[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62907-62909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24659]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70666; File No. SR-BYX-2013-034]
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.
October 11, 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 September 30, 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
[[Page 62908]]
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 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
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
Exchange proposes to modify its fee schedule effective September
30, 2013, in order to amend the way that the Exchange calculates
rebates for removing liquidity from and fees 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 and
fee it will charge to Members based on the Exchange's tiered pricing
structure by excluding from the calculation of both ADV \6\ and average
daily TCV \7\ any day that trading is not available on the Exchange for
more than sixty (60) minutes during regular trading hours (i.e., 9:30
a.m. to 4:00 p.m. Eastern Time) but continues on other markets during
such time (an ``Exchange Outage'').
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\6\ As provided in 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 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 remove liquidity
from the Exchange and the fees that Members are charged for executions
that add liquidity to the Exchange. Under the tiered pricing structure,
the Exchange provides different rebates and charges different fees to
Members based on a Member's ADV as a percentage of average daily TCV.
The Exchange notes that it is not proposing to modify any of the
existing rebates or fees or the percentage thresholds at which a Member
may qualify for certain rebates and fees pursuant to the tiered pricing
structure. Rather, as mentioned above, the Exchange is proposing to
modify its fee schedule in order to exclude trading activity occurring
on any day that the Exchange experiences an Exchange Outage, defined as
an outage lasting for more than sixty (60) minutes, from the
calculation of ADV and average daily TCV. The Exchange believes that
including trading activity on days when trading on the Exchange is
unavailable for a significant portion of the day can unfairly skew the
calculation of ADV and TCV. Thus, the Exchange believes that the most
accurate and fair implementation of its tiered pricing structure is to
exclude from the calculation of ADV and TCV all days where the Exchange
experiences an Exchange Outage.
The Exchange believes that eliminating days where the Exchange
experiences an Exchange Outage from the definition of ADV and TCV, and
thereby eliminating that day from the calculation as it relates to
rebates and fees based on trading activity on 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 and
fees 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 notes that it recently adopted changes to exclude the
last Friday of June from the calculation of ADV and average daily
TCV.\8\ The last day of June is the day that Russell Investments
reconstitutes its family of indexes (``Russell Reconstitution''),
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 Reconstitution. Similar to the current proposal,
the Exchange completely excludes Russell Reconstitution days from the
calculation of ADV and average daily TCV.
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\8\ Securities Exchange Act Release No. 69794 (June 18, 2013),
78 FR 37868 (SR-BYX-2013-021) (notice of filing and immediate
effectiveness of proposed rule change to exclude the Russell
Reconstitution day from the calculation of ADV and TCV for purposes
of BYX tiered pricing).
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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 removing liquidity from the Exchange and 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 and costs for
trading in any month where the Exchange experiences an Exchange Outage
on one or more trading days. The Exchange also believes that its
proposal is reasonable because it is not changing the thresholds to
become eligible or the dollar value associated with the tiered rebates
or fees 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
[[Page 62909]]
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 their
activity included from days where the Exchange has an Exchange Outage,
the proposal will 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.
Volume-based tiers such as the liquidity removing and 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 higher rebates or
lower fees 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 a day
of atypical trading behavior which allows Members to predictably
calculate what their costs associated with trading activity on the
Exchange will be is reasonable, fair and equitable and not unreasonably
discriminatory as 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
benefit intermarket competition in that they 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.
Further, the proposed changes will help to promote intramarket
competition by avoiding a penalty to Members for days when trading on
the Exchange is unavailable for a significant portion of the day. 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 the 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
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 \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 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-2013-034 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-BYX-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-BYX-2013-034 and should be
submitted on or before November 12, 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. 2013-24659 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P