
[Federal Register Volume 76, Number 191 (Monday, October 3, 2011)]
[Notices]
[Pages 61127-61129]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25379]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65407; File No. SR-BATS-2011-037]


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 27, 2011.
    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 September 19, 2011, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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 Substance 
of the Proposed Rule Change

    The Exchange proposes amend the fee schedule applicable to Members 
\5\ and non-members of the Exchange pursuant to BATS Rules 15.1(a) and 
(c). While changes to the fee schedule pursuant to this proposal will 
be effective upon filing, the changes will become operative on 
September 23, 2011.
---------------------------------------------------------------------------

    \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 
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 applicable to use 
of the Exchange effective September 23, 2011, in order to: (1) 
Discontinue payment of a liquidity rebate for any order subject to 
price sliding that adds liquidity to the Exchange and receives price 
improvement over its ranked price when executed; and (2) modify the 
``Options Pricing'' section of its fee schedule to impose a fee for 
newly available logical ports with bulk-quoting capabilities, as 
further described below.
Orders Subject to Price Sliding
    The Exchange proposes to discontinue payment of a liquidity rebate 
for any order subject to price sliding that adds liquidity to the 
Exchange and receives price improvement over its ranked price when 
executed. Pursuant to Exchange price sliding, an order that would lock 
or cross a protected quotation is ranked on the Exchange's order book 
at the locked price and then displayed at one minimum price level less 
aggressive than the locking price. For bids, this means that a price 
slid order is displayed at one minimum price variation less than the 
current national best offer (``NBO''), and for offers, this means that 
a price slid order is displayed at one minimum price variation more 
than the current national best bid (``NBB'').
    The Exchange received approval in June of a rule change to allow a 
non-displayed order or an order subject to the price sliding process 
that is not executable at its most aggressive price to be executed at 
one-half minimum price variation less aggressive than the price at 
which it is ranked.\6\ The Exchange immediately implemented the change 
for non-displayed orders, but delayed the implementation related to 
orders subject to price sliding in order to complete development of the 
necessary system functionality. On September 23, 2011, the Exchange 
plans to implement the systems change to allow an order subject to 
price sliding to execute at one-half minimum price variation less 
aggressive than the price at which such order is ranked. Specifically, 
in the event an order submitted to the Exchange on the side opposite 
such a price slid order is a market order or a limit order priced more 
aggressively than the locking price, the Exchange will execute the 
resting order subject to price sliding at, in the case of a resting 
bid, one-half minimum price variation less than the locking price, and, 
in the case of a resting offer, at one-half

[[Page 61128]]

minimum price variation more than the locking price. Based on the 
functionality, orders executed as described above will receive price 
improvement over the price at which such orders are ranked. Because 
price slid orders subject to the order handling process described above 
will receive price improvement, the Exchange proposes to eliminate the 
payment of a liquidity rebate for such executions, which is the same 
fee structure applied to executions of non-displayed orders that 
receive price improvement when executed. The Exchange believes that 
price improvement received for executions of orders subject to price 
sliding will offset the change in the fee structure for such orders.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 64754 (June 27, 
2011), 76 FR 38712 (July 1, 2011) (SR-BATS-2011-01 [sic]) (Order 
Approving a Proposed Rule Change to Amend BATS Rule 11.9, entitled 
``Orders and Modifiers'' and BATS Rule 11.13, entitled ``Order 
Execution'').
---------------------------------------------------------------------------

Options Logical Port Fees
    The Exchange currently charges a fee of $400.00 per month per 
logical port used by Members or non-members to access and receive 
information from the Exchange's cash equities platform. A logical port 
is also commonly referred to as a TCP/IP port, and represents a port 
established by the Exchange within the Exchange's system for trading 
and billing purposes. Each logical port established is specific to a 
Member or non-member and grants that Member or non-member the ability 
to operate a specific application, such as FIX order entry or PITCH 
data receipt.
    In contrast to its cash equities platform, the Exchange currently 
provides logical ports free of charge to Members and non-members that 
have access to or receive data from the Exchange's equity options 
platform (``BATS Options''). On August 9, 2011, the Exchange filed an 
immediately effective rule filing for BATS Options to introduce a bulk-
quoting interface for registered BATS Options market makers to allow 
such market makers to provide liquidity to the market in a broader set 
of series in a more efficient manner.\7\ On September 2, 2011, the 
Exchange filed an immediately effective rule filing for BATS Options to 
expand the availability of the bulk-quoting interface to all Users \8\ 
of BATS Options.\9\ Due to the development and infrastructure costs 
associated with bulk-quoting functionality, the Exchange proposes to 
charge Users $1,000.00 per month for any logical port with bulk-quoting 
capabilities. The bulk-quoting interface allows Users to provide both a 
bid and an offer in one message as well as bundle several quote updates 
into one bulk message. This is a useful feature for Users that provide 
quotations in many different options. As proposed, the change applies 
to any User that obtains a port enabled with bulk-quoting functionality 
to access the Exchange.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 65133 (August 15, 
2011), 76 FR 52032 (August 19, 2011) (SR-BATS-2011-029).
    \8\ As defined in BATS Rule 16.1(a)(62), a ``User'' on BATS 
Options is either a member of BATS Options or a sponsored 
participant who is authorized to obtain access to the Exchange's 
system pursuant to BATS Rule 11.3.
    \9\ See Securities Exchange Act Release No. 65307 (September 9, 
2011), 76 FR 57092 (September 15, 2011) (SR-BATS-2011-034).
---------------------------------------------------------------------------

    In order to differentiate logical port fees from physical 
connection charges and because the fee described above is applicable 
only to BATS Options, the Exchange also proposes to modify a sub-
heading included in the ``Equities Pricing'' section of the Exchange's 
fee schedule from ``Port Fees'' to ``Equities Logical Port Fees.'' 
Although the Exchange is implementing this fee effective September 23, 
2011, the Exchange will not charge any User of BATS Options a fee for 
bulk-quoting ports until October 1, 2011.
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 Section 6(b)(4) 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 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. With respect to the fee change 
related to price slid orders, the Exchange believes that the lack of a 
fee or rebate for any execution of a price slid order that receives 
price improvement over its ranked price is competitive, fair and 
reasonable, and non-discriminatory in that this fee structure will 
apply uniformly to all Members and because the proposed fee structure 
is the same fee structure imposed for non-displayed orders that are 
handled similarly. Finally, the Exchange believes that the lack of a 
rebate for executions of orders subject to price sliding that receive 
price improvement is appropriate because the price improvement received 
will offset the change in the fee structure for such orders.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    With respect to the proposed charge for ports with bulk-quoting 
functionality, the Exchange notes that the use of such ports is 
optional, and that market participants can continue to access BATS 
Options through other logical ports free of charge. At the same time, 
the Exchange believes that its fees for bulk-quoting logical ports are 
reasonable, given the benefits and added efficiencies Users of BATS 
Options will realize through such ports. In addition, the Exchange 
believes that its fees are equitably allocated among its constituents 
as they are uniform in application to all Users of BATS Options. The 
Exchange believes that fees for each port with bulk-quoting 
capabilities will enable it to cover the development and infrastructure 
costs associated with offering and continuing to offer bulk-quoting 
capabilities to BATS Options Users.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change imposes 
any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to Section 19(b)(3)(A)(ii) of the Act \12\ and Rule 19b-
4(f)(2) thereunder,\13\ the Exchange has designated this proposal as 
establishing or changing a due, fee, or other charge applicable to the 
Exchange's Members and non-members, which renders the proposed rule 
change effective upon filing.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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.

[[Page 61129]]

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BATS-2011-037 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-2011-037. This file 
number should be included on the subject line if e-mail 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 on official business 
days between the hours of 10 a.m. and 3 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-2011-037 and should be submitted on or before October 24, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25379 Filed 9-30-11; 8:45 am]
BILLING CODE 8011-01-P


