[Federal Register Volume 78, Number 161 (Tuesday, August 20, 2013)]
[Notices]
[Pages 51235-51237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-20201]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70197; File No. SR-BATS-2013-044]
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.
August 14, 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 August 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 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
will be 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
routed away by the Exchange and executed at a new options exchange--an
affiliate of the International Securities Exchange, LLC (``ISE'') that
will be called ``ISE Gemini.'' \6\ ISE Gemini commenced trading on
August 5, 2013.
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\6\ The Commission notes that the entity referred to herein as
``ISE Gemini'' is Topaz Exchange, LLC d/b/a ISE Gemini.
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BATS Options 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''). The Exchange did not have
sufficient information to know what Routing Costs the Exchange would
incur in connection with routing to ISE Gemini prior to its launch.
Accordingly, the Exchange originally imposed the same pricing for all
executions at ISE Gemini as are charged by the Exchange for orders
routed to and executed at the NASDAQ Options Market (``NOM'') and NYSE
Arca, Inc. (``ARCA'') in non-Penny Pilot Securities,\7\ which is the
[[Page 51236]]
most expensive routing category based on Routing Costs.
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\7\ The Exchange currently charges different fees and provides
different rebates depending on whether an options class is an
options class that qualifies as a Penny Pilot Security pursuant to
Exchange Rule 21.5, Interpretation and Policy .01 or is a non-penny
options class. Certain other options exchanges also have different
pricing for Penny Pilot Securities and non-Penny Pilot Securities.
Accordingly, the Exchange's routing fees also vary with respect to
the fees for orders executed at such exchanges.
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Based on applicable Routing Costs, the Exchange currently charges
$0.90 per contract for Customer \8\ orders and $0.95 per contract for
Professional,\9\ Firm, and Market Maker \10\ orders executed at NOM and
ARCA in non-Penny Pilot Securities, and thus, since August 5, 2013, has
charged these rates for orders routed to and executed at ISE Gemini in
all securities. Based on the pricing released by ISE Gemini immediately
prior to its launch, the Exchange believes that this pricing continues
to be appropriate for non-Penny Pilot Securities executed on ISE
Gemini. Accordingly, the Exchange proposes to continue to charge the
same for executions at ISE Gemini as it does at NOM and ARCA with
respect to non-Penny Pilot Securities. Thus, the Exchange proposes to
continue to charge $0.90 per contract for Customer orders and $0.95 per
contract for Professional, Firm, and Market Maker orders in non-Penny
Pilot Securities executed at ISE Gemini. The Exchange also proposes to
continue to charge $0.95 per contract for all executions of Directed
ISOs routed to ISE Gemini in non-Penny Pilot Securities. However, as
described below, the Exchange proposes to modify pricing for all
executions, including executions of Directed ISOs, of orders routed by
the Exchange to ISE Gemini in Penny Pilot Securities.
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\8\ As defined on the Exchange's fee schedule, a ``Customer''
order is any transaction identified by a Member for clearing in the
Customer range at the Options Clearing Corporation (``OCC''), except
for those designated as ``Professional''.
\9\ The term ``Professional'' is defined in Exchange Rule 16.1
to mean any person or entity that (A) is not a broker or dealer in
securities, and (B) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s).
\10\ As defined on the Exchange's fee schedule, the terms
``Firm'' and ``Market Maker'' apply to any transaction identified by
a member for clearing in the Firm or Market Maker range,
respectively, at the Options Clearing Corporation (``OCC'').
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Based on the pricing released by ISE Gemini, the Exchange believes
it most appropriate to charge the same pricing for orders in Penny
Pilot Securities routed to and executed at ISE Gemini as it does for
NOM and Arca in Penny Pilot Securities. The Exchange currently charges
$0.52 per contract for Customer orders and $0.57 per contract for
Professional, Firm, and Market Maker orders executed at NOM and ARCA in
Penny Pilot Securities. In order to cover the cost of removing
liquidity, including Routing Costs, in Penny Pilot Securities at ISE
Gemini, the Exchange proposes to charge the same rates, specifically
$0.52 per contract for Customer orders and $0.57 per contract for
Professional, Firm, and Market Maker orders executed at ISE Gemini.
Also based on the pricing released by ISE Gemini, the Exchange
believes it most appropriate charge $0.60 per contract for Directed
ISOs in Penny Pilot Securities routed to and executed at ISE Gemini,
which is the same pricing that the Exchange charges for certain other
Directed ISOs executed at away destinations, as further described
below.
The Exchange currently charges $0.60 per contract for Directed ISOs
routed and executed at away destinations, with the exception of: (i)
Directed ISOs in Mini Options, for which the Exchange charges $0.15 per
contract; and (ii) in the following situations, for which the Exchange
charges $0.95 per contract: (1) orders in non-Penny Pilot Securities
executed at NOM and ARCA; (2) Professional, Firm and Market Maker
orders executed at BX Options in non-Penny Pilot Securities; (3)
Professional, Firm and Market Maker orders executed at C2; and (4) all
orders executed at ISE Gemini. In order to approximate the Routing
Costs for such orders, the Exchange proposes to charge the standard fee
of $0.60 for Directed ISOs in Penny Pilot Securities routed to and
executed at ISE Gemini instead of the $0.95 that it currently charges.
As described above, the Exchange will continue to charge $0.95 per
contract for Directed ISOs in non-Penny Pilot Securities routed to and
executed at ISE Gemini.
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.\11\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\12\ 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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\11\ 15 U.S.C. 78f.
\12\ 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 modify fees to ISE Gemini is
fair, equitable and reasonable because the fees are generally an
approximation of the cost to the Exchange for routing orders to such
exchange. 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 slight loss for orders routed to and executed at ISE Gemini. 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 ISE
Gemini. The Exchange also believes that the proposed fee structure for
orders routed to and executed at this away options exchange is fair and
equitable and not unreasonably discriminatory in that it applies
equally to all Members.
As explained above, the Exchange has also proposed to decrease fees
for Directed ISOs in Penny Pilot Securities to ISE Gemini. The Exchange
believes that the proposed fee structure for Directed ISOs routed to
and executed at ISE Gemini is fair, equitable and reasonable because
the fees are an approximation of the cost to the Exchange for routing
such orders and will allow the Exchange to recoup and cover the costs
of providing routing services to ISE Gemini. The Exchange also believes
that the proposed fee structure for Directed ISOs routed to and
executed at ISE Gemini 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 ISE
Gemini.
[[Page 51237]]
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 another
options exchange on behalf of its participants in a manner that is a
better approximation of actual costs than is currently in place. The
Exchange also notes that Members may choose to mark their orders as
ineligible for routing to avoid incurring routing fees.\13\ 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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\13\ 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 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 \14\ and paragraph (f) of Rule 19b-4
thereunder.\15\ 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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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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-2013-044 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.
All submissions should refer to File Number SR-BATS-2013-044. 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-2013-044 and should be
submitted on or before September 10, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-20201 Filed 8-19-13; 8:45 am]
BILLING CODE 8011-01-P