such, the Exchange proposes 
to adopt pricing related to this new routing strategy: The Exchange is 
proposing to charge $0.0015 per share for ROOC orders routed and 
executed in the listing market's opening or re-opening cross and charge 
$0.0010 per share for orders routed and executed in the listing 
market's closing process.
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    \6\ See Securities Exchange Act Release No. 73418 [sic.] 
(October 23, 2014), 79 FR 64431 (October 29, 2014) (SR-BATS-2014-
052).
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Opening Process
    The Exchange recently filed and the Commission approved a proposed 
rule change to adopt Rule 11.24, establishing an opening and re-opening 
process on the Exchange in non-BATS-listed securities (the ``Opening 
Process'').\7\ The Opening Process is substantially similar to the 
opening processes on EDGA Exchange, Inc. (``EDGA'') and EDGX Exchange, 
Inc. (``EDGX''). The Exchange proposes to adopt pricing for the new 
Opening Process such that any non-BATS-listed security that is executed 
in the Opening Process will be charged $0.0005 per share.\8\
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    \7\ See Securities Exchange Act Release No. 73473 (October 30, 
2014), 79 FR 65744 (November 5, 2014) (SR-BATS-2014-037).
    \8\ The Exchange notes that this proposed fee is $0.0005 less 
than the fee charged for executions in the opening process on EDGX.
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Cross-Asset Step-Up Tiers
    Currently, a Member receives a $0.0032 rebate per share when they 
achieve Tier 3 of the Cross-Asset Step-Up Tier, which requires that the 
Member's Step-Up Add TCV \9\ to be equal to or greater than 0.30% 
(``Requirement One'') and that the Member's Options Step-Up Add TCV 
\10\ is equal to or greater than 0.40% (``Requirement Two''). There is 
no minimum that a Member's Step-Up Add TCV must meet in order to 
achieve Cross-Asset Step-Up Tiers 1 and 2. The Exchange is proposing to 
amend Requirement One in order to change the measurement from a 
Member's Step-Up Add TCV to a Member's ADAV \11\ as a percentage of TCV 
\12\ and to lower the threshold required to satisfy Requirement One 
from 0.30% to 0.20%. This means that a Member would fulfill Requirement 
One by achieving where the Member's ADAV as a percentage of TCV is 
greater than 0.20%. This proposed change would make Requirement One 
significantly easier for Members to meet, not only because the 
numerical threshold has been lowered from 0.30% to 0.20%, but also 
because the entirety of a Member's monthly ADAV would be included in 
the calculation (ADAV/TCV) instead of only including the increase in 
the Member's ADAV as a percentage of TCV for the current month as 
compared to January 2014, as is currently the case ([ADAV/TCV]-[ADAV in 
January 2014/TCV in January 2014]). In coordination with lowering the 
threshold for Requirement One, the Exchange is also proposing to 
increase the threshold for meeting Requirement Two by requiring a 
Member's Options Step-Up Add TCV to be equal to or greater than 0.60% 
instead of 0.40%. The Exchange believes that the combination of these 
two proposed changes will allow more Members to meet Requirement One, 
which will incentivize a greater number of Members to seek to meet 
Requirement Two, thereby enhancing liquidity on both the Exchange and 
the Exchange's options platform (``BATS Options'') and providing more 
Members with the opportunity to receive enhanced rebates.
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    \9\ ``Step-Up Add TCV'' means ADAV as a percentage of TCV in 
January 2014 subtracted from current ADAV as a percentage of TCV.
    \10\ ``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 Options 
Pricing.
    \11\ ``ADAV'' means average daily added volume calculated as the 
number of shares added.
    \12\ ``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, excluding volume on any day that the Exchange 
experiences an Exchange System Disruption, on any day with a 
scheduled early market close and the Russell Reconstitution Day.
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NBBO Setter
    Currently, the Exchange only offers a single NBBO Setter rebate, 
which provides that an order that establishes a new NBBO receives an 
additional rebate of $0.0002 per share, and a single NBBO Joiner 
rebate, which provides that any order that joins the NBBO when BATS is 
not already at the NBBO receives an additional rebate of $0.0001 per 
share. The Exchange is proposing to add two additional tiers at which 
Members may receive additional rebates for setting the NBBO and to 
amend the rebate per share associated with both the current NBBO Setter 
rebate and the NBBO Joiner rebate. In conjunction with the addition of 
these two new tiers, the Exchange is proposing to add additional 
language to footnote one on the fee schedule in order to establish the 
definition of Setter Add TCV as meaning the average daily added volume 
calculated as the number of displayed shares added that establish a new 
NBBO as a percentage of TCV.
    First, the Exchange is proposing to add an NBBO Setter Tier 2 and 
NBBO Setter Tier 3, as well as changing the existing NBBO Setter rebate 
to NBBO Setter Tier 1. The Exchange is proposing that NBBO Setter Tier 
2 shall state that any order that establishes a new NBBO and the 
Member's Setter Add TCV is equal to or greater than 0.05% shall receive 
an additional rebate of $0.0002 per share. The Exchange is also 
proposing that NBBO Setter Tier 3 shall state that any order 
establishing a new NBBO where such Member's Setter Add TCV is equal to 
or greater than 0.10% shall receive an additional rebate of $0.0004 per 
share. Finally, the Exchange is proposing to change the rebate for NBBO 
Setter Tier 1 to $0.0001 per share and the NBBO Joiner rebate to 
$0.00005 per share.
    The Exchange proposes to implement the amendments to its fee 
schedule effective immediately.
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.\13\ 
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,\14\ 
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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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed changes to the Exchange's 
fee schedule to add fees for the ROOC routing strategy when routed and 
executed in the listing market's Auction represent a reasonable and 
equitable allocation of fees because they are equal to or roughly 
equivalent to the fees that will be charged pursuant to the applicable 
exchange's fee schedule for participation in an Auction. The Exchange 
further believes that the proposed fees for ROOC are non-discriminatory 
because they apply uniformly to all Members and, again, because they 
approximate the fees at the away venue.

[[Page 75199]]

    The Exchange also believes that its proposed pricing for the 
Opening Process is reasonable and equitable because the Opening Process 
is generally analogous to the opening and halt auctions in BATS-listed 
securities (the ``Opening Auctions'') in that they both allow orders to 
queue for participation at the market open or to roll over into the 
continuous book and the proposed fees are equal to the standard fees 
applicable to orders that participate in the Opening Auctions. Further, 
the fee per share for participation in the Opening Process is $0.0005 
less than the fee charged for executions in the opening process on 
EDGX. The Exchange also believes that the proposed fees for the Opening 
Process are non-discriminatory because they apply uniformly to all 
Members and, again, because they are equal to or less the fees charged 
at other venues for analogous executions.
    The Exchange also believes that its proposed additional tiers and 
associated rebates to the NBBO Setter are reasonable and equitable 
because the tiers based on Setter Add TCV is intended to reward those 
Members that [sic.] and incentivize other Members to add a larger 
amount of volume that sets the NBBO on the Exchange by providing 
additional rebates of $0.0002 and $0.0004 per share for Members that 
have a Setter Add TCV of 0.05% and 0.10%, respectively. Further, the 
Exchange believes that the new NBBO Setter tiers are reasonable and 
equitable because they incentivize and reward Members for posting 
liquidity that sets the NBBO on the Exchange, which is consistent with 
the overall goals of enhancing market quality on the Exchange. The 
Exchange also believes that the proposed rebates associated with these 
tiers are non-discriminatory in that they are equally available to all 
Members and, again, because they are consistent with the goal of 
enhancing market quality on the Exchange.
    Similarly, the Exchange believes that the reductions to the NBBO 
Setter Tier 1 and NBBO Joiner rebates are reasonable and equitable 
because, while they mark reductions to the standard additional rebates, 
Members have the opportunity to receive equal or greater rebates 
through the addition of NBBO Setter Tier 2, which allows Members to 
receive the old NBBO Setter Tier 1 rebate ($0.0002) if they achieve a 
modest Setter Add TCV (0.05%), and the addition of NBBO Setter Tier 3, 
which allows Members to potentially receive $0.0004 per share where the 
Member achieves NBBO Setter Tier 3 (0.10% Setter Add TCV). Further, 
because the Exchange is lowering the NBBO Setter Tier 1 rebate to 
$0.0001 per share, it follows that the NBBO Joiner rebate should be 
reduced to an amount less than $0.0001 because NBBO Joiner liquidity is 
providing less value to the broader market and the Exchange by only 
joining the already established NBBO than an order that sets the NBBO 
for the entire market. The Exchange believes that such proposed fee 
changes for NBBO Setter Tier 1 and NBBO Joiner are non-discriminatory 
because they will apply uniformly to all Members and all Members will 
still have the opportunity to achieve the higher rebates by achieving 
the requirements to meet NBBO Setter Tiers 2 and 3.
    Finally, the Exchange believes that the proposed changes to the 
Cross-Asset Step-Up Tier 3 are reasonable and equitable because the 
threshold for achieving Requirement One is being significantly reduced 
by: (i) Adjusting the calculation to include only ADAV as a percentage 
of TCV from the current month instead of ADAV as a percentage of TCV 
from the current month minus ADAV as a percentage of TCV in January of 
2014; and (ii) by reducing the required percentage from 0.30% to 0.20%, 
both of which combined will make it easier for Members to satisfy 
Requirement One. While the proposed changes in Requirement Two to the 
Options Step-Up TCV threshold will mark an increase in the Options 
Step-Up TCV necessary to satisfy Requirement Two, the Exchange believes 
that this proposal is reasonable and equitable when evaluated in 
conjunction with the relaxation of Requirement One. Specifically, the 
Exchange believes that the relaxation of Requirement One will generally 
make Tier 3 more attainable to more Members and will incentivize 
Members that otherwise would not have been eligible for Tier 3 to add 
more liquidity to both the Exchange and BATS Options, thereby improving 
market quality on both markets. The Exchange believes that these 
proposed amendments to Cross-Asset Step-Up Tier 3 are non-
discriminatory in that they apply uniformly to all Members.

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 will 
allow the Exchange to compete more ably with other execution venues by 
providing additional competitive services (ROOC, Opening Process) at 
competitive prices as well as to amend its fee schedule to increase the 
market quality in securities traded on the Exchange, thereby making it 
a more desirable destination venue for its customers. Also, because the 
market for order execution is extremely competitive, Members may 
readily opt to disfavor the Exchange's routing services if they believe 
that alternatives offer them better value. For orders routed through 
ROOC, the proposed fees approximate the cost to the Exchange of 
executing the orders on away trading venues. 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 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 \15\ and paragraph (f)(2) 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. 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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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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

[[Page 75200]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BATS-2014-063 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-2014-063. 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-2014-063 and should be 
submitted on or before January 7, 2015.

    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. 2014-29492 Filed 12-16-14; 8:45 am]
BILLING CODE 8011-01-P