[Federal Register Volume 78, Number 51 (Friday, March 15, 2013)]
[Notices]
[Pages 16558-16560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-05979]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69107; File No. SR-BYX-2013-009]


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 11, 2013.
    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 February 26, 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 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\ and non-members 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, 2013.
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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 effective March 1, 
2013, in order to amend the rebates that it provides for removing 
liquidity and to amend the fees that it charges for adding liquidity, 
as described in further detail below.
Rebates To Remove Liquidity
    The Exchange currently offers a tiered pricing structure for 
executions that remove liquidity. Under the tiered pricing structure, a 
Member must add a daily average of at least 50,000 shares of liquidity 
on BYX Exchange in order to receive a rebate to remove liquidity, which 
is currently provided at $0.0002 per share. As with its other current 
tiered pricing, the daily average in order to receive the liquidity 
removal rebate is calculated based on a Member's activity in the month 
for which the rebates would apply. For Members that do not reach the 
tier to receive the liquidity removal rebate, the Exchange does not 
currently provide rebate. The Exchange does not, however, charge such 
Members, but rather, provides such executions free of charge.
    The Exchange proposes to adopt two additional tiers in addition to 
the free removal rate for Members that do not qualify for an enhanced 
rebate and the $0.0002 rebate to remove liquidity for Members that add 
a daily average of at least 50,000 shares of liquidity on BYX Exchange. 
Specifically, the Exchange proposes to provide a rebate of $0.0004 per 
share to remove liquidity for Members that have an average daily volume 
(``ADV'') on the Exchange of at least 0.5% of the total consolidated 
volume (``TCV'') during the month and a rebate of $0.0003 per share to 
remove liquidity for Members that have an ADV on the Exchange of at 
least 0.25% but less than 0.5% of TCV. To receive the rebate pursuant 
to either of the proposed new tiers, the Exchange will continue to 
impose the requirement that a Member add a daily average of at least 
50,000 shares of liquidity on BYX Exchange. Although the Exchange does 
not propose modifying the existing rebate structure for Members that do 
not

[[Page 16559]]

achieve either of the new tiers, the Exchange has proposed language 
changes to the fee schedule to accommodate the new tiers (i.e., adding 
language to the 50,000 shares added tier to address Members that reach 
this tier but not a TCV tier and modifying language for Members that do 
not qualify for an enhanced rebate to remove liquidity to more general 
language).
    Consistent with the current fee structure, the fee structure for 
executions that remove liquidity from the Exchange described above will 
not apply to executions that remove liquidity in securities priced 
under $1.00 per share. The fee for such executions will remain at 0.10% 
of the total dollar value of the execution. Similarly, as is currently 
the case for adding liquidity to the Exchange, there will be no 
liquidity rebate for adding liquidity in securities priced under $1.00 
per share.
Fees To Add Liquidity
    The Exchange currently maintains a tiered pricing structure for 
adding displayed liquidity in securities priced $1.00 and above that 
allows Members to add liquidity at a reduced fee to the extent such 
liquidity sets the national best bid or offer (the ``NBBO Setter 
Program''). The NBBO Setter Program is applicable to a Member's orders 
so long as the Member submitting the order achieves the applicable ADV 
requirement of at least 0.5% of TCV during the month. Members that 
qualify for the NBBO Setter Program are charged a fee of $0.0002 per 
share for executions resulting from orders that add liquidity to the 
BYX Exchange order book and set the NBBO. Members that achieve the 
applicable ADV requirement of at least 0.5% of TCV during the month are 
currently charged $0.00025 per share for all other executions (that do 
not set the NBBO). All other executions resulting from displayed 
liquidity added by any Member are currently subject to a fee of $0.0005 
per share. The Exchange proposes changes to its tiered pricing 
structure to add liquidity, as described below.
    First, the Exchange proposes to increase the fee charged under the 
NBBO Setter Program to Members that maintain ADV on the Exchange of at 
least 0.5% of the total TCV during the month from $0.0002 per share to 
$0.00025 per share on orders that set the NBBO. The Exchange also 
proposes to increase the fee for Members that maintain ADV on the 
Exchange of at least 0.5% of the total TCV during the month on 
executions that do not set the NBBO from $0.00025 per share to $0.0003 
per share.
    Second, the Exchange proposes to adopt a new tier for Members that 
maintain ADV on the Exchange of at least 0.25% but less than 0.5% of 
the total TCV during the month. The Exchange proposes to charge Members 
that reach this 0.25% tier a fee to add liquidity of $0.00035 per share 
on orders that set the NBBO and $0.0004 per share for orders that do 
not set the NBBO.
    The Exchange does not propose to change the fee charged to Members 
that do not qualify for a reduced fee based on their volume on the 
Exchange. Accordingly, such Members will still be charged a fee of 
$0.0005 per share for executions resulting from orders that add 
liquidity to the Exchange.
    The Exchange notes that it does not propose to modify its existing 
definitions of ``ADV'' or ``TCV'' in connection with the changes 
described above. The Exchange notes that the definition of ADV used in 
conjunction with TCV for the NBBO Setter Program and the proposed 
tiered pricing structures for executions that add and remove liquidity 
includes both a Member's liquidity adding and removing activity. 
However, as today, the 50,000 shares added requirement necessary to 
achieve tiered pricing to remove liquidity only includes added volume.
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 changes to Exchange execution fees and rebates proposed by this 
filing are intended to attract order flow to the Exchange by continuing 
to offer competitive pricing while also allowing the Exchange to 
continue to offer incentives to providing aggressively priced displayed 
liquidity. While certain Members that add liquidity to the Exchange 
will be paying higher fees due to the proposal, the increased revenue 
received by the Exchange will be used to continue to fund programs that 
the Exchange believes will attract additional liquidity and thus 
improve the depth of liquidity available on the Exchange. Further, by 
adding another tier to qualify for reduced fees to add liquidity, the 
Exchange is expanding the availability of tiered pricing discounts.
    With respect to the proposed changes to the tiered pricing 
structure for removing liquidity from the Exchange, the Exchange 
believes that its proposal is reasonable because it will allow Members 
that achieve a relatively low threshold of added liquidity, and thus 
who contribute to the depth of liquidity generally available on the 
Exchange, to continue to receive the current rebate. Certain Members 
will be unaffected by this change, as the initial threshold of reaching 
50,000 shares added per day on the Exchange remains unchanged. However, 
by also providing higher potential rebates for Members that achieve at 
least either 0.25% or 0.5% of TCV, the Exchange is further 
incentivizing Members to participate in the growth of the Exchange. 
Volume-based tiers such as the liquidity removal tier proposed by the 
Exchange have been widely adopted in the equities markets, and are 
equitable and not unfairly discriminatory because they are open to all 
members on an equal basis and provide rebates that are reasonably 
related to the value to an exchange's market quality associated with 
higher levels of market activity, such as higher levels of liquidity 
provision and introduction of higher volumes of orders into the price 
and volume discovery process. Accordingly, the Exchange believes that 
the proposal is equitably allocated and not unfairly discriminatory 
because it is consistent with the overall goals of enhancing market 
quality.
    With respect to the Exchange's proposal to add another tier for 
Members that achieve at least 0.25% of TCV through which such Members 
can participate in the NBBO Setter Program and receive lower fees for 
adding liquidity for other orders, the Exchange believes that its 
proposal is reasonable because the tier is intended to incentivize 
Members to maintain or increase their participation on the Exchange. As 
noted above, volume-based tiers such as the threshold necessary to 
qualify for the NBBO Setter Program and the reduced fee to add 
liquidity are equitable and not unfairly

[[Page 16560]]

discriminatory because they are open to all members on an equal basis 
and provide rebates that are reasonably related to the value to an 
exchange's market quality associated with higher levels of market 
activity, such as higher levels of liquidity provision and introduction 
of higher volumes of orders into the price and volume discovery 
process.
    With respect to the increases to the fees charged to add liquidity 
as applied to orders that set the NBBO and all other orders entered 
Members that qualify for reduced charges based on a level of at least 
0.5% of TCV, the Exchange believes that the proposed fees are 
reasonable as both fees are still comparable to other market centers 
that charge to add displayed liquidity and represent only a slight 
increase from the current fee levels. The Exchange notes that at least 
one market center charges a higher fee to add displayed liquidity.\8\ 
The Exchange reiterates that it is not proposing to increase fees 
charged to Members that do not qualify for a tier.
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    \8\ NASDAQ OMX BX charges up to $0.0018 per share, with the 
potential for a slightly lower fee to the extent a participant meets 
certain quoting criteria.
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    The Exchange believes that any additional revenue it receives based 
on the increases to fees set forth above 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. Further, the Exchange again notes that the tiered fee 
structure whereby Members meeting certain volume thresholds will 
receive reduced fees on their added liquidity executions is equitable 
and not unfairly discriminatory because it will be open to all Members 
on an equal basis the reduced fee is reasonably related to the value to 
the Exchange's market quality associated with higher levels of market 
activity, such as higher levels of liquidity provision and introduction 
of higher volumes of orders into the price and volume discovery 
process.

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

    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. 
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. Further, because certain of the proposed changes are 
intended to provide incentives to Members that will result in increased 
activity on the Exchange, such changes are necessarily competitive. The 
Exchange also 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. However, 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 does not believe that any of the changes 
represent a significant departure from previous pricing offered by the 
Exchange or pricing offered by the Exchange's competitors.

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 \9\ and paragraph (f) of Rule 19b-4 
thereunder.\10\ 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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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f).
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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-2013-009 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-2013-009. 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-2013-009, and should be 
submitted on or before April 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05979 Filed 3-14-13; 8:45 am]
BILLING CODE 8011-01-P