[Federal Register Volume 81, Number 69 (Monday, April 11, 2016)]
[Notices]
[Pages 21405-21408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08185]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77526; File No. SR-BatsEDGX-2016-05]
Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change Related
to Fees for Its Equity Options Platform
April 5, 2016.
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 March 31, 2016, Bats EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') 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 EDGX Rules
15.1(a) and (c).
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\5\ The term ``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 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 amend its fee schedule (``Fee Schedule'')
for its equity options platform (``EDGX Options'') to add the
definitions of ``Appointed MM'' and ``Appointed OEF'', effective April
1, 2016, which would increase opportunities for firms to qualify for
tiered pricing on EDGX Options. Specifically, the Exchange proposes to
allow a Market Maker to designate an Order Entry Firm (``OEF'') as its
``Appointed OEF'' and for an OEF to designate a Market Maker as its
``Appointed MM,'' for purposes of the Fee Schedule. Members of EDGX
Options would effectuate such designation by completing and sending an
executed Volume Aggregation and Execution Detail Request form by email
to the Exchange.\6\ As specified in the proposed Fee Schedule, the
Exchange would view the transmittal of the completed form as acceptance
of such an appointment.\7\ The proposed new concepts would be
applicable to all tiered pricing offered by the Exchange, and are
designed to increase opportunities for firms to qualify for such tiers.
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\6\ See proposed language for ``Designating an Appointed OEF/
Appointed MM'' under ``Definitions'' section of the Fee Schedule.
Members should direct their executed forms to
[email protected].
\7\ The Exchange further notes that, as proposed, the Exchange
would only recognize one such designation for each party once every
12 months, which designation would remain in effect unless or until
the Exchange receives written notice from either party indicating
that the appointment has been terminated. Id.
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The Exchange currently offers tiers as described in the footnotes
section of the Fee Schedule. Under the current tiers, Members that
achieve certain volume criteria may qualify for reduced fees or
enhanced rebates for Customer \8\ and Market Maker \9\ orders. In
connection with such tiers, the Exchange calculates on a monthly basis
a Member's ADV \10\ in Customer orders and Market Maker orders,
respectively, as a percentage of average TCV.\11\ Upon reaching a
volume threshold that qualifies a Member for a specified tier, a Member
receives the enhanced rebate or reduced fee associated with the highest
tier achieved for each eligible contract executed on the Exchange.
Under the Exchange's current Fee Schedule, a Member is permitted to
aggregate volume with other Members that control, are controlled by, or
are under common control with such Member. Thus, Members that act as
OEFs with affiliated broker-dealers that are Market Makers on the
Exchange, and vice-versa, may be able to qualify for certain pricing
incentives offered by the Exchange based on such affiliation and
aggregation.
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\8\ The term ``Customer'' applies to any transaction identified
by a Member for clearing in the Customer range at the Options
Clearing Corporation (``OCC''), excluding any transaction for a
Broker Dealer or a ``Professional'' as defined in Exchange Rule
16.1.
\9\ The term ``Market Maker'' applies to any transaction
identified by a Member for clearing in the Market Maker range at the
OCC, where such Member is registered with the Exchange as a Market
Maker as defined in Rule 16.1(a)(37).
\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.
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The proposal would be available to all Market Makers and OEFs.
Specifically, the proposed changes would enable any Market Maker to
qualify an Appointed OEF for purposes of volume-based tiers on the
Exchange. In this regard, the proposed change would enable a Market
Maker without an affiliated OEF--or with an affiliated OEF that doesn't
meet the volume requirements for tiered pricing--to enter into a
relationship with an Appointed OEF. Similarly, as proposed, an OEF, by
virtue of designating an Appointed MM, would be able to aggregate its
own Customer volume with the activity of its Appointed MM, which would
enhance the OEF's potential to qualify for tiered pricing.\12\
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\12\ An OEF that has both an Appointed MM and an affiliated
Market Maker may only aggregate volumes with one of these two, not
both. Specifically, the Exchange proposes to specify in the
definitions section that that ``[w]ith prior notice to the Exchange,
a Member may aggregate ADAV or ADV with other Members that control,
are controlled by, or are under common control with such Member or
who have been appointed as an Appointed OEF or Appointed OEF.'' See
proposed Fee Schedule, ``Definitions'', emphasis added.
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Thus, the proposed changes would enable firms that may not
currently be eligible for tiered pricing incentives to avail themselves
of such incentives as well as to assist firms that are currently
eligible for such incentives to potentially achieve a higher tier, thus
qualifying for higher rebates or reduced fees. The Exchange believes
these proposed changes would incentivize firms to direct their order
flow to the Exchange to the benefit of all market participants.
Further, the Exchange believes that the proposed changes would
encourage Market Maker firms to increase their participation on the
Exchange, which would increase capital commitment and liquidity on the
Exchange to the benefit of all market participants.
As proposed, the Exchange would only process one designation of an
Appointed OEF and Appointed MM per year, which designation would remain
in effect unless or until the parties informed the Exchange of its
termination.\13\ The Exchange believes that this requirement would
impose a measure of exclusivity and would enable both parties to rely
upon each other's transaction volumes executed on the Exchange, and
potentially increase such volumes, which is beneficial to all Exchange
participants.
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\13\ See supra, note 7.
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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.\14\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\15\ 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.
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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that its proposed fees and rebates are
[[Page 21407]]
reasonable, fair and equitable, and non-discriminatory for the
following reasons. First, the proposal would be available to all Market
Makers and OEFs and the decision to be designated as an ``Appointed
OEF'' or ``Appointed MM'' is completely voluntary and Members may elect
to accept this appointment or not. In addition, the proposed changes
would enable firms that are not currently eligible for tiered pricing
to avail themselves such pricing as well as to assist firms that are
currently eligible for such tiers to potentially achieve a higher tier,
thus qualifying for higher rebates or lower fees. The Exchange believes
these proposed changes would incentivize firms to direct their order
flow to the Exchange. Specifically, the proposed changes would enable
any Market Maker to qualify its Appointed OEF for purposes of tiered
pricing. Moreover, the proposed change would allow any OEF, by virtue
of designating an Appointed MM, to aggregate its own Customer volume
with the activity of its Appointed MM, which would enhance the OEF's
potential to qualify for enhanced rebates or reduced fees. The Exchange
believes these proposed changes would incentivize Appointed OEFs with
an Appointed MM to direct their order flow to the Exchange, which
increase in orders routed to the Exchange would benefit all market
participants by expanding liquidity and providing more trading
opportunities on the Exchange. Similarly, the Exchange believes these
proposed changes would incentivize Appointed MMs with an Appointed OEF
to increase their participation on the Exchange, which would increase
capital commitment and liquidity and decrease spreads on the Exchange
to the benefit of all market participants. The Exchange believes that,
similar to volume based tiers offered by the Exchange, the benefits of
the proposal extend to all market participants based on the increased
quality of liquidity on the Exchange, including those market
participants that opt not to become an Appointed OEF or Appointed MM.
Further, the Exchange believes that the proposal is reasonable and
equitably allocated because it is beneficial to all Exchange
participants based on the fact that it enables parties to rely upon
each other's transaction volumes executed on the Exchange, and
potentially increase such volumes. In turn, as above, the potential
increase in order flow, capital commitment and resulting liquidity on
the Exchange would benefit all market participants by expanding
liquidity, providing more trading opportunities and tighter spreads.
The proposal is also reasonable, equitable and not unfairly
discriminatory because the Exchange would only process one designation
of an Appointed OEF and Appointed MM per year, which requirement would
impose a measure of exclusivity while allowing both parties to rely
upon each other's transaction volumes executed on the Exchange, and
potentially increase such volumes, again, to the benefit of all market
participants. Finally, the Exchange believes the proposal is
reasonable, equitable and not unfairly discriminatory as it may
encourage an increase in orders routed to the Exchange, which would
expand liquidity and provide more trading opportunities and tighter
spreads to the benefit of all market participants, even to those market
participants that are either currently affiliated by virtue of their
common ownership or that opt not to become an Appointed OEF or
Appointed MM under this proposal.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed amendments to its
fee schedule would impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act. The
Exchange believes that the proposed changes are pro-competitive as they
would increase opportunities for firms to qualify for tiered pricing on
the Exchange, which may increase intermarket and intramarket
competition by incenting participants to direct their orders to the
Exchange thereby increasing the volume of contracts traded on the
Exchange and enhancing the quality of quoting. Enhanced market quality
and increased transaction volume that results from the anticipated
increase in order flow directed to the Exchange would benefit all
market participants and improve competition on the Exchange. The
Exchange notes that it operates in a highly competitive market in which
market participants can readily favor competing venues. In such an
environment, the Exchange must continually review, and consider
adjusting, its fees and rebates to remain competitive with other
exchanges. For the reasons described above, the Exchange believes that
the proposed rule change reflects this competitive environment.
(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 \16\ and paragraph (f) of Rule 19b-4
thereunder.\17\ 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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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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-BatsEDGX-2016-05 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-BatsEDGX-2016-05. 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
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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 Number SR-BatsEDGX-2016-05 and should be submitted on or before
May 2, 2016.
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\18\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08185 Filed 4-8-16; 8:45 am]
BILLING CODE 8011-01-P