
[Federal Register Volume 79, Number 117 (Wednesday, June 18, 2014)]
[Notices]
[Pages 34817-34819]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14198]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72376; File No. SR-BATS-2014-021]


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.

June 12, 2014.
    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 May 30, 2014, 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 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
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 amend a rebate and 
add two new tiers for Customer \6\ orders that add liquidity to the 
Exchange's options platform (``BATS Options'') in options classes 
subject to the penny pilot program (``Penny Pilot Securities'').\7\ 
More specifically, the Exchange is proposing to amend the fee schedule 
as follows: (i) Lower the standard rebate for Customer orders that add 
liquidity in Penny Pilot Securities; (ii) introduce a new tier for 
Customer orders that add liquidity in Penny Pilot Securities; and (iii) 
introduce a new cross-asset tier for Customer orders that add liquidity 
in Penny Pilot Securities.
---------------------------------------------------------------------------

    \6\ As defined on the Exchange's fee schedule, a ``Customer'' 
order is any transaction identified by a Member for clearing in the 
Customer range at the Options Clearing Corporation (``OCC''), except 
for those designated as ``Professional''.
    \7\ The Exchange currently charges different fees and provides 
different rebates depending on whether an options class is an 
options class that qualifies as a Penny Pilot Security pursuant to 
Exchange Rule 21.5, Interpretation and Policy .01 or is a non-penny 
options class.
---------------------------------------------------------------------------

    The Exchange currently provides rebates for Customer orders that 
add liquidity to the BATS Options order book in Penny Pilot Securities 
pursuant to a tiered pricing structure, as described below, including a 
cross-asset tier, which provides enhanced rebates to

[[Page 34818]]

Members that meet certain volume thresholds on both BATS Options and 
the BATS equities trading platform (``BATS Equities''). The Exchange 
currently offers the following rebates per contract for a Customer 
order that adds liquidity in Penny Pilot Securities to the BATS Options 
order book: (i) $0.45 where the Member does not qualify for any 
additional rebates (the ``Lower Tier''); (ii) $0.48 where the Member 
has an ADV \8\ equal to or greater than 0.30% of average TCV,\9\ but 
less than 1.00% of average TCV (``Second Tier''); (iii) $0.50 where the 
Member has an ADV equal to or greater than 0.90% of average TCV and has 
on BATS Equities an ADAV \10\ equal to or greater than 0.25% of average 
TCV (``Cross-Asset Tier''); \11\ and (iv) $0.50 where the Member has an 
ADV equal to or greater than 1.00% of average TCV.
---------------------------------------------------------------------------

    \8\ As provided in the fee schedule, for purposes of BATS 
Options pricing, ``ADV'' means average daily volume calculated as 
the number of contracts added or removed, combined, per day. ADV is 
calculated on a monthly basis, excluding contracts added or removed 
on any day that the Exchange's system experiences a disruption that 
lasts for more than 60 minutes during regular trading hours 
(``Exchange System Disruption''). The fee schedule also provides 
that routed contracts are not included in ADV calculation.
    \9\ As provided in the fee schedule, for purposes of BATS 
Options pricing, ``TCV'' is 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.
    \10\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``ADAV'' means average daily added volume 
calculated as the number of shares added per day. ADAV is calculated 
on a monthly basis, excluding routed shares as well as shares added 
on any day that the Exchange experiences an Exchange System 
Disruption and on the last Friday in June (the ``Russell 
Reconstitution Day'').
    \11\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``TCV'' means total consolidated volume calculated 
as the volume reported by all exchanges and trade reporting 
facilities to a 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 or the Russell 
Reconstitution Day.
---------------------------------------------------------------------------

    The Exchange is proposing to reduce the per contract rebate for the 
Lower Tier from $0.45 to $0.25. The Exchange is also proposing to 
create a new tier between the Lower Tier and the Second Tier in which a 
Member that has an ADV equal to or greater than 0.05% of average TCV, 
but less than 0.30% of average TCV will receive $0.45 per contract, the 
same rebate previous available in the Lower Tier. Finally, the Exchange 
is proposing to add an additional cross-asset tier in which a Member 
will receive $0.50 per contract where the Member has an ADV equal to or 
greater than 0.80% of average TCV and has on BATS Equities an ADAV 
equal to or greater than 0.50% of average TCV (the ``New Cross-Asset 
Tier'').

Implementation Date

    The Exchange proposes to implement these amendments to its fee 
schedule on June 2, 2014.
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.\12\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\13\ 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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Volume-based rebates and fees such as the ones maintained by BATS 
Options, and as amended by this proposal, have been widely adopted in 
the cash equities markets, and are reasonable and 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. Accordingly, the Exchange believes that 
the proposed changes to the Exchange's tiered pricing structure and 
incentives are not unfairly discriminatory because they are consistent 
with the overall goals of enhancing market quality. Similarly, the 
Exchange believes that continuing to base its tiered fee structure on 
overall TCV, rather than a static number of contracts irrespective of 
overall volume in the options industry, is a fair and equitable 
approach to pricing.
    The Exchange notes that while the rebate for the Lower Tier is 
being reduced (from $0.45 to $0.25 per contract) such proposed new 
rebate is reasonable, fair and equitable in that it is the same as the 
rebate offered by NYSE Arca, Inc. and is $0.05 greater than rebate 
offered by the Nasdaq Stock Market LLC for Customer orders that add 
liquidity in Penny Pilot Securities that do not meet any other volume 
tiers. Further, the Exchange believes the reduction of the rebate for 
the Lower Tier is reasonable, fair and equitable because the Exchange 
is also proposing to introduce a new volume tier between the Lower Tier 
and the Second Tier with a relatively low volume threshold, where a 
Member will receive a $0.45 rebate per contract for Customer orders in 
Penny Pilot Securities where the Member has an ADV equal to or greater 
than 0.05% of average TCV. Thus, all Members with an ADV equal to or 
greater than 0.05%, but less than 0.30% of average TCV will receive the 
same rebate that they would have previously received pursuant to the 
Lower Tier for Customer orders that add liquidity in Penny Pilot 
Securities. The Exchange also believes that the new volume tier between 
the Lower Tier and Second Tier is reasonable, fair and equitable 
because it will encourage Members to add liquidity on BATS Options and 
because such Members will qualify for rebates pursuant to the new 
volume tier at a relatively low volume threshold. The Exchange further 
believes that the proposed amendment to rebates for the Lower Tier and 
the addition of a new tier between the Lower Tier and the Second Tier 
are fair and equitable and not unreasonably discriminatory because they 
will apply uniformly to all Members and are consistent with the overall 
goal of enhancing market quality on BATS Options as described above 
with respect to volume-based rebates and fees.
    The Exchange's proposed New Cross-Asset Tier is reasonable, fair 
and equitable because it provides additional flexibility for Members to 
receive the highest possible rebate for Customer orders that add 
liquidity in Penny Pilot Securities. Compared to the Cross-Asset Tier, 
Members must meet a lower threshold on BATS Options (0.80% vs. 0.90%), 
but a higher threshold for BATS Equities (0.50% vs. 0.25%) in order to 
qualify for the New Cross-Asset Tier rebate of $0.50. Thus, the 
Exchange believes that the New Cross-Asset Tier is reasonable, fair and 
equitable because it will provide Members with a different volume 
profile on BATS Options and BATS Equities with the opportunity to 
qualify for the $0.50 per contract rebate, while simultaneously 
encouraging more Members to add liquidity on both BATS Equities and 
BATS Options. Further, the Exchange believes that the addition of

[[Page 34819]]

the New Cross-Asset Tier is fair and equitable and not unreasonably 
discriminatory because it is consistent with the overall goal of 
enhancing market quality on BATS Options and BATS Equities as described 
above with respect to volume-based rebates and fees.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. With 
respect to the proposed new tiers and 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, and, in the case of the New 
Cross-Asset Tier, also to BATS Equities. The Exchange also believes 
that the changes to the tiers as a whole will enhance competition 
because they are similar to pricing tiers currently available on 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. As such, the proposal is a competitive 
proposal that is intended to add additional liquidity to the Exchange, 
which will, in turn, benefit the Exchange and all Exchange 
participants.

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)(ii) of the Act \14\ and paragraph (f) of Rule 19b-4 
thereunder.\15\ 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 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-2014-021 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-BATS-2014-021. 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 the 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-2014-021, and should be 
submitted on or before July 9, 2014.
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14198 Filed 6-17-14; 8:45 am]
BILLING CODE 8011-01-P


