
[Federal Register Volume 81, Number 104 (Tuesday, May 31, 2016)]
[Notices]
[Pages 34398-34401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12666]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77889; File No. SR-BatsEDGA-2016-09]


Self-Regulatory Organizations; Bats EDGA Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Change to the 
Market Data Section of its Fee Schedule

May 24, 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 17, 2016, Bats EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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 Market Data section of 
its fee schedule to: (i) Decrease the User fees for the EDGA Top and 
EDGA Last Sale feeds; and (ii) amend the New External Distributor 
Credit for the Bats One Feed.
    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 proposes to amend the Market Data section of its fee 
schedule to: (i) Decrease the User fees for the EDGA Top and EDGA Last 
Sale feeds; and (ii) amend the New External Distributor Credit for the 
Bats One Feed.
    EDGA Top and Last Sale Fees
    EDGA Top is a market data feed that includes top of book quotations 
and execution information for all equity securities traded on the 
Exchange.\5\ EDGA Last Sale is a market data feed that includes last 
sale information for all equity securities traded on Exchange.\6\ The 
Exchange proposes to decrease the User fees for the EDGA Top and EDGA 
Last Sale feeds. \7\
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    \5\ See Exchange Rule 13.8(c).
    \6\ See Exchange Rule 13.8(d).
    \7\ The Exchange notes that Bats BYX Exchange, Inc. (``BYX'') 
and Bats EDGX Exchange, Inc. (``EDGX'') also filed proposed rule 
changes with Commission to amend similar fees for their respective 
Top and Last Sale market data products. See File Nos. SR-BatsBYX-
2016-08 and SR-BatsEDGX-2016-18. The Exchange represents that the 
proposed fees will continue to not cause the combined cost of 
subscribing to EDGX, EDGA, BYX, and Bats BZX Exchange Inc.'s 
(``BZX'') individual Top and Last Sale feeds to be greater than 
those currently charged to subscribe to the Bats One Feed. See 
Securities Exchange Act Release Nos. 74285 (February 18, 2015), 80 
FR 9828 (February 24, 2015) (SR-BATS-2015-11); 74283 (February 18, 
2015), 80 FR 9809 (February 24, 2015) (SR-EDGA-2015-09); 74282 
(February 17, 2015), 80 FR 9487 (February 23, 2015) (SR-EDGX-2015-
09); and 74284 (February 18, 2015), 80 FR 9792 (February 24, 2015) 
(SR-BYX-2015-09) (``Initial Bats One Feed Fee Filings''). In these 
filings, the Exchange represented that the cost of subscribing to 
each of the underlying individual feeds necessary to create the Bats 
One Feed would not be greater than the cost of subscribing to the 
Bats One Feed. Id.
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    The Exchange does not currently charge an External Distributor\8\ 
of EDGA Last Sale or EDGA Top a Distributor fee. The Exchange does, 
however, charge those who receive either EDGA Top or EDGA Last Sale 
from External Distributors different fees for both their 
Professional\9\ and Non-Professional\10\

[[Page 34399]]

Users. The Exchange currently assesses a monthly fee for Professional 
Users of $2.00 per User. Non-Professional Users are assessed a monthly 
fee of $0.05 per User. The Exchange now proposes to decrease the 
Professional User fee to $1.00 per User per month and the Non-
Professional User fee to $0.025 per User per month.
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    \8\ An ``External Distributor'' of an Exchange Market Data 
product is defined as ``a Distributor that receives the Exchange 
Market Data product and then distributes that data to a third party 
or one or more Users outside the Distributor's own entity.'' See the 
Exchange Fee Schedule available at http://batstrading.com/support/fee_schedule/edga/.
    \9\ A ``Professional User'' is defined as ``any User other than 
a Non-Professional User.'' See the Exchange Fee Schedule available 
at http://batstrading.com/support/fee_schedule/edga/.
    \10\ A ``Non-Professional User'' is defined as ``a natural 
person who is not: (i) registered or qualified in any capacity with 
the Commission, the Commodity Futures Trading Commission, any state 
securities agency, any securities exchange or association, or any 
commodities or futures contract market or association; (ii) engaged 
as an ``investment adviser'' as that term is defined in Section 
202(a)(11) of the Investment Advisers Act of 1940 (whether or not 
registered or qualified under that Act); or (iii) employed by a bank 
or other organization exempt from registration under federal or 
state securities laws to perform functions that would require 
registration or qualification if such functions were performed for 
an organization not so exempt.'' Id.
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Bats One Feed
    In sum, the Bats One Feed is a data feed that disseminates, on a 
real-time basis, the aggregate best bid and offer (``BBO'') of all 
displayed orders for securities traded on EDGA and its affiliated 
exchanges and for which the Bats Exchanges report quotes under the 
Consolidated Tape Association (``CTA'') Plan or the Nasdaq/UTP Plan. 
The Bats One Feed also contains the individual last sale information 
for the Bats Exchanges (collectively with the aggregate BBO, the ``Bats 
One Summary Feed''). In addition, the Bats One Feed contains optional 
functionality which enables recipients to receive aggregated two-sided 
quotations from the Bats Exchanges for up to five (5) price levels 
(``Bats One Premium Feed'').\11\
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    \11\ See Exchange Rule 13.8(b). See also Securities Exchange Act 
Release No. 73918 (December 23, 2014), 79 FR 78920 (December 31, 
2014) (File Nos. SR-EDGX-2014-25; SR-EDGA-2014-25; SR-BATS-2014-055; 
SR-BYX-2014-030) (Notice of Amendments No. 2 and Order Granting 
Accelerated Approval to Proposed Rule Changes, as Modified by 
Amendments Nos. 1 and 2, to Establish a New Market Data Product 
called the Bats One Feed) (``Bats One Approval Order'').
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    The Exchange charges External Distributors of the Bats One Summary 
Feed a monthly Distribution fee of $5,000. The Exchange also offers a 
New External Distributor Credit under which new External Distributors 
of the Bats One Feed will not be charged a Distributor Fee for their 
first three (3) months in order to allow them to enlist new Users to 
receive the Bats One Summary Feed. The Exchange now proposes to 
decrease the time a new External Distributor of the Bats One Feed will 
not be charged a Distributor Fee from their first three (3) months to 
their first one (1) month.\12\
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    \12\ The Exchange notes that New External Distributor Credit 
will continue to be available for three (3) months to those 
Distributors who began to distribute the Bats One Summary Feed prior 
to June 1, 2016.
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Implementation Date
    The Exchange proposes to implement the proposed changes to its fee 
schedule on June 1, 2016.
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 recipients of 
Exchange data. The Exchange believes that the proposed rates are 
equitable and non-discriminatory in that they apply uniformly to all 
recipients of Exchange data. The Exchange believes the proposed fees 
are competitive with those charged by other venues and, therefore, 
reasonable and equitably allocated to recipients. Lastly, the Exchange 
also believes that the proposed fees are reasonable and non-
discriminatory because they will apply uniformly to all recipients of 
Exchange data.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    The Exchange also believes that the proposed rule change is 
consistent with Section 11(A) of the Act \15\ in that it supports (i) 
fair competition among brokers and dealers, among exchange markets, and 
between exchange markets and markets other than exchange markets and 
(ii) the availability to brokers, dealers, and investors of information 
with respect to quotations for and transactions in securities. 
Furthermore, the proposed rule change is consistent with Rule 603 of 
Regulation NMS,\16\ which provides that any national securities 
exchange that distributes information with respect to quotations for or 
transactions in an NMS stock do so on terms that are not unreasonably 
discriminatory. In adopting Regulation NMS, the Commission granted 
self-regulatory organizations and broker-dealers increased authority 
and flexibility to offer new and unique market data to the public. It 
was believed that this authority would expand the amount of data 
available to consumers, and also spur innovation and competition for 
the provision of market data.
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    \15\ 15 U.S.C. 78k-1.
    \16\ See 17 CFR 242.603.
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    In addition, the proposed fees would not permit unfair 
discrimination because all of the Exchange's customers and market data 
vendors will be subject to the proposed fees on an equivalent basis. 
EDGA Last Sale, EDGA Top and the Bats One Feed are distributed and 
purchased on a voluntary basis, in that neither the Exchange nor market 
data distributors are required by any rule or regulation to make this 
data available. Accordingly, Distributors and Users can discontinue use 
at any time and for any reason, including due to an assessment of the 
reasonableness of fees charged. The Exchange also believes the proposed 
decrease to the External Distribution fees for EDGA Last Sale and EDGA 
Top are reasonable and equitable in light of the continued benefits to 
data recipients. To the extent consumers do purchase the data products, 
the revenue generated will continue to offset the Exchange's fixed 
costs of operating and regulating a highly efficient and reliable 
platform for the trading of U.S. equities. It will also help the 
Exchange to continue to cover its costs in developing and running that 
platform, as well as ongoing infrastructure costs. Firms have a wide 
variety of alternative market data products from which to choose, such 
as similar proprietary data products offered by other exchanges and 
consolidated data feeds. Moreover, the Exchange is not required to make 
any proprietary data products available or to offer any specific 
pricing alternatives to any customers.
    In addition, the fees that are the subject of this rule filing are 
constrained by competition. As explained below in the Exchange's 
Statement on Burden on Competition, the existence of alternatives to 
EDGA Top, EDGA Last Sale, and the Bats One Feed further ensures that 
the Exchange cannot set unreasonable fees, or fees that are 
unreasonably discriminatory, when vendors and subscribers can elect 
such alternatives because the Exchange competes with other exchanges 
(and their affiliates) that provide similar market data products. If 
another exchange (or its affiliate) were to charge less to consolidate 
and distribute its similar product than the Exchange charges to 
consolidate and distribute EDGA Top, EDGA Last Sale, or the Bats One 
Feed, prospective Users likely would not subscribe to, or would cease 
subscribing to, the EDGA Top, EDGA Last Sale, or the Bats One Feed.
    The Exchange notes that the Commission is not required to undertake 
a cost-of-service or rate-making approach. The Exchange believes that, 
even if it were possible as a matter of economic theory, cost-based 
pricing for non-core market data would

[[Page 34400]]

be so complicated that it could not be done practically.\17\
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    \17\ The Exchange believes that cost-based pricing would be 
impractical because it would create enormous administrative burdens 
for all parties, including the Commission, to cost-regulate a large 
number of participants and standardize and analyze extraordinary 
amounts of information, accounts, and reports. In addition, it is 
impossible to regulate market data prices in isolation from prices 
charged by markets for other services that are joint products. Cost-
based rate regulation would also lead to litigation and may distort 
incentives, including those to minimize costs and to innovate, 
leading to further waste. Under cost-based pricing, the Commission 
would be burdened with determining a fair rate of return, and the 
industry could experience frequent rate increases based on 
escalating expense levels. Even in industries historically subject 
to utility regulation, cost-based ratemaking has been discredited. 
As such, the Exchange believes that cost-based ratemaking would be 
inappropriate for proprietary market data and inconsistent with 
Congress's direction that the Commission use its authority to foster 
the development of the national market system, and that market 
forces will continue to provide appropriate pricing discipline. See 
Appendix C to NYSE's comments to the Commission's 2000 Concept 
Release on the Regulation of Market Information Fees and Revenues, 
which can be found on the Commission's Web site at http://www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities 
Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200 
(December 17, 2014) (SR-NYSE-2014-64) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change to Establish an 
Access Fee for the NYSE Best Quote and Trades Data Feed, Operative 
December 1, 2014).
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    The Exchange believes the proposed Professional and Non-
Professional User fees for EDGA Top and EDGA Last Sale are equitable 
and reasonable because they will continue to result in greater 
availability to Professional and Non-Professional Users. The Exchange 
believes that the proposed fees are equitable and not unfairly 
discriminatory because they will be charged uniformly to recipient 
firms and Users. In addition, the proposed fees are reasonable when 
compared to similar fees for comparable products offered by the NYSE. 
Specifically, NYSE offers NYSE BBO, which includes best bid and offer 
for NYSE traded securities, for a monthly fee of $4.00 per professional 
subscriber and $0.20 per non-professional subscriber.\18\ NYSE also 
offers NYSE Trades, which is a data feed that provides the last sale 
information for NYSE traded securities, for the same price as NYSE BBO. 
The Exchange's proposed per User Fees for EDGA Top and EDGA Last Sale 
are less than the NYSE's fees for NYSE Trades and NYSE BBO.
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    \18\ See NYSE Market Data Pricing dated March 2016 available at 
http://www.nyxdata.com/.
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    The Exchange also believes that amending the New External 
Distributor Credit for the Bats One Feed is equitable and reasonable. 
The Exchange notes that the New External Distributor Credit was 
initially adopted at the time the Exchange began to offer the Bats One 
Summary Feed to subscribers. It was intended to incentivize new 
Distributors to enlist Users to subscribe to the Bats One Summary Feed 
in an effort to broaden the product's distribution. The Exchange also 
believes that decreasing the time during which the New External 
Distributor Credit is available from three (3) to one (1) month for the 
Bats One Feed is equitable and reasonable because the credit has been 
available to Distributors since January 2015 providing new Distributors 
with ample time to grow their subscriber bases during the available 
three (3) month period. Decreasing the credit period to one (1) month 
is equitable and reasonable as it would continue to provide new 
Distributors ample time to grow their subscriber bases.

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's ability to price EDGA Last Sale, EDGA Top, and the Bats One 
Feed are constrained by: (i) Competition among exchanges, other trading 
platforms, and Trade Reporting Facilities (``TRF'') that compete with 
each other in a variety of dimensions; (ii) the existence of 
inexpensive real-time consolidated data and market-specific data and 
free delayed data; and (iii) the inherent contestability of the market 
for proprietary data. This competitive pressure is evidenced by the 
Exchange's proposal to decrease fees as described herein.
    The Exchange and its market data products are subject to 
significant competitive forces and the proposed fees represent 
responses to that competition. To start, the Exchange competes 
intensely for order flow. It competes with the other national 
securities exchanges that currently trade equities, with electronic 
communication networks, with quotes posted in FINRA's Alternative 
Display Facility, with alternative trading systems, and with securities 
firms that primarily trade as principal with their customer order flow.
    In addition, EDGA Last Sale, EDGA Top, and the Bats One Feed 
compete with a number of alternative products. For instance, EDGA Last 
Sale, EDGA Top, and the Bats One Feed do not provide a complete picture 
of all trading activity in a security. Rather, the other national 
securities exchanges, the several TRFs of FINRA, and Electronic 
Communication Networks (``ECN'') that produce proprietary data all 
produce trades and trade reports. Each is currently permitted to 
produce last sale information products, and many currently do, 
including Nasdaq and NYSE. In addition, market participants can gain 
access to EDGA last sale prices and top-of-book quotations, though 
integrated with the prices of other markets, on feeds made available 
through the SIPs.
    In sum, the availability of a variety of alternative sources of 
information imposes significant competitive pressures on the Exchange's 
data products and the Exchange's compelling need to attract order flow 
imposes significant competitive pressure on the Exchange to act 
equitably, fairly, and reasonably in setting the proposed data product 
fees. The proposed data product fees are, in part, responses to that 
pressure. The Exchange believes that the proposed fees would reflect an 
equitable allocation of its overall costs to users of its facilities.
    In addition, when establishing the proposed fees, the Exchange 
considered the competitiveness of the market for proprietary data and 
all of the implications of that competition. The Exchange believes that 
it has considered all relevant factors and has not considered 
irrelevant factors in order to establish fair, reasonable, and not 
unreasonably discriminatory fees and an equitable allocation of fees 
among all Users. The existence of alternatives to EDGA Last Sale, EDGA 
Top, and the Bats One Feed, including existing similar feeds by other 
exchanges, consolidated data, and proprietary data from other sources, 
ensures that the Exchange cannot set unreasonable fees, or fees that 
are unreasonably discriminatory, when vendors and subscribers can elect 
these alternatives or choose not to purchase a specific proprietary 
data product if its cost to purchase is not justified by the returns 
any particular vendor or subscriber would achieve through the purchase.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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)

[[Page 34401]]

of the Act \19\ and paragraph (f) of Rule 19b-4 thereunder.\20\ 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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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 proposal 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 No. SR-BatsEDGA-2016-09 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 No. SR-BatsEDGA-2016-09. 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 No. SR-BatsEDGA-2016-09, and should be 
submitted on or before June 21, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12666 Filed 5-27-16; 8:45 am]
 BILLING CODE 8011-01-P


