[Federal Register Volume 78, Number 14 (Tuesday, January 22, 2013)]
[Notices]
[Pages 4502-4505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-01114]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68659; File No. SR-BATS-2013-002]
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.
January 15, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the
[[Page 4503]]
``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on January 7, 2013, 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. 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\ and non-members of the Exchange pursuant to BATS 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 adopt pricing for orders routed by the
Exchange to a new options market, the MIAX Options Exchange (``MIAX''),
and to modify pricing for orders routed by the Exchange to NASDAQ OMX
PHLX LLC (``PHLX'') and NASDAQ OMX BX, Inc. (``BX Options''), as
further described below.
The Exchange currently charges certain flat rates for routing to
other options exchanges that have been placed into groups based on the
approximate cost of routing to such venues. The grouping of away
options exchanges is based on the cost of transaction fees assessed by
each venue as well as costs to the Exchange for routing (i.e., clearing
fees, connectivity and other infrastructure costs, membership fees,
etc.) (collectively, ``Routing Costs'').
Based on applicable Routing Costs, the Exchange currently charges
$0.11 per contract for Customer orders executed at NYSE MKT LLC
(``AMEX''), BOX Options Exchange LLC (``BOX''), Chicago Board Options
Exchange, Inc. (``CBOE''), BX Options, International Securities
Exchange, LLC (``ISE'') (Classic issues), and PHLX (Classic issues).
The Exchange currently charges $0.57 per contract for Professional,
Firm, and Market Maker orders executed at AMEX, BOX, CBOE, BX Options,
ISE (Classic issues), and PHLX (Classic issues).
Based on fees at MIAX, the Exchange believes that MIAX would be
appropriately grouped with the Exchanges listed above, as MIAX now has
fees that are approximately the same as these markets. Accordingly, the
Exchange proposes to charge $0.11 per contract for Customer orders
executed at MIAX and $0.57 per contract for Professional, Firm, and
Market Maker orders executed at MIAX.
As noted above, the Exchange currently charges $0.11 per contract
for Customer orders and $0.57 per contract for Professional, Firm, and
Market Maker orders executed at BX Options. Based on changes to pricing
at BX Options that differentiates between options classes subject to
the penny pilot program (``Penny Pilot Securities'') and those that are
not (``Non-Penny Pilot Securities''), the Exchange proposes to add
additional pricing for executions of Non-Penny Pilot Securities
resulting from orders routed to BX Options. The Exchange will maintain
the current pricing structure for Penny Pilot Securities. The Exchange
proposes to provide executions of Customer orders in Non-Penny Pilot
Securities without imposing a fee and to charge $0.95 per contract for
Professional, Firm and Market Maker orders.
As noted above, the Exchange currently charges $0.11 per contract
for Customer orders executed at PHLX in Classic issues and $0.52 per
contract for Customer orders executed at PHLX in Make/Take issues.\6\
The differentiation between Classic and Make/Take issues was based on
divergent pricing at PHLX for Customer orders between such types of
options. Specifically, PHLX has previously charged increased rates to
remove liquidity in specified symbols identified by the Exchange as
Make/Take issues (identified as ``Select Symbols'' at PHLX). With
changes to Select Symbol pricing that became effective on January 2,
2013, PHLX no longer assesses a higher fee for executions of Customer
orders in Select Symbols. Accordingly, the Exchange believes that the
pricing applicable to Make/Take issues at PHLX is no longer necessary,
and that all Customer executions resulting from orders routed to PHLX
should be charged $0.11 per contract. Despite identical fees, the
Exchange is maintaining separate references to Make/Take and Classic
pricing for orders routed to and executed [sic] PHLX because it
believes that participants that are accustomed to this distinction will
be less confused if it continues to separately list each category.
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\6\ As defined on the fee schedule, Make/Take pricing refers to
executions at the identified exchange under which ``Post Liquidity''
or ``Maker'' rebates (``Make'') are credited by that exchange and
``Take Liquidity'' or ``Taker'' fees (``Take'') are charged by that
exchange. ``Classic'' issues includes all executions not subject to
Make/Take pricing at the identified exchange.
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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.\7\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\8\ 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 or providers of routing services
if they deem fee levels to be excessive.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(4).
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As explained above, the Exchange generally attempts to approximate
the
[[Page 4504]]
cost of routing to other options exchanges, including other applicable
costs to the Exchange for routing. The Exchange believes that a pricing
model based on approximate Routing Costs is a reasonable, fair and
equitable approach to pricing. Specifically, the Exchange believes that
its proposal to adopt routing fees to MIAX and modify fees to PHLX and
BX Options is fair, equitable and reasonable because the fees are
generally an approximation of the cost to the Exchange for routing
orders to such exchanges. The Exchange believes that its flat fee
structure for orders routed to various venues is a fair and equitable
approach to pricing, as it provides certainty with respect to execution
fees at groups of away options exchanges. Under its flat fee structure,
taking all costs to the Exchange into account, the Exchange may operate
at a slight gain or a slight loss for orders routed to and executed at
MIAX, PHLX and BX Options. As a general matter, the Exchange believes
that the proposed fees will allow it to recoup and cover its costs of
providing routing services to such exchanges. The Exchange also
believes that the proposed fee structure for orders routed to and
executed at these away options exchanges is fair and equitable and not
unreasonably discriminatory in that it applies equally to all Members.
The Exchange notes that under its new pricing model, BX Options
will provide rebates for Customer orders in Non-Penny Pilot Securities
that the Exchange is not proposing to pass on to the entering Member;
instead, the Exchange proposes to provide such executions free of
charge. The Exchange specifically believes that its pricing structure
for Customer orders in Non-Penny Pilot Securities routed to BX Options
is reasonable because, although not an approximation of the cost of
routing per se, Customer orders will still receive executions free of
charge, whereas all other routed orders are charged a fee that includes
applicable Routing Costs. The Exchange believes that pricing for
Customer orders in Non-Penny Pilot Securities is fair and equitable and
non-discriminatory because it will apply equally to all Members, and
because Members can and will likely route directly to BX Options to the
extent they are specifically seeking the rebate provided for such
orders. The Exchange reiterates 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 to be excessive
or providers of routing services if they deem fee levels to be
excessive. Finally, the Exchange notes that it constantly evaluates its
routing fees, including profit and loss attributable to routing, as
applicable, in connection with the operation of a flat fee routing
service, and would consider future adjustments to the proposed pricing
structure to the extent it was recouping a significant profit from
routing to another options exchange.
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
assist the Exchange in recouping costs for routing orders to other
options exchanges on behalf of its participants. The Exchange also
notes that Members may choose to mark their orders as ineligible for
routing to avoid incurring routing fees.\9\ 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 levels to be excessive or providers of routing
services if they deem fee levels to be excessive.
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\9\ See BATS Rule 21.1(d)(8) (describing ``BATS Only'' orders
for BATS Options) and BATS Rule 21.9(a)(1) (describing the BATS
Options routing process, which requires orders to be designated as
available for routing).
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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 \10\ and Rule 19b-
4(f)(2) thereunder,\11\ 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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\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 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 email to [email protected]. Please include
File Number SR-BATS-2013-002 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-BATS-2013-002. 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-BATS-2013-002 and should be
submitted on or before February 12, 2013.
[[Page 4505]]
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).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01114 Filed 1-18-13; 8:45 am]
BILLING CODE 8011-01-P