[Federal Register Volume 78, Number 15 (Wednesday, January 23, 2013)]
[Notices]
[Pages 4946-4949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-01221]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68665; File No. SR-BYX-2013-001]
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.
January 16, 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 January 2, 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
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 BYX Rules
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal
will be effective upon filing.
---------------------------------------------------------------------------
\5\ A Member is any registered broker or dealer that has been
admitted to membership in the Exchange.
---------------------------------------------------------------------------
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 effective January
2, 2013,
[[Page 4947]]
in order to amend the rebates that it provides for removing liquidity,
amend the fees that it charges for adding liquidity and to modify
certain routing fees, as described in further detail below.
Rebates To Remove Liquidity
The Exchange currently provides a rebate of $0.0002 per share for
orders that remove liquidity from the Exchange. The Exchange proposes
to introduce a tiered pricing structure for executions that remove
liquidity. Under the proposed tiered pricing structure, a Member must
add a daily average of at least 50,000 shares of liquidity on BYX
Exchange in order to receive this rebate. As with its other current
tiered pricing, the daily average in order to receive the liquidity
removal rebate will be calculated based on a Member's activity in the
month for which the rebates would apply. For Members that do not reach
the tier to receive the liquidity removal rebate, the Exchange proposes
to eliminate the rebate. The Exchange does not, however, propose to
charge such Members, but rather, will provide such executions free of
charge.
Consistent with the current fee structure, the fee structure for
executions that remove liquidity from the Exchange described above 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.
In connection with the proposed change to the Exchange's fees to
remove liquidity, the Exchange proposes to modify a footnote on its fee
schedule related to its Retail Price Improvement (``RPI'') program,
which references the current standard liquidity removal rebate of
$0.0002 per share. This footnote was intended to make clear that
applicable removal fees, and not specific RPI pricing, would apply to
certain executions (Type 2 Retail Orders) that remove displayed
liquidity. The Exchange proposes to modify this footnote to simply
reference the applicable standard rebate or fee to access liquidity in
order to remove the necessity to update the footnote any time that
pricing applicable to removing displayed liquidity changes. Under the
proposed pricing structure, a Member that qualifies for the $0.0002 per
share liquidity removal rebate would receive such rebate for any Type 2
Retail Order that removes displayed liquidity, and a Member that does
not qualify for the liquidity removal rebate would not receive such
rebate but would instead receive the execution of a Type 2 Retail Order
that removes displayed liquidity free of charge.
Fees To Add 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 at a reduced fee 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. Members that
qualify for the NBBO Setter Program are charged a fee of $0.0002 per
share for executions resulting from orders that add liquidity to the
BYX Exchange order book and set the NBBO. All other executions
resulting from liquidity added by any Member are currently subject to a
fee of $0.0003 per share.
The Exchange proposes to increase the ADV requirement for the NBBO
Setter Program to a requirement that a Member maintain ADV on the
Exchange of at least 0.5% of the total TCV during the month in order to
receive the reduced fee of $0.0002 per share on orders that set the
NBBO.
The Exchange also proposes to add tiered pricing for executions of
orders that add liquidity but do not set a new NBBO. The Exchange
proposes to use the same criteria, specifically, that a Member
maintains ADV on the Exchange of at least 0.5% of the total TCV during
the month, in order for a Member to receive a reduced fee on executions
of orders that add liquidity but do not set the NBBO. The Exchange
proposes to charge a reduced fee of $0.00025 per share to Members that
qualify based on their ADV on the Exchange, which is a slight reduction
from the current standard fee to add liquidity of $0.0003 per share.
Lastly, the Exchange proposes to charge Members that do not qualify
for a reduced fee based on their volume on the Exchange a fee of
$0.0005 per share for executions resulting from orders that add
liquidity to the Exchange, which is an increase from the current
standard fee to add liquidity of $0.0003 per share.
The Exchange does not propose to modify its existing definitions of
ADV or TCV in connection with the changes described above. The Exchange
notes that, in contrast to the tiered pricing structure for removing
liquidity, described above, which only takes into account a Member's
liquidity adding activity, the definition of ADV used for the NBBO
Setter Program and the proposed tiered pricing structure for other
executions that add liquidity includes both a Member's liquidity adding
and removing activity.
Routing Fees
The Exchange proposes to modify the fee charged by the Exchange for
its CYCLE, RECYCLE, Parallel D and Parallel 2D routing strategies from
$0.0028 per share to $0.0029 per share. To be consistent with this
change, the Exchange proposes to charge 0.29%, rather than 0.28%, 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.
Finally, the Exchange proposes to modify pricing for its SLIM \6\
routing strategy, which is focused on seeking execution of orders while
minimizing execution costs by setting a priority on routing, when
possible, to low cost execution venues on the Exchange's routing table.
The Exchange currently charges three different fees for executions
through the SLIM routing strategy. Specifically, the Exchange charges
the following fees for executions of orders routed through the SLIM
routing strategy: (i) A fee of $0.0029 per share for executions at BATS
Exchange, Inc. (``BZX''), (ii) a fee of $0.0024 per share for
executions at the New York Stock Exchange LLC (``NYSE''), and (iii) a
fee of $0.0026 per share for executions at any other venue. The
Exchange proposes to increase the fee for executions resulting from the
SLIM routing strategy at any other venue from $0.0026 per share to
$0.0027 per share. The Exchange does not propose any other changes to
SLIM routing fees.
---------------------------------------------------------------------------
\6\ As defined in BYX Rule 11.13(a)(3)(H).
---------------------------------------------------------------------------
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
[[Page 4948]]
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.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
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 many Members that remove liquidity from the Exchange,
add liquidity to the Exchange and/or route orders through the
Exchange's routing strategies will be paying higher fees or receiving
lower rebates due to the proposal, the increased revenue received by
the 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.
With respect to the proposed tiered pricing structure for removing
liquidity from the Exchange, the Exchange believes that its proposal is
reasonable because it will allow Members that achieve a relatively low
threshold of added liquidity, and thus who contribute to the depth of
liquidity generally available on the Exchange, to continue to receive
the current rebate. Although Members that do not achieve the volume
threshold will no longer receive the rebate to remove liquidity, the
Exchange believes that its proposal is reasonable because such Members
will not be charged a fee to remove liquidity but will receive such
executions free of charge. Volume-based tiers such as the liquidity
removal tier proposed 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
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.
The Exchange believes that its proposal to modify the footnote
related to the RPI program is reasonable, equitably allocated and not
unfairly discriminatory because this change merely achieves the goal of
the existing language by making clear that standard pricing to remove
liquidity, whatever that pricing may be, will be applied to Type 2
Retail Orders that remove displayed liquidity, and that RPI program
pricing does not apply.
With respect to the Exchange's proposal to increase the threshold
necessary to participate in the NBBO Setter Program, the Exchange
believes that its proposal is reasonable because the tier is intended
to incentivize Members to maintain or increase their participation on
the Exchange. As noted above, volume-based tiers such as the threshold
necessary to qualify for the NBBO Setter Program and the reduced fee to
add liquidity are equitable and not unfairly 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.
With respect to the fee tier for qualifying Members that add
liquidity but do not set the NBBO and the higher fee for Members that
do not qualify for such tier, the Exchange believes that the proposed
fees are reasonable as both fees are still comparable to other market
centers that charge to add displayed liquidity. The Exchange notes that
at least one market center charges a higher fee to add displayed
liquidity.\9\ Although the proposed changes will result in increased
fees charged to Members that do not qualify for the tier, 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. Further, the Exchange again notes that the tiered fee
structure whereby Members meeting certain volume thresholds will
receive reduced fees on their added liquidity executions is equitable
and not unfairly discriminatory because it will be open to all Members
on an equal basis the reduced fee is reasonably related to the value to
the 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.
---------------------------------------------------------------------------
\9\ NASDAQ OMX BX charges up to $0.0018 per share, with the
potential for a slightly lower fee to the extent a participant meets
certain quoting criteria.
---------------------------------------------------------------------------
The Exchange believes that its increase to the standard routing fee
is reasonable in that it will align the Exchange's standard routing fee
with that charged by the Exchange's affiliate, BZX, and is consistent
with routing fees charged with others for routing services. The
proposed increase is also equitable and non-discriminatory in that it
will be increased equally for all Members. The Exchange also notes that
it operates in a highly competitive market in which market participants
can readily choose amongst market participants that provide routing
services, and believes that market participants will simply not use the
Exchange for routing services if they deem the fee levels set to be
excessive.
Finally, the Exchange believes that the proposed changes to the
Exchange's SLIM routing strategy is reasonable, equitable and non-
discriminatory in that it is proposed in order to account for certain
increased costs to the Exchange in providing routing services, the fee
will be increased equally for all Members, and the SLIM routing
strategy is a completely optional routing service that Members must
affirmatively choose to use. The Exchange also notes that the increased
fee is still lower than its standard routing fee, thus providing
savings to Members that prefer to include access fee cost savings as a
factor in their routing determinations.
B. Self-Regulatory Organization's Statement on Burden on Competition
Because the market for order execution is extremely competitive,
Members may choose to preference other market centers ahead of the
Exchange if they believe that they can receive better fees or rebates
elsewhere. Similarly, because the market for order routing services is
also competitive, Members may readily opt to disfavor the Exchange's
routing services if they believe that alternatives offer them better
value. Because certain of the proposed changes are intended to provide
incentives to Members that will result in increased activity on the
Exchange, such changes are necessarily competitive. However, 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 Exchange does
not believe that any of the changes represent a significant departure
from previous pricing offered by the Exchange or pricing offered by the
Exchange's competitors.
[[Page 4949]]
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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
\11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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-BYX-2013-001 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-2013-001. 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-2013-001, and should be
submitted on or before February 13, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01221 Filed 1-22-13; 8:45 am]
BILLING CODE 8011-01-P