[Federal Register Volume 78, Number 121 (Monday, June 24, 2013)]
[Notices]
[Pages 37865-37867]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-14966]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69793; File No. SR-BATS-2013-034]
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.
June 18, 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 June 13, 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 the
Substance of the Proposed Rule Change
The Exchange filed a proposal 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
[[Page 37866]]
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 purpose of the proposed rule change is to modify the ``Equities
Pricing'' section of its fee schedule effective June 13, 2013, in order
to amend the way that the Exchange calculates rebates for adding
liquidity to the Exchange. Specifically, the Exchange is proposing to
amend the methodology by which it determines the rebate that it will
provide to Members for adding liquidity to the Exchange by excluding
the last Friday of June from the calculation of both ADV \6\ and
average daily TCV \7\ as they relate to ``Equities Pricing.''
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\6\ As provided in the ``Equities Pricing'' section of the fee
schedule, ``ADV'' means average daily volume calculated as the
number of shares added or removed, combined, per day on a monthly
basis; routed shares are not included in ADV calculation.
\7\ As provided in the ``Equities Pricing'' section of the fee
schedule ``TCV'' means total consolidated volume calculated as the
volume reported by all exchanges and trade reporting facilities to a
consolidated transaction reporting plan for the month for which the
fees apply.
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The Exchange currently offers a tiered structure for determining
the rebates that Members receive for executions that add liquidity to
the Exchange.\8\ Under the tiered pricing structure, the Exchange
provides different rebates to Members based on a Member's ADV as a
percentage of average daily TCV, as well as a possible additional
rebate where a Member's order sets the NBBO and that Member meets or
exceeds a certain threshold of ADV as a percentage of average daily
TCV. The Exchange notes that it is not proposing to modify any of the
existing rebates or the percentage thresholds at which a Member may
qualify for certain rebates. Rather, as mentioned above, the Exchange
is proposing to modify the ``Equities Pricing'' section of its fee
schedule in order to exclude trading activity occurring on the last
Friday of June from the calculation of ADV and average daily TCV.
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\8\ See Securities Exchange Act Release No. 64847 (July 8,
2011), 76 FR 41546 (July 14, 2011) (Notice of filing and immediate
effectiveness of proposed rule change related to fees for use of
BATS Exchange, Inc., which established tiered rebates based on ADV
as a percentage of average daily TCV) (SR-BATS-2011-019).
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The Exchange is proposing to exclude the last Friday of June from
the definition of ADV and TCV because the last Friday of June is the
day that Russell Investments reconstitutes its family of indexes
(``Russell Rebalance''), resulting in particularly high trading
volumes, much of which the Exchange believes derives from market
participants who are not generally as active entering the market to
rebalance their holdings in-line with the Russell Rebalance. The
Exchange believes that trading occurring as a result of the Russell
Rebalance can significantly skew the calculation of ADV and TCV. For
example, since 2008, on the last Friday in June, the TCV has exceeded
the average daily TCV for the preceding trading days in June by
approximately 42% on average. The chart below reflects the TCV on the
last Friday of June for each year dating to 2008 and compares it to the
average daily TCV for the preceding trading days in the month of June.
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MTD average TCV as
Russell reconstitution date (RCD) TCV on RCD of day before RCD Percent difference
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6/29/2012........................................... 7,924,340,355 6,833,486,672 15.96
6/24/2011........................................... 10,472,502,657 7,237,593,514 44.70
6/25/2010........................................... 14,482,717,113 8,981,067,278 61.26
6/26/2009........................................... 13,024,518,377 9,597,498,903 35.71
6/27/2008........................................... 12,010,692,402 7,835,813,201 53.28
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Because of the extremely high volume numbers and abnormally
distributed daily volume as a percentage of the TCV on this day, it
stands that the ADV as a percentage of average daily TCV can be
significantly impacted.
As such, the Exchange believes that eliminating the last Friday of
June from the definition of ADV and TCV and thereby eliminating that
day from the calculation as it relates to rebates for adding liquidity
to the Exchange, will help to eliminate significant uncertainty faced
by Members as to their monthly ADV as a percentage of average daily TCV
and the rebates that this percentage will qualify for, providing
Members with an increased certainty as to their monthly cost for trades
executed on the Exchange. The Exchange further believes that removing
this uncertainty will encourage Members to participate in trading on
the Exchange during the remaining trading days in June in a manner
intended to be incented by the Exchange's fee schedule.
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.\9\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\10\ 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 structures at a
particular venue to be unreasonable and/or excessive.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4).
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With respect to the proposed changes to the tiered pricing
structure for adding liquidity to the Exchange, the Exchange believes
that its proposal is reasonable because, as explained above, it will
help provide Members with a greater level of certainty as to their
level of rebates for trading in the month of June. The Exchange also
believes that its proposal is reasonable because it is not changing
[[Page 37867]]
the thresholds to become eligible or the dollar value associated with
the rebates and, moreover, by eliminating the inclusion of a trading
day that would almost certainly lower a Member's ADV as a percentage of
average daily TCV, it will make the majority of Members more likely to
meet the minimum or higher tier thresholds, which will provide
additional incentive to Members to increase their participation on the
Exchange in order to meet the next tier. In addition, the Exchange
believes that the proposed changes to fees are equitably allocated
among Exchange constituents as the methodology for calculating ADV and
TCV will apply equally to all Members. While, although unlikely,
certain Members may have a higher ADV as a percentage of average daily
TCV with the day included, the proposal will make June trading rebates
more similar to other months as well as to make all Members' cost of
trading on the Exchange more predictable, regardless of how the
proposal affects their ADV as a percentage of average daily TCV, which
in turn will preserve Members' incentives to participate in trading on
the Exchange in a manner intended to be incented by the Exchange's fee
schedule.
Volume-based tiers such as the liquidity adding 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. Further, the Exchange believes that a tiered pricing model not
significantly altered by the removal of a single known day of atypical
trading behavior, which will allow Members to predictably calculate
what the costs associated with their trading activity on the Exchange.
is reasonable, fair and equitable and not unreasonably discriminatory
because it is uniform in application amongst Members and should enable
such participants to operate their business without concern of
unpredictable and potentially significant changes in expenses.
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 help
the Exchange to continue to incentivize higher levels of liquidity at a
tighter spread while providing more stable and predictable costs to its
Members. 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 structures to be
unreasonable or excessive.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
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).
\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 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-2013-034 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-2013-034. 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-BATS-2013-034 and should be
submitted on or before July 15, 2013.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets, pursuant
to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-14966 Filed 6-21-13; 8:45 am]
BILLING CODE 8011-01-P