
[Federal Register Volume 82, Number 145 (Monday, July 31, 2017)]
[Notices]
[Pages 35573-35575]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15996]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81206; File No. SR-BatsBZX-2017-44]


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.

July 25, 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 July 12, 2017, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
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.
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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 \3\ and non-Members of the Exchange pursuant to BZX Rules 
15.1(a) and (c).
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    \3\ 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 to modify the tier-
based incremental credits for Members that are Lead Market Makers 
(``LMMs'') for their orders that provide displayed liquidity in the 
securities described under footnote 14.\4\
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    \4\ See the Exchange's fee schedule available at https://www.bats.com/us/equities/membership/fee_schedule/bzx/.
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    On April 17, 2014, the Exchange filed a proposal to adopt rules to 
create an LMM Program (the ``Program'') on an immediately effective 
basis.\5\ The Program is designed to strengthen market quality for 
Exchange-listed Exchange Traded Products (``ETPs'') \6\ by offering 
enhanced pricing to Market Makers \7\ registered with the Exchange \8\ 
that are also registered as an LMM in an LMM Security \9\ and meet 
certain minimum quoting standards (``Minimum Performance 
Standards'').\10\ In October 2015, the Exchange filed a proposed rule 
change with the Commission to adopt LMM credit tiers under part (B) of 
footnote 14 on an immediately effective basis.\11\
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    \5\ See Securities Exchange Act Release No. 72020 (April 25, 
2014), 79 FR 24807 (May 1, 2014) (SR-BATS-2014-015).
    \6\ As defined in Exchange Rule 11.8(e)(1)(A), ETP means any 
security listed pursuant to Exchange Rule 14.11.
    \7\ As defined in Exchange Rule 1.5(l), Market Maker means a 
Member that acts as a Market Maker pursuant to Chapter XI.
    \8\ See Exchange Rule 11.5.
    \9\ As defined in Exchange Rule 11.8(e)(1)(C), LMM Security 
means an ETP that has an LMM.
    \10\ As defined in Exchange Rule 11.8(e)(1)(D), Minimum 
Performance Standards means a set of standards applicable to an LMM 
that may be determined from time to time by the Exchange.
    \11\ See Securities Exchange Act Release No. 76147 (October 14, 
2015), 80 FR 63621 (October 20, 2015) (SR-BATS-2015-89).
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    As described above, the Exchange offers tier-based incremental 
credits to Members that are LMMs for their orders that provide 
displayed liquidity pursuant to part (B) of footnote 14 of the fee 
schedule. Specifically, Members that are a Qualified LMM \12\ in at 
least 25 LMM Securities receive an additional rebate per share (``LMM 
Credit'') for orders that provide displayed liquidity in Tape B 
securities traded on the Exchange, including non-Exchange-listed 
securities, except that such LMM Credits are not applied to the rebates 
provided to LMMs pursuant to part (A) of footnote 14 of the fee 
schedule (the ``LMM Rebate''). Currently, the LMM Credits and volume 
thresholds associated with Tape B securities are as follows: (i) An LMM 
Credit of $0.0001 per share where an LMM is a Qualified LMM in at least 
25 ETPs; (ii) an LMM Credit of $0.0002 per share where an LMM is a 
Qualified LMM in at least 50 ETPs; (iii) an LMM Credit of $0.0003 per 
share where an LMM is a Qualified LMM in at least 75 ETPs; and (iv) an 
LMM Credit of $0.0004 per share where an LMM is a Qualified LMM in at 
least 125 ETPs.
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    \12\ An LMM is a ``Qualified LMM'' in a security where it 
provides pricing for orders that add displayed liquidity in an LMM 
Security that meets the Minimum Performance Standards during the 
applicable billing month. See Exchange Rule 11.8(e).
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    The Exchange proposes to increase these LMM Credits for Tape B 
securities and to create new LMM Credits for Tape A and Tape C 
securities. For Tape B securities, the Exchange is proposing to 
increase the LMM Credits as follows: (i) From an LMM Credit of $0.0001 
to $0.0002 per share where an LMM is a Qualified LMM in at least 25 
ETPs; (ii) from an LMM Credit of $0.0002 to $0.0004 per share where an 
LMM is a Qualified LMM in at least 50 ETPs; (iii) from an LMM Credit of 
$0.0003 to $0.0006 per share where an LMM is a Qualified LMM in at 
least 75 ETPs; and (iv) from an LMM Credit of $0.0004 to $0.0008 per 
share where an LMM is a Qualified LMM in at least 125 ETPs.
    For Tape A and Tape C securities, the Exchange is proposing to 
create new LMM Credit Tiers such that a Member would receive: (i) An 
LMM Credit of $0.0001 per share where an LMM is a Qualified LMM in at 
least 25 ETPs; (ii) an LMM Credit of $0.0002 per share where an LMM is 
a Qualified LMM in at least 50 ETPs; (iii) an LMM Credit of $0.0003 per 
share where an LMM is a Qualified LMM in at least 75 ETPs; and (iv) an 
LMM Credit of $0.0004 per share where an LMM is a Qualified LMM in at 
least 125 ETPs.
    Finally, the Exchange proposes to implement a cap of $100,000 per 
Member on a monthly basis for additional rebates as part of the LMM 
Credit Tiers under part B of footnote 14.
Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule on September 1, 2017.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of

[[Page 35574]]

Section 6(b)(4),\14\ in particular, as it is designed to provide for 
the equitable allocation of reasonable dues, fees and other charges 
among its Members and other persons using its facilities and it does 
not unfairly discriminate between customers, issuers, brokers or 
dealers. The proposed rule change reflects a competitive pricing 
structure designed to incent market participants to direct their order 
flow to the Exchange. The Exchange believes that the proposed rebates 
are equitable and non-discriminatory in that they would apply uniformly 
to all Members.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    The proposed changes are intended to encourage Members to promote 
price discovery and market quality across all Exchange-listed 
securities for the benefit of all market participants. The Exchange 
believes that increasing the LMM Credits for Tape B securities and 
offering LMM Credits in Tape A and Tape C securities provides greater 
incentives to Members to become LMMs in Exchange-listed ETPs, to 
satisfy the Minimum Performance Standards in ETPs each month, and to 
add liquidity in securities on the Exchange, and is therefore 
reasonable because the Exchange believes doing so would encourage more 
LMMs to register to quote and trade in as many Exchange-listed ETPs as 
possible. While the Exchange already offers LMM Credits in Tape B 
securities, increasing such rebates will further incentivize Members to 
become LMMs in Exchange-listed ETPs and provide additional liquidity in 
other ETPs generally. In particular, enhanced rebates based on the 
number of securities for which a Member is registered as an LMM, would 
provide an incentive for such Members not only to register as an LMM in 
more liquid securities, but also to register to quote in lower volume 
ETPs, which are traditionally less profitable for Market Makers than 
more liquid ETPs. Moreover, the Exchange believes that the proposed 
change will incentivize LMMs to register as an LMM in more ETPs, 
including less liquid ETPs and, thus, add more liquidity in securities 
to the benefit of all market participants. The Exchange also believes 
that the proposed changes are equitable and not unfairly discriminatory 
because they remain consistent with the market quality and 
competitiveness benefits associated with the fee program and because 
the magnitude of the additional rebate is not unreasonably high in 
comparison to the requirements associated with receiving such LMM 
Credit and the rebate paid with respect to other displayed liquidity-
providing orders.
    The Exchange further believes that it is an equitable allocation of 
reasonable fees to offer different LMM Credit rebates between Tape B 
securities as compared to Tape A and Tape C securities. As described 
above, LMM Credits are designed to incentivize increased participation 
in the Exchange's LMM Program, but the Exchange believes that they will 
also simultaneously incentivize higher trading volumes and enhanced 
market quality by LMMs in all securities for which the LMM Credits 
apply. While the Exchange believes that offering LMM Credits on each of 
Tape A, Tape B, and Tape C securities will enhance market quality on 
all securities traded on the Exchange, by offering higher LMM Credits 
for Tape B securities, the Exchange will further incentivize increased 
liquidity provision in Exchange-listed securities and for ETPs 
generally, which further supports the purpose of the LMM Credits.
    Finally, the Exchange believes that it is an equitable allocation 
of reasonable dues, fees and other charges among its Members and is not 
unfairly discriminatory to implement a monthly cap of $100,000 per 
Member for additional rebates as part of the LMM Credit Tiers under 
part B of footnote 14. Such a cap will help ensure that it will remain 
financially viable for the Exchange to continue to offer the LMM Credit 
Tiers. Further, the Exchange believes that the proposed cap is high 
enough as to not meaningfully reduce the incentives for Members to 
become an LMM in Bats-listed securities or significantly mitigate any 
of the market quality benefits to Bats-listed securities or other 
securities traded on the Exchange that were described above.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Similarly, the Exchange does 
not believe that the proposed change to the Exchange's pricing 
structure burden competition, but instead, that they enhance 
competition as they are intended to increase the competitiveness of the 
Exchange by modifying pricing incentives in order to attract order flow 
and incentivize participants to increase their participation on the 
Exchange.
    The Exchange does not believe that the proposed increase in rebates 
will burden competition, but instead, enhances competition, as these 
changes are intended to increase LMM participation in securities, to 
incentivize Members to register as LMMs in Exchange-listed ETPs, and to 
encourage Members to meet the Minimum Performance Standards in such 
ETPs. As such, the proposal is a competitive proposal that is intended 
to add additional liquidity to the Exchange, which will, in turn, 
benefit the Exchange and all Exchange participants. Moreover, the 
Exchange does not believe that the proposed amendments would burden 
intramarket competition as they would be available 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\15\ and paragraph (f) of Rule 19b-4 
thereunder.\16\ 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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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19-4(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 proposal 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 No. SR-BatsBZX-2017-44 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.


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    All submissions should refer to File No. SR-BatsBZX-2017-44. 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 will also 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 No. SR-BatsBZX-2017-44 and should be 
submitted on or before August 21, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-15996 Filed 7-28-17; 8:45 am]
 BILLING CODE 8011-01-P


