
[Federal Register Volume 81, Number 249 (Wednesday, December 28, 2016)]
[Notices]
[Pages 95693-95699]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31298]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79636; File No. SR-BatsBZX-2016-87]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Market Data Section of Its Fee Schedule To Adopt Fees for BZX 
Summary Depth and Amend Fees for BZX Depth

December 21, 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 December 14, 2016, Bats BZX Exchange, Inc. (``BZX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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) Adopt fees for a new market data product 
called BZX Summary Depth; and (ii) amend the fees for BZX Depth.
    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 the Market Data section of its fee 
schedule to: (i) Adopt fees for a new market data product called BZX 
Summary Depth; and (ii) amend the fees for BZX Depth.
BZX Summary Depth
    BZX Summary Depth is a data feed that will provide aggregated two-
sided quotations for all displayed orders entered into the System \5\ 
for up to five (5) price levels for securities traded on the Exchange 
and for which the Exchange reports quotes under the Consolidated Tape 
Association (``CTA'') Plan or the Nasdaq/UTP Plan.\6\ BZX Summary Depth 
will also contain the individual last sale information, Market Status, 
Trading Status, and Trade Break messages. The individual last sale 
information will include the price, size, and time of execution. The 
last sale message will also include the cumulative number of shares 
executed on the Exchange for that trading day. The Exchange intends to 
begin to offer BZX Summary Depth on January 3, 2017.\7\
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    \5\ ``System'' is defined as the ``the electronic communications 
and trading facility designated by the Board through which 
securities orders of Users Are consolidated for ranking, execution 
and, when applicable, routing away.'' See Exchange Rule 1.5(aa).
    \6\ See Exchange Rule 11.22(m).
    \7\ See Reminder: Bats Global Markets to Introduce Bats Summary 
Depth Feeds on January 3, 2017, http://cdn.batstrading.com/resources/release_notes/2017/Reminder-Bats-Global-Markets-to-Introduce-Bats-Summary-Depth-Feeds-on-Jan-3-2017.pdf.
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    The Exchange now proposes to amend its fee schedule to incorporate 
fees for distribution of BZX Summary Depth to subscribers.\8\ The 
proposed fees include the following, each of which are described in 
detail below: (i) Distribution Fees for both Internal and External 
Distributors; \9\ (ii) Usage Fees for both Professional \10\ and Non-
Professional \11\ Users; (iii) an Enterprise Fee; and (iv) a Digital 
Media Enterprise Fee.
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    \8\ The Exchange notes that its affiliated exchanges, Bats EDGX 
Exchange, Inc. (``EDGX''), Bats EDGA Exchange, Inc. (``EDGA'') and 
Bats BYX Exchange, Inc. (``BYX'', together with the Exchange, EDGX 
and EDGA, the ``Bats Exchanges''), also intent to file proposed rule 
changes with Commission to adopt similar fees for their respective 
Summary Depth market data product.
    \9\ A ``Distributor'' is defined as ``any entity that receives 
the Exchange Market Data product directly from the Exchange or 
indirectly through another entity and then distributes it internally 
or externally to a third party.'' See the Exchange's fee schedule 
available at http://www.bats.com/us/equities/membership/fee_schedule/bzx/. An ``Internal Distributor'' is defined as ``a 
Distributor that receives the Exchange Market Data product and then 
distributes that data to one or more Users within the Distributor's 
own entity.'' Id. An ``External Distributor'' 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.'' Id.''
    \10\ A ``Professional User'' is defined as ``any User other than 
a Non-Professional User.'' See the Exchange's fee schedule available 
at http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
    \11\ 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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    Distribution Fees. As proposed, each Internal Distributor that 
receives BZX

[[Page 95694]]

Summary Depth shall pay a fee of $5,000 per month. The Exchange does 
not propose to charge any User fees for BZX Summary Depth where the 
data is received and subsequently internally distributed to 
Professional or Non-Professional Users. In addition, the Exchange 
proposes to charge also External Distributors that receive BZX Summary 
Depth a fee of $5,000 per month.
    User Fees. The Exchange proposes to charge External Distributors 
that redistribute BZX Summary Depth different fees for their 
Professional Users and Non-Professional Users. The Exchange will assess 
a monthly fee for Professional Users of $5.00 per User. Non-
Professional Users will be assessed a monthly fee of $0.15 per User. 
The Exchange does not propose to charge per User fees to Internal 
Distributors.
    External Distributors that receive BZX Summary Depth will be 
required to count every Professional User and Non-Professional User to 
which they provide BZX Summary Depth, the requirements for which are 
identical to that currently in place for other market data products 
offered by the Exchange.\12\ Thus, the External Distributor's count 
will include every person and device that accesses the data regardless 
of the purpose for which the individual or device uses the data. 
External Distributors must report all Professional and Non-Professional 
Users in accordance with the following:
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    \12\ See Securities Exchange Act Release Nos. 74285 (February 
18, 2015); 80 FR 9828 (February 24, 2015) (SR-BATS-2015-11) 
(proposing fees for the Bats One Feed); 75406 (July 9, 2015), 80 FR 
41522 (July 15, 2015) (SR-BATS-2015-48) (proposing user fees for the 
BZX Top and Last Sale data feeds); and 75785 (August 28, 2015), 80 
FR 53360 (September 3, 2015) (SR-BATS-2015-64) (proposing fees for 
BZX Book Viewer).
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     In connection with an External Distributor's distribution 
of BZX Summary Depth, the Distributor should count as one User each 
unique User that the Distributor has entitled to have access to BZX 
Summary Depth. However, where a device is dedicated specifically to a 
single individual, the Distributor should count only the individual and 
need not count the device.
     The External Distributor should identify and report each 
unique User. If a User uses the same unique method to gain access to 
BZX Summary Depth, the Distributor should count that as one User. 
However, if a unique User uses multiple methods to gain access to BZX 
Summary Depth (e.g., a single User has multiple passwords and user 
identifications), the External Distributor should report all of those 
methods as an individual User.
     External Distributors should report each unique individual 
person who receives access through multiple devices as one User so long 
as each device is dedicated specifically to that individual.
     If an External Distributor entitles one or more 
individuals to use the same device, the External Distributor should 
include only the individuals, and not the device, in the count.
    Each External Distributor will receive a credit against its monthly 
Distribution Fee for BZX Summary Depth equal to the amount of its 
monthly Usage Fees up to a maximum of the Distribution Fee for BZX 
Summary Depth. For example, an External Distributor will be subject to 
a $5,000 monthly Distribution Fee where they receive BZX Summary Depth. 
If that External Distributor reports User quantities totaling $5,000 or 
more of monthly usage of BZX Summary Depth, it will pay no net 
Distribution Fee, whereas if that same External Distributor were to 
report User quantities totaling $4,000 of monthly usage, it will pay a 
net of $1,000 for the Distribution Fee. External Distributors will 
remain subject to the per User fees discussed above.
    Enterprise Fee. The Exchange also proposes to establish a $30,000 
per month Enterprise Fee that will permit a recipient firm who receives 
BZX Summary Depth from an External Distributor to receive the data for 
an unlimited number of Professional and Non-Professional Users. For 
example, if a recipient firm had 15,000 Professional Users who each 
receive BZX Summary Depth at $5.00 per month, then that recipient firm 
will pay $75,000 per month in Professional Users fees. Under the 
proposed Enterprise Fee, the recipient firm will pay a flat fee of 
$30,000 for an unlimited number of Professional and Non-Professional 
Users for BZX Summary Depth. A recipient firm must pay a separate 
Enterprise Fee for each External Distributor that controls the display 
of BZX Summary Depth if it wishes such User to be covered by an 
Enterprise Fee rather than by per User fees. A recipient firm that pays 
the Enterprise Fee will not have to report its number of such Users on 
a monthly basis. However, every six months, a recipient firm must 
provide the Exchange with a count of the total number of natural person 
users of each product, including both Professional and Non-Professional 
Users. Lastly, the proposed Enterprise Fee would be counted towards the 
Distribution Fee credit described above, under which an External 
Distributor receives a credit towards its Distribution Fee equal to the 
amount of its monthly BZX Summary Depth User fees.
    Digital Media Enterprise Fee. The Exchange proposes to adopt a 
Digital Media Enterprise Fee of $7,500 per month for BZX Summary Depth. 
As an alternative to proposed User fees discussed above, a recipient 
firm may purchase a monthly Digital Media Enterprise license to receive 
BZX Summary Depth from an External Distributor to distribute to an 
unlimited number of Professional and Non-Professional Users for viewing 
via television, Web sites, and mobile devices for informational and 
non-trading purposes only without having to account for the extent of 
access to the data or the report the number of Users to the Exchange. 
Lastly, the proposed Digital Media Enterprise Fee would be counted 
towards the Distribution Fee credit described above, under which an 
External Distributor receives a credit towards its Distribution Fee 
equal to the amount of its monthly BZX Summary Depth User fees.
BZX Depth
    BZX Depth is an uncompressed market data feed that provides depth-
of-book quotations and execution information based on equity orders 
entered into the System.\13\ Currently, the Exchange charges fees for 
both internal and external distribution of BZX Depth. The cost of BZX 
Depth for an Internal Distributor is currently $1,500 per month. The 
Exchange also separately charges an External Distributor of BZX Depth a 
flat fee of $5,000 per month. The Exchange does not currently charge 
Internal and External Distributors separate display User fees. The 
Exchange also charges a fee for Non-Display Usage \14\ by Trading 
Platforms \15\ by which subscribers to BZX Depth are charged a fee of 
$5,000 per month. This fee is assessed in addition to existing 
Distribution fees. The Exchange now proposes to amend its fee schedule 
to incorporate Usage Fees for both Professional and Non-Professional 
Users

[[Page 95695]]

and an Enterprise Fee for BZX Depth. Each of these changes are 
described in detail below.
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    \13\ See Exchange Rule 11.22(a) and (c).
    \14\ The term ``Non-Display Usage'' is defined as ``any method 
of accessing a Market Data product that involves access or use by a 
machine or automated device without access or use of a display by a 
natural person or persons.'' See the Exchange's fee schedule 
available at http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
    \15\ The term ``Trading Platform'' is defined as ``any execution 
platform operated as or by a registered National Securities Exchange 
(as defined in Section 3(a)(1) of the Exchange Act), an Alternative 
Trading System (as defined in Rule 300(a) of Regulation ATS), or an 
Electronic Communications Network (as defined in Rule 600(b)(23) of 
Regulation NMS).'' See the Exchange's fee schedule available at 
http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
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    User Fees. The Exchange proposes to charge Internal and External 
Distributors that redistribute BZX Depth different fees for their 
Professional Users and Non-Professional Users.\16\ The Exchange will 
assess a monthly fee for Professional Users of $40.00 per User. Non-
Professional Users will be assessed a monthly fee of $5.00 per User. 
Distributors that receive BZX Depth will be required to count every 
Professional User and Non-Professional User to which they provide BZX 
Depth, the requirements for which are identical to that set forth above 
for BZX Summary Depth and as currently in place for other market data 
products offered by the Exchange.\17\
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    \16\ The Exchange notes that, unlike as proposed for BZX Summary 
Depth described above, both Internal and External Distributors of 
BZX Depth would be charged the same User fee for their Professional 
and Non-Professional Users.
    \17\ See supra note 12 and accompanying text.
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    Enterprise Fee. The Exchange also proposes to establish a $100,000 
per month Enterprise Fee that will permit an Internal Distributor, 
External Distributor, or a recipient firm who receives BZX Depth from 
an External Distributor to receive the data for an unlimited number of 
Professional and Non-Professional Users. For example, if a recipient 
firm had 15,000 Professional Users who each receive BZX Depth at $40.00 
per month, then that recipient firm will pay $600,000 per month in 
Professional Users fees. Under the proposed Enterprise Fee, the 
recipient firm will pay a flat fee of $100,000 for an unlimited number 
of Professional and Non-Professional Users for BZX Depth. Like proposed 
above for BZX Summary Depth, a recipient firm must pay a separate 
Enterprise Fee for each External Distributor that controls the display 
of BZX Depth if it wishes such User to be covered by an Enterprise Fee 
rather than by per User fees. A recipient firm that pays the Enterprise 
Fee will not have to report its number of such Users on a monthly 
basis. However, every six months, a recipient firm must provide the 
Exchange with a count of the total number of natural person users of 
each product, including both Professional and Non-Professional Users.
Implementation Date
    The Exchange intends to implement the proposed fee change on 
January 3, 2017.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\18\ in general, and 
furthers the objectives of Section 6(b)(4),\19\ 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. The Exchange also 
believes it is reasonable to charge different rates for BZX Depth and 
BZX Summary Depth as both products different levels of content (e.g., 
BZX Depth contains quotations for all individual orders while BZX 
Summary Depth contains the aggregation quotation information for all 
orders up to five (5) price levels). 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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    \18\ 15 U.S.C. 78f.
    \19\ 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 \20\ 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,\21\ 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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    \20\ 15 U.S.C. 78k-1.
    \21\ 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. 
BZX Summary Depth and BZX Depth 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. 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. 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 
BZX Summary Depth and BZX Depth further ensures that the Exchange 
cannot set unreasonable fees, or fees that are unreasonably 
discriminatory, when vendors and subscribers can elect such 
alternatives. That is, 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 distribute its 
similar product than the Exchange charges to consolidate and distribute 
BZX Summary Depth and BZX Depth, prospective Users likely would not 
subscribe to, or would cease subscribing to, BZX Summary Depth and BZX 
Depth.
    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 be so complicated that it could 
not be done practically.\22\
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    \22\ 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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[[Page 95696]]

BZX Summary Depth
    Distribution Fee. The Exchange believes that the proposed 
Distribution Fees are also reasonable, equitably allocated, and not 
unreasonably discriminatory. The fees for Members and non-Members are 
uniform except with respect to reasonable distinctions with respect to 
internal and external distribution. The Exchange believes that the 
Distribution Fees for BZX Summary Depth are reasonable and fair in 
light of alternatives offered by other market centers. For example, BZX 
Summary Depth provides investors with alternative market data and 
competes with similar market data product currently offered by the New 
York Stock Exchange, Inc. (``NYSE'') and the Nasdaq Stock Market LLC 
(``Nasdaq'').\23\ Specifically, the NYSE charges an access fee of 
$5,000 per month for NYSE OpenBook,\24\ which is equal to the External 
Distribution fee proposed herein for BZX Summary Depth.
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    \23\ See Nasdaq Rule 7023(a)(1)(C) (describing Nasdaq TotalView 
is a depth-of-book data feed that includes all orders and quotes 
from all Nasdaq members displayed in the Nasdaq Market Center as 
well as the aggregate size of such orders and quotes at each price 
level in the execution functionality of the Nasdaq Market Center). 
See also Nasdaq Book Viewer, a description of which is available at 
https://data.nasdaq.com/Book Viewer.aspx. See NYSE OpenBook 
available at http://www.nyxdata.com/openbook (providing real-time 
view of the NYSE limit order book).
    \24\ See NYSE Market Data Pricing dated November 2016 available 
at http://www.nyxdata.com/. Nasdaq charges distribution fees ranging 
from $375 for 1-39 subscribers to $75,000 for more than 250 
subscribers. See Nasdaq Rule 7023(b)(4).
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    User Fees. The Exchange believes that implementing the Professional 
and Non-Professional User fees for BZX Summary Depth are equitable and 
reasonable because they will result in greater availability to 
Professional and Non-Professional Users. Moreover, introducing a modest 
Non-Professional User fee for BZX Summary Depth is reasonable because 
it provides an additional method for retail investors to access BZX 
Summary Depth data by providing the same data that is available to 
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. The fee structure of 
differentiated Professional and Non-Professional fees is utilized by 
the Exchange for the Bats One Feed and has long been used by other 
exchanges for their proprietary data products, and by the Nasdaq UTP 
and the CTA and CQ Plans in order to reduce the price of data to retail 
investors and make it more broadly available.\25\ Offering BZX Summary 
Depth to Non-Professional Users with the same data available to 
Professional Users results in greater equity among data recipients.
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    \25\ 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''). 
See also, e.g., Securities Exchange Act Release No. 20002, File No. 
S7-433 (July 22, 1983) (establishing nonprofessional fees for CTA 
data); and Nasdaq Rules 7023(b), 7047.
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    In addition, the proposed fees are reasonable when compared to 
similar fees for comparable products offered by the NYSE and Nasdaq. 
Specifically, NYSE offers NYSE OpenBook for a monthly fee of $60.00 per 
professional subscriber and $15 per non-professional subscriber.\26\ 
Nasdaq offers Nasdaq TotalView-Aggregated for a monthly fee of $70.00 
per professional subscriber and $14 per non-professional 
subscriber.\27\ The Exchange's proposed per User Fees for BZX Summary 
Depth are less than the NYSE and Nasdaq fees.
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    \26\ See NYSE Market Data Pricing dated November 2016 available 
at http://www.nyxdata.com/.
    \27\ See Nasdaq Rule 7023(b)(2).
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    Enterprise Fee. The proposed Enterprise Fee for BZX Summary Depth 
is equitable and reasonable as the fees proposed are less than the 
enterprise fees currently charged for Nasdaq TotalView-Aggregated. 
Nasdaq charges an enterprise fee of $100,000 per month for Nasdaq 
TotalView-Aggregated,\28\ which is far greater than the proposed 
Enterprise Fee of $30,000 per month for BZX Summary Depth. In addition, 
the Enterprise Fee proposed by the Exchange could result in a fee 
reduction for recipient firms with a large number of Professional and 
Non-Professional Users. If a recipient firm has a smaller number of 
Professional Users of BZX Summary Depth, then it may continue using the 
per User structure and benefit from the per User Fee reductions. By 
reducing prices for recipient firms with a large number of Professional 
and Non-Professional Users, the Exchange believes that more firms may 
choose to receive and to distribute BZX Summary Depth, thereby 
expanding the distribution of this market data for the benefit of 
investors.
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    \28\ See Nasdaq Rule 7023(c)(2) (stating that a distributor that 
is also a broker-dealer pays a monthly fee of $100,000 for the right 
to provide Nasdaq TotalView and for display usage for internal 
distribution, or for external distribution to both professional and 
non-professional subscribers with whom the firm has a brokerage 
relationship.) Nasdaq also charges an enterprise fee of $25,000 to 
provide Nasdaq TotalView to an unlimited number of non-professional 
subscribers only. See Nasdaq Rule 7023(c)(1).
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    The Exchange further believes that the proposed Enterprise Fee is 
reasonable because it will simplify reporting for certain recipients 
that have large numbers of Professional and Non-Professional Users. 
Firms that pay the proposed Enterprise Fee will not have to report the 
number of Users on a monthly basis as they currently do, but rather 
will only have to count natural person users every six months, which is 
a significant reduction in administrative burden. Finally, the Exchange 
believes that it is equitable and not unfairly discriminatory to 
establish an Enterprise Fee because it reduces the Exchange's costs and 
the Distributor's administrative burdens in tracking and auditing large 
numbers of Users.
    Digital Media Enterprise Fee. The Exchange believes that the 
proposed Digital Media Enterprise Fee for BZX Summary Depth provides 
for an equitable allocation of reasonable fees among recipients of the 
data and is not designed to permit unfair discrimination among 
customers, brokers, or dealers. In establishing the Digital Media 
Enterprise Fee, the Exchange recognizes that there is demand for a more 
seamless and easier-to-administer data distribution model that takes 
into account the expanded variety of media and communication devices 
that investors utilize today. The Exchange believes the Digital Media 
Enterprise Fee will be easy to administer because data recipients that 
purchase it would not be required to differentiate between Professional 
and Non-Professional Users, account for the extent of access to the 
data, or report the number of Users. This is a significant reduction on 
a recipient firm's administrative burdens and is a significant value to 
investors. For example, a television broadcaster could display BZX 
Summary Depth data during market-related programming and on its Web 
site or allow viewers to view the data via their mobile devices, 
creating a more seamless distribution

[[Page 95697]]

model that will allow investors more choice in how they receive and 
view market data, all without having to account for and/or measure who 
accesses the data and how often they do so.
    The proposed Digital Media Enterprise Fee is equitable and 
reasonable because it will also enable recipient firms to more widely 
distribute data from BZX Summary Depth to investors for informational 
purposes at a lower cost than is available today. For example, a 
recipient firm may purchase an Enterprise license in the amount of 
$30,000 per month for to receive BZX Summary Depth from an External 
Distributor for an unlimited number of Professional and Non-
Professional Users, which is greater than the proposed Digital Media 
Enterprise Fee. The Exchange also believes the amount of the Digital 
Media Enterprise Fee is reasonable as compared to the existing 
enterprise fees discussed above because the distribution of BZX Summary 
Depth data is limited to television, Web sites, and mobile devices for 
informational purposes only, while distribution of BZX Summary Depth 
data pursuant to an Enterprise license contains no such limitation. The 
Exchange also believes that the proposed Digital Media Enterprise Fee 
is equitable and reasonable because it is less than similar fees 
charged by other exchanges.\29\
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    \29\ Nasdaq offers proprietary data products for distribution 
over the internet and television under alternative fee schedules 
that are subject to maximum fee of $50,000 [sic] per month. See 
Nasdaq Rule 7039(b). The NYSE charges a Digit Media Enterprise fee 
of $40,000 per month for the NYSE Trade Digital Media product. See 
Securities Exchange Act Release No. 69272 (April 2, 2013), 78 FR 
20983 (April 8, 2013) (SR-NYSE-2013-23).
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BZX Depth
    User Fees. The Exchange believes that implementing the Professional 
and Non-Professional User fees for BZX Depth are equitable and 
reasonable because they will result in greater availability to 
Professional and Non-Professional Users. Moreover, introducing a modest 
Non-Professional User fee for BZX Depth is reasonable because it 
provides an additional method for retail investors to access BZX Depth 
data by providing the same data that is available to 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. The fee structure of differentiated 
Professional and Non-Professional fees is utilized by the Exchange and 
has long been used by other exchanges for their proprietary data 
products, and by the Nasdaq UTP and the CTA and CQ Plans in order to 
reduce the price of data to retail investors and make it more broadly 
available.\30\ Offering BZX Depth to Non-Professional Users with the 
same data available to Professional Users results in greater equity 
among data recipients. The Exchange also believes it is equitable, 
reasonable, and not unfairly discriminatory to charge User fees to 
Internal Distributors, as such fees are currently charged by NYSE and 
Nasdaq.\31\
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    \30\ See supra note 24.
    \31\ See supra notes 24 and 25 (not limiting the application of 
user fees to external distribution only).
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    In addition, the proposed fees are reasonable when compared to 
similar fees for comparable products offered by the NYSE and Nasdaq. 
Specifically, NYSE offers NYSE OpenBook Ultra for a monthly fee of 
$60.00 per professional subscriber and $15 per non-professional 
subscriber.\32\ Nasdaq offers Nasdaq TotalView-ITCH for a monthly fee 
of $70.00 per professional subscriber and $14 per non-professional 
subscriber.\33\ The Exchange's proposed per User Fees for BZX Depth are 
less than the NYSE and Nasdaq fees.
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    \32\ See supra note 25.
    \33\ See supra note 26.
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    Enterprise Fee. The proposed Enterprise Fee for BZX Depth is 
equitable and reasonable as compared to the enterprise fees currently 
charged for Nasdaq TotalView-ITCH. Nasdaq charges an enterprise fee of 
$100,000 per month for Nasdaq TotalView-ITCH,\34\ which is equal to the 
proposed Enterprise Fee of $100,000 per month for BZX Depth. In 
addition, the Enterprise Fee proposed by the Exchange could result in a 
fee reduction for recipient firms with a large number of Professional 
and Non-Professional Users. If a recipient firm has a smaller number of 
Professional Users of BZX Depth, then it may continue using the per 
User structure and benefit from the per User Fee reductions. By 
reducing prices for recipient firms with a large number of Professional 
and Non-Professional Users, the Exchange believes that more firms may 
choose to receive and to distribute BZX Depth, thereby expanding the 
distribution of this market data for the benefit of investors.
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    \34\ See supra note 27.
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    The Exchange further believes that the proposed Enterprise Fee is 
reasonable because it will simplify reporting for certain recipients 
that have large numbers of Professional and Non-Professional Users. 
Firms that pay the proposed Enterprise Fee will not have to report the 
number of Users on a monthly basis as they currently do, but rather 
will only have to count natural person users every six months, which is 
a significant reduction in administrative burden. Finally, the Exchange 
believes that it is equitable and not unfairly discriminatory to 
establish an Enterprise Fee because it reduces the Exchange's costs and 
the Distributor's administrative burdens in tracking and auditing large 
numbers of Users.

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 BZX Depth and BZX Summary Depth is 
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.
    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, BZX Summary Depth and BZX Depth compete with a number 
of alternative products. For instance, BZX Summary Depth and BZX Depth 
do 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 BZX last sale and depth-of-book 
quotations, though integrated with the prices of other markets, on 
feeds made available through the SIPs.

[[Page 95698]]

    In sum, the availability of a variety of alternative sources of 
information imposes significant competitive pressures on Exchange 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 BZX Depth and BZX 
Summary Depth, 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.
    Lastly, the Exchange represents that the increase in pricing of BZX 
Depth and the proposed pricing of the BZX Summary Feed would continue 
to enable a competing vendor to create a competing product to the 
Exchange's Bats One Feed on the same price and latency basis as the 
Exchange. The Bats One Feed is a data feed that disseminates, on a 
real-time basis, the aggregate BBO of all displayed orders for 
securities traded on each of the Bats Exchanges and for the Bats 
Exchanges report quotes under the 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'').\35\ The Exchange uses the following data 
feeds to create the Bats One Feed, each of which are available to 
vendors: EDGX Depth, EDGA Depth, BYX Depth, and the BZX Depth.
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    \35\ See Exchange Rule 11.22(i). 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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    When adopting the Bats One Feed, the Exchange represented that a 
vendor could create a competing product based in the data feed used to 
construct the Bats One Feed on the same cost and latency basis as the 
Exchange.\36\ Therefore, the Exchange designed the pricing of these 
products so that their aggregate cost is not greater than the Bats One 
Feed, thereby enabling a vendor to create a competing product to the 
Bats One Feed on the same cost basis as the Exchange. However, the 
Exchange now proposes to increase the cost of BZX Depth, which when 
combined with the proposed increases by its affiliates for their depth 
products, would cause their aggregate cost to be higher than the Bats 
One Premium Feed.\37\ However, to ensure that a vendor could continue 
to create a competing product to the Bats One Premium Feed at no 
greater cost, that vendor could now utilize BZX Summary Depth, as well 
as the Summary Depth feeds of BYX, EDGA, and EDGX to create a competing 
product to the Bats One Premium Feed for less cost and on the same 
latency basis as the Exchange.\38\ The Exchange has designed the 
content and pricing of BZX Summary Depth, and related products by its 
affiliates, so that a vendor could utilize those feeds, in lieu of the 
Bats Exchange's existing depth-of-book products, to construct a 
competing product on the same cost and latency basis as the Exchange. 
The pricing the Exchange and its affiliates propose to charge for 
Summary Depth feeds would be lower than the cost to obtain the Bats One 
Premium Feed.\39\ Such pricing would continue to enable a vendor to 
receive each of the Bats Exchange's Summary Depth feeds and offer a 
similar product to the Bats One Premium Feed on a competitive basis and 
at no greater cost than the Exchange.
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    \36\ Id.
    \37\ The Exchange notes that a vendor seeking to create a 
product to compete with the Bats One Summary Feed may continue to 
utilize each of the Bats Exchange's Top and Last Sale data feeds, 
the aggregate cost of which is less than the Bats One Summary Feed.
    \38\ While the proposed BZX Summary Depth feed does not contain 
the symbol summary or consolidated volume data included in the Bats 
One Feed, a vendor could include this information in a competing 
product as this information is easily derivable from the proposed 
feeds or can be obtained from the securities information processors 
on the same terms as the Exchange.
    \39\ While the aggregate cost of each of the Bats Exchange's 
Summary Depth Products equals the cost of the Bats One Premium Feed, 
the cost of the Bats One Feed continues to be greater because 
subscribers are required to pay an additional $1,000 aggregation 
fee. See the Exchange's fee schedule available at http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
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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) of the Act \40\ and paragraph (f) of Rule 19b-4 
thereunder.\41\ 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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    \40\ 15 U.S.C. 78s(b)(3)(A).
    \41\ 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-2016-87 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BatsBZX-2016-87. 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

[[Page 95699]]

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 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-BatsBZX-2016-87 and should 
be submitted on or before January 18, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
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    \42\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31298 Filed 12-27-16; 8:45 am]
 BILLING CODE 8011-01-P


