[Federal Register Volume 80, Number 13 (Wednesday, January 21, 2015)]
[Notices]
[Pages 2987-2989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00837]
[[Page 2987]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74052; File No. SR-BATS-2015-02]
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 14, 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 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 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
adding a new tier within the Professional, Firm, and Market Maker Penny
Pilot Add Volume Tiers, a new Market Maker Penny Pilot Add Volume Tier,
and several corresponding changes, as further described below.
The Exchange proposes to add a new Non-Customer Take Volume Tier.
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 under fee code
PP, or, where the Member meets the requirements of the existing Non-
Customer Take Volume Tier under footnote 3, i.e. 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 proposes to add
an additional Non-Customer Take Volume Tier to footnote 3 of the fee
schedule that will charge $0.45 per contract for Professional, Firm,
and Market Maker orders in a Penny Pilot Security that removes
liquidity from BATS Options where the Member: (1) Has an ADAV \12\
equal to or greater than 1.00% of average TCV; and (2) has an ADV equal
to or greater than 2.00% of average TCV.
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\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\ ``ADAV'' means average daily added volume calculated as the
number of contracts added.
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The Exchange is also proposing to add a new Market Maker Penny
Pilot Add Volume Tier. Currently, the Exchange provides a $0.40 per
contract rebate for a Market Maker order in a Penny Pilot Security that
adds liquidity to BATS Options under fee code PM. The Exchange proposes
to add a Market Maker Penny Pilot Tier under footnote 6 of the fee
schedule that will provide a $0.42 per contract rebate for Market Maker
orders in a Penny Pilot Security that adds liquidity to BATS Options
where the Member: (1) Has an ADAV equal to or greater than 1.00% of
average TCV; and (2) has an ADV equal to or greater than 2.00% of
average TCV.
Finally, the Exchange proposes to make several corresponding
changes to the fee schedule to reflect the proposed changes above.
Specifically, the Exchange is proposing to add the fee and rebate
proposed above to the Standard Rates chart on the fee schedule, to add
footnote six to fee code PM, and to title the current Non-Customer Take
Volume Tier in footnote 3 as ``Non-Customer Take Volume Tier 1'' in
order to reflect the addition of the second tier proposed above.
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.\13\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\14\ 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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\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4).
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Volume-based rebates and fees such as the ones currently maintained
on BATS Options as well as the new Non-Customer Take Volume Tier 2 and
the
[[Page 2988]]
new Market Maker Penny Pilot Add Volume Tier 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 Non-Customer Take Volume Tier 2 is a reasonable and
equitable allocation of fees and rebates because the requirement that
the Member has an ADAV equal to or greater than 1.00% of average TCV
combined with the requirement that a Member achieve an ADV of equal to
or greater than 2.00% of average TCV will provide such enhancements in
market quality on BATS Options by incentivizing increased participation
on BATS Options. This is especially true as compared to Non-Customer
Take Volume Tier 1, which has no ADAV component, meaning that Non-
Customer Take Volume Tier 2 will act to incentivize Members to add
liquidity on BATS Options in order to receive further reduced fees.
Similarly, the Exchange believes that the new Market Maker Penny Pilot
Add Volume Tier is a reasonable and equitable allocation of fees and
rebates it will incentivize Members to both add and remove liquidity
from the Exchange in order to meet the ADV and ADAV thresholds required
to receive the enhanced rebates.
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 which also benefits all
Members. The Exchange believes that restricting the availability of the
proposed rebates in Penny Pilot Securities associated with the Market
Maker Add Volume Tier to Market Maker orders is reasonable and
equitably allocated as well as not unreasonably discriminatory because
Market Makers are subject to additional regulatory requirements not
applicable for Professional and Firm orders and such Market maker
orders are not currently eligible for certain enhanced rebate tiers
available to Professional and Firm orders under the Professional and
Firm Penny Pilot Add Volume Tiers. The Exchange notes that all non-
Customer orders (i.e., Professional, Firm and Market Maker orders) will
be eligible for the reduced fees proposed as under the Non-Customer
Take Volume Tier 2.
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 tiers would
further 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 \15\ and paragraph (f)(2) of Rule 19b-4
thereunder.\16\ 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. If
the Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule should be approved
or disapproved.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(2).
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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-2015-02 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-2015-02. 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
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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-2015-02 and should be
submitted on or before February 11, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00837 Filed 1-20-15; 8:45 am]
BILLING CODE 8011-01-P