Document ID: SEC-2014-1189-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Y-Exchange, Inc.
Posted Date: 2014-07-16T04:00Z

[Federal Register Volume 79, Number 136 (Wednesday, July 16, 2014)]
[Notices]
[Pages 41605-41606]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16665]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72590; File No. SR-BYX-2014-009]

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.

July 10, 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 July 1, 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, 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 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 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 the 
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 on the Exchange, the Exchange calculates ADAV and average daily 
TCV (as such terms are defined below).
    Currently, the Exchange determines the liquidity adding fee that it 
will charge to Members based on the Exchange's tiered pricing structure 
by excluding from the calculation of ADAV \6\ and average daily TCV \7\ 
any day that an Exchange System Disruption \8\ occurs as well as the 
last Friday in June (the ``Russell Reconstitution Day'').
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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.
    \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\ As provided in the fee schedule, ``Exchange Systems 
Disruption'' means any day that the Exchange's system experiences a 
disruption that lasts for more than 60 minutes during regular 
trading hours.
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    The Exchange excludes these days from the calculation of ADAV and 
TCV in order to avoid penalizing Members that might otherwise qualify 
for certain tiered pricing but that, because of special circumstances 
on a particular day, did not participate on the Exchange to the extent 
that they might have otherwise participated. Similarly, the Exchange 
believes that scheduled early market closes, which typically are the 
day before or after a holiday, may preclude some Members from 
submitting orders to the Exchange at the same level as they might 
otherwise. 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 fees 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 with a 
scheduled early market close.
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

[[Page 41606]]

with Section 6(b)(4) 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).
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    With respect to the proposed changes to the calculation of tiered 
pricing for adding liquidity to the Exchange, 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 fees for trading in any month where there is a scheduled early 
market close. The Exchange is not proposing to amend the thresholds a 
Member must achieve to become eligible for, or the dollar value 
associated with, the tiered fees. Eliminating the inclusion of any day 
with a scheduled early market close would, in many cases, 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.
    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 overall trading activity 
might be significantly lower than a typical trading 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 \11\ and paragraph (f) 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-BYX-2014-009 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-BYX-2014-009. 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 the 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-BYX-2014-009 and should be 
submitted on or before August 6, 2014.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-16665 Filed 7-15-14; 8:45 am]
BILLING CODE 8011-01-P