
[Federal Register Volume 81, Number 69 (Monday, April 11, 2016)]
[Notices]
[Pages 21417-21420]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08184]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77524; File No. SR-BatsBZX-2016-04]


 Self-Regulatory Organizations; Bats BZX 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 BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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 BZX 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

[[Page 21418]]

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 (``BZX 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 BZX 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 BZX 
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 
membershipservices@bats.com.
    \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 various executions, including executions of 
Customer \8\ and Market Maker \9\ orders. In connection with such 
tiers, the Exchange calculates on a monthly basis a Member's ADV \10\ 
and/or ADAV \11\ in the applicable category (e.g., Customer orders or 
Market Maker orders), as a percentage of average TCV.\12\ The Exchange 
also offers various incentives focused on growth that compare a 
Member's ADAV as compared to a baseline ADAV established in a prior 
period (i.e., the Exchange's ``step-up'' pricing). 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\ ``ADAV'' means average daily added volume calculated as the 
number of contracts per day.
    \12\ ``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.\13\
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    \13\ 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.\14\ 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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    \14\ 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.\15\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\16\ 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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    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposed fees and rebates are 
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

[[Page 21419]]

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 volume, including 
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 \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 rule-comments@sec.gov. Please include 
File Number SR-BatsBZX-2016-04 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-BatsBZX-2016-04. 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 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

[[Page 21420]]

available publicly. All submissions should refer to File Number SR-
BatsBZX-2016-04 and should be submitted on or before May 2, 2016.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08184 Filed 4-8-16; 8:45 am]
 BILLING CODE 8011-01-P


