[Federal Register Volume 78, Number 120 (Friday, June 21, 2013)]
[Notices]
[Pages 37636-37638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-14792]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69773; File No. SR-BYX-2013-020]


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.

June 17, 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 June 7, 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). 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 effective June 7, 
2013, in order to amend the fee structure related to its Retail Price 
Improvement (``RPI'') program. Specifically, the Exchange is proposing 
to: (i) Apply standard pricing to all securities participating in the 
RPI program; (ii) eliminate the language related to groups of 
securities; and (iii) eliminate RPI-specific fees for non-displayed 
liquidity. In summary, the Exchange is proposing a simplification of 
the fees and rebates applied to the RPI program, such that the Exchange 
will: Provide a $0.0025 rebate per share for a Retail Order \6\ that 
removes liquidity from the BYX order book, except for a Retail Order 
that removes displayed liquidity, which will be subject to standard 
rebates and fees; and charge a $0.0025 fee per share for any Retail 
Price Improving Order \7\ that adds liquidity to the Exchange order 
book and is removed by a Retail Order.
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    \6\ As defined in BYX Rule 11.24(a)(2), a ``Retail Order'' is an 
agency order that originates from a natural person and is submitted 
to the Exchange by a Retail Member Organization, provided that no 
change is made to the terms of the order with respect to price or 
side of market and the order does not originate from a trading 
algorithm or any other computerized methodology.
    \7\ As defined in BYX Rule 11.24(a)(3), a ``Retail Price 
Improvement Order'' consists of non-displayed interest on the 
Exchange that is priced better than the Protected NBB or Protected 
NBO by at least $0.001 and that is identified as such.
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    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 Exchange order book in Group

[[Page 37637]]

1 Securities \8\ and provides a rebate of $0.0010 per share for a 
Retail Order that removes liquidity from the Exchange order book in 
Group 2 Securities.\9\ For executions of Retail Orders that remove 
displayed liquidity, however, the Exchange's fee schedule states that 
it applies standard removal pricing (i.e., either a $0.0005, $0.0006, 
or $0.0007 per share liquidity removal rebate or an execution free of 
charge) rather than pricing that is specific to the RPI program. 
Additionally, the Exchange currently charges any Retail Price Improving 
Order or non-displayed order that is added to the Exchange a fee of 
$0.0025 per share for Group 1 Securities and $0.0010 per share for 
Group 2 Securities.
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    \8\ As provided in the fee schedule, Group 1 Securities include: 
AAPL, SPY, FB, FAS, FAZ, IWM, C, GE, GOOG, and GLD.
    \9\ As provided in the fee schedule, Group 2 Securities include: 
SIRI, BAC, NOK, S, MU, F, AMD, JPM, HPQ, and XLF.
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    As described above, the Exchange intends to simplify pricing for 
the RPI program by making the following changes:
Standard Pricing for All Securities
    The Exchange is proposing to apply flat pricing for all securities 
in the RPI program (``RPI Securities''), without regard to securities 
groups. Specifically, the Exchange is proposing to provide a $0.0025 
rebate per share for a Retail Order that removes liquidity from the BYX 
order book, except for a Retail Order that removes displayed liquidity, 
in all securities participating in the RPI program. The Exchange is 
also proposing to charge a $0.0025 per share fee for any Retail Price 
Improving Order that adds liquidity to the BYX order book that is 
removed by a Retail Order. As described above, the Exchange currently 
has different pricing for executions in RPI Securities depending on 
whether the security is included in Group 1 Securities or Group 2 
Securities. Under this proposal, the Exchange would eliminate the 
$0.0010 per share rebate and fee applicable to Group 2 Securities and 
then apply existing Group 1 Securities pricing to all RPI Securities: A 
$0.0025 per share rebate for removing liquidity or a $0.0025 per share 
fee for adding liquidity.
Eliminating Securities Groups
    In conjunction with the proposed change to apply standard pricing 
for all RPI Securities, the Exchange is proposing to eliminate from its 
fee schedule references to Group 1 Securities and Group 2 Securities. 
As described above, the Exchange currently offers different rebates and 
fees as part of the RPI program for executions based on the group in 
which the security falls. As proposed, the Exchange will offer a flat 
fee or rebate without regard to any grouping, which renders the 
distinction in the fee schedule unnecessary. As such, the Exchange is 
proposing to eliminate any references to Group 1 Securities and Group 2 
Securities in the fee schedule, including the securities included in 
these groups.
RPI Fees for Non-Displayed Liquidity
    Also in conjunction with the proposed change to standard pricing 
for the RPI program, the Exchange is proposing to eliminate pricing 
specific to the RPI program related to non-displayed orders. As 
described above, the Exchange currently charges non-displayed orders 
that are added to the BYX order book $0.0025 per share in Group 1 
Securities and $0.0010 per share for Group 2 Securities. The Exchange 
is proposing to eliminate this RPI program pricing for non-displayed 
orders and instead to charge a flat fee of $0.0010 per share for non-
displayed liquidity that is removed by a Retail Order, which is 
intentionally the same as the standard fee for executions of non-
displayed liquidity. Based on this change, the Exchange is also 
proposing to eliminate from the fee schedule the cross-reference to the 
Retail Order section in the fees for non-displayed liquidity for 
securities priced $1.00 or above.
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.\10\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act \11\ 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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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to modify the fee schedule 
related to the RPI program is reasonable because eliminating the 
distinction between groups of securities and offering a single rebate 
and fee for participating executions creates a more easily 
understandable pricing structure for the RPI program. The Exchange 
believes that a simple pricing structure will help to garner increased 
participation in the RPI program, which will help improve execution 
quality generally, and for retail customers in particular.
    The Exchange also believes that this proposal is equitably 
allocated and not unfairly discriminatory because it will be applied 
equally to all participants in all RPI Securities. While the Exchange 
acknowledges that certain executions for Retail Price Improvement 
Orders will be charged more under the proposal, specifically Retail 
Price Improving Orders that add liquidity to the BYX book and are 
removed by a Retail Order (which are charged $0.0010 per share under 
the current fee schedule, and would be charged $0.0025 per share as 
proposed), the Exchange believes that such costs are offset by the 
benefits of the standard pricing model and the ability to interact with 
a Retail Order. Additionally, all other executions under the current 
RPI program will realize increased rebates, reduced fees, or their 
rebates and fees for the execution will remain the same under the 
proposal. Further, the Exchange believes that charging Retail Price 
Improving Orders that are removed by a Retail Order more than non-
displayed orders that are removed by a Retail Order is not unfairly 
discriminatory because non-displayed orders can interact with any order 
(a Retail Order or otherwise) and may not have any preference to 
interact with a Retail Order, while Retail Price Improvement Orders 
will only interact with Retail Orders. As such, the Exchange believes 
that it is not unfairly discriminatory to charge a higher fee for 
orders that will only interact with Retail Orders. Additionally, such 
pricing provides certainty in execution costs for non-displayed orders, 
regardless of the order that removes the non-displayed order. The 
Exchange again 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.
    Accordingly, the Exchange believes that it is reasonable, 
equitable, and not unfairly discriminatory to apply standard pricing to 
all orders that are executed as part of the RPI program.

[[Page 37638]]

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 the RPI program is appropriately 
competitive vis-[agrave]-vis the Exchange's competitors. Further, the 
Exchange believes that providing a more straight-forward pricing 
structure will encourage increased participation in the RPI program and 
will continue to incentivize the entry of aggressively priced, 
displayed liquidity, which fosters intra-market competition to the 
benefit of all market participants that enter orders on 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 \12\ and paragraph (f) of Rule 19b-4 
thereunder.\13\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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-2013-020 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-2013-020. 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-2013-020, and should be 
submitted on or before July 12, 2013.

    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. 2013-14792 Filed 6-20-13; 8:45 am]
BILLING CODE 8011-01-P