[Federal Register Volume 79, Number 213 (Tuesday, November 4, 2014)]
[Notices]
[Pages 65447-65450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26123]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73462; File No. SR-BATS-2014-053]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Related to
Fees for Use of BATS Exchange, Inc.
October 29, 2014.
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 October 24, 2014, 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
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.
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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 \3\ 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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\3\ A Member is defined as ``any registered broker or dealer
that has been admitted to membership in the Exchange.'' See Exchange
Rule 1.5(n).
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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 its fee schedule effective
immediately in order to adopt pricing charged by the Exchange for
Supplemental Peg Orders and several new routing strategies, as
described below.
Supplemental Peg Orders
The Exchange recently adopted a new order type, the Supplemental
Peg Order, which is a non-displayed limit order described in Rule
11.9(c)(19). The Exchange proposes to modify its fee schedule to make
clear that standard pricing for all other types of Non-Displayed
Liquidity, as defined in the fee schedule, applies to Supplemental Peg
Orders. Thus, the Exchange proposes to provide a rebate of $0.0017 per
share for all Supplemental Peg Orders executed on the Exchange that add
liquidity in securities priced $1.00 and above. As with all orders
adding liquidity to the Exchange, Supplemental Peg Orders in securities
priced below $1.00 would not receive a liquidity rebate.
Routing Strategies
The Exchange recently filed a proposed rule change to adopt several
new routing options in connection with the Exchange's technology
integration with EDGA Exchange, Inc. (``EDGA'') and EDGX Exchange, Inc.
(``EDGX'').\4\ The Exchange proposes to adopt pricing for the new
routing options, as set forth below, and also proposes various
structural changes to the fee schedule.
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\4\ See Securities Exchange Act Release No. 73412 (October 23,
2014) (SR-BATS-2014-052), available at http://www.sec.gov/rules/sro/bats.shtml.
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First, the Exchange adopted two new routing strategies that are
similar to the Exchange's existing standard best execution routing
strategies. Specifically, the Exchange adopted ROUT and ROUX, which are
similar to Parallel D and Parallel 2D. Accordingly, the Exchange
proposes to charge the same fee for ROUT and ROUX routed executions as
it does for Parallel D and
[[Page 65448]]
Parallel 2D routing strategies. Specifically, the Exchange proposes to
charge $0.0029 per share for orders in securities priced $1.00 and
above executed through ROUT and ROUX at a venue other than a dark
liquidity venue (i.e., through DRT routing). As it does currently, any
execution through DRT routing at a dark liquidity venue will continue
to be charged $0.0020 per share. Because DRT routing can be combined
with various other new routing strategies set forth below, the Exchange
also proposes to modify the description in the ``Other Non-Standard
Routing Options'' section of the fee schedule to explicitly state that
any liquidity removed through DRT at a venue other than through the
SLIM routing strategy is $0.0020 per share (SLIM currently charges
$0.0026 for executions at dark liquidity venues). This reflects an
expansion of the current provision that applies a rate of $0.0020 per
share for BYX [sic] + DRT Destination Specific Orders to apply that
same rate to all executions that remove liquidity at a dark liquidity
venue. In addition, to conform to the fee charged for Parallel D and
Parallel 2D routed executions in securities priced below $1.00, the
Exchange proposes to charge a fee that is 0.29% of the total dollar
value for any execution of a ROUT or ROUX routed order in securities
priced below $1.00.
Second, the Exchange adopted various new strategies that are
similar (but not identical) to existing Destination Specific routing
offered by the Exchange. The Exchange proposes to conform such new
strategies with pricing for the similar existing strategies as set
forth below. For instance, the Exchange adopted two new routing
strategies that can remove liquidity specifically targeted at NYSE,
RDOT and RDOX. The Exchange proposes to charge the same fee of $0.0026
per share for RDOT and RDOX routed executions at NYSE as it does for
Destination Specific executions at NYSE. The Exchange also adopted the
INET routing strategy, which is specifically targeted at NASDAQ. The
Exchange proposes to charge the same fee of $0.0029 per share for INET
routed executions at NASDAQ as it does for Destination Specific
executions at NASDAQ. Finally, the Exchange adopted the ROLF routing
strategy, which is specifically targeted at the LavaFlow ECN. The
Exchange proposes to charge the same fee for ROLF as it does for all
Destination Specific routing at venues not included in the Exchange's
One Under/Better Program (where the Exchange seeks to improve by
$0.0001 per share the fee charged or rebate provided by each venue in
the program). Thus, the Exchange proposes to charge $0.0030 per share
for any ROLF routed execution at LavaFlow ECN.
Third, the Exchange adopted the new Post to Away routing strategy,
which, for the first time on the Exchange, can result in the Exchange
routing an order to an away venue to be posted to such venue. In
addition to the Post to Away routing strategy, the RDOT, RDOX and INET
routing strategies can also post at away venues. The Exchange proposes
to adopt the following pricing for executions in securities priced
$1.00 and above through these routing strategies: (1) Add liquidity at
BYX through Post to Away routing: $0.0018 charge per share; (2) add
liquidity at EDGX through Post to Away routing: $0.0020 rebate per
share; (3) add liquidity at EDGA through Post to Away routing: $0.0005
charge per share; (4) add liquidity at NYSE through Post to Away, RDOT
or RDOX routing: $0.0015 rebate per share; (5) add liquidity at NYSE
ARCA through Post to Away routing for Tape B: $0.0022 rebate per share;
(6) add liquidity at NYSE ARCA through Post to Away routing for Tapes A
and C: $0.0021 rebate per share; (7) add liquidity at NYSE MKT through
Post to Away routing: $0.0015 rebate per share; (8) add liquidity at
NASDAQ through Post to Away or INET routing: $0.0015 rebate per share;
(9) add liquidity at NASDAQ BX through Post to Away routing: $0.0020
charge per share. Each of the proposed fees and rebates set forth above
is equal to or roughly equivalent to the standard fee or rebate (i.e.,
without taking any potential tiered pricing into account) that will be
charged or provided pursuant to the applicable exchange's fee schedule.
More importantly, the Exchange notes that these are the same fees and
rebates charged and provided by the Exchange's affiliates, EDGA and
EDGX, for identical routing strategies that post to away market venues.
Accordingly, the Exchange is seeking to conform to such pricing
schedules. In addition to standard pricing set forth above, the
Exchange proposes to provide executions through the RDOT, RDOX, INET,
and Post to Away routing strategies that post to away markets in
securities priced below $1.00 without any fee or rebate, as this is the
pricing structure in place at many of the away venues where orders can
be routed and provides for a simplistic pricing model.
Fourth, the Exchange notes that although orders sent through each
of the routing strategies described in the preceding paragraph can
provide liquidity on away market venues, such strategies can also
result in orders removing liquidity. Accordingly, the Exchange proposes
to adopt fees for orders that remove liquidity through such routing
strategies. For orders that remove liquidity through Post to Away
routing, the Exchange proposes to charge the same fees that have been
proposed for ROUT and ROUX routed executions. Specifically, the
Exchange proposes to charge $0.0029 per share for orders in securities
priced $1.00 and above that are routed by the Exchange through the Post
to Away routing strategy and remove liquidity. The Exchange also
proposes a fee that is 0.29% of the total dollar value for any
execution of a Post to Away routed order in securities priced below
$1.00 that removes liquidity. The Exchange also has adopted new routing
strategies that can send orders to the NYSE that can, in turn, be re-
routed by the NYSE. For each of these routing strategies, RDOT, RDOX
and Post to Away, the Exchange proposes to adopt a fee of $0.0030 per
share for any execution of an order that has been re-routed by NYSE.
Finally, the Exchange notes that it has proposed stylistic and
corrective changes throughout the fee schedule. For instance, because
the Exchange is adopting routing strategies that will now add liquidity
to away market venues, the Exchange has proposed to include language
throughout its routing fees stating whether an order adds or removes
liquidity through such strategy. Similarly, in certain places where
routing strategies referred to specific orders or order types rather
than routing strategies, the Exchange has modified the description,
which is consistent with its recent routing filing.\5\ The Exchange has
also proposed to eliminate references to the CYCLE and RECYCLE routing
strategies. The Exchange no longer offers the CYCLE routing strategy
and has eliminated such routing strategy from its rules. Similarly, the
Exchange recently updated its rules to rename the RECYCLE strategy as
Re-Route. However, the Exchange proposes to omit reference to Re-Route
from its fee schedule (other than orders ``re-routed'' by NYSE, as
described above) rather than to replace RECYCLE with Re-Route. Orders
that have been routed to away market centers through a routing strategy
offered by the Exchange that are posted to the Exchange's order book
and subject to the Re-Route option may be routed away from the Exchange
again pursuant to Rule 11.13(a)(4). The Exchange maintains the routing
strategy instruction on an order when re-routing
[[Page 65449]]
pursuant to the Re-Route option, and thus, charges the fee related to
such routing strategy rather than to apply a specific ``Re-Route'' fee.
In addition to these changes, the Exchange has proposed various
additional stylistic changes, such as adopting a new sub-heading for
routed executions in securities priced below $1.00, eliminating
quotation marks and other minor word changes.
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\5\ See id.
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The Exchange proposes to implement the amendments to its fee
schedule effective immediately.
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 Sections 6(b)(4) of the Act and 6(b)(5) 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) and (5).
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The Exchange believes that the proposed rebate for liquidity added
through use of Supplemental Peg Orders is reasonable and equitable
because it is the same rebate provided for other types of non-displayed
liquidity on the Exchange. The Exchange does not currently believe that
there is any reason to differentiate Supplemental Peg Orders from other
types of non-displayed liquidity. The Exchange also believes that its
proposed rebate for Supplemental Peg Orders is non-discriminatory
because it applies uniformly to all Members, and again, is based on
existing pricing for similar orders.
The Exchange believes that the proposed changes to the Exchange's
fee schedule to add fees for the ROUT and ROUX routing strategies
represent a reasonable and equitable allocation of fees because they
are identical to the fees charged for executions through similar
routing strategies offered by the Exchange, namely Parallel D and
Parallel 2D. The Exchange further believes that the proposed fees for
ROUT and ROUX are non-discriminatory because they apply uniformly to
all Members, and again, are based on existing pricing for similar
orders. Similarly, the Exchange believes that expansion of standard DRT
pricing of $0.0020 per share for all executions at a dark liquidity
venue other than through SLIM routing is reasonable and equitable
because it is consistent with existing pricing for executions at dark
liquidity venues. In addition, the Exchange believes that this pricing
is non-discriminatory because it applies uniformly to all Members and
is based on existing DRT routing pricing.
The Exchange believes that the proposed changes to the Exchange's
fee schedule to add fees for RDOT, RDOX, INET and ROLF routing
strategies when removing liquidity represent a reasonable and equitable
allocation of fees because they are identical to the fees charged for
executions through similar routing strategies offered by the Exchange,
namely Destination Specific orders to each applicable venue (i.e., NYSE
for RDOT and RDOX, NASDAQ for INET and LavaFlow ECN through ROLF). The
Exchange further believes that the proposed fees for RDOT, RDOX, INET
and ROLF are non-discriminatory because they apply uniformly to all
Members, and again, are based on existing pricing for similar orders.
The Exchange also believes that its proposed pricing for Post to
Away routing strategies that add liquidity in securities priced $1.00
and above are reasonable and equitable because they are equal to or
roughly equivalent to the standard fee or rebate that will be charged
or provided pursuant to the applicable exchange's fee schedule and are
identical to the same fees and rebates charged and provided by the
Exchange's affiliates, EDGA and EDGX, for identical routing strategies
that post to away market venues. The Exchange also believes that its
proposed pricing for Post to Away routing strategies that add liquidity
in securities priced below $1.00 (i.e., no fee or rebate) is reasonable
and equitable because most away venues charge no fee and provide no
rebate for such orders. The Exchange further believes that the proposed
fees and rebates for Post to Away are non-discriminatory because they
apply uniformly to all Members and, again, because they approximate the
fee or rebate at the away venue.
The Exchange also believes that its proposed fees for orders that
remove liquidity when sent through the Post to Away routing is
reasonable and equitable because it is identical to that proposed for
ROUT and ROUX, and is thus, equivalent to the Exchange's standard
routing fees. The Exchange further believes that a slightly higher fee
for orders re-routed by NYSE through the RDOT, RDOX and Post to Away
routing strategies are is [sic] reasonable as it is the same fee
charged by NYSE for routing. The Exchange again believes that its
proposed fees are non-discriminatory in that they apply uniformly to
all Members and are intended to generally approximate routing costs
and/or to align with existing routing pricing.
Finally, the Exchange believes that the additional clarifications,
stylistic changes, and elimination of reference to CYCLE and RECYCLE
proposed by the Exchange are consistent with the Act as they will
enhance the readability and clarity of the fee schedule.
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. The
Exchange reiterates that the Supplemental Peg Order will be treated
similar to most other non-displayed liquidity on the Exchange (other
than Mid-Point Peg orders). Also, because the market for order
execution is extremely competitive, Members may readily opt to disfavor
the Exchange's routing services if they believe that alternatives offer
them better value. For orders routed through the routing strategies
adopted by the Exchange, the proposed fees are in line with the fees
charged for executions through other routing strategies offered by the
Exchange and approximate the cost to the Exchange of executing midpoint
orders on away trading venues. 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 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)
[[Page 65450]]
of the Act \8\ and paragraph (f) of Rule 19b-4 thereunder.\9\ 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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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 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-2014-053 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BATS-2014-053. 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-2014-053, and should be
submitted on or before November 25, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26123 Filed 11-3-14; 8:45 am]
BILLING CODE 8011-01-P