
[Federal Register Volume 82, Number 12 (Thursday, January 19, 2017)]
[Notices]
[Pages 6678-6684]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-01149]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79775; File No. SR-BatsBZX-2017-01]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees for Use of the Exchange's Equity Options Platform

January 12, 2017.
    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 January 3, 2017, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``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 BZX 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 statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its fee schedule for its equity 
options platform (``BZX Options'') to: (i) Add definitions of terms 
``OCC Customer Volume'' or ``OCV'' and ``Options Step-Up Add TCV'' to 
the Definitions section; and (ii) modify the criteria for tiers under 
footnotes 1 through 13 to reflect the new definition of OCV. The 
Exchange also proposes to (i) increase the rebate provided in the 
Customer \6\ Cross-Asset Add Tier under footnote 1; (ii) add a new 
Step-Up Tier under footnote 1; (iii) eliminate and replace the existing 
Step-Up Tier under footnote 3 with a new Step-Up Tier; (iv) add Tier 3 
under footnote 7; (iv) add Tier 2 and a Step-Up Tier under footnote 12; 
and (v) add a new footnote 14 entitled,

[[Page 6679]]

``Customer Penny Pilot Take Volume Tier.''
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    \6\ As defined in the Exchange's fee schedule available at 
http://www.bats.com/us/options/membership/fee_schedule/bzx/.
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New Defined Terms
    OCC Customer Volume or OCV. 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 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.
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    \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.'' Id.
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    Options Step-Up Add OCV. The Exchange proposes to replace the 
definition of ``Options Step-Up Add TCV'' \8\ with the definition of 
``Options Step-Up Add OCV'' to reflect the new tier qualifications 
resulting from the change in calculation from Total Consolidated Volume 
(``TCV'') \9\ to OCV. Similar to the definition of Options Step-Up Add 
TCV, Options Step-Up Add OCV will be defined as, ``ADAV \10\ as a 
percentage of OCV in the relevant baseline month subtracted from 
current ADAV as a percentage of OCV''. The only difference between the 
two definitions is replacing the term TCV with OCV.
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    \8\ Id.
    \9\ As defined in the Exchange's fee schedule available at 
http://www.bats.com/us/options/membership/fee_schedule/bzx/.
    \10\ Id.
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Tier Qualifications Change
    The Exchange proposes to replace current tier qualifications which 
refer to TCV with a reference to OCV in the tiers under footnotes 1 
through 13. Because OCV generally makes up a smaller range than the 
prior TCV, the Exchange also proposes to amend the percentage of OCV 
necessary to achieve the tier so that it is substantially identical to 
the previously required percentage of TCV. Doing so will keep each 
tier's criteria relatively unchanged from its current requirements. The 
rates for each tier are unchanged. Changes to each tier are described 
below.
    Customer Penny Pilot Add Tiers under footnote 1. Customer orders 
that yield fee code PY \11\ are given a standard rebate of $0.25 per 
contract. Footnote 1 of the fee schedule sets forth eight tiers, each 
providing enhanced rebates, ranging from $0.40 to $0.53 per contract, 
to a Member's order that yields fee code PY upon satisfying monthly 
volume criteria.
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    \11\ Fee code PY is appended to a Member's Customer orders which 
add liquidity in Penny Pilot options. Id.
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     Tier 1 currently requires that a Member has an ADV \12\ 
equal to or greater than 0.05% of average TCV. As amended, a Member 
must have an ADV equal to or greater than 0.05% of average OCV.\13\
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    \12\ Id.
    \13\ The Exchange proposes to retain the 0.05% requirement as 
adjusting that number to reflect replacing TCV with OCV will result 
in a de minimmis change in the percentage.
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     Tier 2 currently requires that a Member has an ADV equal 
to or greater than 0.30% of average TCV. As amended, a Member must have 
an ADV equal to or greater than 0.40% of average OCV.
     Tier 3 currently requires that a Member has an ADV equal 
to or greater than 1.00% of average TCV. As amended, a Member must have 
an ADV equal to or greater than 1.30% of average OCV.
     Tier 4 currently requires that a Member has an ADAV in 
Customer orders equal to or greater than 1.00% of average TCV. As 
amended, a Member must have an ADAV in Customer orders equal to or 
greater than 1.30% of average OCV.
     Tier 5 currently requires that a Member has an: (i) ADAV 
in Customer orders equal to or greater than 0.60% of average TCV; (ii) 
ADAV in Market Maker \14\ orders equal to or greater than 0.25% of 
average TCV; and (iii) ADAV in orders on the Exchange equities platform 
(``BZX Equities'') equal to or greater than 0.30% of average TCV. As 
amended, a Member must have an: (i) An ADAV in Customer orders equal to 
or greater than 0.80% of average OCV; (ii) an ADAV in Market Maker 
orders equal to or greater than 0.35% of average OCV; and (iii) ADAV in 
orders on BZX Equities equal to or greater than 0.30% of average TCV.
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    \14\ Id.
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     Tier 6 currently requires that a Member has an ADAV in 
Customer orders equal to or greater than 1.30% of average TCV. As 
amended, a Member must have an ADAV in Customer orders equal to or 
greater than 1.70% of average OCV.
     The Customer Step-Up Volume Tier currently requires that a 
Member has an Options Step-Up Add TCV in Customer orders from September 
2015 baseline equal to or greater than 0.40%. As amended, a Member must 
have an Options Step-Up Add OCV in Customer orders from September 2015 
baseline equal to or greater than 0.45%.
     The Customer Cross-Asset Add Tier currently requires that 
a Member has an: (i) ADV equal to or greater than 0.80% of average TCV; 
and (ii) ADAV on BZX Equities equal to or greater than 0.50% of average 
TCV. As amended, a Member must have an: (i) ADAV in Customer orders 
equal to or greater than 0.50% of average OCV; and (ii) ADAV on BZX 
Equities greater than or equal to 0.50% of average TCV. As a result of 
the change from requiring a Member to meet a certain threshold of ADV 
to a certain threshold of ADAV, the Exchange proposes to increase the 
rebate provided by this tier from $0.50 to $0.52 per contract. The 
Exchange believes an increased rebate more appropriately corresponds 
with the tier's more stringent criteria.
    Firm,\15\ Broker Dealer,\16\ and Joint Back Office \17\ Penny Pilot 
Add Volume Tiers under footnote 2. Firm, Broker Dealer and Joint Back 
Office orders that yield fee code PF \18\ are given a standard rebate 
of $0.36 per contract. Footnote 2 of the fee schedule sets forth two 
tiers, each providing enhanced rebates of $0.43 and $0.46 per contract 
to a Member's order that yields fee codes PF upon satisfying monthly 
volume criteria.
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    \15\ Id.
    \16\ Id.
    \17\ Id.
    \18\ Fee code PF is appended to a Member's Firm, Broker Deal and 
Joint Back Office orders which add liquidity in Penny Pilot options. 
As defined in the Exchange's fee schedule available at http://www.bats.com/us/options/membership/fee_schedule/bzx/.
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     Tier 1 currently requires that a Member has an: (i) ADAV 
in Away Market Maker,\19\ Firm, Broker Dealer and Joint Back Office 
orders greater than or equal to 0.80% of average TCV; and (ii) ADV 
greater than or equal to 1.50% of average TCV. As amended, a Member 
must have an: (i) ADAV in Away Market Maker, Firm, Broker Dealer and 
Joint Back Office orders greater than or equal to 1.05% of average OCV; 
and (ii) ADV greater than or equal to 1.95% of average OCV.
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    \19\ Id.
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     Tier 2 currently requires that a Member has an: (i) ADV 
greater than or equal to 0.40% of average TCV; and (ii) ADAV in Away 
Market Maker, Firm, Broker Dealer and Joint Back Office greater than or 
equal to 0.30% of average TCV. As amended, a Member must have an: (i) 
ADV greater than or equal to 0.50% of average OCV; and (ii) ADAV in 
Away Market Maker, Firm, Broker Dealer and Joint Back Office greater 
than or equal to 0.40% of average OCV.

[[Page 6680]]

    Non-Customer Penny Pilot Take Volume Tiers under footnote 3. Non-
Customer orders that yield fee code PP \20\ are charged a standard fee 
of $0.50 per contract. Footnote 3 of the fee schedule sets forth three 
tiers, each providing reduced fees ranging from $0.44 to $0.47 per 
contract to a Member's order that yields fee codes PP upon satisfying 
monthly volume criteria.\21\
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    \20\ Fee code PP is appended to a Member's Non-Customer orders 
which remove liquidity in Penny Pilot options. Id.
    \21\ Footnote 3 also includes an additional Step-Up Tier under 
which Members orders that yield fee code PP receive an additional 
$0.01 discount upon satisfying certain criteria. As described in 
more detail below, the Exchange proposes to delete this tier with a 
new Step-Up Tier as part of this filing.
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     Tier 1 currently requires that a Member has an: (i) ADAV 
in Customer orders greater than or equal to 0.60% of average TCV; (ii) 
ADAV in Market Maker orders greater than or equal to 0.25% of average 
TCV and (iii) ADAV on BZX Equities greater than or equal to 0.30% of 
average TCV. As amended, a Member must have an: (i) ADAV in Customer 
orders greater than or equal to 0.80% of average OCV; (ii) ADAV in 
Market Maker orders greater than or equal to 0.35% of average OCV; and 
(iii) ADAV on BZX Equities greater than or equal to 0.30% of average 
TCV.
     Tier 2 currently requires that a Member has an ADAV in 
Customer orders greater than or equal to 1.00% of average TCV. As 
amended, a Member must have an ADAV in Customer orders greater than or 
equal to 1.30% of average OCV.
     Tier 3 currently requires that a Member has an ADAV in 
Customer orders greater than or equal to 1.30% of average TCV. As 
amended, a Member must have an ADAV in Customer orders greater than or 
equal to 1.70% of average OCV.
    National Best Bid or Best Offer (``NBBO'') Setter Tiers under 
footnote 4. Footnote 4 of the fee schedule sets forth five tiers, each 
providing enhanced rebates, ranging from $0.02 to $0.05 per contract, 
to a Member's orders that establish a new NBBO and yield fee codes PF, 
PM \22\ or PN \23\ upon satisfying monthly volume criteria.
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    \22\ Fee code PM is appended to a Member's Market Maker orders 
which add liquidity in Penny Pilot options and provides a standard 
rebate of $0.35 per contract. Id.
    \23\ Fee code PN is appended to a Member's Away Market Maker 
orders which add liquidity in Penny Pilot options and provides a 
standard rebate of $0.30 per contract. As defined in the Exchange's 
fee schedule available at http://www.bats.com/us/options/membership/fee_schedule/bzx/.
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     Tier 1 currently requires that a Member has an ADV greater 
than or equal to 0.30% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 0.40% of average OCV.
     Tier 2 currently requires that a Member has an ADV greater 
than or equal to 1.00% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 1.30% of average OCV.
     Tier 3 currently requires that a Member has an: (i) ADV 
greater than or equal to 0.40% of average TCV; and (ii) ADAV in Away 
Market Maker, Firm, Broker Dealer and Joint Back Office orders greater 
than or equal to 0.30% of average TCV. As amended, a Member must have 
an: (i) ADV greater than or equal to 0.50% of average OCV; and (ii) 
ADAV in Away Market Maker, Firm, Broker Dealer and Joint Back Office 
orders greater than or equal to 0.40% of average OCV.
     Tier 4 currently requires that a Member has an ADAV in 
Market Maker \24\ orders greater than or equal to 0.40% of average TCV. 
As amended a Member must have an ADAV in Market Maker orders greater 
than or equal to 0.50% of average OCV.
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    \24\ Id.
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     Tier 5 currently requires that a Member has an ADAV in 
Non-Customer orders greater than or equal to 2.30% of average TCV. As 
amended a Member must have an ADAV in Non-Customer orders greater than 
or equal to 3.00% of average OCV.
    Quoting Incentive Program (``QIP'') Tiers under footnote 5. 
Footnote 5 sets forth four tiers each providing additional rebates 
ranging from $0.02 to $0.05 per contract for an order appended with fee 
code PM or NM \25\ that adds liquidity to the BZX Options order book in 
options classes in which a Member is a Market Maker registered on BZX 
Options pursuant to Exchange Rule 22.2. A Market Maker must be 
registered with BZX Options in an average of 20% or more of the 
associated options series in a class in order to qualify for QIP 
rebates for that class.
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    \25\ Fee code NM is appended to a Member's Market Maker orders 
which add liquidity in Non-Penny Pilot options. As defined in the 
Exchange's fee schedule available at http://www.bats.com/us/options/membership/fee_schedule/bzx/.
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     Tier 1 currently requires that a Member has an ADV greater 
than or equal to 0.30% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 0.40% of average OCV.
     Tier 2 currently requires that a Member has an ADV greater 
than or equal to 1.00% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 1.30% of average OCV.
     Tier 3 currently requires that a Member has an ADV greater 
than or equal to 2.50% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 3.25% of average OCV.
     Tier 4 currently requires that a Member has an ADV [sic] 
in Market Maker orders greater than or equal to 0.40% of average TCV. 
As amended, a Member must have an ADV [sic] in Market Maker orders 
greater than or equal to 0.50% of average OCV.
    Market Maker Penny Pilot Add Volume Tiers under footnote 6. 
Footnote 6 of the fee schedule sets forth two tiers, each providing 
enhanced rebates of $0.40 and $0.42 per contract to a Member's order 
that yields fee code PM upon satisfying monthly volume criteria.
     Tier 1 currently requires that a Member has an ADV greater 
than or equal to 0.30% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 0.40% of average OCV.
     Tier 2 currently requires that a Member has an: (i) ADAV 
in Market Maker and/or Away Market Maker orders greater than or equal 
to 1.00% of average TCV; and (ii) ADV greater than or equal to 2.00% of 
average TCV. As amended, a Member must have an: (i) ADAV in Market 
Maker and/or Away Market Maker orders greater than or equal to 1.30% of 
average OCV; and (ii) ADV greater than or equal to 2.60% of average 
OCV.
    Market Maker Non-Penny Pilot Add Volume Tiers under footnote 7. 
Footnote 7 of the fee schedule sets forth two tiers, each providing 
enhanced rebates of $0.45 and $0.52 per contract to a Member's order 
that yields fee code NM upon satisfying monthly volume criteria,\26\
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    \26\ As described in more detail below, the Exchange also 
proposes to adopt a third tier under footnote 7 as part of this 
filing.
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     Tier 1 currently requires that a Member has an ADV greater 
than or equal to 0.30% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 0.40% of average OCV.
     Tier 2 currently requires that a Member has an ADV greater 
than or equal to 1.00% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 1.30% of average OCV.
    Firm, Broker Dealer, and Joint Back Office Non-Penny Pilot Add 
Volume Tiers under footnote 8. Firm, Broker Dealer and Joint Back 
Office orders that

[[Page 6681]]

yield fee code NF \27\ are given a standard rebate of $0.30 per 
contract. Footnote 8 of the fee schedule sets forth three tiers, each 
providing enhanced rebates ranging from $0.45 to $0.69 per contract to 
a Member's order that yields fee codes NF upon satisfying monthly 
volume criteria.
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    \27\ Fee code NF is appended to a Member's Firm, Broker Dealer 
and Joint Back Office orders which add liquidity in Non-Penny Pilot 
options. Id.
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     Tier 1 currently requires that a Member has an ADV greater 
than or equal to 0.15% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 0.20% of average OCV.
     Tier 2 currently requires that a Member has an ADV greater 
than or equal to 0.25% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 0.35% of average OCV.
     Tier 3 currently requires that a Member has an: (i) ADV 
greater than or equal to 1.75% of average TCV; and (ii) ADAV in Away 
Market Maker, Firm, Broker Dealer, and Joint Back Office orders greater 
than or equal to 1.25% of average TCV. As amended, a Member must have 
an: (i) ADV greater than or equal to 2.30% of average OCV; and (ii) 
ADAV in Away Market Maker, Firm, Broker Dealer, and Joint Back Office 
orders greater than or equal to 1.65% of average OCV.
    Professional Penny Pilot Add Volume Tiers under footnote 9. 
Professional orders that yield fee code PA \28\ are given a standard 
rebate of $0.25 per contract. Footnote 9 of the fee schedule sets forth 
four tiers, each providing enhanced rebates ranging from $0.42 to $0.48 
per contract to a Member's order that yields fee codes PA upon 
satisfying monthly volume criteria.
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    \28\ Fee code PA is appended to a Member's Professional orders 
which add liquidity in Penny Pilot options. Id.
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     Tier 1 currently requires that a Member has an ADAV in 
Customer and Professional orders greater than or equal to 0.10% of 
average TCV. As amended, a Member must have an ADAV in Customer and 
Professional orders greater than or equal to 0.15% of average OCV.
     Tier 2 currently requires that a Member has an ADAV in 
Customer and Professional orders greater than or equal to 0.20% of 
average TCV. As amended, a Member must have an ADAV in Customer and 
Professional orders greater than or equal to 0.25% of average OCV.
     Tier 3 currently requires that a Member has an ADAV in 
Customer and Professional orders greater than or equal to 0.30% of 
average TCV. As amended, a Member must have an ADAV in Customer and 
Professional orders greater than or equal to 0.40% of average OCV.
     Tier 4 currently requires that a Member has an ADAV in 
Customer and Professional orders greater than or equal to 0.50% of 
average TCV. As amended a Member must have an ADAV in Customer and 
Professional orders greater than or equal to 0.65% of average OCV.
    Away Market Maker Penny Pilot Add Volume Tiers under footnote 10. 
Away Market Maker orders that yield fee code PN are given a standard 
rebate of $0.30 per contract. Footnote 10 of the fee schedule sets 
forth three tiers, each providing enhanced rebates ranging from $0.40 
to $0.46 per contract to a Member's order that yields fee code PN upon 
satisfying monthly volume criteria.
     Tier 1 currently requires that a Member has an ADV greater 
than or equal to 0.30% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 0.40% of average OCV.
     Tier 2 currently requires that a Member has an: (i) ADAV 
in Away Market Maker, Firm, Broker Dealer and Joint Back Office orders 
greater than or equal to 0.80% of average TCV; and (ii) ADV greater 
than or equal to 1.50% of average TCV. As amended, a Member must have 
an: (i) ADAV in Away Market Maker, Firm, Broker Dealer and Joint Back 
Office orders greater than or equal to 1.05% of average OCV; and (ii) 
ADV greater than or equal to 1.95% of average OCV.
     Tier 3 currently requires that a Member has an: (i) ADV 
greater than or equal to 0.40% of average TCV: and (ii) ADAV in Away 
Market Maker, Firm, Broker Dealer and Joint Back Office orders greater 
than or equal to 0.30% of average TCV. As amended, a Member must have 
an: (i) ADV greater than or equal to 0.50% of average OCV; and (ii) 
ADAV in Away Market Maker, Firm, Broker Dealer and Joint Back Office 
orders greater than or equal to 0.40% of average OCV.
    Away Market Maker Non-Penny Pilot Add Volume Tiers under footnote 
11. Away Market Maker orders that yield fee code NN \29\ are given a 
standard rebate of $0.30 per contract. Footnote 11 of the fee schedule 
sets forth two tiers, each providing enhanced rebates of $0.40 and 
$0.52 per contract to a Member's order that yields fee code NN upon 
satisfying monthly volume criteria.
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    \29\ Fee code NN is appended to a Member's Away Market Maker 
orders which add liquidity in Non-Penny Pilot options. Id.
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     Tier 1 currently requires that a Member has an ADV greater 
than or equal to 0.30% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 0.40% of average OCV.
     Tier 2 currently requires that a Member has an ADV greater 
than or equal to 1.00% of average TCV. As amended, a Member must have 
an ADV greater than or equal to 1.30% of average OCV.
    Customer Non-Penny Pilot Add Volume Tier under footnote 12. 
Customer orders that yield fee code NY \30\ are given a standard rebate 
of $0.85 per contract. Footnote 12 of the fee schedule sets forth one 
tier, providing an enhanced rebate of $1.00 per contract to a Member's 
order that yields fee code NY upon satisfying monthly volume 
criteria.\31\
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    \30\ Fee code NY is appended to a Member's Customer orders which 
add liquidity in Non-Penny Pilot options. As defined in the 
Exchange's fee schedule available at http://www.bats.com/us/options/membership/fee_schedule/bzx/.
    \31\ As described in more detail below, the Exchange proposes to 
implement a second and third tier under footnote 12 as part of this 
filing.
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     Tier 1 currently requires that a Member has an ADAV in 
Customer orders greater than or equal to 0.70% of average TCV. As 
amended a Member must have an ADAV in Customer orders greater than or 
equal to 0.90% of average OCV.
    Non-Customer Non-Penny Pilot Take Volume Tiers, under footnote 13. 
Non-Customer orders that yield fee code NP \32\ are charged a standard 
fee of $1.07 per contract. Footnote 13 of the fee schedule sets forth 
three tiers, each providing reduced fees ranging from $1.01 to $1.02 
per contract to a Member's order that yields fee code NP upon 
satisfying monthly volume criteria.
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    \32\ Fee code NP is appended to a Member's Non-Customer orders 
which remove liquidity in Non-Penny Pilot options. Id.
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     Tier 1 currently requires that a Member has an: (i) ADAV 
in Customer orders greater than or equal to 0.60% of average TCV; (ii) 
ADAV in Market Maker orders greater than or equal to 0.25% of average 
TCV; and (iii) ADAV on BZX Equities greater than or equal to 0.30% of 
average TCV. As amended, a Member must have an: (i) ADAV in Customer 
orders greater than or equal to 0.80% of average OCV; (ii) ADAV in 
Market Maker orders greater than or equal to 0.35% of average OCV; and 
(iii) ADAV on BZX Equities greater than or equal to 0.30% of average 
TCV.
     Tier 2 currently requires that a Member has an ADAV in 
Customer

[[Page 6682]]

orders greater than or equal to 1.00% of average TCV. As amended a 
Member must have an ADAV in Customer orders greater than or equal to 
1.30% of average OCV.
     Tier 3 currently requires that a Member has an ADAV in 
Customer orders greater than or equal to 1.30% of average TCV. As 
amended, a Member must have an ADAV in Customer orders greater than or 
equal to 1.70% of average OCV.
Addition of the Step-Up Tier, Under Footnote 1
    As described above, the Exchange currently offers eight Customer 
Penny Pilot Add Volume Tiers under footnote 1 which provide enhanced 
rebates ranging from $0.40 to $0.53 per contract for orders which yield 
fee code PY and meet the required criteria. The Exchange now proposes 
to add a Step-Up Tier which would provide an additional rebate of $0.02 
to orders appended with fee code PY, including those orders that 
satisfy the required criteria under the tiers listed under footnote 1. 
To qualify for the additional rebate, a Member must have an Options 
Step-Up Add OCV in Customer orders from October 2016 baseline equal to 
or greater than 0.45%.
Elimination and Replacement of the Step-Up Tier Under Footnote 3
    As described above, the Exchange currently offers three Non-
Customer Penny Pilot Take Volume Tiers under footnote 3 which provide 
reduced fees of $0.44 and $0.47 per contract for orders which yield fee 
code PP and meet the required criteria. Additionally, footnote 3 
provides a Step-Up Tier under which Members may receive an additional 
discount of $0.01 per contract for orders appended with fee code PP, 
including those orders that satisfy the required criteria under the 
tiers listed under footnote 3. To receive the additional $0.01 per 
contract discount, the Member must have an Options Step-Up Add TCV in 
Customer orders from September 2016 baseline greater than or equal to 
0.30%. The Exchange now proposes to delete and replace this Step-Up 
Tier under footnote 3 with a new Step-Up Tier which would provide a 
reduced fee of $0.47 per contract for orders which yield fee code PP 
and where the Member has an Options Step-Up Add OCV in Customer orders 
from October 2016 baseline greater than or equal to 0.45%.
Addition of Tier 3 Under Footnote 7
    As described above, the Exchange currently offers two Market Maker 
Non-Penny Pilot Add Volume Tiers under footnote 7 which provide 
enhanced rebates of $0.45 and $0.52 per contract for orders which yield 
fee code NM and meet the required criteria. The Exchange now proposes 
to add Tier 3 under which a Member would receive an enhanced rebate of 
$0.65 per contract where that Member has an: (i) ADAV in Market Maker 
orders in Non-Penny Pilot Securities greater than or equal to 0.20% of 
average OCV; and (ii) ADAV in Non-Customer orders greater than or equal 
to 3.00% of average OCV. The Exchange also notes that changes are 
required to the Standard Rates table of the fee schedule applicable to 
fee code NM in connection with this change.
Addition of Tier 2 and the Customer Step-Up Tier Under Footnote 12
    As described above, the Exchange currently offers one Customer Non-
Penny Pilot Add Volume Tier under footnote 12 which provides an 
enhanced rebate of $1.00 per contract for orders which yield fee code 
NY and meet the required criteria. The Exchange now proposes to add two 
new tiers under footnote 12. First, proposed Tier 2 would provide an 
enhanced rebate of $1.05 per contract where that Member has an ADAV in 
Customer orders greater than or equal to 2.10% of average OCV. Second, 
the proposed Step-Up Tier will provide an enhanced rebate of $1.00 per 
contract where that Member has an Options Step-Up Add OCV in Customer 
orders from October 2016 baseline greater than or equal to 0.45%. The 
Exchange also notes that changes are required to the Standard Rates 
table of the fee schedule applicable to fee code NY in connection with 
these changes.
Addition of Footnote 14, the Customer Penny Pilot Take Volume Tier
    The Exchange proposes to add new footnote 14 entitled, ``Customer 
Penny Pilot Take Volume Tier''. Under the proposed Cross-Asset Tier, a 
Member's orders that yield fee code PC \33\ would be charged a reduced 
fee of $0.48 per contract where that Member has an: (i) ADAV in 
Customer orders greater than or equal to 0.50% of average OCV; and (ii) 
ADAV on BZX Equities greater than or equal to 0.50% of average TCV. The 
Exchange also notes that changes are required to the Standard Rates 
table of the fee schedule applicable to fee code PC in connection with 
this change. In addition, the Exchange proposes to append footnote 14 
to fee code PC within in the Fee Codes and Associated Fees table.
---------------------------------------------------------------------------

    \33\ Fee code PC is appended to a Member's Customer orders which 
remove liquidity in Penny Pilot options and is charged a standard 
fee of $0.49 per contract. Id.
---------------------------------------------------------------------------

Implementation Date
    The Exchange proposes to implement this amendment to its fee 
schedule on January 3, 2017.\34\
---------------------------------------------------------------------------

    \34\ The Exchange notes that the date of the fee schedule was 
updated to January 3, 2017 in SR-BatsBZX-2016-90 (filed on December 
27, 2016).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\35\ in general, and 
furthers the objectives of Section 6(b)(4),\36\ 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 fee 
changes are equitable and non-discriminatory in that they apply 
uniformly to all Members. The Exchange believes the rates remain 
competitive with those charged by other venues and, therefore, are 
reasonable and equitably allocated to Members.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78f.
    \36\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

New Defined Terms
    The Exchange believes adopting a definition of OCV, utilizing OCV 
in lieu of TCV, and changing the definition of Options Step-Up Add TCV 
to Options Step-Up Add OCV are 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 without changing the rate provided 
for by the tiers. In addition, the amount of OCV historically tends to 
remain reasonably consistent from month to month, as opposed to TCV 
which is less consistent. OCV is also more consistent than options 
volume that clears in the Market Maker or Firm range at the OCC, as 
Market Maker and Firm volume may vary drastically from month to month 
based on market events, as opposed to Customer options volume which 
remains relatively consistent. Therefore, the Exchange believes 
utilizing OCV would result in consistent tier criteria as OCV is a 
relatively static monthly number which would enable market participants 
to better predict whether they may achieve a tier criteria each month 
and qualify for that tier's preferred pricing.

[[Page 6683]]

    The Exchange also believes that the use of OCV provides a 
calculation that is identical to that which was implemented in December 
2016 on the EDGX Options fee schedule.\37\ Additionally, the OCV 
calculation is reasonably identical to and is not a significant 
departure from tier qualifications conventions offered by other 
exchanges.\38\ The Exchange believes that the proposed definition of 
OCV and the proposed revision of the definition of Options Step-Up Add 
TCV to Options Step-Up Add OCV are reasonable, fair and equitable, and 
non-discriminatory, and will provide additional transparency and 
simplicity to Members regarding the calculations used to determine 
volume levels for purposes of the proposed tiered pricing model.
---------------------------------------------------------------------------

    \37\ See Securities Exchange Act Release No. 239239 [sic] 
(December 7, 2016), 81 FR 90009 (December 13, 2016) (SR-BatsEDGX-
2016-68).
    \38\ See the NYSE MKT LLC (``NYSE MKT'') fee schedule available 
at https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf (setting forth tiers that provide 
preferred pricing to options market makers who meet certain 
criteria, including achieving a specific ``Monthly Volume as a % of 
Industry Customer Equity and Exchange Traded Fund (``ETF'') Option 
Volume''); NYSE Arca, Inc. (``NYSE ARCA'') options fee schedule 
available at https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf (setting forth a Market 
Maker Incentive tier that provides preferred pricing to market 
makers who meet certain criteria, including achieving a specific 
percentage of ``Total Industry Customer equity and ETF option 
ADV''); Nasdaq Stock Market LLC (``Nasdaq'') options fee schedule 
available at http://www.nasdaqtrader.com/Micro.aspx?id=optionsPricing (setting forth tiers that provide 
preferred pricing to market makers who meet certain criteria, 
including achieving a specific percentage of ``total industry 
customer equity and ETF option ADV contracts per month''); and 
Nasdaq BX LLC (``BX'') options fee schedule available at http://www.nasdaqtrader.com/Micro.aspx?id=BXOptionsPricing (setting forth 
tiers that provide preferred pricing to market makers who meet 
certain criteria, including achieving a specific percentage of 
``total industry customer equity and ETF option ADV contracts per 
month'').
---------------------------------------------------------------------------

Volume-Based Tier Modifications
    The Exchange believes that the proposed modifications to the tiered 
pricing structure are reasonable, fair and equitable, and non-
discriminatory. The Exchange operates in a highly competitive market in 
which market participants may readily send order flow to many competing 
venues if they deem fees at the Exchange to be excessive. 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 proposed modifications and additions proposed herein are also 
intended to incentivize additional Members to send orders to the 
Exchange in an effort to qualify for the enhanced rebate made available 
by the tiers. The Exchange believes the proposed change to each tier's 
criteria is consistent with the Act.
    Proposed Revisions and New Tiers under Footnotes 1, 3, 7, and 12. 
The Exchange believes the proposed tiers under footnotes 1, 3 7, and 12 
are reasonable, fair and equitable, and non-discriminatory. The 
proposed tiers are intended to attract order flow to the Exchange by 
offering market participants a competitive pricing structure. The 
Exchange believes it is reasonable to offer incrementally modified 
incentives intended to help to contribute to the growth of the 
Exchange. First, the Exchange believes the revisions to the Customer 
Cross-Asset Add Tier under footnote 1 are equitable and reasonable 
because further incentivize Members to reach certain thresholds on both 
BZX Options and BZX Equities. 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 the BZX Options but not on BZX Equities, the Exchange does believe 
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 BZX Equities.
    Additionally, the Exchange believes the elimination and replacement 
of the Step-Up tier under footnote 3 is reasonable, fair, and equitable 
because the current tier was not providing the desired result of 
incentivizing Members to increase their participation over time. 
Therefore, eliminating the current Step-Up Tier under footnote 3 will 
have a negligible effect on order flow and market behavior. The 
Exchange believes the proposed new Step-Up Tier under footnote 3 should 
incentives Members to increase their participation in Customer and Non-
Customer orders. Likewise, the proposed tiers under footnotes 1, 7 and 
12 are also designed to incentivize Members to increase their 
participation on the Exchange. The Exchange believes it is reasonable 
to continue to modify the volume based incentives to help to contribute 
to the growth of the Exchange. The Exchange also believes the proposed 
change is not unfairly discriminatory because it will apply equally to 
all participants.
    Addition of Footnote 14, Customer Penny Pilot Take Volume Tier. The 
Exchange believes that the proposal to add a Cross-Asset Tier is a 
reasonable, fair and equitable, and not unfairly discriminatory 
allocation of fees and rebates for similar reasons stated above with 
regard to the revisions of the Customer Cross-Asset Add Tier under 
footnote 1. Specifically, the Exchange believes the proposed tier will 
provide Members with an additional incentive to reach certain 
thresholds on both BZX Equities and BZX Options. The increased 
liquidity from this proposal also benefits all investors by deepening 
the BZX Equities and BZX Options 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 the 
Exchange but not on BZX Equities, the Exchange does believe 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 BZX 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 BZX 
Options or not. The proposed pricing program is also fair and equitable 
in that membership in BZX Options is available to all market 
participants which would provide them with access to the benefits on 
BZX Options provided by the proposed changes, as described above, even 
where a member of BZX Options is not

[[Page 6684]]

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 also believes that the proposed tiered 
pricing structure is consistent with pricing previously offered by the 
Exchange as well as other options exchanges and does not represent a 
significant departure from such pricing structures.\39\
---------------------------------------------------------------------------

    \39\ See, e.g., BZX Exchange Options Fee Schedule, Footnote 1, 
Customer Add Tier, which provides an enhanced rebate to Customer 
orders on BZX Options based on both Customer volume and Market Maker 
volume. The BZX Options Fee Schedule is available at: http://www.batsoptions.com/support/fee_schedule/bzx/.
---------------------------------------------------------------------------

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. The Exchange believes that its 
proposal to amend the qualification criteria and to incorporate OCV as 
proposed 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 each tier. Additionally, Members may opt to disfavor the 
Exchange's pricing if they believe that alternatives offer them better 
value. Accordingly, the Exchange does not believe that the proposed 
changes to the volume discount and rebate structure will impair the 
ability of Members or competing venues to maintain their competitive 
standing in the financial markets. The Exchange believes that its 
proposal would not burden intramarket competition because the proposed 
rate changes would continue to apply uniformly to all Members. 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 structure s to be 
unreasonable or excessive. The Exchange does not believe the proposed 
tiers would burden intramarket competition as they would apply to all 
Members uniformly.

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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from Members or other interested 
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \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.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78s(b)(3)(A).
    \41\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2017-01 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-2017-01. 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-BatsBZX-2017-01 and should 
be submitted on or before February 9, 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. 2017-01149 Filed 1-18-17; 8:45 am]
 BILLING CODE 8011-01-P


