[Federal Register Volume 80, Number 12 (Tuesday, January 20, 2015)]
[Notices]
[Pages 2763-2766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00702]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74043; File No. SR-BATS-2015-01]
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.
January 13, 2015.
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 January 2, 2015, 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 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
[[Page 2764]]
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: (1) Adopt pricing for Retail Orders, as
defined below, on the Exchange, including a new Retail Order Tier; (2)
add Membership Fees; and (3) make certain non-substantive clean-up
changes to the fee schedule.
Retail Order Pricing
The Exchange recently adopted rules related to the Exchange's
Retail Order Attribution Program.\6\ Under such program, the Exchange
allows Members to designate Retail Orders \7\ that they enter to be
identified as being Retail Orders on the Exchange's proprietary data
feeds. Not all Retail Orders entered by a Member will be identified as
being a Retail Order, but rather a Retail Order will only be displayed
on the Exchange's proprietary data feeds as a Retail Order where the
Member designates that the order be identified as such. There are not
currently any pricing incentives for participation in the Retail Order
Attribution Program.
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\6\ See Securities Exchange Act Release No. 73237 (September 26,
2014), 79 FR 59537 (October 2, 2014) (SR-BATS-2014-043).
\7\ As defined in Rule 11.25(a)(2), a ``Retail Order'' is an
agency or riskless principal order that meets the criteria of FINRA
Rule 5320.03 that originates from a natural person and is submitted
to the Exchange by a Retail Member Organization, provided that no
change is made to the terms of the order with respect to price or
side of market and the order does not originate from a trading
algorithm or any other computerized methodology. A Retail Member
Organization or ``RMO'' is a Member (or a division thereof) that has
been approved by the Exchange under Rule 11.25 to submit Retail
Orders.
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The Exchange proposes to introduce new fee codes ZA and ZR in order
to provide pricing specific to Retail Orders executed on the Exchange.
The Exchange notes that such proposed pricing would apply to all Retail
Orders and that a Retail Order would not need to be attributable in
order to receive the proposed pricing. The Exchange is proposing new
fee code ZA to apply to Retail Orders that add liquidity to the
Exchange. A transaction with fee code ZA is proposed to be assigned a
rebate of $0.0032 per share. The Exchange is also proposing new fee
code ZR to apply to Retail Orders that remove liquidity from the
Exchange. A transaction with fee code ZR and is proposed to be assigned
a charge of $0.0030 per share, which is the same as the standard fee
for removing liquidity from the Exchange. Proposed fee codes ZA and ZR
will only apply to Retail Orders that add or remove liquidity,
respectively, in executions that occur on the Exchange. Where a Retail
Order is routed, executes in an auction, or executes in the Opening or
Re-Opening, the appropriate fee code will apply and proposed fee codes
ZA and ZR will not apply.
In addition to the proposed standard pricing for Retail Orders
executed on the Exchange, the Exchange is also proposing to add a new
Retail Order Tier. As proposed, the Exchange would offer a rebate of
$0.0034 per share for adding liquidity for a Retail Order executed on
the Exchange where the Member adds an average daily volume of Retail
Orders (fee code ZA), that is 0.07% or more of average daily TCV.\8\
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\8\ 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. The Exchange excludes from its calculation of TCV volume
on any day that the Exchange experiences an Exchange System
Disruption, on any day with a scheduled early market close and the
Russell Reconstitution Day.
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Membership Fees
The Exchange is also proposing to charge an Annual Membership Fee
for Members of the Exchange of $2,500, which will support their
Exchange membership for the calendar year. The fee will be charged per
Member firm. Beginning in January 2015, the Exchange plans to charge an
Annual Membership Fee which will be assessed on all Members as of a
date determined by the Exchange in January of each year. For any month
in which a firm is approved for membership with the Exchange after the
January renewal period, the Annual Membership Fee will be pro-rated
beginning on the date on which membership is approved and based on the
number of remaining trading days in that year. The fee will be assessed
in the month following membership approval. For example, if a firm
applies and is accepted for membership with the Exchange on February
15, 2015, the new Member will be assessed a pro-rated Annual Membership
Fee for the period beginning on February 15 through the end of 2015.
The fee will be assessed in the next month's billing cycle, which in
this case, would be March 2015. Such fees will be non-refundable.
However, where a Member is pending a voluntary termination of rights as
a Member pursuant to Rule 2.8 prior to the date any Annual Membership
Fee for a given year will be assessed (i.e., January 1, 2015) and the
Member does not utilize the facilities of the Exchange while such
voluntary termination of rights is pending, then the Member will not be
obligated to pay the Annual Membership Fee. The Exchange believes this
to be appropriate because there is ordinarily a 30 day waiting period
before such resignation shall take effect.
Non-Substantive Changes
Finally, the Exchange is proposing to make certain non-substantive
clean-up changes to the fee schedule. Footnote 2 relates to Step-Up
Tiers in which displayed orders that add liquidity to the Exchange
receive enhanced rebates where the Member meets certain thresholds
related to a Member's Step-Up Add TCV.\9\ Footnote 2 currently states
that it applies to fee codes B, V, and Y, however footnote 2 does not
currently appear in the Fee Codes and Associated Fees table next to fee
codes V and Y (but does appear next to fee code B). As such, the
Exchange is proposing to add footnote 2 to fee codes V and Y in the Fee
Codes and Associated Fees table in the fee schedule. This is a non-
substantive change to the fee schedule because footnote 2 states that
it applies to each of fee codes B, V, and Y and the Exchange is adding
the footnote to fee codes V and Y in order to make the fee schedule as
consistent as possible to indicate that footnote 2 should apply to
those fee codes.
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\9\ Step-Up Add TCV means ADAV as a percentage of TCV in January
2014 subtracted from current ADAV as a percentage of TCV.
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The Exchange proposes to implement the amendments to its fee
schedule effective January 2, 2015.
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.\10\
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,\11\
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
[[Page 2765]]
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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\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the new Retail Order rebate and fee code
associated with adding liquidity is reasonable and equitable because it
will incentivize Members to submit orders designated as Retail Orders
to the Exchange which will enhance liquidity in Retail Orders on the
Exchange and further incentivize Members who wish to execute against
Retail Orders to send additional orders to the Exchange. The Exchange
believes that this increased liquidity would potentially stimulate
further price competition for Retail Orders, thereby deepening the
Exchange's liquidity pool in both non-Retail and Retail Orders,
supporting the quality of price discovery, and promoting market
transparency, further rendering the proposal reasonable and equitable.
The Exchange believes that the new Retail Order rebate is non-
discriminatory because it is equally available to all Members that
enter Retail Orders.
The Exchange believes that the new Retail Order fee code for
removing liquidity is reasonable, equitable, and non-discriminatory
because, as stated above, the fees associated with a Retail Order that
removes liquidity on the Exchange is the same as the standard fee for
removing liquidity for a non-Retail Order. The only difference is that
the Exchange is now providing a more specific fee code in order to make
it easier for Members to understand their monthly invoices, which the
Exchange again believes makes the proposed change reasonable,
equitable, and non-discriminatory.
The Exchange also believes that its proposed new Retail Order Tier
and associated enhanced rebate are reasonable and equitable because the
tiers based on added Retail Order volume is intended to reward those
Members that and incentivize other Members to add a larger amount of
volume in Retail Orders on the Exchange by providing an additional
$0.0002 per share rebate for Members that have a add an average daily
volume of Retail Orders that is 0.07% or more of average daily TCV.
Further, the Exchange believes that the new Retail Order Tier is
reasonable and equitable because it incentivizes and rewards Members
for posting Retail Orders on the Exchange, which is consistent with the
overall goal of enhancing market quality on the Exchange. The Exchange
also believes that the proposed rebates [sic] associated with the tier
is non-discriminatory in that it is equally available to all Members
and, again, because it is consistent with the goal of enhancing market
quality on the Exchange.
Volume-based rebates and fees such as the ones proposed by and
maintained on the Exchange, including Step-Up Tiers, the cross-asset
step-up tier, the cross-asset tier and the Retail Order Tier proposed
herein, have been widely adopted in the cash equities markets 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. The Exchange notes that it is not
proposing to modify any existing tiers, but rather to add a new tier
that will provide Members with additional ways to receive higher
rebates, meaning that under the proposal, a Member will receive either
the same or a higher rebate than they would receive 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 apply uniformly to all Members and are consistent
with the overall goals of enhancing market quality on the Exchange.
The Exchange also believes that assessing an Annual Membership Fee
provides an equitable allocation of reasonable dues, fees and other
charges among its Members and other persons using its facilities. The
Exchange makes all services and products subject to these fees
available on a non-discriminatory basis to similarly situated
recipients. The Exchange believes that the Annual Membership Fee is a
reasonable and equitable method of ensuring that its fees fund a
greater portion of the cost of regulating activity on the Exchange, and
that even after assessing these fees, the overall cost of Exchange
membership is reasonable as compared with the costs of membership in
other SROs.\12\ The Exchange believes that the proposed addition of an
Annual Membership Fee is non-discriminatory in that it applies
uniformly to all Members.
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\12\ See, e.g., NASDAQ Rule 7001(a) (assessing an [sic] $3,000
annual membership fee); see also New York Stock Exchange Price List
2015, at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf (assessing a $40,000 annual trading license fee
for the first two licenses held by a member organization).
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Finally, the Exchange believes that the clarifying change that adds
the footnote 2 to fee codes V and Y in the Fee Codes and Associated
Fees table is reasonable as it will help to avoid confusion for those
that review the Exchange's fee schedule. The Exchange notes that the
proposed change is not designed to amend any fee or rebate, nor alter
the manner in which it assesses fees or calculates rebates. The
Exchange believes that the proposed amendment is intended to make the
fee schedule clearer and less confusing for investors and eliminate
potential investor confusion, thereby removing impediments to and
perfecting the mechanism of a free and open market and a national
market system, and, in general, protecting investors and the public
interest.
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. To
the contrary, the Exchange believes that the proposed changes will
allow the Exchange to compete more ably with other execution venues by
providing more competitive prices for Retail Orders that add liquidity
in securities traded on the Exchange, thereby making it a more
desirable destination venue for its customers. 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.
The Exchange's proposed membership fees will be lower than the cost
of membership on other exchanges,\13\ and therefore, may stimulate
intramarket competition by attracting additional firms to become
Members on the Exchange. In addition, membership fees are subject to
competition from other exchanges. Accordingly, if the changes proposed
herein are unattractive to market participants, it is likely the
Exchange will see a decline in membership and/or trading activity as a
result. The proposed fee change will not impact intermarket competition
because it will apply to all Members equally. 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,
[[Page 2766]]
including Annual Membership Fees, to be unreasonable or excessive.
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\13\ See id.
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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 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 \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-2015-01 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.
All submissions should refer to File Number SR-BATS-2015-01. 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-2015-01, and should be
submitted on or before February 10, 2015.
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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Brent J. Fields,
Secretary.
[FR Doc. 2015-00702 Filed 1-16-15; 8:45 am]
BILLING CODE 8011-01-P