[Federal Register Volume 76, Number 198 (Thursday, October 13, 2011)]
[Notices]
[Pages 63685-63686]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26384]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65497; File No. SR-BATS-2011-042]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Revenue Sharing Program With 
Correlix and a Free Trial Period for New Users of the Correlix Service

October 6, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or the ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on September 30, 2011, BATS Exchange, Inc. 
(the ``Exchange'' or ``BATS'') 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 is proposing to establish a revenue sharing program 
with Correlix, Inc. (``Correlix'') and a free trial period for new 
subscribers to the Correlix service.
    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 purpose of the proposed rule change is to establish a revenue 
sharing program with Correlix. The Exchange has entered into an 
agreement with Correlix to provide to Users \3\ of the Exchange real-
time analytical tools to measure the latency of orders to and from the 
Exchange's system as well as the latency of market data updates 
transmitted from the Exchange systems to the User. Under the agreement, 
the Exchange will receive 30% of the total monthly subscription fees 
received by Correlix from parties who have contracted directly with 
Correlix to use their RaceTeam latency measurement service for the 
Exchange. The Exchange will not bill or contract with any Correlix 
RaceTeam customer directly.
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    \3\ A ``User'' is defined in BATS Rule 1.5(cc) as any member or 
sponsored participant of the Exchange who is authorized to obtain 
access to the System.
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    Fees will apply separately for Users of the Exchange's cash 
equities platform and the Exchange's equity options platform. Pricing 
for the Correlix RaceTeam product for Users of the Exchange will be 
based on the number of ports requested by the User for monitoring by 
Correlix; each ``port'' is a FIX or binary order entry (``BOE'') 
protocol connection to the Exchange. The fee for equities Users of the 
Exchange will be an initial $2,500 monthly base fee for the first 25 
ports requested by the User for latency monitoring, and an additional 
$1,000 per month for each additional 25 ports (or portion thereof) 
requested by the User for latency monitoring. The fee for options Users 
of the Exchange will be an initial $1,500 monthly fee for the first 25 
ports requested by the User for latency monitoring, and an additional 
$1,000 per month for each additional 25 ports (or portion thereof).
    The use of ports as the basis of charging will permit order-related 
messages transmitted to the Exchange's cash equities platform and the 
Exchanges equity options platform to be differentiated and kept 
separate. For these purposes, the combination of port and User ID 
provides the mechanism for Users to receive latency data for their 
transactions on each particular Exchange market. The Correlix RaceTeam 
product will include controls such that Users will not be able to 
obtain latency information about options orders through an equities 
port connection and vice versa.
    Under the program, the Correlix data collector \4\ will see an 
individualized unique identifier that will allow Correlix RaceTeam to 
determine round trip order time,\5\ from the time the order reaches the 
Exchange, through the Exchange matching engine, and back out of the 
Exchange. The RaceTeam product offering does not measure latency 
outside of the Exchange. The unique identifier serves as a 
technological information barrier so that the Correlix data collector 
will only be able to view data for Correlix RaceTeam subscribers 
related to latency. The Correlix data collector will not see 
subscriber's individual order detail such as security, price or size. 
Individual RaceTeam subscribers' logins will restrict access to only 
their own latency data. The Correlix data collector will see no 
specific information regarding the trading activity of non-subscribers. 
The Exchange believes that the above arrangement will provide Users of 
the Exchange with greater transparency into the processing of their 
trading activity and allow them to make more efficient trading 
decisions.
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    \4\ The Correlix data collector is a Correlix process that 
receives information from the Exchange that is subsequently taken 
into Correlix's systems for latency monitoring purposes.
    \5\ The product measures latency of orders whether the orders 
are rejected, executed, or partially executed.
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    In addition, the Exchange proposes to establish a flexible 60-day 
free trial so parties will be eligible for one free 60-day trial period 
of Correlix services whenever they initially elect to sign-up for the 
service, now or in the future. The Exchange is proposing the flexible 
trial to ensure that all Correlix subscribers have an equal opportunity 
to take advantage of an initial free trial period.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to

[[Page 63686]]

and perfect the mechanism of a free and open market and a national 
market system and, in general, to protect investors and the public 
interest. The Exchange believes the proposed rule will provide greater 
transparency into trade and information processing and thus allow 
market participants to make better-informed and more efficient trading 
decisions.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    In addition, the Exchange believes that the proposed rule change is 
consistent with the provisions of Section 6 of the Act,\8\ in general, 
and with Section 6(b)(4) of the Act,\9\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility or system that the Exchange operates or controls. In 
particular, the Exchange notes that it operates in a highly competitive 
market in which market participants can readily direct orders to 
competing venues and that use of the Correlix RaceTeam product is 
completely voluntary. Further, the Exchange will make the RaceTeam 
product uniformly available pursuant to a standard non-discriminatory 
pricing schedule offered by Correlix and will offer the free trial 
period on a uniform and non-discriminatory basis.
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    \8\ 15 U.S.C. 78f.
    \9\ 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6)(iii) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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 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 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 e-mail to [email protected]. Please include 
File Number SR-BATS-2011-042 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-BATS-2011-042. 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 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 
a.m. and 3 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-BATS-2011-042 and should be 
submitted on or before November 3, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26384 Filed 10-12-11; 8:45 am]
BILLING CODE 8011-01-P