Document ID: SEC-2017-0623-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats EDGX Exchange, Inc.
Posted Date: 2017-04-17T04:00Z

[Federal Register Volume 82, Number 72 (Monday, April 17, 2017)]
[Notices]
[Pages 18180-18182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07640]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80434; File No. SR-BatsEDGX-2017-15]

Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change to Fees 
for Use on the Exchange's Equities Options Platform

April 11, 2017.
    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 31, 2017, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission (the 
``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 EDGX Rules 
15.1(a) and (c).
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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.bats.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 amend its fee schedule for its equity 
options platform (``EDGX Options'') to modify fees for its recently 
adopted Qualified Contingent Cross Orders (``QCC'').\6\
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    \6\ See Securities Exchange Act Release No. 79942 (February 1, 
2017), 82 FR 9804 (February 8, 2017) (SR-BatsEDGX-2017-11) (``QCC 
Filing'').
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Background of QCC
    The Exchange recently adopted functionality allowing participants 
on the Exchange the ability to submit to the Exchange Qualified 
Contingent Cross Orders, an order type offered by multiple other 
options exchanges.\7\ The operation of Qualified Contingent Cross 
Orders on the Exchange is substantially similar in all material 
respects to the operation of such orders on such other exchanges.\8\
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    \7\ See ISE Rule 715(j), Supplementary Material .01 to ISE Rule 
715 and ISE Rule 721(b); see also CBOE Rule 6.53(u); NASDAQ PHLX 
Rule 1080(o); NYSE Arca Rule 6.62(bb), Commentary .02 to NYSE Arca 
Rule 6.62 and NYSE Arca Rule 6.90.
    \8\ See QCC Filing supra, note 6.
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Pricing of QCC Orders
    Since the launch of QCC order functionality on the Exchange on 
March 3, 2017, all executions in QCC orders have been provided free of 
charge. The Exchange proposes to amend these fees to reflect the value 
of the execution opportunities provided by the QCC functionality. Thus, 
the Exchange proposes to adopt fees corresponding to the four new fee 
codes that were adopted in connection with QCC, as described below.
    Fee Code QA. Currently, fee code QA is appended to Customer \9\ 
``QCC Agency Orders'', which are QCC orders represented as an agent by 
a Member on behalf of another party and submitted for execution 
pursuant to Rule 21.1. The Exchange proposes that orders that yield fee 
code QA would provide the Member with a standard rebate of $0.05 per 
contract.
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    \9\ ``Customer'' applies to any transaction identified by a 
Member for clearing in the Customer range at the OCC, excluding any 
transaction for a Broker Dealer or a ``Professional'' as defined in 
Exchange Rule 16.1
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    Fee Code QC. Currently, fee code QC is appended to Customer ``QCC 
Contra Orders'', which are QCC orders submitted by a Member for 
execution that will potentially execute against the QCC Agency Order 
pursuant to Rule 21.1. The Exchange proposes that orders that yield fee 
code QC would provide the Member with a standard rebate of $0.05 per 
contract.
    Fee Code QM. Currently, fee code QM is appended to Non-Customer\10\ 
QCC Agency Orders, as described above. The Exchange proposes that for 
orders that yield fee code QM the Member would be charged a fee of 
$0.019 [sic] per contract.
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    \10\ ``Non-Customer'' applies to any transaction that is not a 
Customer order.
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    Fee Code QN. Currently, fee code QN is appended to Non-Customer QCC 
Agency Orders, as described above. The Exchange proposes that for 
orders that yield fee code QN the Member would be charged a fee of 
$0.019 [sic] per contract.
Designated Give Up Footnote
    Footnote 5 of the fee schedule currently specifies that when order 
is submitted with a Designated Give Up, as defined in Rule 21.12(b)(1), 
the applicable rebates for such orders when executed on the Exchange 
(yielding fee code BC,\11\ NC \12\ or PC \13\) are provided to the 
Member who routed the order to the Exchange. Pursuant to Rule 21.12, 
which specifies the process to submit an order with a Designated Give 
Up, a Member acting as an options routing firm on behalf of one or more 
other Exchange Members (a ``Routing Firm'') is able to route orders to 
the Exchange and to immediately give up the party (a party other than 
the Routing Firm itself or the Routing Firm's own clearing firm) who 
will accept and clear any resulting transaction. Because the Routing 
Firm is

[[Page 18181]]

responsible for the decision to route the order to the Exchange, the 
Exchange provides such Member with the rebate when orders that yield 
fee code BC, NC or PC are executed.
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    \11\ Fee code BC is appended Customer orders represented as 
agent by a Member on behalf of another party and submitted to BAM 
for potential price improvement pursuant to Rule 21.19, and provided 
a standard rebate of $0.14 per share. Id.
    \12\ Fee code NC is appended to Customer orders which add 
liquidity in Non-Penny Pilot securities is provided a standard 
rebate of $0.05 per share. Id.
    \13\ Fee code PC is appended to Customer orders which add 
liquidity in Penny Pilot securities is provided a standard rebate of 
$0.05 per share. Id.
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    In connection with the adoption of fees applicable to QCC as 
described above the Exchange proposes to add fee code QA and QC to the 
lead-in sentence of footnote 5 and to append footnote 5 to fee code BC 
[sic] in the Fee Codes and Associated Fees table of the fee schedule.
Implementation Date
    The Exchange proposes to implement this amendment to its fee 
schedule on April 3, 2017.
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.\14\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\15\ 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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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
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    The Exchange's proposal establishes corresponding fees and rebates 
for QCC Orders. The Exchange believes that its proposed fees and 
rebates related to QCC Orders are reasonable and fair and equitable as 
the fees will allow the Exchange to continue to offer QCC Order 
functionality, which is functionality offered on other options 
exchanges, with pricing that is comparable to that offered by other 
options exchanges. The Exchange further believes that this pricing 
structure is non-discriminatory, as it applies equally to all Members. 
In addition, the Exchange notes that, while orders for other market 
participants (Non-Customers) will be assessed a fee, Customers will 
receive a rebate. The Exchange believes the proposed rebate for 
Customer QCC Orders (in contrast to the fee for Non-Customer QCC 
Orders) is equitable and not unfairly discriminatory as the Exchange 
and other options exchanges have generally established pricing 
structures that are intended to encourage Customer order flow.
    In connection with the adoption of fees applicable to QCC, the 
Exchange proposes to QA and QC to the lead-in sentence of footnote 5 
and to append footnote 5 to fee code BC [sic] in the Fee Codes and 
Associated Fees table of the fee schedule. The Exchange believes this 
proposal is a reasonable and equitable allocation of fees and dues and 
is not unreasonably discriminatory because, as is currently the case 
pursuant to footnote 5, the proposal simply will make clear that a firm 
acting as a Routing Firm that routes QCC Orders to the Exchange will be 
provided applicable rebates based on the Routing Firm's decision to 
route the order to the Exchange.

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

    The Exchange does not believe that the proposed rule change to 
adopt fees related to QCC Orders will impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The Exchange's proposed functionality is open to all market 
participants. Further, the proposed rule will allow the Exchange to 
continue to offer QCC functionality, which in turn will allow the 
Exchange to compete with other options exchanges that currently offer 
QCC Orders. The pricing is designed to be competitive with pricing on 
other options exchanges and QCC functionality is a competitive offering 
by the Exchange. For these reasons, the Exchange does not believe that 
the proposed fee schedule changes will impose any burden on competition 
not necessary or appropriate in furtherance of the purposes of the Act, 
and believes the proposed change will enhance competition.

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 \16\ and paragraph (f) of Rule 19b-4 
thereunder.\17\ 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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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-BatsEDGX-2017-15 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-BatsEDGX-2017-15. 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-BatsEDGX-2017-15, and should 
be submitted on or before May 8, 2017.

[[Page 18182]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07640 Filed 4-14-17; 8:45 am]
BILLING CODE 8011-01-P