[Federal Register Volume 77, Number 182 (Wednesday, September 19, 2012)]
[Notices]
[Pages 58198-58199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-23101]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67854; File No. SR-BATS-2012-036]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Related to 
Fees Applicable to the Exchange's Competitive Liquidity Provider 
Program.

September 13, 2012.
    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 August 31, 2012, 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 
Exchange has designated the proposed rule change as one establishing or 
changing a 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 institute a fee change in connection with 
an incentive program for Exchange-registered market makers (``Market 
Makers'') in securities listed on the Exchange. Changes to the 
Exchange's fees pursuant to this proposal will be effective upon 
filing. 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
    On August 30, 2011, the Exchange received approval of rules 
applicable to the qualification, listing and delisting of securities of 
issuers on the Exchange.\5\ More recently, the Exchange received 
approval to operate a program that is designed to incentivize certain 
market makers registered with the Exchange as Competitive Liquidity 
Providers (``CLPs'') to enhance liquidity on the Exchange in Exchange-
listed securities (``Competitive Liquidity Provider Program'' or ``CLP 
Program'').\6\ The Exchange subsequently adopted financial incentives 
for the Competitive Liquidity Provider Program.\7\ These incentives 
include daily rebates to CLPs awarded based on competitive quoting 
activity and the waiver of applicable execution fees in Exchange 
auctions of Exchange-listed securities. The Exchange proposes to 
eliminate the waiver of fees for executions in Exchange auctions by 
CLPs, as further described below. The Exchange also proposes to correct 
a typographical error in its rules relating to the numbering of the 
financial incentives for the CLP Program. Specifically, when the CLP 
Program was originally proposed, the Exchange numbered the section 
applicable to financial incentives as section (k), and reserved that 
section for later.\8\ However, when such financial incentives were 
adopted, they were adopted as section (j).\9\ Accordingly, the Exchange 
proposes re-numbering the financial incentives section as (k), as was 
originally intended, and eliminating the reference to ``Reserved.''
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    \5\ See Securities Exchange Act Release No. 65225 (August 30, 
2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018).
    \6\ See Securities Exchange Act Release No. 66307 (February 2, 
2012), 77 FR 6608 (February 8, 2012) (SR-BATS-2011-051) (``CLP 
Program Approval'').
    \7\ See Securities Exchange Act Release No. 66427 (February 21, 
2012), 77 FR 11608 (February 27, 2012) (SR-BATS-2012-011) (``CLP 
Financial Incentives Filing'').
    \8\ See CLP Program Approval, supra note 6.
    \9\ See CLP Financial Incentives Filing, supra note 7.
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    In order to incentivize Members to participate in the CLP Program, 
the Exchange currently waives applicable execution fees in Exchange 
auctions for any CLP that receives a daily rebate for a specific 
Exchange-listed security on at least two (2) trading days during a 
calendar month. Based on the Exchange's experience in operating the CLP 
Program, the Exchange proposes to eliminate the waiver of applicable 
execution fees for CLPs. This financial incentive has very rarely been 
applicable, as the majority of the orders entered to date by CLPs that 
have participated in Exchange auctions have been order types that are 
not subject to a charge when entered by any Member (certain orders, 
including orders entered into the Exchange's order book not explicitly 
designated for the auction process, are exempt from fees). In light of 
this fact, the burden upon the Exchange in administering the fee waiver 
exceeds the benefit provided to CLPs pursuant to the current pricing 
structure, particularly in light of the fact that all other financial 
incentives to CLPs will remain unchanged.
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

[[Page 58199]]

exchange, and, in particular, with the requirements of Section 6 of the 
Act.\10\ Specifically, the Exchange believes that the proposed rule 
change is consistent with Sections 6(b)(4) and (b)(5) of the Act,\11\ 
in that it provides for the equitable allocation of reasonable dues, 
fees and other charges among members and issuers, and it does not 
unfairly discriminate between customers, issuers, brokers or dealers.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4) and (b)(5).
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    The Exchange believes that the elimination of the waiver of auction 
fees is equitable and not unreasonably discriminatory because it will 
equally affect all CLPs and because CLPs will be charged the same rates 
for auction executions as are charged to all other Members. The 
Exchange believes that the elimination of the waiver of auction fees is 
reasonable because the waiver has not resulted in significant savings 
to CLPs nor has it provided the intended incentive to participate in 
the CLP Program.

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 \12\ and Rule 19b-
4(f)(2) thereunder,\13\ the Exchange has designated this proposal as 
establishing or changing a due, fee, or other charge applicable to the 
Exchange's Members and non-members, which renders the proposed rule 
change effective upon filing.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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 email to [email protected]. Please include 
File Number SR-BATS-2012-036 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.

All submissions should refer to File Number SR-BATS-2012-036. 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 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-2012-036 and should be 
submitted on or before October 10, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-23101 Filed 9-18-12; 8:45 am]
BILLING CODE 8011-01-P