[Federal Register Volume 73, Number 213 (Monday, November 3, 2008)]
[Notices]
[Pages 65428-65429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26110]



[[Page 65428]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58871; File No. SR-BATS-2008-009]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Implementing 
Fees for Use of BATS Exchange

October 28, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 21, 2008, BATS Exchange, Inc. (``BATS'' or ``Exchange'') 
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 Exchange filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(2) thereunder,\4\ which renders it effective upon filing 
with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.196-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \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 is proposing to implement a fee schedule applicable to 
use of the Exchange commencing on the date it begins operating as a 
national securities exchange. The Exchange currently intends to 
commence operations as a national securities exchange on October 24, 
2008.
    The text of the proposed rule change is available at the Exchange's 
Web site at http://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 implement a fee schedule applicable to use 
of the Exchange commencing on the date it begins operating as a 
national securities exchange. The Exchange currently intends to 
commence operations as a national securities exchange on October 24, 
2008. Please find below a description of the fees and rebates that the 
Exchange intends to impose under the initial, proposed fee schedule.
    The Exchange does not propose to charge different fees or grant 
different rebates depending on the amount of orders submitted to, and/
or trades executed on or through, the Exchange. Accordingly, all fees 
and rebates described below are applicable to all Members,\5\ 
regardless of the overall volume of their trading activities on the 
Exchange.
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    \5\ A Member is any registered broker or dealer that has been 
admitted to membership in the Exchange.
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    (i) Standard Fees for Removing Liquidity.
    The Exchange is proposing to charge $0.0025 per share for 
executions that remove liquidity from the Exchange, with the exception 
of executions that remove non-displayed liquidity and securities priced 
under $1.00 per share, as described below. The charge for removing 
liquidity will apply to securities traded on the Exchange pursuant to 
unlisted trading privileges that are listed on: (A) The New York Stock 
Exchange (``NYSE''); (B) regional exchanges, such as NYSE Arca Equities 
(``NYSE Arca'') and NYSE Alternext US (``NYSE Alternext,'' formerly the 
American Stock Exchange); and (C) the NASDAQ Stock Market (``NASDAQ'') 
(``Tape A Securities'', ``Tape B Securities'' and ``Tape C 
Securities'', respectively, and collectively, ``All Tapes'').
    (ii) Standard Rebates for Adding Liquidity.
    With the exception of executions that result from non-displayed 
orders and securities priced under $1.00 per share, as described below, 
the Exchange is proposing to rebate: (A) $0.0030 per share for 
executions that add liquidity to the Exchange in Tape B Securities; and 
(B) $0.0024 per share for executions that add liquidity to the Exchange 
in Tape A Securities and Tape C Securities.
    (iii) Securities Priced under $1.00 per Share.
    In connection with executions in securities priced under $1.00 per 
share, the Exchange does not propose to charge any fee or to provide 
any rebates to Members.
    (iv) Routing Charges.
    The Exchange proposes to charge the routing charges described 
below. All charges by the Exchange for routing are applicable only in 
the event that an order is executed. In other words, there is no charge 
for orders that are routed away from the Exchange but are not filled. 
In connection with routing of orders away from the Exchange, the 
Exchange proposes to charge: (A) $0.0029 per share for Destination 
Specific Orders \6\ routed to NASDAQ, the International Securities 
Exchange (``ISE''), and the National Securities Exchange (``NSX''); (B) 
$0.0028 per share for Destination Specific Orders routed to NYSE Arca; 
(C) $0.0009 per share (other than exchange traded funds, or ``ETFs'', 
if applicable) \7\ for Destination Specific Orders routed to the NYSE; 
(D) $0.0005 per share for Modified Destination Specific Orders \8\ 
routed to a dark liquidity venue (i.e., an alternative trading system 
known as a ``dark pool''); (E) $0.0035 per share for Directed ISO's; 
\9\ (F) $0.03 per share for Odd Lot Orders \10\ routed to NYSE Arca in 
Tape A Securities and Tape B Securities; (G) 0.004 per share for Odd 
Lot Orders routed to NYSE Arca in Tape C Securities; (H) 0.29% of the 
total dollar value of the execution of an order for any security (All 
Tapes) priced under $1.00 per share that is routed away from the 
Exchange; and (I) $0.0029 per share for all other routing options 
offered by the Exchange, including routing as part of the Exchange's 
default best execution routing strategy (``CYCLE''). The differences 
between the fees charged for routing to specific market centers and 
routing of specific order types described above are due to different 
cost structures at the various market centers to which orders may be 
routed and other factors. For instance, lower transaction fees at NYSE 
Arca (in round lots) and NYSE allow the Exchange to charge lower 
routing fees for Destination Specific Orders routed to such markets 
than Destination Specific Orders routed elsewhere (i.e., to

[[Page 65429]]

NASDAQ, ISE or NSX) or for odd lots routed to NYSE Arca. Similarly, 
lower transaction fees at dark liquidity venues permit the Exchange to 
charge lower routing fees for Modified Destination Specific Orders 
routed to such venues. Because the Exchange incurs additional costs and 
performs additional services in connection with the routing of Directed 
ISOs, it charges a higher routing fee for such orders. Finally, because 
the Exchange believes that a uniform routing fee for all other orders 
routed away from the Exchange (other than those set forth in (A) 
through (H) above) provides Members with certainty as to transaction 
costs, it proposes to charge a standard routing fee for such orders, 
rather than further differentiating routing fees that it charges to 
Members.
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    \6\ As defined in BATS Rule 11.9(c)(10).
    \7\ To the extent any Destination Specific Orders in ETF 
products are routed to the NYSE, the charge will be $0.0029 per 
share, as set forth in (I) and on the schedule of fees (``all other 
routing options offered by the Exchange'').
    \8\ As defined in BATS Rule 11.9(c)(11).
    \9\ As defined in BATS Rule 11.9(d)(2).
    \10\ As defined in BATS Rule 11.9(c)(2).
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    (v) Fees and Rebates for Non-Displayed Liquidity.
    The Exchange proposes to charge different fees and provide 
different rebates for executions involving non-displayed liquidity on 
the Exchange's book (this pricing is referred to by the Exchange as 
``Dark Match'' pricing on the proposed fee schedule). Because the 
Exchange wishes to encourage larger trade sizes to execute against non-
displayed liquidity on the Exchange's book, orders that remove non-
displayed liquidity from the Exchange will be charged fees lower than 
the Exchange's standard fees, as set forth on the schedule below. 
Conversely, non-displayed orders, including Pegged Orders,\11\ Mid-
Point Peg Orders,\12\ and Non-Displayed Orders,\13\ will receive 
rebates lower than the Exchange's standard rebates, as set forth on the 
schedule below. Dark Match pricing for rebates does not apply to 
Reserve Orders \14\ or Discretionary Orders.\15\
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    \11\ As defined in BATS Rule 11.9(c)(6).
    \12\ As defined in BATS Rule 11.9(c)(7).
    \13\ As defined in BATS Rule 11.9(c)(9).
    \14\ As defined in BATS Rule 11.9(c)(1).
    \15\ As defined in BATS Rule 11.9(c)(8).
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    Below is the proposed Dark Match pricing schedule:

------------------------------------------------------------------------
                                                       Rebate/    Fee/
                     Trade size                         share     share
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1-500...............................................   $0.0020   $0.0025
501-5,000...........................................    0.0020    0.0024
5,001-10,000........................................    0.0016    0.0020
10,001-25,000.......................................    0.0010    0.0018
25,001+.............................................    0.0005    0.0015
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2. Statutory Basis
    The Exchange believes that the rule change proposed in this 
submission 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.\16\ Specifically, the proposed rule change is consistent with 
Section 6(b)(4) of the Act,\17\ 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. 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 levels at a particular 
venue to be excessive. The Exchange believes that its fees and credits 
are competitive with those charged by other venues. The Exchange also 
believes that the proposed rates further the objectives of Regulation 
NMS by promoting competition and granting fair and equal access to all 
exchange participants. Finally, the Exchange believes that the proposed 
rates are equitable in that they apply uniformly to all Members.
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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
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B. Self Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change imposes 
any burden on competition.

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

    No written comments were solicited or received.

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

    The foregoing proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \18\ and Rule 
19b-4(f)(2) thereunder,\19\ because it establishes or changes a due, 
fee or other charge imposed on members by the Exchange. Accordingly, 
the proposal is effective upon filing with the Commission.
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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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.

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 e-mail to [email protected]. Please include 
File Number SR-BATS-2008-009 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-BATS-2008-009. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of BATS. 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-BATS-2008-009 and should be 
submitted on or before November 24, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-26110 Filed 10-31-08; 8:45 am]
BILLING CODE 8011-01-P