
[Federal Register Volume 81, Number 99 (Monday, May 23, 2016)]
[Notices]
[Pages 32356-32358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12013]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77846; File No. SR-BatsBZX-2016-18]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rules 
15.1(a) and (c) in Order To Implement a Tape B Quoting Tier

May 17, 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 May 11, 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 and 
II below, which Items have been prepared by the Exchange. 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.
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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 \3\ and non-members of the Exchange pursuant to BZX Rules 
15.1(a) and (c) in order to implement a Tape B Quoting Tier.
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    \3\ 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).
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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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule to adopt a new Tape 
B Quoting Tier in order to strengthen market quality in LMP Securities 
\4\ and ETPs \5\ more broadly, by providing an enhanced rebate in Tape 
B \6\ securities to Members that meet certain minimum quoting standards 
in at least 50 LMP Securities. In particular, the Exchange proposes to 
adopt the new Tape B Quoting Tier under which all Members would be 
eligible to receive an additional $0.0001 for each share of added 
displayed liquidity in all Tape B securities if the Member is enrolled 
in at least 50 LMP Securities for which: \7\ (i) The Member's NBBO Time 
\8\ is at least 15% or NBBO Size Time \9\ is at least 25%; and (ii) the 
Member's Displayed Size Time \10\ is at least 90%.

[[Page 32357]]

As proposed, the Exchange will publish and update periodically via 
circular a list of LMP Securities in which all Members will be eligible 
to enroll.\11\ All Members will be eligible to enroll in LMP 
Securities, there will be no limit to the number of LMP Securities in 
which a Member may enroll, and there will be no limit to the number of 
Members that can enroll in each LMP Security.\12\ All Members enrolled 
in LMP Securities will be eligible for the additional rebate where the 
Member meets the Tape B Quoting Tier requirements.
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    \4\ As proposed, LMP Securities means a list of securities 
included in the Liquidity Management Program, the universe of which 
will be determined by the Exchange and published in a circular 
distributed to Members and on the Exchange's Web site. Such LMP 
Securities will include all Bats-listed ETPs and certain non-Bats-
listed ETPs for which the Exchange wants to incentivize Members to 
provide enhanced market quality.
    \5\ For purposes of this filing, ETP means any security type 
defined in Exchange Rule 14.11.
    \6\ Tape B securities includes all securities listed on the 
Exchange, NYSE Arca, Inc., and NYSE MKT LLC.
    \7\ As proposed, a Member must be enrolled in at least 50 LMP 
Securities for which the Member meets proposed requirements (i) and 
(ii), as measured on a security by security basis, in order to 
qualify for the Tape B Quoting Tier. Where a Member is enrolled in 
50 or more LMP Securities, but only meets proposed requirements (i) 
and (ii) in 49 or fewer of those LMP Securities, the Member will not 
qualify for the Tape B Quoting Tier.
    \8\ As proposed, NBBO Time means the average of the percentage 
of time during regular trading hours during which the Member 
maintains at least 100 shares at each of the NBB and NBO. As an 
example, where the Member maintains at least 100 shares at the NBB 
for 20% of the time during regular trading hours and at least 100 
shares at the NBO for 10% of the time during regular trading hours, 
the Member's NBBO Time would be 15% ((.20 + .10)/2).
    \9\ As proposed, NBBO Size Time means the percentage of time 
during regular trading hours during which there are size-setting 
quotes at the NBBO on the Exchange. Stated another way, where the 
Exchange has size-setting quotes at the each of the NBB and NBO for 
any amount of time equal to or greater than 25% of regular trading 
hours, the proposed NBBO Size Time threshold will be met. A quote is 
a size-setting quote where it is the largest quote at the NBB or NBO 
and remains a size-setting quote until and unless another quote is 
at a more aggressive price or at the same price with greater size. 
The Exchange notes that, unlike NBBO Time, which applies to a 
particular Member's quoting activity, NBBO Size Time is calculated 
based on all quoting activity on the Exchange. As an example, where 
the NBB is 10.00 as quoted by a single exchange with 500 shares and 
the Exchange then quotes 600 shares at 10.00, such quote is a size-
setting quote until another exchange quotes 700 shares at 10.00 or 
quotes at a more aggressive price.
    \10\ As proposed, Displayed Size Time means the percentage of 
time during regular trading hours during which the Member maintains 
at least 2,500 displayed shares on the bid and separately maintains 
at least 2,500 displayed shares on the offer that are priced no more 
than 2% away from the NBB and NBO, respectively. Stated another way, 
where the Member maintains at least 2,500 displayed shares at or 
within 2% of the NBB and NBO on each of the bid and the offer, 
respectively, for any amount of time equal to or greater than 90% of 
regular trading hours, the Member will meet the proposed threshold. 
The Exchange notes that any displayed shares priced at or within 2% 
of the NBB or NBO (e.g. at multiple price levels) will be counted 
toward the 2,500 share requirement. As an example, where the NBBO is 
$10.00 by $10.01 all bid shares with a limit equal to or greater 
than $9.80 will be counted and any offer shares with a limit equal 
to or less than $10.21 will be counted. Where the Member maintains 
at least 2,500 displayed shares at or within those thresholds on 
each of the bid and the offer for any amount of time equal to or 
greater than 90% of regular trading hours, the Member will meet the 
proposed threshold.
    \11\ The Exchange anticipates that the initial list of LMP 
Securities will include at least 175 ETPs, at least 80 of which will 
be Bats-listed securities. A current list of LMP Securities will be 
available on www.batstrading.com, which will be updated as new 
securities are added to the list of LMP Securities. A direct link to 
the list of LMP Securities will be included in the circular 
described above. All Bats-listed securities will be LMP Securities 
immediately upon listing on the Exchange. The Exchange will not 
remove a security from the list of LMP Securities without 30 days 
prior notice provided via circular.
    \12\ After executing a form notifying the Exchange of its intent 
to enroll in LMP Securities, a Member is eligible to enroll in LMP 
Securities daily through the Exchange's Web site. There is no 
approval or disapproval process associated with enrollment and 
execution of the form is solely for administrative purposes. All 
Members will be eligible to enroll in all LMP Securities after 
executing the form.
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    In addition to the changes proposed above, the Exchange proposes to 
relocate the term ``Qualified LMM'' within the list of Definitions to 
its proper alphabetical placement.
Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule effective June 1, 2016.
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.\13\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) and 6(b)(5) of the Act,\14\ in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its Members and other persons using its facilities. 
The proposed rule change reflects a competitive pricing structure 
designed to incent market participants to direct their order flow to 
the Exchange and enhance market quality in LMP Securities and in Tape B 
securities. The Exchange believes that the proposed tier is equitable 
and non-discriminatory in that it would apply uniformly to all Members, 
any Member may enroll in any LMP Security, and enrollment is a purely 
administrative process. 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.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed new tier is reasonable in 
that it will enhance market quality on the Exchange in two ways: (i) By 
incentivizing Members to meet certain quoting standards in LMP 
Securities designed to narrow spreads, increase size at the inside, and 
increase liquidity depth on the Exchange in such LMP Securities; and 
(ii) providing an additional rebate for all of a qualifying Member's 
orders that add liquidity in Tape B securities will incentivize Members 
to increase their participation on the Exchange in Tape B securities. 
The Exchange believes that the proposed quoting standards are 
reasonable because the NBBO Time and NBBO Size Time will either act to 
add additional liquidity at the NBBO in the LMP Securities or ensure 
that there is already significant size-setting quote activity on the 
Exchange in the LMP Securities and the Displayed Size Time will act to 
increase the depth of the market within 2% of the NBB and NBO for the 
vast majority of the trading day. The Exchange believes that such 
incentives will promote price discovery and market quality in such 
securities and, further, that the tightened spreads and increased 
liquidity from the proposal will benefit all investors by deepening the 
Exchange's liquidity pool, offering additional flexibility for all 
investors to enjoy cost savings, supporting the quality of price 
discovery, enhancing quoting competition across exchanges, promoting 
market transparency, and improving investor protection. The Exchange 
also believes that including all Bats-listed ETPs as LMP Securities is 
equitable and not unfairly discriminatory because it will help to 
strengthen the Exchange's market quality for Bats-listed securities by 
enhancing the quality of quoting in such securities, which will further 
assist the Exchange in competing as a listing venue for issuers seeking 
to list ETPs. The Exchange also believes that including only certain 
non-Bats-listed ETPs as LMP Securities is equitable and not unfairly 
discriminatory because the Exchange has identified such non-Bats-listed 
ETPs as securities for which it would like to inject additional quoting 
competition, which it believes will generally act to narrow spreads, 
increase size at the inside, and increase liquidity depth in such 
securities. Accordingly, the Exchange believes that the proposal is 
reasonable, equitably allocated, and not unfairly discriminatory 
because it is consistent with the overall goals of enhancing market 
quality.
    The Exchange notes that the proposed pricing structure is not 
dissimilar from volume-based rebates and fees (``Volume Tiers'') that 
have been widely adopted by exchanges, including the Exchange, and are 
equitable and not unfairly discriminatory because they are open to all 
members on an equal basis and provide higher rebates and lower fees 
that are reasonably related to the value to an exchange's market 
quality. Much like Volume Tiers are generally designed to incentivize 
higher levels of liquidity provision and/or growth patterns on the 
Exchange, the proposal is designed to incentivize enhanced market 
quality on the Exchange through tighter spreads, greater size at the 
inside, and greater quoting depth in LMP Securities by offering an 
enhanced rebate in Tape B securities. Such enhanced rebate will 
simultaneously incentivize higher levels of liquidity provision in all 
Tape B securities. Where the NBBO Size Time is at least 25%, there is 
no minimum NBBO Time standard applicable to the Member, however, the 
Exchange believes that this is reasonable because where the NBBO Size 
Time is already at least 25%, a Member meeting the NBBO Time standard 
will not significantly enhance market quality at the NBBO for the 
product on the Exchange. The Exchange also notes that the Member must 
still have a Displayed Size Time of at least 90% to receive the 
enhanced rebate. As such, the Exchange believes that the proposed 
enhanced rebate will strengthen the Exchange's market quality for LMP 
Securities by enhancing the quality of quoting in such securities, as 
well as enhancing market quality in Tape B securities generally. 
Accordingly, the Exchange believes that the proposal will act to 
enhance liquidity and competition across exchanges in LMP Securities 
and enhance liquidity provision in Tape B securities on the Exchange by 
providing a rebate reasonably related to such enhanced market quality 
to the benefit of all investors, thereby promoting the

[[Page 32358]]

principles discussed in Section 6(b)(5) of the Act.\15\
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    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes that the clarifying change to 
alphabetize the Definitions section of the fee schedule is reasonable, 
fair and equitable and non-discriminatory because it is non-substantive 
and is designed to make sure that the fee schedule is as clear and 
easily understandable as possible.

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. The 
Exchange does not believe that the changes burden competition, but 
instead, enhance competition, as these changes are intended to increase 
the competitiveness of the Exchange as it is designed to draw 
additional volume to the Exchange. 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. The proposed changes are generally intended 
to enhance the rebates in Tape B securities, which is intended to 
enhance market quality in LMP Securities and Tape B securities. 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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and paragraph 
(f)(6) of Rule 19b-4 thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative before 30 days from the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \18\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange has asked the Commission to waive the 30-day operative 
delay. The Exchange states that waiver of the 30-day operative delay 
will allow the Exchange to implement the proposal without delay on June 
1, 2016, allowing market participants to potentially realize the 
benefits of the proposal. The Exchange further states that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest because it believes that the proposed 
rule change would promote enhanced market quality and serve as an 
additional safeguard against extreme price dislocation. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. The Commission hereby 
waives the 30-day operative delay and designates the proposed rule 
change to be operative upon filing with the Commission.\19\
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    \19\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-2016-18 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-2016-18. 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 available publicly. All 
submissions should refer to File Number SR-BatsBZX-2016-18 and should 
be submitted on or before June 13, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12013 Filed 5-20-16; 8:45 am]
 BILLING CODE 8011-01-P


