Document ID: SEC-2013-2228-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Y-Exchange, Inc.
Posted Date: 2013-12-26T05:00Z

[Federal Register Volume 78, Number 248 (Thursday, December 26, 2013)]
[Notices]
[Pages 78445-78447]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30759]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71138; File No. SR-BYX-2013-041]

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

December 19, 2013.
    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 9, 2013, 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 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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to modify its fee schedule applicable to the 
use of the Exchange effective December 9, 2013, in order to temporarily 
amend the way that the Exchange calculates rebates for accessing 
liquidity and fees for adding liquidity to the Exchange. Specifically, 
the Exchange is proposing to exclude odd lot executions from the 
calculation of average daily TCV, as defined below, until February 1, 
2014.

[[Page 78446]]

    The Exchange currently offers a tiered structure for determining 
the fees and rebates that Members receive or pay for executions on the 
Exchange. Under the tiered pricing structure, the Exchange charges 
different fees and provides different rebates to Members based on a 
Member's ADV \6\ as a percentage of average daily TCV,\7\ as well as a 
reduction in fees where a Member's order sets the NBBO and that Member 
meets or exceeds a certain threshold of ADV as a percentage of average 
daily TCV. The Exchange notes that it is not proposing to modify any of 
the existing fees or rebates or the percentage thresholds at which a 
Member may qualify for certain fees or rebates. Rather, as mentioned 
above, the Exchange is proposing to modify its fee schedule in order to 
temporarily exclude odd lot executions from the calculation of average 
daily TCV.
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    \6\ As provided in the ``Equities Pricing'' section of the fee 
schedule, ``ADV'' average daily volume calculated as the number of 
shares added or removed, combined, per day on a monthly basis, 
excluding shares added or removed on any day that trading is not 
available on the Exchange for more than 60 minutes during regular 
trading hours but continues on other markets during such time 
(``Exchange Outage'') and on the last Friday in June (the ``Russell 
Reconstitution Day''); routed shares 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 (as evidenced on such 
Member's Form BD).
    \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, 
excluding any day that the Exchange experiences an Exchange Outage 
and the Russell Reconstitution Day.
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    The Exchange is proposing to exclude odd lot executions from the 
calculation of average daily TCV through January 31, 2014 because 
recent amendments to the Consolidated Tape Association and NASDAQ UTP 
Plans \8\ require that odd lots be reported to the consolidated tape. 
Beginning on December 9, 2013, exchanges and trade reporting facilities 
are required to report odd lot executions to the consolidated 
transaction reporting plan and, as currently defined, odd lots would be 
included in the calculation of TCV. As such, the Exchange is proposing 
to amend the definition of TCV in order to exclude odd lots from the 
calculation of TCV until January 31, 2014. When calculating ADV as a 
percentage of TCV, the Exchange has historically included odd lots in 
the Member's ADV, but excluded them from TCV since they have not been 
included in the trades reported to consolidated transaction reporting 
plans. Accordingly, the proposal intends to exclude odd lots from TCV 
for the first two billing cycles in which odd lots are reported to the 
consolidated transaction reporting plans in order to create a period 
during which odd lot reporting behavior can be observed without 
affecting the fees and rebates for which a Member will qualify. The 
Exchange believes that excluding such odd lots will help to eliminate 
uncertainty faced by Members as to their monthly ADV as a percentage of 
average daily TCV because of the additional reported volume and the 
fees and rebates that this percentage will qualify for, providing 
Members with an increased certainty as to their monthly cost for trades 
executed on the Exchange. Further, excluding such odd lots through 
January 31, 2014 will allow the Exchange to evaluate the impact that 
odd lot orders would have on Member fees and rebates.
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    \8\ Securities Exchange Act Release No. 70794 (October 31, 
2013), 78 FR 66789 (November 6, 2013) (SR-CTA-2013-05); Securities 
Exchange Act Release No. 70793 (October 31, 2013), 78 FR 66788 
(November 6, 2013) (File No. S7-24-89).
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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 structures at a 
particular venue to be unreasonable and/or excessive.
    With respect to the proposed changes to the tiered pricing 
structure for adding and removing liquidity, 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 and rebates for December and January. The Exchange also believes 
that its proposal is reasonable because it is not changing the 
thresholds to become eligible or the dollar value associated with the 
fees and rebates and, moreover, by continuing to exclude odd lots from 
the calculation of average daily TCV, Members will be more likely to 
meet the minimum or higher tier thresholds for December and January, 
which will provide additional incentive to Members to increase their 
participation on the Exchange in order to meet the next tier. In 
addition, the Exchange believes that the proposed changes to fees are 
equitably allocated among Exchange constituents as the methodology for 
calculating ADV and TCV will apply equally to all Members.
    Volume-based tiers such as those maintained by the Exchange have 
been widely adopted in the equities markets, and are equitable and not 
unfairly discriminatory because they are open to all members on an 
equal basis and provide fees and rebates 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.

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. The proposed changes will help 
the Exchange to continue to incentivize higher levels of liquidity at a 
tighter spread while providing more stable and predictable costs to its 
Members. 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

    No written comments were solicited or received.

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 \9\ and paragraph (f) of Rule 19b-4 
thereunder.\10\ 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

[[Page 78447]]

public interest, for the protection of investors, or otherwise in 
furtherance of the purposes of the Act.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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-2013-041 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BYX-2013-041. 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-BYX-2013-041 and should be 
submitted on or before January 16, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30759 Filed 12-24-13; 8:45 am]
BILLING CODE 8011-01-P