
[Federal Register Volume 81, Number 82 (Thursday, April 28, 2016)]
[Notices]
[Pages 25462-25464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09899]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77691; File No. SR-BatsEDGX-2016-11]


Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change Related 
to Fees

April 22, 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 April 11, 2016, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 EDGX Rules 
15.1(a) and (c) (``Fee Schedule'') to amend the Investor Depth Tier 
under footnote 1.
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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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange determines the liquidity adding rebate that it will 
provide to Members using the Exchange's tiered pricing structure. Under 
such pricing structure, a Member will receive a rebate of anywhere 
between $0.0025 and $0.0034 per share executed, depending on the volume 
tier for which such Member qualifies. In January 2014, the Exchange 
adopted the Investor Depth Tier under footnote 1 of the Fee 
Schedule.\6\ Members who qualify for the Investor Depth Tier receive a 
rebate of $0.0033 per share where they: (i) Add an ADV \7\ of at least 
0.15% of the TCV; \8\ (ii) have an ``added liquidity'' as a percentage 
of ``added plus removed liquidity'' of at least 85%; and (3) add an ADV 
of at least 500,000 share as Non-displayed \9\ orders that yield fee 
code HA.\10\
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    \6\ See Securities Exchange Act Release No. 76816 (January 4, 
2016, 81 FR 987 (January 8, 2016) (SR-EDGX-2015-67).
    \7\ As defined in the Exchange's Fee Schedule available at 
http://batstrading.com/support/fee_schedule/edgx/.
    \8\ Id.
    \9\ See Exchange Rule 11.6(e)(2) for the definition of Non-
Displayed.
    \10\ Fee code HA is appended to Non-displayed orders that add 
liquidity on the Exchange. See the Exchange's Fee Schedule available 
at http://batstrading.com/support/fee_schedule/edgx/.
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    The Exchange now proposes to amend the Investor Depth Tier to: (i) 
Decrease the Member's added ADV threshold in Non-Displayed orders from 
500,000 shares to 400,000 shares; and (ii) permit a Member's added ADV 
to include Non-Displayed orders that yield fee codes HI and/or MM, in 
addition to fee code HA. Fee code HI is appended to Non-Displayed 
orders that receive price improvement and add liquidity, and fee code 
MM is appended to Non-Displayed orders that add liquidity using 
MidPoint Peg Orders.\11\ Lowering the Member's ADV threshold would 
encourage Members who cannot meet the tier's current criteria to 
increase their volume on the Exchange in order to achieve the lower 
threshold. Also, permitting Non-Displayed orders that yield fee codes 
HI and/or MM, in addition to fee code HA, to be included as part of the 
Member's ADV would enable Members that utilize other types of Non-
Displayed orders to be included as part of the Members added ADV for 
purposes to satisfying the Investor Depth Tier. In addition, lowering 
the ADV threshold, combined with the additional fee codes, necessary to 
achieve the tier should encourage Members to add displayed liquidity, 
as only the displayed liquidity in this tier is awarded the enhanced 
rebate. The remainder of the criteria required to meet the tier as well 
as the rate offered by the tier would remain unchanged.
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    \11\ See Exchange Rule 11.8(d) for a description of MidPoint Peg 
orders.
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    The Exchange proposes to implement this amendment to its Fee 
Schedule immediately.\12\
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    \12\ The Exchange initially filed the proposed change on April 
1, 2016 (SR-BatsEDGX-2016-06). On April 11, 2016, the Exchange 
withdrew SR-BatsEDGX-2016-06 and submitted this filing).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. The Exchange also notes that it operates in

[[Page 25463]]

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. The proposed rule changes reflect a 
competitive pricing structure designed to incent market participants to 
direct their order flow to the Exchange. The Exchange believes that the 
proposed amendments to the Investor Depth Tier are equitable and non-
discriminatory in they would apply uniformly to all Members. The 
Exchange believes the rate remains competitive with those charged by 
other venues and, therefore, reasonable and equitably allocated to 
Members.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates such as that proposed herein have been widely 
adopted by equities exchanges and are equitable because they are open 
to all Members on an equal basis and provide additional benefits or 
discounts that are reasonably related to: (i) The value to an 
exchange's market quality; (ii) associated higher levels of market 
activity, such as higher levels of liquidity provision and/or growth 
patterns; and (iii) introduction of higher volumes of orders into the 
price and volume discovery processes. The Exchange believes that the 
proposal is a reasonable, fair and equitable, and not unfairly 
discriminatory allocation of fees and rebates because it will provide 
Members with an additional incentive to reach certain thresholds on the 
Exchange.
    In particular, the Exchange believes the amendments to the Investor 
Depth Tier are a reasonable means to encourage Members to increase 
their liquidity on the Exchange. The Exchange further believes that the 
amendments to the Investor Depth Tier represent an equitable allocation 
of reasonable dues, fees, and other charges because the thresholds 
necessary to achieve the tier continue to encourage Members to add 
displayed liquidity to the EDGX Book \15\ each month, as only the 
displayed liquidity in this tier is awarded the rebate of $0.0033 per 
share. The amendments to the Investor Depth Tier also continue to 
recognizes the contribution that non-displayed liquidity provides to 
the marketplace, including: (i) Adding needed depth to the EDGX market; 
(ii) providing price support/depth of liquidity; and (iii) increasing 
diversity of liquidity to EDGX. Including Non-Displayed orders that 
yield fee codes HI and/or MM, in addition to fee code HA, would enable 
Members that utilize other types of Non-Displayed orders to be included 
as part of the Member's added ADV for purposes to satisfying the 
Investor Depth Tier. In addition, fee code MM and HI are both yielded 
on Non-Displayed orders that add liquidity--fee code MM for MidPoint 
Peg Orders and fee code HI for Non-Displayed orders that receive price 
improvement. The Exchange believes that Members utilizing Non-Displayed 
orders that add liquidity to the EDGX Book provide increased 
opportunities for Members to receive the benefit of price improvement, 
and the addition of fee codes HI and MM is a reasonable means by which 
to encourage the use of such orders. Combined with the addition of fee 
codes HI and MM, lowering the ADV threshold necessary to achieve the 
tier should encourage Members to add displayed liquidity, as only the 
displayed liquidity in this tier is awarded the enhanced rebate. The 
increased liquidity benefits all investors by deepening EDGX's 
liquidity pool, offering additional flexibility for all investors to 
enjoy cost savings, supporting the quality of price discovery, 
promoting market transparency and improving investor protection.
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    \15\ The EDGX Book is the System's electronic file of orders. 
See Exchange Rule 1.5(d).
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    The Exchange also notes that the criteria and rebate under the 
Investor Depth Tier continues to be equitable and reasonable as 
compared to other tiers offered by the Exchange. For example, under the 
Investor Tier Members may receive a rebate of $0.0032 per share where 
they (i) add an ADV of at least 0.15% of the TCV; and (ii) have an 
``added liquidity'' as a percentage of ``added plus removed liquidity'' 
of at least 85%. These thresholds mirror the first two thresholds 
required to meet the Investor Depth Tier. However, in order to achieve 
the higher rebate of $0.0033 per share provided by the amended Investor 
Depth Tier, Members must also add an ADV of at least 400,000 share as 
Non-displayed orders that yield fee codes HA, HI, and/or MM. Therefore, 
the Exchange believes the Investor Depth Tier continues to be 
consistent with Section 6(b)(4) \16\ of the Act as the more stringent 
criteria correlates with the tier's higher rebate.
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    \16\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe its proposed amendment 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 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. Accordingly, the Exchange does not believe that the 
proposed change will impair the ability of Members or competing venues 
to maintain their competitive standing in the financial markets.
    The Exchange does not believe that the amended tier would burden 
competition, but instead, enhances competition, as it is intended to 
increase the competitiveness of and draw additional volume to the 
Exchange. 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 they deem fee structures to be 
unreasonable or excessive. The proposed change is generally intended to 
draw additional liquidity to the Exchange. The Exchange does not 
believe the amended tier would burden intramarket competition as it 
would apply to all Members uniformly.

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 unsolicited 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.

[[Page 25464]]

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-BatsEDGX-2016-11 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-BatsEDGX-2016-11. 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-BatsEDGX-2016-11, and should 
be submitted on or before May 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-09899 Filed 4-27-16; 8:45 am]
 BILLING CODE 8011-01-P


