
[Federal Register Volume 82, Number 94 (Wednesday, May 17, 2017)]
[Notices]
[Pages 22697-22699]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-09928]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80658; File No. SR-BatsEDGX-2017-21]


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

May 11, 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 May 8, 2017, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 the 
Substance of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-members of the Exchange pursuant to EDGX Rules 
15.1(a) and (c).
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange.'' See 
Exchange Rule 1.5(n).
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.bats.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 (``EDGX Options'') to: (i) Modify fees for Qualified 
Contingent Cross Orders (``QCC''),\6\ including the adoption of a new 
naming convention for certain rebates, ``QCC Initiator Rebates''; (ii) 
update the descriptions for fee codes PM and NM; (iii) add new fee 
codes PT and NT; and (iv) eliminate Tiers 4 and 6 under footnote 1.
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    \6\ See Securities Exchange Act Release No. 79942 (February 1, 
2017), 82 FR 9804 (February 8, 2017) (SR-BatsEDGX-2017-11) (``QCC 
Filing'').
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    QCC Order Pricing
    The Exchange proposes to amend QCC fees and rebates to reflect the 
value of the execution opportunities provided by the QCC functionality. 
Thus, the Exchange proposes to modify the fees and rebates 
corresponding to the fee codes that were originally adopted in 
connection with QCC, as described below.
    Fee Code QA. Currently, fee code QA is appended to Customer \7\ QCC 
Agency Orders \8\, and provides a standard rebate of $0.05 per 
contract. The Exchange proposes to alter the pricing for QCC Agency 
Orders yielding fee code QA to instead provide such executions free of 
charge. However, as proposed, the Exchange would continue to provide a 
rebate of $0.05 per contract to QCC Agency orders in which at least one 
side of the transaction is a Non-Customer \9\ order. This proposed 
rebate of $0.05 per contract for such executions will be described in 
footnote 7 more specifically and there will be no other charge or 
rebate for executing orders appended with QA. Thus, the Exchange 
proposes to append footnote 7 to fee code QA in addition to the 
existing footnote appended to fee code QA, footnote 5. Current footnote 
5 and proposed footnote 7 are described in additional detail below.
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    \7\ ``Customer'' applies to any transaction identified by a 
Member for clearing in the Customer range at the OCC, excluding any 
transaction for a Broker Dealer or a ``Professional'' as defined in 
Exchange Rule 16.1. See the Exchange's fee schedule available at 
http://www.bats.com/us/options/membership/fee_schedule/edgx/.
    \8\ ``QCC Agency'' is a Qualified Contingent Cross Order 
represented as agent by a Member on behalf of another party and 
submitted for execution pursuant to Rule 21.1. Id.
    \9\ ``Non-Customer'' applies to any transaction that is not a 
Customer order. Id.
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    Fee Code QC. Currently, fee code QC is appended to Customer QCC 
Contra Orders, and provides a standard rebate of $0.05 per contract. 
The Exchange proposes to alter the pricing for QCC Agency Orders 
yielding fee code QC to instead provide such executions free of charge. 
The Exchange proposes to remove footnote 5 from QC, as there is no 
longer the potential to earn a rebate in connection with routing a 
Customer QCC Contra Order to the Exchange and thus the footnote is 
inapplicable. Footnote 5 is described in additional detail below.
    Fee Code QM. Currently, fee code QM is appended to Non-Customer QCC 
Agency Orders, and assessed a fee of $0.19 per contract. The Exchange 
proposes to lower the fee charged for Non-Customer QCC Agency Orders to 
$0.08 per contract. In addition, as noted above, the Exchange proposes 
to provide a rebate of $0.05 per contract to QCC Agency orders in which 
at least one side of the transaction is a Non-Customer order. This 
proposed rebate of $0.05 per contract for such executions will be 
described in footnote 7. Accordingly, the Exchange proposes to append 
footnotes 5 and 7 to fee code QM, as there will now be the potential to 
receive a rebate in connection with QCC Agency Orders.
    Fee Code QN. Currently, fee code QN is appended to Non-Customer QCC 
Contra Orders, and assessed a fee of $0.19 per contract. The Exchange 
proposes to lower the fee charged for Non-Customer QCC Contra Orders to 
$0.08 per contract.
    As noted above, The Exchange proposes to modify the rebates 
provided to QCC orders, to only apply to QCC Agency Orders in which one 
side of the transaction includes a Non-Customer order. The Exchange 
proposes that the rebate applicable to QCC orders be defined as the 
``QCC Initiator Rebate'' and its scope be refined to only apply to QCC 
Agency orders in which at least one side of the transaction is a Non-
Customer order.
    The Exchange proposes to adopt new footnote 7 to describe the 
rebate paid by the Exchange to a Member that submits a QCC Agency Order 
to the Exchange when at least one side of the transaction is of Non-
Customer capacity and to define this rebate as the QCC Initiator 
Rebate. As proposed, and consistent with other pricing on the Exchange, 
the Exchange would provide the QCC Initiator Rebate to all Members 
submitting QCC Agency Orders to the Exchange, including a Member who

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routed an order to the Exchange with a Designated Give Up, as discussed 
below.
    In connection with the proposed change and the adoption of footnote 
7, footnote 5 would be appended to fee code QM \10\ and removed from 
fee code QC. Currently, footnote 5 of the fee schedule specifies that 
when order is submitted with a Designated Give Up, as defined in Rule 
21.12(b)(1), the applicable rebates for such orders when executed on 
the Exchange (yielding fee code BC,\11\ NC,\12\ PC,\13\ QA and QC) are 
provided to the Member who routed the order to the Exchange. Pursuant 
to Rule 21.12, which specifies the process to submit an order with a 
Designated Give Up, a Member acting as an options routing firm on 
behalf of one or more other Exchange Members (a ``Routing Firm'') is 
able to route orders to the Exchange and to immediately give up the 
party (a party other than the Routing Firm itself or the Routing Firm's 
own clearing firm) who will accept and clear any resulting transaction. 
Because the Routing Firm is responsible for the decision to route the 
order to the Exchange, the Exchange currently provides such Member with 
the rebate when orders that yield fee code BC, NC, PC, QA and QC are 
executed. As amended, the Exchange would provide rebates to a Routing 
Firm when orders that yield fee code BC, NC, PC, QA and QM are 
executed.
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    \10\ Fee code QM is appended to QCC Non-Customer orders 
represented as agent by a Member on behalf of another party for 
execution pursuant to Rule 21.1. Id.
    \11\ Fee code BC is appended Customer orders represented as 
agent by a Member on behalf of another party and submitted to BAM 
for potential price improvement pursuant to Rule 21.19, and provided 
a standard rebate of $0.14 per order. Id.
    \12\ Fee code NC is appended to Customer orders which add 
liquidity in Non-Penny Pilot securities and is provided a standard 
rebate of $0.05 per order. Id.
    \13\ Fee code PC is appended to Customer orders which add 
liquidity in Penny Pilot securities and is provided a standard 
rebate of $0.05 per order. Id.
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Fee Codes PM and NM
    Currently fee codes PM and NM apply to orders in Market Maker \14\ 
Penny Pilot \15\ and Non-Penny Pilot contracts, respectively. To 
further specify which orders add and remove liquidity, the Exchange 
proposes to modify the definitions for PM and NM. As proposed, fee code 
PM would be appended to Market Maker Penny Pilot orders which add 
liquidity. Fee code NM would be appended to Market Maker Non-Penny 
Pilot orders which add liquidity. The Exchange does not propose to 
alter the standard fee of $0.19 per contract assessed on orders 
appended with fee codes PM and NM.
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    \14\ ``Market Maker'' applies to any transaction identified by a 
Member for clearing in the Market Maker range at the OCC, where such 
Member is registered with the Exchange as a Market Maker as defined 
in Rule 16.1(a)(37). Id.
    \15\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01. Id.
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Fee Codes PT and NT
    Exchange proposes to amend its fee schedule to add fee codes PT and 
NT, which would apply to orders which remove liquidity in Market Maker 
Penny Pilot and Non-Penny Pilot orders, respectively. Similar to the 
current fee codes PM and NM, orders appended with fee codes PT and NT 
would be assessed a fee of $0.19 per contract.
Eliminate Customer Volume Tiers 4 and 6
    Footnote 1 of the fee schedule sets forth six tiers, each providing 
enhanced rebates ranging from $0.10 to $0.25 per contract to a Member's 
order that yields fee code PC or NC upon satisfying monthly volume 
criteria. The Exchange proposes to eliminate Tiers 4 and 6 as they did 
not result in incentivizing additional order flow as designed. In 
connection with the change the Exchange proposes to update the standard 
rates table to reflect the removal of the $0.25 rebate applicable to 
Tiers 4 and 6.
Implementation Date
    The Exchange proposes to implement this amendment to its fee 
schedule on May 1, 2017.\16\
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    \16\ The Exchange initially submitted the proposed fee change on 
May 1, 2017. (SR-BatsEDGX-2017-18). On May 8, 2017, the Exchange 
withdrew SR-BatsEDGX-2017-18 and submitted this filing.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange, and, 
in particular, with the requirements of Section 6 of the Act.\17\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\18\ in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among Members and other persons using any facility or system which the 
Exchange operates or controls.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
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QCC Pricing
    The Exchange believes that its proposed fees and rebates related to 
QCC Orders are reasonable and fair and equitable as the fees will allow 
the Exchange to continue to offer QCC Order functionality, which is 
functionality offered on other options exchanges, with pricing that is 
comparable to that offered by other options exchanges. The Exchange 
further believes that this pricing structure is non-discriminatory, as 
it applies equally to all Members. In addition, the Exchange believes 
this proposal is reasonable because, while orders for other market 
participants (Non-Customers) will be assessed a fee, the Exchange is 
reducing this fee; further, orders for Customers will receive free 
executions and Members submitting QCC Agency Orders will receive a 
rebate where one side of the transaction is a Non-Customer order. The 
Exchange believes the proposed QCC Initiator Rebate is equitable and 
not unfairly discriminatory as the Exchange and other options exchanges 
have generally established pricing structures that are intended to 
encourage additional QCC order flow.
Fee Codes Addition and Modification
    The Exchange believes that its proposals to add fee codes PT and NT 
related specifically to orders which remove liquidity and modify the 
definition of PM and NM related specifically to orders which add 
liquidity are fair and equitable and reasonable because the proposed 
fees for orders appended with fee codes PT, NT, PM and NM are identical 
and consistent with pricing previously offered by the Exchange as well 
as competitors of the Exchange and do not represent a significant 
departure from the Exchange's general pricing structure. Instead, the 
changes and additions will simply allow the Exchange to further 
differentiate between different types of executions for purposes of 
transparency to Members as well as potential future pricing changes. 
Also, the proposed changes to fee codes are not unfairly discriminatory 
because they will apply equally to all Members.
Eliminating Customer Volume Tiers 4 and 6
    Lastly, the Exchange believes that eliminating the Customer Volume 
Tiers 4 and 6 under footnote 1 is reasonable, fair, and equitable 
because the these tiers were not providing the desired result of 
incentivizing Members to increase their participation in Customer 
orders on the Exchange. As such, the Exchange also believes that the 
proposed elimination of these tiers would be non-discriminatory in that 
they currently apply equally to all Members and, upon elimination, 
would

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no longer be available to any Members. Further, their elimination will 
allow the Exchange to explore other pricing mechanisms in which it may 
enhance market quality for all Members.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed change to fees 
related to QCC Orders will impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
Exchange's proposed functionality is open to all market participants. 
The proposals to provide a rebate for certain QCC Agency Orders through 
the QCC Initiator Rebate and to reduce fees for QCC Contra Orders are 
competitive proposals intended to incentivize the entry of additional 
orders into QCC. Further, the pricing is designed to be competitive 
with pricing on other options exchanges and QCC functionality is a 
competitive offering by the Exchange. Further, the Exchange does not 
believe that the changes to eliminate pricing incentives that have been 
ineffective, to modify fee code descriptions or add fee codes will 
impose any burden on competition. For these reasons, the Exchange does 
not believe that the proposed fee schedule changes will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act, and believes the proposed change will enhance 
competition.

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

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \19\ and paragraph (f) of Rule 19b-4 
thereunder.\20\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BatsEDGX-2017-21 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BatsEDGX-2017-21. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should
    submit only information that you wish to make available publicly. 
All submissions should refer to File Number SR-BatsEDGX-2017-21, and 
should be submitted on or before June 7, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09928 Filed 5-16-17; 8:45 am]
 BILLING CODE 8011-01-P


