
[Federal Register Volume 81, Number 202 (Wednesday, October 19, 2016)]
[Notices]
[Pages 72135-72138]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25237]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79090; File No. SR-BatsEDGX-2016-55]


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

October 13, 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 September 30, 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).
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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

[[Page 72136]]

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 modify its fee schedule in order to: (i) 
Add the definition of OCC Customer Volume or OCV, to the Definitions 
section of the fee schedule; and (ii) amend Footnote 1 to: (A) Modify 
the criteria for the Cross-Asset Add Volume Tier to reflect the new 
definition of OCV; and (B) establish a Single MPID Cross-Asset Tier.
OCC Customer Volume Definition
    The Exchange proposes to add the definition of ``OCC Customer 
Volume'' or ``OCV'' to the definition section of its fee schedule. OCC 
Customer Volume or OCV will be defined as the total equity and Exchange 
Traded Fund (``ETF'') options volume that clears in the Customer \6\ 
range at the Options Clearing Corporation (``OCC'') for the month for 
which the fees apply, excluding volume on any day that the Exchange 
experiences an Exchange System Disruption \7\ and on any day with a 
scheduled early market close, using the definition of Customer as 
provided under the Exchange's fee schedule for EDGX Options.
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    \6\ As defined in the fee schedule for the Exchange's equity 
options platform (``EDGX Options'') available at http://www.batsoptions.com/support/fee_schedule/edgx/.
    \7\ An ``Exchange System Disruption'' means ``any day that the 
Exchange's system experiences a disruption that lasts for more than 
60 minutes during Regular Trading Hours.'' See the Exchange's fee 
schedule available at http://batstrading.com/support/fee_schedule/edgx/.
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Footnote One
    The Exchange determines the liquidity adding rebate that it will 
provide to Members using the Exchange's tiered pricing structure. 
Currently, the Exchange provides various rebates under Footnote 1 of 
the fee schedule for a Member dependent on the Member's ADV \8\ as a 
percentage of the TCV \9\ for orders that yield fee codes B, V, Y, 3, 4 
and ZA. The Exchange currently has none Add Volume Tiers. Under such 
pricing structure, a Member will receive a rebate of anywhere between 
$0.0025 and $0.0033 per share executed, depending on the volume tier 
for which such Member qualifies.
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    \8\ As defined in the Exchange's fee schedule available at 
http://batstrading.com/support/fee_schedule/edgx/.
    \9\ Id.
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    Cross-Asset Tier Amendments. Footnote 1 of the fee schedule 
includes a Cross-Asset Tier under which Members may receive an enhanced 
rebate of $0.0028 where they have on EDGX Options an ADV in Firm \10\ 
orders equal to or greater than 0.10% of average TCV and an ADAV \11\ 
equal to or greater than 0.12% of average TCV. The Exchange proposes to 
replace the term TCV with the new defined term OCV (discussed above). 
As amended, Members must have on EDGX Options an ADV in Firm orders 
equal to or greater than 0.15% of average OCV. Because, OCV is a by 
definition, a smaller amount than TCV, the Exchange proposes to 
slightly increase the volume percentage required to attain the first 
prong of the tier from 0.10% to 0.15%. Doing so will keep tier's 
criteria relatively unchanged from its current requirements. Lastly, 
the Exchange will continue to require Members to also have an ADAV 
equal to or greater than 0.12% of average TCV on the Exchange.
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    \10\ As defined in EDGX Option's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/edgx/.
    \11\ Exchange's fee schedule available at http://batstrading.com/support/fee_schedule/edgx/.
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    Single MPID Cross-Asset Investor Tier. The Exchange proposes to add 
new tier to Footnote 1 to be called the Single MPID Cross-Asset Tier. 
Under the proposed tier, a Member may would receive an enhanced rebate 
of $0.0030 per share where that Member's: (i) Market Participant 
Identifier (``MPID'') has on EDGX Options an ADAV in Market Maker \12\ 
orders equal to or greater than 0.12% of average OCV; and (ii) an ADAV 
equal to or greater than 0.12% of average TCV.
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    \12\ As defined in EDGX Option's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/edgx/.
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Implementation Date
    The Exchange proposes to implement the amendments to its fee 
schedule on October 3, 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 persons using its 
facilities. The Exchange also 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. The Exchange believes that the proposed rates 
are equitable and non-discriminatory in that they apply uniformly to 
all Members.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed modifications to the tiered 
pricing structure are reasonable, fair and equitable, and non-
discriminatory. The proposed fee structure remains intended to attract 
order flow to the Exchange by offering market participants a 
competitive pricing structure. The Exchange believes it is reasonable 
to offer and incrementally modify incentives intended to help to 
contribute to the growth of the Exchange. Volume-based rebates such as 
that proposed herein have been widely adopted by exchanges, including 
the Exchange, 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 provisions and/or growth patterns; and (iii) introduction 
of higher volumes of orders into the price and volume discovery 
processes.
    The Exchange believes adopting a definition of OCV and utilizing 
OCV in lieu of TCV for its Cross-Asset Tier is reasonable, fair and 
equitable, and non-discriminatory because the Exchange also proposed to 
modify the tier's related criteria in order to maintain substantially 
identical requirements to qualify for the tier. Competitors of the 
Exchange also use similar calculations and the proposed qualifications 
do not represent a significant departure from such pricing 
structures.\15\ The Exchange believes that the proposed qualifications 
are reasonable, fair and equitable, and non-discriminatory, and will 
provide additional transparency to Members regarding the calculations 
used to determine volume levels for purposes of the proposed tiered 
pricing model.
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    \15\ NYSE Amex Options Customer volume tiers require a specific 
``Customer Electronic ADV as a % of Industry Customer Equity and ETF 
Options ADV''. https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf. Nasdaq NOM Options 
Customer volume tiers require a specific percentage of ``total 
industry customer equity and ETF option average daily volume 
(''ADV'') contracts per day in a month.'' http://www.nasdaqtrader.com/Micro.aspx?id=optionsPricing.
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    The Exchange believes that the proposed Single MIPID Cross-Asset 
Tier is reasonable, fair and equitable, and non-discriminatory. The 
increased liquidity from this proposed tier also

[[Page 72137]]

benefits all investors by deepening the EDGX Options and the Exchange's 
liquidity pools, offering additional flexibility for all investors to 
enjoy cost savings, supporting the quality of price discovery, 
promoting market transparency and improving investor protection. Such 
pricing programs thereby reward a Member's growth pattern on the 
Exchange and such increased volume increases potential revenue to the 
Exchange, and will allow the Exchange to continue to provide and 
potentially expand the incentive programs operated by the Exchange. To 
the extent a Member participates on EDGX Options and not EDGX Equities, 
the Exchange believes that the proposal is still reasonable, equitably 
allocated and non-discriminatory with respect to such Member based on 
the overall benefit to the Exchange resulting from the success of EDGX 
Options. As noted above, such success allows the Exchange to continue 
to provide and potentially expand its existing incentive programs to 
the benefit of all participants on the Exchange, whether they 
participate on EDGX Options or not. The proposed tier is also fair and 
equitable in that membership in EDGX Options is available to all market 
participants which would provide them with access to the benefits on 
EDGX Equities provided by the proposed changes, as described above, 
even where a member of EDGX Equities is not necessarily eligible for 
the proposed increased rebates on the Exchange. Further, the proposed 
changes will result in Members receiving either the same or an 
increased rebate than they would currently receive.
    The Exchange further believes that the proposed addition of the 
Single MPID Cross Asset Tier represents an equitable allocation of 
reasonable dues, fees, and other charges among Members and other 
persons using its facilities because it rewards Members with order flow 
characteristics that contribute meaningfully to price discovery on the 
Exchange. In other words, Members that post a substantial amount of 
liquidity and primarily post liquidity are valuable Members to the EDGX 
Options and EDGX Equities Exchanges and the marketplace in terms of 
liquidity provision. By applying the tier on a single MPID rather than 
across a Member's entire trading activity, the Exchange is also 
allowing more Members to potentially receive the enhanced rebates for 
their trading activity related to liquidity provision. The Single MPID 
Cross Asset Tier also encourages Members to primarily add liquidity in 
order to satisfy the ADAV as a percentage of OCV. Such increased volume 
increases potential revenue to the Exchange, and would allow the 
Exchange to spread its administrative and infrastructure costs over a 
greater number of shares, leading to lower per share costs. These lower 
per share costs would allow the Exchange to pass on the savings to 
Members in the form of higher rebates. The increased liquidity also 
benefits 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, promoting market 
transparency and improving investor protection. Volume-based rebates 
such as the ones proposed herein have been widely adopted in the cash 
equities markets, and are equitable because they are open to all 
Members on an equal basis and provide 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 introduction of higher volumes of orders into the price 
and volume discovery processes.
    In addition, the rebate is also reasonable in that other exchanges 
likewise employ similar pricing mechanisms based on a Member's 
MPID.\16\ Finally, the Exchange also believes that the proposed Single 
MPID Investor Tier is non-discriminatory in that it would apply equally 
to all Members.
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    \16\ See Bats BZX Exchange, Inc. fee schedule available at 
http://batstrading.com/support/fee_schedule/bzx/ (offering a Single 
MPID Investor Tier with volume requirements based on MPID).
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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 changes 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. The Exchange believes that its proposal would not 
burden intramarket competition because the proposed rate would apply 
uniformly to all Members. The Exchange does not believe that the 
proposed new tiers and standard removal rates would burden competition, 
but instead, enhances competition, as they are 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 changes are generally intended 
to draw additional liquidity to the Exchange. The Exchange does not 
believe the proposed tiers and standard rates would burden intramarket 
competition as they would apply to all Members uniformly.
    The Exchange does not believe that the proposed new Single MPID 
Cross-Asset Add Tier would burden competition, but instead, enhances 
competition, as it is intended to increase the competitiveness of and 
draw additional volume to the Exchange and EDGX Options. The Exchange 
does not believe that its proposal would burden intramarket competition 
because the proposed rebate would apply uniformly to all Members that 
achieve the objective criteria of the Single MPID Investor Tier.
    Lastly, the Exchange believes that its proposal to amend the 
qualification criteria for the Cross-Asset Tier to incorporate OCV 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
Exchange also proposed to modify the tier's related criteria in order 
to maintain substantially identical requirements to qualify for the 
tier.

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

[[Page 72138]]

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-BatsEDGX-2016-55 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-2016-55. 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-2016-55, and should 
be submitted on or before November 9, 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. 2016-25237 Filed 10-18-16; 8:45 am]
 BILLING CODE 8011-01-P


