[Federal Register Volume 78, Number 178 (Friday, September 13, 2013)]
[Notices]
[Pages 56760-56761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22306]
[[Page 56760]]
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SECURITIES AND EXCHANGE COMMISSION
[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.
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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 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.
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\5\ A Member is any registered broker or dealer that has been
admitted to membership in the Exchange.
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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 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.
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\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).
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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.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(4).
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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
alternative
[[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.
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 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-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.
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\11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-22306 Filed 9-12-13; 8:45 am]
BILLING CODE 8011-01-P