Document ID: SEC-2010-0385-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2010-03-12T05:00Z

[Federal Register: March 12, 2010 (Volume 75, Number 48)]
[Notices]               
[Page 11951-11953]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12mr10-167]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61650; File No. SR-BATS-2010-005]

 
 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 4, 2010.
    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 February 25, 2010, 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. BATS 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 proposes to modify its fee schedule applicable to 
Members \5\ of the Exchange pursuant to BATS Rules 15.1(a) and (c). 
While changes to the fee schedule pursuant to this proposal will be 
effective upon filing, the changes will become operative on February 
26, 2010.
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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, on the Commission's Web site at 
http://www.sec.gov, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

[[Page 11952]]

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 use 
of the Exchange effective February 26, 2010, in order to (i) establish 
fees for executions that occur on the BATS Exchange options market 
(``BATS Options''); \6\ (ii) establish fees for executions routed via 
BATS Options to other options exchanges; and (iii) make other technical 
changes to the fee schedule.
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    \6\ On January 26, 2010, the Commission approved SR-BATS-2009-
031, which proposed rules for the trading of equity options on the 
Exchange. See Securities Exchange Act Release No. 61419 (January 26, 
2010), 75 FR 5157 (February 1, 2010) (SR-BATS-2009-031).
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(i) Fees for Executions on BATS Options
    The Exchange proposes to implement fees based on the pricing model 
currently in place for the trading of equities via the Exchange. 
Specifically, the Exchange will assess fees for the execution of 
options contracts based upon which Member provides liquidity to the 
BATS Options order book and which Member takes liquidity from BATS 
Options order book. This model seeks to attract liquidity to BATS 
Options by providing credits to Members that provide liquidity, and to 
assess a fee to the Member whose order executes against an order that 
has provided liquidity. An order that provides liquidity is any order 
that is entered into BATS Options and is placed on the BATS Options 
order book for potential execution. An order that takes liquidity is 
one that is entered into BATS Options and that executes against an 
order resting on the BATS Options order book.
    The Exchange is proposing to charge $0.30 per contract for 
executions that remove liquidity from BATS Options and to rebate $0.20 
per contract for executions that add liquidity to BATS Options.
(ii) Routing Fees for Orders Routed Away From BATS Options
    The Exchange proposes to charge the routing charges per contract as 
described below. All charges by the Exchange for routing away from BATS 
Options are applicable only in the event that an order is executed. In 
other words, there is no charge for orders that are routed away from 
the Exchange but are not filled.
    BATS Options will pass through the charges assessed by other 
markets for the execution of options orders, plus an additional charge. 
Specifically, in connection with routing of orders other than directed 
ISOs away from BATS Options, the Exchange proposes to charge $0.05 per 
contract plus all destination exchange fees incurred for the execution. 
In connection with routing of directed ISOs away from BATS Options, the 
Exchange proposes to charge $0.10 per contract plus all destination 
exchange fees incurred for the execution. For instance, if the Exchange 
routes an order (other than a directed ISO) to another options exchange 
and is charged $0.30 for the execution, then the total charge billed to 
the Member will be $0.35. Similarly, if the Exchange routes a directed 
ISO to another options exchange and is charged $0.30 for the execution, 
then the total charge billed to the Member will be $0.40. With respect 
to orders that are executed at other options exchanges without a charge 
to the Exchange, such orders will only be assessed the applicable 
additional charge (i.e., $0.05 per contract for all orders other than 
directed ISOs and $0.10 per contract for all directed ISOs).
(iii) Technical Changes to Fee Schedule
    The Exchange proposes to create headings to make clear which fees 
apply to the Exchange's pre-existing equity securities trading 
platform, the BATS Options trading platform, which will commence 
operations on February 26, 2010, or both. At this time, the Exchange is 
not proposing to charge for logical ports for Members who connect to 
BATS Options. Accordingly, the Exchange has intentionally left the 
portions of the fee schedule that set forth fees for logical ports 
classified under the new ``Equities Pricing'' heading. However, the 
Exchange's proposal to implement physical port fees, which was recently 
approved,\7\ was intended to operate such that physical port fees 
charged by the Exchange apply to any Member or non-Member that 
maintains more than four (4) physical ports at either of the Exchange's 
data centers, regardless of their activities on the Exchange (e.g., 
equities trading, options trading, receipt of Exchange market data or 
some combination of the foregoing). Accordingly the Exchange has also 
created a heading to make clear that such physical connection charges 
are applicable to all Exchange constituents.
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    \7\ See Securities Exchange Act Release No. 61545 (February 19, 
2010) (SR-BATS-2009-032).
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    In addition, the Exchange proposes an amendment to the description 
of pricing for executions on the Exchange in equity securities priced 
below $1.00 to make clear that the 0.10% fee applies to executions on 
the Exchange that remove liquidity from the Exchange by adding the 
words ``to remove liquidity'' to the existing text.
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.\8\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\9\ 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. Upon launch, BATS Options will be the 
eighth options market in the national market system. Joining BATS 
Options and electing to trade options via BATS Options is entirely 
voluntary. Under these circumstances, the fees for trading on and 
through BATS Options must be competitive in order for BATS Options to 
attract order flow, execute orders, and grow as a market. The Exchange 
believes that the fees and credits proposed for BATS Options are 
competitive with those charged by other venues. In addition, the 
Exchange believes that the proposed rates are equitable in that they 
apply uniformly to all Members.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).

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[[Page 11953]]

 (B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change imposes 
any burden on competition.

 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 proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \10\ and Rule 
19b-4(f)(2) thereunder,\11\ because it establishes or changes a due, 
fee or other charge imposed on members by the Exchange. Accordingly, 
the proposal is effective upon filing with the Commission.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal 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 e-mail to rule-comments@sec.gov. Please include 
File No. SR-BATS-2010-005 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 No. SR-BATS-2010-005. This file 
number should be included on the subject line if e-mail 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 
a.m. and 3 p.m. Copies of such filing will also 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 No. SR-BATS-2010-005 and should be 
submitted on or before April 2, 2010.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5296 Filed 3-11-10; 8:45 am]
BILLING CODE 8011-01-P