[Federal Register Volume 76, Number 49 (Monday, March 14, 2011)]
[Notices]
[Pages 13681-13683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5774]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64055; File No. SR-BYX-2011-005]


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

March 8, 2011.
    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 February 28, 2011, BATS Y-Exchange, Inc. (the ``Exchange'' or 
``BYX'') 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 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 proposes to amend the fee schedule applicable to 
Members \5\ of the Exchange pursuant to BYX Rules 15.1(a) and (c). 
While changes to the fee schedule pursuant to this proposal will be 
effective upon filing, the changes will become operative on March 1, 
2011. 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.
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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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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 modify its fee schedule applicable to use 
of the Exchange effective March 1, 2011, in order to: (i) Amend the 
liquidity fees for adding liquidity, including increased fees to add 
non-displayed liquidity and adoption of a fee to add displayed 
liquidity unless a Member has an average daily volume of 10 million 
shares or more added per day in a given month; (ii) reduce certain 
standard routing fees; and (iii) expand the Exchange's Discounted 
Destination Specific Routing program to include a rebate for 
Destination Specific Orders \6\ routed to EDGA Exchange.
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    \6\ As defined in BYX Rule 11.9(c)(12).
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(i) Amending the Liquidity Fees for Adding Liquidity
    The Exchange has not previously provided any rebate or imposed any 
charge for adding displayed liquidity to the BYX order book in 
securities priced $1.00 and above. The Exchange proposes to introduce a 
tiered pricing structure applicable to added displayed liquidity in 
securities priced $1.00 and above, under which Members adding a daily 
average of 10 million shares or more of liquidity (including displayed 
and non-displayed liquidity) during a month will continue to be able to 
add displayed liquidity without charge, while Members adding a daily 
average of less than 10 million shares of liquidity during a month will 
be charged $0.0002 per share. Thus, while the fee change will result in 
a small fee increase for Members providing low volumes of liquidity on 
BYX, it will remain unchanged for Members providing higher volumes of 
liquidity.
    The Exchange also proposes to increase its fee to add non-displayed 
liquidity to the BYX order book in securities priced $1.00 and above 
from a charge of $0.0005 per share to a charge of $0.0010 per share. As 
defined on the BYX fee schedule, the reference to ``non-displayed 
liquidity'' for purposes of the fee schedule includes liquidity 
resulting from all forms of Pegged Orders,\7\ Mid-Point Peg Orders,\8\ 
and Non-Displayed Orders,\9\ but does not include liquidity resulting 
from Reserve Orders \10\ or Discretionary Orders.\11\
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    \7\ As defined in BYX Rule 11.9(c)(8).
    \8\ As defined in BYX Rule 11.9(c)(9).
    \9\ As defined in BYX Rule 11.9(c)(11).
    \10\ As defined in BYX Rule 11.9(c)(1).
    \11\ As defined in BYX Rule 11.9(c)(10).
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    The Exchange does not propose to change its pricing structure for 
added liquidity in securities priced below $1.00.
(ii) Reduced Standard Routing Fees
    The Exchange proposes to reduce the fee that it charges for certain 
of its standard best execution routing strategies. The Exchange 
currently offers the Parallel D, Parallel 2D, CYCLE and RECYCLE routing 
strategies at a charge of $0.0028 per share for executions that occur 
at other trading venues as a result of such strategies in securities 
priced $1.00 and above.\12\ The Exchange proposes to reduce the fee for 
use of such strategies to a charge of $0.0026 per share to in order to 
encourage use

[[Page 13682]]

of these strategies. To be consistent with this change, the Exchange 
proposes to charge 0.26%, rather than 0.28%, of the total dollar value 
of the executions at other trading venues as a result of Parallel D, 
Parallel 2D, CYCLE and RECYCLE in securities priced under $1.00 per 
share.
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    \12\ The Exchange's routing strategies are described in Rule 
11.13(a)(3).
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(iii) Destination Specific Routing to EDGA Exchange
    The Exchange currently provides a discounted fee for Destination 
Specific Orders routed to certain market centers (NYSE, NYSE Arca and 
NASDAQ), which, in each instance is $0.0001 less per share for orders 
routed to such market centers by the Exchange than such market centers 
currently charge for removing liquidity (referred to by the Exchange as 
``One Under'' pricing). Consistent with this program, the Exchange 
proposes to adopt pricing for Destination Specific Orders routed to 
EDGA Exchange. Specifically, the Exchange proposes to provide a rebate 
of $0.00025 per share for BYX + EDGA Destination Specific Orders 
executed at EDGA, which is $0.0001 higher per share than the $0.00015 
per share rebate provided by EDGA for orders that remove liquidity.
    The Exchange imposes a charge of $0.0030 per share for Destination 
Specific Orders sent to and executed by any market center for which it 
does not have any separately identified pricing. Based on the change 
described above, the Exchange proposes to add EDGA to the list of 
market centers to which this charge does not apply.
    Consistent with the changes described above, the Exchange proposes 
to change the title of its Discounted Destination Specific Routing 
section to refer to the program as ``One Under/Better,'' rather than 
``One Under,'' and to add reference to EDGA.
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.\13\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\14\ 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.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    While the establishment of tiered pricing for adding displayed 
liquidity to the Exchange's order book will result in a small increase 
in fees for some Members, this fee still remains lower than other 
markets that impose a fee to add liquidity, such as EDGA Exchange and 
NASDAQ OMX BX. Similarly, while the Exchange's proposal to increase the 
fee to add non-displayed liquidity to the Exchange will result in an 
increase in fees for Members that add non-displayed liquidity, this fee 
is lower than the fee to add liquidity (whether displayed or non-
displayed) to NASDAQ OMX BX. As it relates to its differentiation 
between displayed and non-displayed liquidity, the Exchange believes 
that a fee structure that provides greater incentives to add displayed 
liquidity than incentives to add non-displayed liquidity is fair and 
reasonable. In addition, to the extent the proposed changes will result 
in increased fees charged to Members, the Exchange believes that any 
additional revenue it receives will allow the Exchange to devote 
additional capital to its operations and to continue to offer 
competitive pricing, which, in turn, will benefit Members of the 
Exchange.
    The reduction of the routing fee for several of the BYX standard 
routing options and the adoption of new pricing for a Destination 
Specific Order that offers improvement of the execution rebate offered 
by another market center are changes intended to attract order flow to 
BYX by offering competitive rates to Exchange Members for strategies 
that first check the BYX order book before routing to away venues. 
Accordingly, the Exchange's proposal will result in reduced fees that 
will benefit Members due to the obvious economic savings those Members 
will receive and the potential of increased available liquidity at the 
Exchange.

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

    Pursuant to Section 19(b)(3)(A)(ii) of the Act \15\ and Rule 19b-
4(f)(2) thereunder,\16\ the Exchange has designated this proposal as 
establishing or changing a due, fee, or other charge applicable to its 
members, which renders the proposed rule change effective upon filing.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(2).
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    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.

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-BYX-2011-005 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BYX-2011-005. 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 website (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

[[Page 13683]]

available for Web site viewing and printing in the Commission's Public 
Reference Room 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 offices 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-BYX-2011-005, and should be 
submitted on or before April 4, 2011.

    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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5774 Filed 3-11-11; 8:45 am]
BILLING CODE 8011-01-P