[Federal Register Volume 78, Number 94 (Wednesday, May 15, 2013)]
[Notices]
[Pages 28669-28671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-11518]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69546; File No. SR-BATS-2013-025]


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

May 9, 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 May 1, 2013, 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 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

[[Page 28670]]

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 Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-members of the Exchange pursuant to BATS Rules 
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal 
are 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 purpose of the proposed rule change is to modify the ``Options 
Pricing'' section of its fee schedule effective immediately, in order 
to (i) increase fees for any logical port with bulk-quoting 
capabilities; and (ii) to eliminate the waiver of fees for logical 
ports with bulk-quoting capabilities for Members achieving certain 
Quoting Incentive Program (``QIP'') thresholds.
    The Exchange offers a bulk-quoting interface which allows Users \6\ 
of BATS Options to submit and update multiple bids and offers in one 
message through logical ports enabled for bulk-quoting.\7\ A logical 
port represents a port established by the Exchange within the 
Exchange's system for trading and billing purposes. Each logical port 
established is specific to a Member or non-member and grants that 
Member or non-member the ability to operate a specific application, 
such as FIX order entry or PITCH data receipt. The bulk-quoting 
application for BATS Options is a particularly useful feature for Users 
that provide quotations in many different options.
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    \6\ A User on BATS Options is either a member of BATS Options or 
a sponsored participant who is authorized to obtain access to the 
Exchange's system pursuant to BATS Rule 11.3.
    \7\ See Securities Exchange Act Release Nos. 65133 (August 15, 
2011), 76 FR 52032 (August 19, 2011) (SR-BATS-2011-029) and 65307 
(September 9, 2011), 76 FR 57092 (September 15, 2011) (SR-BATS-2011-
034).
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    Currently, the Exchange charges a fee of $1,000.00 per month per 
logical port with such bulk-quoting capabilities, which it began 
charging in October 2011.\8\ The Exchange is proposing to increase the 
fee to $1,500.00 per month per logical port with bulk-quoting 
capabilities. Over time, the costs associated with maintaining the 
infrastructure of such ports has increased and the Exchange has 
recently incurred additional expenses in connection with improving the 
performance and capacity of bulk-quoting ports. Accordingly, the 
Exchange believes that the proposed increase in port fees will help the 
Exchange to continue to maintain and improve its infrastructure.
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    \8\ See Securities Exchange Act Release No. 65407 (September 27, 
2011), 76 FR 61127 (October 3, 2011) (SR-BATS-2011-037).
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    Additionally, the Exchange is proposing to eliminate the waiver of 
fees for logical ports with bulk-quoting capabilities for Members 
achieving QIP. The QIP is a program designed to enhance market quality 
by incentivizing Market Makers \9\ to participate on BATS Options by 
providing supplemental rebates for executed orders that add liquidity 
where the Market Maker has an average daily trading volume (``ADV'') of 
at least 0.25% of the total consolidated volume reported to the 
consolidated transaction reporting plan. Currently, the Exchange does 
not charge Members that participate in the QIP in more than 25 
underlying securities for logical ports with bulk-quoting capabilities. 
The Exchange originally offered these free logical ports with bulk-
quoting capability in order to encourage participation in the QIP and 
to increase the usage of bulk-quoting ports.\10\
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    \9\ As defined in Rule 16.1(a)(37), a ``Market Maker'' on BATS 
Options is a member of BATS Options registered with the Exchange for 
the purpose of making markets in options contracts traded on the 
Exchange and that is vested with the rights and responsibilities 
specified in Chapter XXII of the Exchange's Rules.
    \10\ See Securities Exchange Act Release No. 66120 (January 9, 
2012), 77 FR 2108 (January 13, 2012) (SR-BATS-2011-053).
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    The Exchange proposes to eliminate this waiver and to charge all 
Members equally for logical ports with bulk-quoting capabilities and to 
eliminate the exception for Members achieving the above described QIP 
thresholds. As mentioned above, as logical ports with bulk-capacity 
capabilities have become more widely adopted, the Exchange's 
infrastructure costs associated with offering and continuing to offer 
bulk-quoting capabilities have increased. Additionally, the Exchange 
believes that providing ports free of charge has not encouraged Members 
to reserve and maintain ports efficiently, but rather, has led to a 
significant number of ports that are reserved and enabled by such 
market participants, but are under-used. Accordingly, the Exchange 
believes that the imposition of port fees for Market Makers 
participating in the QIP will help the Exchange to continue to maintain 
and improve its infrastructure, while also encouraging Exchange 
customers to request and enable only the ports that are necessary for 
their operations related 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.\11\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\12\ 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.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange operates in a highly competitive market in which 
exchanges offer connectivity services as a means to facilitate the 
trading activities of members and other participants. Accordingly, fees 
charged for connectivity are constrained by the active competition for 
the order flow of such participants as well as demand for market data 
from the Exchange. If a particular exchange charges excessive fees for 
connectivity, affected members will opt to terminate their connectivity 
arrangements with that exchange, and adopt a possible range of 
alternative strategies, including routing to the applicable exchange 
through another participant or market center or taking that exchange's 
data indirectly. Accordingly, the exchange charging

[[Page 28671]]

excessive fees would stand to lose not only connectivity revenues but 
also revenues associated with the execution of orders routed to it by 
affected members, and, to the extent applicable, market data revenues. 
The Exchange believes that this competitive dynamic imposes powerful 
restraints on the ability of any exchange to charge unreasonable fees 
for connectivity.
    The Exchange believes that the proposal to increase fees for 
logical ports with bulk-quoting capability is equitably allocated, 
reasonable, and not unfairly discriminatory in that the proposal will 
help the Exchange to cover increasing infrastructure costs associated 
with offering and continuing to offer bulk-quoting capabilities to BATS 
Options Users. The Exchange notes that the use of such ports is 
optional and that market participants can continue to access BATS 
Options through other logical ports for $400.00 per month. At the same 
time, the Exchange believes that its fees for bulk-quoting ports are 
reasonable, given the benefits and added efficiencies Users of BATS 
Options realize through such ports. In addition, the Exchange believes 
that its fees are equitably allocated among its constituents and not 
unfairly discriminatory, as, upon eliminating the bulk port fee 
exemption for Market Makers meeting QIP threshold requirements, they 
are uniform in application to all Users of BATS Options.
    For the same reasons discussed above, elimination of the bulk port 
fee waiver for Market Makers meeting QIP threshold requirements is 
reasonable, equitably allocated, and not unfairly discriminatory. In 
addition, elimination of the bulk port fee waiver is reasonable, 
equitably allocated, and not unfairly discriminatory because it will 
encourage those Members that were previously exempted from paying bulk 
port fees to reserve and maintain ports in a more efficient manner. 
This will allow the Exchange to continue to maintain and improve its 
infrastructure for all Exchange customers, while also encouraging 
Market Makers to request and enable only the ports that are necessary 
for their operations related to the Exchange.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. As discussed above, the 
Exchange believes that fees for connectivity are constrained by the 
robust competition for order flow among exchanges and non-exchange 
markets. Further, excessive fees for connectivity, including logical 
port fees, would serve to impair an exchange's ability to compete for 
order flow rather than burdening 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-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 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 email to [email protected]. Please include 
File No. SR-BATS-2013-025 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 No. SR-BATS-2013-025. 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 changes 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 will also 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 No. SR-BATS-2013-025 and should be 
submitted on or before June 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11518 Filed 5-14-13; 8:45 am]
BILLING CODE 8011-01-P