[Federal Register Volume 78, Number 62 (Monday, April 1, 2013)]
[Notices]
[Pages 19559-19561]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-07471]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69237; File No. SR-BATS-2013-021]
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 26, 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 March 18, 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 modify pricing applicable to the
Exchange's options platform (``BATS Options'') with respect to orders
in Mini Options routed by the Exchange and executed at an away options
exchange. Mini Options overlie 10 equity or ETF shares, rather than the
standard 100 shares.\6\ Mini Options are currently approved on the
following five (5) underlying securities: SPDR S&P 500 ETF (``SPY''),
Apple Inc. (``AAPL''), SPDR Gold Trust (``GLD''), Google Inc.
(``GOOG''), and Amazon.com, Inc. (``AMZN''). BATS
[[Page 19560]]
Options will begin allowing trading in Mini Options on March 18,
2013.\7\
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\6\ See Securities Exchange Act Release No. 69018 (March 1,
2013), 78 FR 15090 (March 8, 2013) (Notice of filing and immediate
effectiveness allowing Mini Options to be listed and traded on BATS
Options) (SR-BATS-2013-013).
\7\ The three classes are the Nasdaq-100 Index Tracking Stock
(``QQQQ''), SPY, and the iShares Russell 2000 Index Fund (``IWM'').
QQQQ, SPY, and IWM are quoted in $0.01 for all options series.
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In conjunction with the beginning of trading in Mini Options on
March 18, 2013, the Exchange is proposing to implement pricing for
routing orders in Mini Options to other options exchanges. The Exchange
is proposing to introduce simple pricing in which the Exchange will
charge one of two possible fees for routed orders in Mini Options: one
flat rate for all orders in Mini Options that are directed intermarket
sweep orders (``Directed ISOs'') that execute at an away options
exchange and a separate flat rate for all orders in Mini Options that
are not Directed ISOs that are routed to and executed at an away
options exchange. The Exchange is proposing to charge these flat rates
for routing orders in Mini Options to away options exchanges based on
the approximate cost of routing to such venues. These fees are 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 is proposing to:
(i) charge $0.15 per contract for all orders in Mini Options that are
Directed ISOs that are routed to and executed at away options
exchanges; and (ii) charge $0.10 per contract for all other orders in
Mini Options that are routed to and executed at away options exchanges.
Notices distributed by other options exchanges indicate that removal
fees will range from free to $0.12 per contract executed in Mini
Options. In order to provide certainty around execution costs for
participants, the Exchange is proposing to introduce these flat routing
fees that approximate the Exchange's Routing Costs.
The Exchange is not proposing to modify fees for any of its
existing routing services.
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 or providers of routing services
if they deem fee levels to be excessive.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
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As explained above, the Exchange generally attempts to approximate
the 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 implement fees for routing Mini
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 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 in Mini Options routed to and
executed at away options exchanges. 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 in Mini
Options 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 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.\10\ 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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\10\ 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
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written comments from members or other interested parties.
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 \11\ and paragraph (f) of Rule 19b-4
thereunder.\12\ 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.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 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 proposal is
consistent with the Act. Comments may be submitted by any of the
following methods:
[[Page 19561]]
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-2013-021 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-2013-021. 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-2013-021 and should be
submitted on or before April 22, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-07471 Filed 3-29-13; 8:45 am]
BILLING CODE 8011-01-P