[Federal Register Volume 78, Number 70 (Thursday, April 11, 2013)]
[Notices]
[Pages 21651-21653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08465]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69317; File No. SR-BYX-2013-012]
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.
April 5, 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 27, 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.
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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 BYX 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 April 1, 2013.
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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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to modify its fee schedule effective April 1,
2013, in order to amend the rebates that it provides for removing
liquidity and to amend the fees that it charges for adding liquidity,
as described in further detail below.
Rebates to Remove Liquidity
The Exchange currently offers a tiered pricing structure for
executions that remove liquidity. Under the 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 a rebate to remove liquidity. For
Members that meet this requirement, the Exchange provides three
different rebates, as described below.
The Exchange currently provides a rebate of $0.0004 per share to
remove liquidity for Members that have an average daily volume
(``ADV'') on the Exchange of at least 0.5% of the total consolidated
volume (``TCV''), a rebate of $0.0003 per share to remove liquidity for
Members that have an ADV on the Exchange of at least 0.25% but less
than 0.5% of TCV, and a rebate of $0.0002 per share to remove liquidity
for Members that add the requisite number of shares of liquidity on BYX
Exchange but do not qualify for a rebate based on TCV as set forth
above. As with its other current tiered pricing, the daily average in
order to receive the liquidity removal rebate is calculated based on a
Member's activity in the month for which the rebates would apply. For
Members that do not reach a tier to receive the liquidity removal
rebate, the Exchange does not currently provide rebate. The Exchange
does not, however, charge such Members, but rather, provides such
executions free of charge. The Exchange does not propose modifying the
existing rebate structure for Members that do not achieve one of the
three enhanced rebate tiers.
The Exchange does not propose to change the requirement that a
Member add a daily average of at least 50,000 shares of liquidity on
BYX Exchange in order to receive a rebate to remove liquidity. The
Exchange proposes to
[[Page 21652]]
increase by $0.0003 per share the rebates provided to all Members that
qualify for a liquidity removal tier. Specifically, the Exchange
proposes to provide a rebate of $0.0007 per share to remove liquidity
for Members that have an ADV on the Exchange of at least 0.5% of TCV, a
rebate of $0.0006 per share to remove liquidity for Members that have
an ADV on the Exchange of at least 0.25% but less than 0.5% of TCV, and
a rebate of $0.0005 per share to remove liquidity that add the
requisite number of shares of liquidity on BYX Exchange but do not
qualify for a rebate based on TCV as set forth above.
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.
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 if they reach certain
volume thresholds. The tiered pricing structure allows Members that
qualify for reduced fees to add liquidity at a further reduced fee to
the extent such liquidity sets the national best bid or offer (the
``NBBO Setter Program''). The Exchange charges Members that maintain
ADV on the Exchange of at least 0.5% of the total TCV during the month
a liquidity adding fee of $0.00025 per share on orders that set the
NBBO and $0.0003 per share on orders that do not set the NBBO. The
Exchange charges Members that maintain ADV on the Exchange of at least
0.25% but less than 0.5% of the total TCV during the month a liquidity
adding fee of $0.00035 per share on orders that set the NBBO and
$0.0004 per share for orders that do not set the NBBO. The Exchange
charges a liquidity adding fee of $0.0005 per share to Members that do
not qualify for a reduced fee based on their volume on the Exchange.
The Exchange proposes to increase its fees to add displayed
liquidity for all Members by $0.0002 per share. Specifically, the
Exchange proposes to charge Members that maintain ADV on the Exchange
of at least 0.5% of the total TCV during the month a liquidity adding
fee of $0.00045 per share on orders that set the NBBO and $0.0005 per
share on orders that do not set the NBBO. The Exchange proposes to
charge Members that maintain ADV on the Exchange of at least 0.25% but
less than 0.5% of the total TCV during the month a liquidity adding fee
of $0.00055 per share on orders that set the NBBO and $0.0006 per share
for orders that do not set the NBBO. The Exchange proposes to charge
Members that do not qualify for a reduced fee based on their volume on
the Exchange a liquidity adding fee of $0.0007 per share.
The Exchange notes that it does not propose to modify its existing
definitions of ``ADV'' or ``TCV'' in connection with the changes
described above. The Exchange notes that the definition of ADV used in
conjunction with TCV for the NBBO Setter Program and the tiered pricing
structures for executions that add and remove liquidity includes both a
Member's liquidity adding and removing activity. However, as today, the
50,000 shares added requirement necessary to achieve tiered pricing to
remove liquidity only includes added volume.
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.\6\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\7\ 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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\6\ 15 U.S.C. 78f.
\7\ 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 add liquidity to the Exchange will be
paying higher fees 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 to the Exchange.
With respect to the proposed changes to the tiered pricing
structure for removing liquidity from the Exchange, the Exchange
believes that its proposal is reasonable because it will continue to be
available to Members that achieve a relatively low threshold of added
liquidity, and thus who contribute to the depth of liquidity generally
available on the Exchange. By providing higher potential rebates to all
qualifying Members, the Exchange is further incentivizing Members to
participate in the growth of the Exchange. The increased rebates also
provide additional incentive to Members that do not qualify for the
tier to increase their participation on the Exchange in order to
qualify. Volume-based tiers such as the liquidity removal tiers
maintained 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.
With respect to the increases to the fees charged to add displayed
liquidity, the Exchange believes that the proposed fees are reasonable
as such fees are still comparable to other market centers that charge
to add displayed liquidity and represent only a slight increase from
the current fee levels. The Exchange notes that at least one market
center charges a higher fee to add displayed liquidity.\8\
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\8\ 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.
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The Exchange believes that any additional revenue it receives based
on the increases to fees set forth above 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
[[Page 21653]]
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.
B. Self-Regulatory Organization's Statement on Burden on Competition
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.
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. Further, 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. The
Exchange also believes that its pricing for displayed orders is
appropriately competitive vis-[agrave]-vis the Exchange's competitors.
Further, the Exchange believes that continuing to incentivize the entry
of aggressively priced, displayed liquidity fosters intra-market
competition to the benefit of all market participants that enter orders
to the Exchange. 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.
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 rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \9\ and paragraph (f) of Rule 19b-4
thereunder.\10\ 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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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 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 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-2013-012 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-2013-012. 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-BYX-2013-012 and should be
submitted on or before May 2, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08465 Filed 4-10-13; 8:45 am]
BILLING CODE 8011-01-P