[Federal Register Volume 76, Number 135 (Thursday, July 14, 2011)]
[Notices]
[Pages 41541-41543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17692]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64846; File No. SR-BYX-2011-013]
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.
July 8, 2011.
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, 2011, 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 proposes to amend the fee schedule applicable to
Members \5\ of the Exchange pursuant to BYX Rules 15.1(a) and (c).
Changes to the fee schedule pursuant to this proposal will be 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 use
of the Exchange effective July 1, 2011, in order to: (i) Decrease the
standard rebate to remove liquidity from the Exchange; (ii) modify the
tiered pricing structure applicable to adding displayed liquidity to
the Exchange's order book; (iii) adopt a fee for non-displayed orders
that add liquidity to the Exchange and receive price improvement when
executed; (iv) increase the standard routing fee for the CYCLE,
RECYCLE, Parallel D and
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Parallel 2D routing strategies; \6\ and (v) make other modifications to
certain other non-standard routing options and strategies.
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\6\ As defined in BYX Rule 11.13.
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(i) Decrease to Standard Rebate for Removing Liquidity
The Exchange proposes to reduce the rebate that it provides for
orders that remove liquidity from the Exchange from $0.0003 per share
to $0.0002 per share. Consistent with the current rebate to remove
liquidity, the rebate per share for executions that remove liquidity
from the Exchange will not apply to executions that remove liquidity in
securities priced under $1.00 per share. The fee for such executions
will remain at 0.10% of the total dollar value of the execution.
Similarly, as is currently the case for adding liquidity to the
Exchange, there will be no liquidity rebate for adding liquidity in
securities priced under $1.00 per share.
(ii) Changes to Tiered Fee Structure for Adding Liquidity
The Exchange currently maintains a tiered pricing structure for
adding displayed liquidity in securities priced $1.00 and above that
allows Members to add liquidity free of charge to the extent such
liquidity sets the national best bid or offer (the ``NBBO Setter
Program''). The NBBO Setter Program is applicable to a Member's orders
so long as the Member submitting the order achieves the applicable
average daily volume (``ADV'') requirement of at least 0.1% of the
total consolidated volume (``TCV'') during the month. All other
executions resulting from liquidity added by a Member are subject to a
fee of $0.0002 per share. The Exchange proposes to increase this
standard fee to add liquidity from $0.0002 per share to $0.0003 per
share and to adopt a fee to add liquidity under the NBBO Setter
Program. Specifically, the Exchange proposes to charge $0.0002 per
share for Member executions under the NBBO Setter Program, which will
continue to be available for Members with an ADV of at least 0.1% of
TCV during the month. The Exchange does not propose to modify either
the volume level required to meet the NBBO Setter Program or its
existing definitions of ADV or TCV in connection with this change.
(iii) Fee for Non-Displayed Price Improved Orders
As defined on the Exchange's current fee schedule, ``non-displayed
liquidity'' includes liquidity resulting from all forms of Pegged
Orders,\7\ Mid-Point Peg Orders,\8\ and Non-Displayed Orders,\9\ but
does not include liquidity resulting from Reserve Orders \10\ or
Discretionary Orders.\11\ The Exchange currently charges $0.0010 per
share for non-displayed orders that add liquidity to and are executed
on the Exchange. The Exchange recently received approval of a rule to
allow non-displayed orders that are not executable at their most
aggressive price to be executed at one-half minimum price variation
less aggressive than that price.\12\ Accordingly, such non-displayed
orders will receive price improvement upon execution. Because such
orders will receive price improvement, the Exchange proposes to execute
the orders subject to a fee of $0.0030 per share. The Exchange believes
that price improvement received for executions of non-displayed orders
will offset the additional fee charged by the Exchange for such orders.
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\7\ As defined in BYX Rule 11.9(c)(8).
\8\ As defined in BYX Rule 11.9(c)(9).
\9\ As defined in BYX Rule 11.9(c)(11).
\10\ As defined in BYX Rule 11.9(c)(1).
\11\ As defined in BYX Rule 11.9(c)(10).
\12\ See Securities Exchange Act Release No. 64753 (June 27,
2011) (SR-BYX-2011-009).
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(iv) Increase to Fee for Standard Best Execution Routing Strategies
The Exchange proposes to modify the fee charged by the Exchange for
its CYCLE, RECYCLE, Parallel D and Parallel 2D routing strategies from
$0.0026 per share to $0.0028 per share. To be consistent with this
change, the Exchange proposes to charge 0.28%, rather than 0.26%, of
the total dollar value of the execution for any security priced under
$1.00 per share that is routed away from the Exchange through these
strategies.
(v) Other Modifications to Non-Standard Routing Rates
Various market centers, including the Exchange's affiliate, BATS
Exchange, Inc. (``BZX''), are implementing certain pricing changes
effective July 1, 2011. The Exchange proposes various changes to its
routing strategies in connection with such changes so that fees charged
and rebates provided reflect a direct pass-through of the fee charged
or rebate received when routing directly to such market centers. For
instance, the Exchange's affiliate, BZX, is increasing the fee charged
for shares removed from BZX from $0.0028 per share to $0.0029 per
share. Accordingly, the Exchange proposes to modify its Destination
Specific Order \13\ to BZX, as well as its TRIM \14\ and SLIM \15\
routing strategies with respect to any executions at BZX, to charge a
fee of $0.0029 per share. The Exchange also proposes to modify its TRIM
routing strategy to reflect the exact rate paid or assessed for
executions at NASDAQ BX and EDGA Exchange, respectively. The Exchange
currently identifies both of these venues as ``low priced venues'' and
the Exchange does not charge or rebate its Members for orders routed to
and executed by such venues. As proposed, the Exchange will pass on
rebates that are paid by these venues in full. Specifically, the
Exchange proposes to rebate $0.0014 per share for TRIM routed orders
executed at NASDAQ BX, as this is the same rate paid by NASDAQ BX and
is thus a direct pass-through. Similarly, the Exchange proposes to
rebate $0.00015 per share for TRIM routed orders executed at EDGA
Exchange, as this is, again, a direct pass-through of the rebate
provided by EDGA Exchange.
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\13\ As defined in BYX Rule 11.9(c)(12).
\14\ As defined in BYX Rule 11.13(a)(3)(G).
\15\ As defined in BYX Rule 11.13(a)(3)(H).
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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.\16\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\17\ 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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\16\ 15 U.S.C. 78f.
\17\ 15 U.S.C. 78f(b)(4).
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The changes to Exchange execution fees and rebates proposed by this
filing are intended to attract order flow to the Exchange by continuing
to offer competitive pricing while also allowing the Exchange to
continue to offer incentives to providing aggressively priced displayed
liquidity. While Members that remove liquidity from the Exchange, add
liquidity to the Exchange and/or route orders through the Exchange's
standard routing strategies will be paying higher fees or receiving
lower rebates due to the proposal, the increased revenue received by
the
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Exchange will be used to continue to fund programs that the Exchange
believes will attract additional liquidity and thus improve the depth
of liquidity available on the Exchange.
The Exchange believes that basing its tiered rebate structure on
overall TCV, rather than a static number irrespective of overall volume
in the securities industry, is a fair and equitable approach to
pricing. Volume-based tiers such as the liquidity rebate tiers offered
by the Exchange have been widely adopted in the equities markets, and
are equitable and not unreasonably discriminatory because they are open
to all members on an equal basis and provide 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 not unreasonably discriminatory because
it is consistent with the overall goals of enhancing market quality.
Despite the decrease in rebate for all Members, the Exchange
believes that its proposed fee structure is fair and equitable as the
Exchange's standard rebate to remove liquidity still remains higher
than standard rebates paid by at least one other market center with a
similar fee structure, EDGA Exchange ($0.00015 per share).
Also, the Exchange's proposed NBBO Setter liquidity adding fee of
$0.0002 per share and standard displayed liquidity adding fee of
$0.0003 per share still remain approximately the same as one other
market center that imposes a fee to add liquidity, EDGA Exchange
($0.00025 charge per share). The Exchange's proposed fees for adding
liquidity are also significantly lower than the standard liquidity
adding fees of NASDAQ OMX BX ($0.0018 charge per share). Additionally,
the Exchange believes that the NBBO Setter Program will continue to
incentivize the entry of more aggressive orders that will create
tighter spreads, benefitting both Members and public investors. To the
extent the proposed changes will result in increased fees charged to
Members, the Exchange believes that any additional revenue it receives
will allow the Exchange to devote additional capital to its operations
and to continue to offer competitive pricing, which, in turn, will
benefit Members of the Exchange.
The Exchange believes that the additional fee for executions of
non-displayed orders that receive price improvement is appropriate
because the price improvement received will offset the change in the
fee structure for such orders. The Exchange does not want to overly
incentivize hidden liquidity, as this would be contrary to the goals of
this proposal. Finally, the Exchange believes that the proposed changes
to the Exchange's non-standard routing fees and strategies are
competitive, fair and reasonable, and non-discriminatory in that they
are designed to mirror the cost and/or rebate applicable to the
execution if such routed orders were executed directly by the Member at
each away market.
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
Pursuant to Section 19(b)(3)(A)(ii) of the Act \18\ and Rule 19b-
4(f)(2) thereunder,\19\ the Exchange has designated this proposal as
establishing or changing a due, fee, or other charge applicable to the
Exchange's Members and non-members, which renders the proposed rule
change effective upon filing.
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\18\ 15 U.S.C. 78s(b)(3)(A)(ii).
\19\ 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 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.
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 e-mail to [email protected]. Please include
File Number SR-BYX-2011-013 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-2011-013. 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-BYX-2011-013 and should be
submitted on or before August 4, 2011.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17692 Filed 7-13-11; 8:45 am]
BILLING CODE 8011-01-P