[Federal Register Volume 79, Number 241 (Tuesday, December 16, 2014)]
[Notices]
[Pages 74794-74796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-29364]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73809; File No. SR-BATS-2014-064]
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.
December 10, 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 December 1, 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
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of 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.
---------------------------------------------------------------------------
\5\ 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).
---------------------------------------------------------------------------
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 the ``Options Pricing'' section of
its fee schedule effective immediately, in order to modify pricing
charged by the Exchange's options platform (``BATS Options'') including
a new September Options Step-Up Add TCV tier that will apply to certain
orders executed on the Exchange, as further described below.
Currently, the Exchange charges $0.48 per contract for a
Professional,\6\ Firm,\7\ or Market Maker \8\ order in a Penny Pilot
Security \9\ that removes liquidity from BATS Options generally, or,
where the Member has an ADV \10\ equal to or greater than 1.00% of
average TCV,\11\ $0.47 per contract for a Professional, Firm, or Market
Maker order in a Penny Pilot Security that removes liquidity from BATS
Options. The Exchange offers rebates of $0.40 per share for Market
Maker orders in Penny Pilot Securities that add liquidity to BATS
Options and, as further discussed below, such orders are also eligible
for additional rebates via the Quoting Incentive Program (``QIP''). The
Exchange offers rebates of $0.40 to Professional and Firm orders in
Penny Pilot Securities that add liquidity to BATS Options and offers an
enhanced $0.44 rebate for Professional and Firm orders that add
liquidity to BATS Options in Penny Pilot Securities where the Member
has an Options Step-Up Add TCV \12\ of equal to or greater than
0.50%.\13\ The Exchange also offers NBBO setter liquidity rebates in
all securities such that: (i) A Member will receive an additional $0.02
per contract for a Professional, Firm, or Market Maker order that adds
liquidity to the BATS Options order book that sets a new national best
bid or offer where the Member has an ADV equal to or greater than 0.30%
of average TCV but less than 1.00% of average TCV; and (ii) a Member
will receive an additional $0.04 per contract for a Professional, Firm,
or Market Maker order that adds liquidity to the BATS Options order
book that sets a new national best bid or offer where the Member has an
ADV equal to or greater than 1.00% of average TCV.
---------------------------------------------------------------------------
\6\ ``Professional'' applies to any transaction identified by a
Member as such pursuant to Exchange Rule 16.1.
\7\ ``Firm'' applies to any transaction identified by a Member
for clearing in the Firm range at the OCC.
\8\ ``Market Maker'' applies to any transaction identified by a
Member for clearing in the Market Maker range at the OCC.
\9\ ``Penny Pilot Securities'' are those issues quoted pursuant
to Exchange Rule 21.5, Interpretation and Policy .01.
\10\ ``ADV'' means average daily volume calculated as the number
of contracts added or removed, combined, per day.
\11\ ``TCV'' means total consolidated volume calculated as the
volume reported by all exchanges to the consolidated transaction
reporting plan for the month for which the fees apply, excluding
volume on any day that the Exchange experiences an Exchange System
Disruption and on any day with a scheduled early market close.
\12\ ``Options Step-Up Add TCV'' means ADAV as a percentage of
TCV in June 2014 subtracted from current ADAV as a percentage of
TCV.
\13\ See Exchange Act Release No. 72128 (May 8, 2014), 79 FR
27666 (May 14, 2014) (SR-BATS-2014-017).
---------------------------------------------------------------------------
The Exchange is proposing to add the definition of ``September
Options Step-Up Add TCV'' to its fee schedule along with three new fees
and rebates associated with this new defined term. Specifically, the
Exchange is proposing to define September Options Step-Up Add TCV as a
Member's ADAV \14\ as a percentage of TCV in September 2014 subtracted
from current ADAV as a percentage of TCV. Based on this definition, the
Exchange is proposing to add an additional tier to fees charged to
Professional, Firm, and Market Maker orders in Penny Pilot Securities
such that the Exchange will charge $0.47 per contract for a
Professional, Firm, or Market Maker order that removes liquidity from
the BATS Options order book where the Member has a September Options
Step-Up Add TCV equal to or greater than 0.30% and an ADV equal to or
greater than 0.40% of average TCV. Similarly, the Exchange is proposing
to add an additional tier to liquidity rebates for Professional and
Firm orders in Penny Pilot Securities such that the Exchange will
provide a $0.44 rebate per contract for a Professional or Firm order
that adds liquidity to the BATS Options order book where the Member has
a September Options Step-Up Add TCV equal to or greater than 0.30% and
an
[[Page 74795]]
ADV equal to or greater than 0.40% of average TCV. Finally, the
Exchange is proposing to add an additional tier to the NBBO Setter
Liquidity Rebates, which apply to all securities, such that a
Professional, Firm, or Market Maker order that adds liquidity to BATS
Options that sets a new NBBO where the Member has a September Options
Step-Up Add TCV equal to or greater than 0.30% and an ADV equal to or
greater than 0.40% of average TCV will receive an additional $0.04 per
contract added.
---------------------------------------------------------------------------
\14\ ``ADAV'' means average daily added volume calculated as the
number of contracts added.
---------------------------------------------------------------------------
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.\15\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\16\ 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.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f.
\16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Volume-based rebates and fees such as the ones maintained on BATS
Options and the new September Options Step-Up Add TCV tiers proposed
herein, have been widely adopted by equities and options exchanges and
are equitable because they are open to all Members on an equal basis
and provide additional benefits or discounts 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/or growth patterns, and introduction of higher volumes of
orders into the price and volume discovery processes. Further, the
Exchange believes the proposed amendments are reasonable and equitable
allocations of fees and rebates because the September Options Step-Up
Add TCV tiers, combined with the requirement that a Member achieve an
ADV of equal to or greater than 0.40% of average TCV, will provide such
enhancements in market quality on BATS Options by incentivizing
increased participation on BATS Options as compared to September 2014,
especially as it relates to incentivizing Members to add orders that
will set the NBBO on BATS Options. The Exchange notes that it is not
proposing to modify any existing tiers, but rather to add new tiers
that will provide Members with additional ways to receive higher
rebates or pay lower fees. As such, under the proposal a Member will
receive either the same or a higher rebate or be charged either the
same or a lower fee than they would today. Accordingly, the Exchange
believes that the proposed additions to the Exchange's tiered pricing
structure and incentives are not unfairly discriminatory because they
will, except as noted below, apply uniformly to all Members and are
consistent with the overall goals of enhancing market quality on BATS
Options. The Exchange notes that it believes that restricting the
availability of the proposed rebates in Penny Pilot Securities
associated with the September Options Step-Up tier to Professional and
Firm orders is reasonable and equitably allocated as well as not
unreasonably discriminatory because Market Maker orders are already
afforded an opportunity to receive QIP rebates of up to an additional
$0.04 per contract, a rebate which is not available to Professional and
Firm orders. Professional and Firm orders can receive the same maximum
rebate that Market Maker orders can receive via QIP under the existing
Options Step-Up Add TCV but, pursuant to the proposal, the Exchange is
proposing to add an additional way for Professional and Firm orders to
achieve such rebate via the proposed new tier. The Exchange notes that
Market Maker orders will be eligible for both the reduced fees and NBBO
Setter tiers proposed as part of the September Options Step-Up Add TCV
tiers.
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.
(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. With respect to the proposed
new tiered rebates, the Exchange does not believe that any such changes
burden competition, but instead, enhance competition, as they are
intended to increase the competitiveness of and draw additional volume
to BATS Options. The Exchange also believes the proposed step-up tiers
would enhance competition because they are similar to pricing tiers
currently available on both the Exchange and other exchanges. 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
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) of the Act \17\ and paragraph (f) of Rule 19b-4
thereunder.\18\ 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.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal 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 No. SR-BATS-2014-064 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
[[Page 74796]]
All submissions should refer to File No. SR-BATS-2014-064. 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 will also 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 No. SR-BATS-2014-064 and should be
submitted on or before January 6, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29364 Filed 12-15-14; 8:45 am]
BILLING CODE 8011-01-P