[Federal Register Volume 78, Number 32 (Friday, February 15, 2013)]
[Notices]
[Pages 11255-11256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-03520]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68895; File No. SR-BYX-2013-004]


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.

February 11, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19-4 thereunder,\2\ notice is hereby given 
that on January 29, 2013, 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 19-4(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 240.19-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19-4(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\ and non-members of the Exchange pursuant to BYX Rules 
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal 
will be effective upon filing.
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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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    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 modify its fee schedule in order to amend 
the fee structure related to its Retail Price Improvement (``RPI'') 
program. Under the RPI program as currently constituted, the Exchange 
generally provides a rebate of $0.0025 per share for Retail Orders that 
remove liquidity from the BYX Exchange order book in certain specified 
securities and provides a rebate of $0.0010 per share for a Retail 
Order that removes liquidity from the BYX Exchange order book in other 
specified securities. For executions of Type 2 Retail Orders that 
remove displayed liquidity, however, the Exchange's fee schedule states 
that it applies standard removal pricing (i.e., either a $0.0002 per 
share liquidity removal rebate or an execution free of charge) rather 
than specific RPI pricing.
    The Exchange wishes to note that the standard removal pricing 
applied to Type 2 Retail Orders that remove displayed liquidity 
includes Type 2 Retail Orders that remove displayed orders at a price 
more aggressive than the displayed price of such orders--this includes 
displayed orders subject to display-price sliding and displayed 
discretionary orders. The Exchange proposes to modify the fee schedule, 
including a related footnote, to extend the application of its standard 
removal pricing to include Type 1 Retail Orders that remove displayed 
liquidity, including orders that are displayed at a less aggressive 
price, but are willing to execute at a non-displayed and more 
aggressive price (again, displayed orders subject to display-price 
sliding and displayed discretionary orders).
    As proposed, all Retail Orders (both Type 1 and Type 2 Retail 
Orders) that remove displayed liquidity would be, in all cases, subject 
to the Exchange's standard removal fees or rebates, as applicable. 
Under the proposed pricing structure, a Member that qualifies for the 
Exchange's $0.0002 per share liquidity removal rebate will receive such 
rebate for any Retail Order that removes displayed liquidity, and a 
Member that does not qualify for the liquidity removal rebate would not 
receive such rebate, but would instead

[[Page 11256]]

receive the execution of a Retail Order that removes displayed 
liquidity free of charge. With this in mind, the Exchange believes that 
providing a lower rebate or a free execution for incoming Retail Orders 
that interact with displayed liquidity at price improving prices is 
reasonable due to the price improvement received; such price 
improvement will help to offset and likely exceed the reduction in 
rebates for such orders. Further, the Exchange believes that this 
change will ensure that Members are properly incented to continue to 
add aggressively priced, displayed liquidity to the Exchange.
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.\6\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\7\ 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.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to modify the fee schedule 
and footnote related to the RPI program is reasonable, equitably 
allocated and not unfairly discriminatory because this change will 
result in the application of standard pricing to remove displayed 
liquidity. The Exchange is concerned that applying higher pricing to 
displayed orders that are aggressively priced to the extent such orders 
are displayed by the Exchange and interact with incoming Retail Orders 
may result in reduced levels of aggressively priced, displayed 
liquidity on the Exchange. Additionally, the Exchange believes that 
providing a lower rebate or no rebate to incoming Retail Orders that 
interact with displayed liquidity is reasonable because, to the extent 
that such orders interact with displayed liquidity at more aggressive, 
non-displayed prices, the price improvement received for such 
executions will help to offset or exceed the reduction in rebates for 
such orders. Accordingly, the Exchange believes it is reasonable to 
apply standard pricing to any order displayed by the Exchange, even if 
removed by a Retail Order pursuant to the RPI program.

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

    Because the market for order execution is extremely competitive, 
Members may choose to preference other market centers ahead of the 
Exchange if they believe that they can receive better fees or rebates 
elsewhere. The Exchange does not believe that the proposed rule change 
will result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
Exchange believes that its pricing for displayed orders is 
appropriately competitive vis-[agrave]-vis the Exchange's competitors. 
Further, the Exchange believes that continuing to incentivize the entry 
of aggressively priced, displayed liquidity fosters intra-market 
competition to the benefit of all market participants that enter orders 
to the Exchange, including Retail Orders.

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 rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and paragraph (f) of Rule 19-4 
thereunder.\9\ 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19-4(f)(2).
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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 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-BYX-2013-004 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-2013-004. 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-BYX-2013-004, and should be 
submitted on or before March 8, 2013.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03520 Filed 2-14-13; 8:45 am]
BILLING CODE 8011-01-P