
[Federal Register Volume 82, Number 117 (Tuesday, June 20, 2017)]
[Notices]
[Pages 28147-28150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12760]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80919; File No. SR-BatsBZX-2017-41)]


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

June 14, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 28148]]

notice is hereby given that on June 1, 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 its fees and rebates 
applicable to Members \5\ and non-Members of the Exchange pursuant to 
BZX Rule 15.1(a) and (c). The text of the proposed rule change is 
attached as Exhibit 5.
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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 (``BZX Options'') to: (i) Increase the standard fee 
provided by fee code PC; (ii) decrease the standard rebate provided by 
fee code PN; (iii) modify the conditions and rebates of the Firm,\6\ 
Broker Dealer \7\ and Joint Back Office \8\ Non-Penny Pilot \9\ Add 
Volume Tiers 1 and 2 under footnote 8; and (iv) eliminate the (A) Firm, 
Broker Dealer and Joint Back Office, Penny Pilot Add Volume Tier 2 
under footnote 2; (B) Away Market Maker \10\ Penny Pilot Add Volume 
Tiers 1 and 3 under footnote 10; and (C) Customer \11\ Penny Pilot Take 
Volume Tier under footnote 14.
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    \6\ ``Firm'' applies to any transaction identified by a Member 
for clearing in the Firm range at the OCC, excluding any Joint Back 
Office transaction. See the Exchange's fee schedule available at 
http://www.bats.com/us/options/membership/fee_schedule/bzx/.
    \7\ ``Broker Dealer'' applies to any order for the account of a 
broker dealer, including a foreign broker dealer, that clears in the 
Customer range at the Options Clearing Corporation (``OCC''). Id.
    \8\ ``Joint Back Office'' applies to any transaction identified 
by a Member for clearing in the Firm range at the OCC that is 
identified with an origin code as Joint Back Office. A Joint Back 
Office participant is a Member that maintains a Joint Back Office 
arrangement with a clearing broker-dealer. Id.
    \9\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01. Id.
    \10\ ``Away Market Maker'' applies to any transaction identified 
by a Member for clearing in the Market Maker range at the OCC, where 
such Member is not registered with the Exchange as a Market Maker, 
but is registered as a market maker on another options exchange. Id.
    \11\ ``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/bzx/.
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Fee Code PC
    Currently, fee code PC charges a standard fee of $0.49 per contract 
for Customer orders that remove liquidity on the Exchange in Penny-
Pilot securities.\12\ The Exchange proposes to increase this fee to 
$0.50 per contract. The Exchange also proposes to update the Standard 
Rates table accordingly to reflect new rate.
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    \12\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01. Id.
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Fee Code PN
    Currently, fee code PN provides a standard rebate of $0.30 per 
contract for Away Market Maker orders that add liquidity on the 
Exchange in Penny-Pilot securities. The Exchange proposes to reduce 
this rebate to $0.26 per contract. The Exchange also proposes to update 
the Standard Rates table accordingly to reflect new rate.
Firm, Broker Dealer and Joint Back Office Non-Penny Add Volume Tiers
    The Exchange currently offers three Firm, Broker Dealer and Joint 
Back Office Non-Penny Add Volume Tiers under footnote 8, which provide 
an enhanced rebate ranging from $0.45 to $0.82 per contract for 
qualifying orders that add liquidity in Non Penny Pilot Securities and 
yields fee code NF.\13\ The Exchange now proposes to modify Tier 1 and 
Tier 2's required criteria and rebate.
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    \13\ Fee code NF is appended to Firm, Broker Dealer and Joint 
Back Office orders in Non-Penny Pilot Securities that add liquidity. 
Orders that yield fee code NF are provided a rebate of $0.30 per 
contract. Id.
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    Currently under Tier 1, Member's orders that yield fee code NF will 
receive an enhanced rebate of $0.45 per contract where they have an ADV 
\14\ greater than or equal to 0.20% of average OCV.\15\ First, the 
Exchange proposes to reduce the rebate provided under Tier 1 from $0.45 
per contract to $0.33 per contract. The Exchange also proposes to 
update the Standard Rates table accordingly to reflect the new rate. 
Second, the Exchange proposes to increase the tier's ADV requirement 
from 0.20% to 1.00%. Going forward, Member's orders that yield fee code 
NF will receive an enhanced rebate of $0.33 per contract where they 
have an ADV greater than or equal to 1.00% of average OCV.
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    \14\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day. Id.
    \15\ ``OCV'' means the total equity and 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 and on any day with a scheduled early market close. Id.
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    Currently under Tier 2, Member's orders that yield fee code NF will 
receive an enhanced rebate of $0.60 per contract where they have an ADV 
greater than or equal to 0.35% of average OCV. First, the Exchange 
proposes to reduce the rebate provided under Tier 1 from $0.60 per 
contract to $0.53 per contract. The Exchange also proposes to update 
the Standard Rates table accordingly to reflect the new rate. Second, 
the Exchange proposes to amend the Tier's criteria by increasing the 
tier's current ADV requirement from 0.35% to 3.00% and to add a second 
criteria under which the Member must also have an ADAV \16\ in Market

[[Page 28149]]

Maker \17\ orders greater than or equal to 2.75% of average OCV. Going 
forward, Member's orders that yield fee code NF will receive an 
enhanced rebate of $0.53 per contract where they have an: (i) ADV 
greater than or equal to 3.00% of average OCV; (ii) and ADAV in Market 
Maker orders greater than or equal to 2.75% of average OCV.
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    \16\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added and ``ADV'' means average daily volume 
calculated as the number of contracts added or removed, combined, 
per day. See the Exchange's fee schedule available at http://www.bats.com/us/options/membership/fee_schedule/bzx/.
    \17\ ``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.
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Firm, Broker Dealer and Joint Back Office, Penny Pilot Add Volume Tiers
    The Exchange currently offers two Firm, Broker Dealer and Joint 
Back Office, Penny Pilot Add Volume Tiers under footnote 2, which 
provide an additional rebate of $0.43 or $0.46 per contract for 
qualifying Firm, Broker Dealer and Joint Back Office orders that add 
liquidity in Penny Pilot Securities that yield fee code PF.\18\ The 
Exchange now proposes to delete Tier 2 under footnote 2. Under Tier 2, 
a Member's orders that yield fee code PF would have received an 
enhanced rebate of $0.43 per contract where they have an: (i) An ADV 
greater than or equal 0.50% of average OCV; and an (ii) ADAV in Away 
Market Maker, Firm, Broker Dealer and Joint Back Office orders greater 
than or equal to 0.40% of average OCV. The Exchange also proposes 
update the Standard Rates table accordingly to reflect deletion of the 
rate.
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    \18\ Fee code PF is appended to Firm, Broker Dealer and Joint 
Back Office orders in Penny Pilot Securities that add liquidity. 
Orders that yield fee code PF are provided a rebate of $0.25 per 
contract. Id.
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Away Market Maker Penny Pilot Add Volume Tiers
    The Exchange currently offers three Away Market Maker Penny Pilot 
Add Volume Tiers under footnote 10, which provide an enhanced rebate 
ranging from $0.40 to $0.45 per contract for qualifying Away Market 
Maker orders that add liquidity in Penny Pilot Securities that yield 
fee code PN.\19\ The Exchange now proposes to delete current Tiers 1 
and 3 under footnote 10 and to update the Standard Rates table 
accordingly to reflect deletion of the rate. Under the current Tier 1, 
a Member's orders that yield fee code PN would have received an 
enhanced rebate of $0.40 per contract where they have an an [sic] ADV 
greater than or equal 0.40% of average OCV. . [sic] Under the current 
Tier 3, a Member's orders that yield fee code PN would have received an 
enhanced rebate of $0.43 per contract where they have an: (i) An ADV 
greater than or equal 0.50% of average OCV; and an (ii) ADAV in Away 
Market Maker, Firm, Broker Dealer and Joint Back Office orders greater 
than or equal to 0.40% of average OCV.
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    \19\ Fee code PN is appended to Away Market Market orders in 
Penny Pilot Securities that add liquidity. Orders that yield fee 
code PN are provided a rebate of $0.30 per contract. Id.
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Customer Penny Pilot Take Volume Tier
    The Exchange proposes to delete the tier described under footnote 
14 of the fee schedule. The Exchange offers a single Customer Penny 
Pilot Take Volume Tier under footnote 14, by which a Member's orders 
that yield fee code PC \20\ would have received a reduced fee of $0.48 
per contract where that Member had an: (i) ADAV in Customer orders 
greater than or equal to 0.50% of average OCV; and (ii) on the 
Exchange's equities trading platform (``BZX Equities'') an ADAV of 
0.50% of average TCV.\21\ The Exchange also proposes to update the 
Standard Rates table accordingly to reflect deletion of the rate.
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    \20\ Fee code PC is appended to Customer orders in Penny Pilot 
Securities that remove liquidity. Orders that yield fee code PC are 
charged a fee of $0.49 per contract. Id.
    \21\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges to the consolidated transaction 
reporting plan for the month for which the fees apply, excluding 
volume on any day that the Exchange experiences an Exchange System 
Disruption and on any day with a scheduled early market close. See 
the Exchange's fee schedule available at http://www.bats.com/us/options/membership/fee_schedule/bzx/.
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Implementation Date
    The Exchange proposes to implement the above changes to its fee 
schedule on June 1, 2017.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\22\ in general, and 
furthers the objectives of Section 6(b)(4),\23\ 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 or incentives to be insufficient. The proposed 
rule changes reflect a competitive pricing structure designed to 
incentivize market participants to direct their order flow to the 
Exchange.
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    \22\ 15 U.S.C. 78f.
    \23\ 15 U.S.C. 78f(b)(4).
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Fee Codes PC and PN
    The Exchange believes that its proposals to increase the fee 
charged by fee code PC and decrease the rebate provided by fee code PN 
are fair and equitable and reasonable because the proposed rates remain 
consistent with pricing previously offered by the Exchange as well as 
its competitors and does not represent a significant departure from the 
Exchange's general pricing structure. Specifically, the proposed rebate 
for fee code PN is higher than the rebate provided by the Nasdaq Stock 
Market LLC (``Nasdaq'') to non-Nasdaq Market Markers that add liquidity 
in Penny Pilot Securities on the Nasdaq Options Market (``NOM'').\24\ 
In addition, the proposed rate for fee code PC equals the rate NOM 
charges for Customer orders that remove liquidity in Penny Pilot 
Securities.\25\ Lastly, the proposed changes to fee codes PC and PN are 
not unfairly discriminatory because they will apply equally to all 
Members.
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    \24\ See Section 2(1) of the NOM fee schedule available at 
http://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing (providing 
a standard rebate of $0.10 per contract to non-NOM market makers 
that add liquidity).
    \25\ Id.
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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 or incentives 
provided to be insufficient. The proposed 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 pricing 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

[[Page 28150]]

and volume discovery processes. In particular, the proposed changes to 
footnote 8 are intended to further incentivize Members to send 
increased order flow to the Exchange in an effort to qualify for the 
enhanced rebates made available by the tiers, which in turn, 
contributes to the growth of the Exchange. The Exchange also believes 
the rebate associate with each tier is reasonable as they continue to 
reflect the difficultly in achieving the corresponding tier. These 
incentives remain reasonably related to the value to the Exchange's 
market quality associated with higher levels of market activity, 
including liquidity provision and the introduction of higher volumes of 
orders into the price and volume discovery processes. The proposed 
changes to the tiered pricing structure are not unfairly discriminatory 
because they will apply equally to all Members.
    Lastly, the Exchange believes that eliminating Tier 2 under 
footnote 2, Tiers 1 and 3 under footnote 10, and the Cross Asset Tier 
under footnote 14 is reasonable, fair, and equitable because these 
tiers were not providing the desired results of incentivizing Members 
to increase their participation 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 no longer be available to any Members. 
Further, their elimination could allow the Exchange to explore other 
pricing mechanisms such as those described herein, in which it may 
enhance market quality for all Members.

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

    The Exchange believes the proposed amendment to its fee schedule 
would not 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 represent a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. Accordingly, the Exchange does not believe that the 
proposed changes will impair the ability of Members or competing venues 
to maintain their competitive standing in the financial markets. The 
Exchange does not believe that the proposed changes to the Exchange's 
standard fees, rebates and tiered pricing structure burdens 
competition, but instead, enhances competition as it is intended to 
increase the competitiveness of the Exchange.

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 \26\ and paragraph (f) of Rule 19b-4 
thereunder.\27\ 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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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 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-2017-41 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-2017-41. 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-2017-41 and should 
be submitted on or before July 11, 2017.
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    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12760 Filed 6-19-17; 8:45 am]
BILLING CODE 8011-01-P


