[Federal Register Volume 78, Number 178 (Friday, September 13, 2013)]
[Pages 56760-56761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22306]

[[Page 56760]]



[Release No. 34-70348; File No. SR-BATS-2013-048)

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Related to 
Fees for Use of BATS Exchange, Inc.

September 9, 2013.
    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 August 28, 2013, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes 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 any registered broker or dealer that has been 
admitted to membership in the Exchange.

    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 

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to adopt fees for new 
physical connections that the Exchange is making available to Members 
and non-Members.
    The Exchange currently maintains a presence in two third-party data 
centers: (i) The primary data center where the Exchange's business is 
primarily conducted on a daily basis, and (ii) a secondary data center, 
which is predominantly maintained for business continuity purposes. The 
Exchange currently assesses fees to Members and non-Members of $1,000 
for any 1G physical port connection at either data center and of $2,500 
for any 10G physical port connection at either data center. The 
Exchange is not proposing to modify its port fees for 1G or 10G 
physical ports at either of its data centers.
    The Exchange recently received approval to provide market 
participants with the ability to access the Exchange's network through 
another data center entry point, or Point of Presence (``PoP''), at a 
data center other than the Exchange's primary or secondary data 
center.\6\ By offering an optional means of access to the Exchange via 
PoPs at other data centers, the Exchange is providing market 
participants with another means of accessing the Exchange. In 
particular, participants that do not maintain a presence in either of 
the Exchange's data centers must establish connectivity to such data 
centers. By making PoP entry points available, the Exchange is adding 
additional entry points to the Exchange's network and reducing the need 
for such connectivity for participants located in the same data center 
as such PoPs.

    \6\ Securities Exchange Act Release No. 70199 (August 14, 2013), 
78 FR 51250 (August 20, 2013) (SR-BATS-2013-036) (Order Approving a 
Proposed Rule Change to Introduce a Connectivity Option Through 
Points of Presence).

    A PoP connection could be used by any Member, non-member service 
bureau that acts as a conduit for orders entered by Exchange Members, 
Sponsored Participant, or market data recipient. This new access option 
is in response to industry demand. Clients opting not to access the 
Exchange at a PoP point of entry will still be able to access the 
Exchange directly in the existing data centers in the same way as they 
do currently.
    In connection with offering PoP connectivity in other data centers, 
the Exchange proposes to charge physical port fees as follows. The 
Exchange proposes to charge $2,000 for any 1G physical port to connect 
to the Exchange in any data center where the Exchange maintains a PoP 
other than the Exchange's primary or secondary data center. The 
proposed fee for PoP connectivity is higher than the fee for 
connectivity in the Exchange's primary and secondary data centers due 
to the increased infrastructure costs of maintaining the PoP, including 
the necessary connectivity maintained by the Exchange from such PoP to 
the Exchange's data centers. Due to the further infrastructure costs 
associated with providing the additional bandwidth for 10G physical 
ports, the Exchange proposes to charge $5,000 per month for each single 
physical 10G port provided by the Exchange to any Member or non-member 
in any data center where the Exchange maintains a PoP other than the 
Exchange's primary or secondary data center.
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.\7\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\8\ 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.

    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).

    The Exchange operates in a highly competitive market in which 
exchanges offer connectivity services as a means to facilitate the 
trading activities of members and other participants. Accordingly, fees 
charged for connectivity are constrained by the active competition for 
the order flow of such participants as well as demand for market data 
from the Exchange. If a particular exchange charges excessive fees for 
connectivity, affected members will opt to terminate their connectivity 
arrangements with that exchange, and adopt a possible range of 

[[Page 56761]]

strategies, including routing to the applicable exchange through 
another participant or market center or taking that exchange's data 
indirectly. Accordingly, the exchange charging excessive fees would 
stand to lose not only connectivity revenues but also revenues 
associated with the execution of orders routed to it by affected 
members, and, to the extent applicable, market data revenues. The 
Exchange believes that this competitive dynamic imposes powerful 
restraints on the ability of any exchange to charge unreasonable fees 
for connectivity. The Exchange believes that the proposal to offer PoP 
connectivity clearly evidences such competition. Specifically, the 
Exchange is offering a new connectivity option to keep pace with 
changes in the industry and evolving customer needs. PoP connectivity 
will be available to all Exchange constituents to whom such 
connectivity will be useful and cost-effective. The offering is 
entirely optional, and is geared towards attracting new customers, as 
well as retaining existing customers.
    Moreover, the Exchange believes the proposed fees for PoP 
connectivity to the Exchange are reasonable because they are based on 
the Exchange's costs to cover hardware, installation, testing and 
connection, as well [sic] expenses involved in maintaining and managing 
the PoP infrastructure. The proposed fees allow the Exchange to recoup 
these costs and may someday allow the Exchange to make a profit, while 
providing customers the ability to access the Exchange via a 
potentially more cost-effective mechanism than if they obtain third-
party connectivity to the Exchange's primary and/or secondary data 
centers. The Exchange believes the proposed fees for PoP connectivity 
are equitably allocated and non-discriminatory in that all Exchange 
constituents that voluntarily select this service option will be 
charged the same amount for the same services.

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. To the contrary, this proposal 
will promote competition through the offering of an optional, 
additional mechanism to connect to the Exchange. As discussed above, 
the Exchange believes that fees for connectivity are constrained by the 
robust competition for order flow among exchanges and non-exchange 
markets. Further, excessive fees for connectivity, including port fee 
access, would serve to impair an exchange's ability to compete for 
order flow rather than burdening competition.
    The proposed rule change will likewise enhance competition among 
service providers offering connections between market participants and 
the data centers. The offering will expand the multiple means of 
connectivity available, allowing customers to compare the benefits and 
costs connectivity with reference to numerous variables. The Exchange, 
and presumably its competitors, selects service providers on a 
competitive basis in order to pass along price advantages to their 
customers, and to win and maintain their business. The offering is 
consistent with the Exchange's own economic incentives to facilitate as 
many market participants as possible in connecting to its market.

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 \9\ and paragraph (f) of Rule 19b-4 
thereunder.\10\ 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.


    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 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 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 rule-comments@sec.gov. Please include 
File Number SR-BATS-2013-048 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BATS-2013-048. 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-2013-048 and should be 
submitted on or before October 4, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Kevin M. O'Neill,
Deputy Secretary.

    \11\ 17 CFR 200.30-3(a)(12).

[FR Doc. 2013-22306 Filed 9-12-13; 8:45 am]