[Federal Register Volume 78, Number 160 (Monday, August 19, 2013)]
[Notices]
[Pages 50463-50465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-20065]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70170; File No. SR-BYX-2013-025]


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.

August 13, 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 July 31, 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 August 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 August 
1, 2013, in order to: (i) Lower the thresholds at which Members qualify 
for tiers related to lower fees for adding liquidity and higher rebates 
for removing liquidity; (ii) amend the rebates that it provides for 
removing liquidity; and (iii) amend the fees that it charges for adding 
liquidity. The Exchange is also proposing to correct a typographical 
error on its fee schedule.
Tiers and Trading Volume
    The Exchange currently offers tiered pricing structures for both 
adding and removing liquidity. As part of this pricing structure, 
Members must also add a daily average (calculated monthly) of at least 
50,000 shares of liquidity on the Exchange (the ``Liquidity Add 
Requirement'') in order to receive a rebate for removing liquidity. 
Under these tiered pricing structures, Members that have an average 
daily volume (``ADV'') on the Exchange of at least .25% but less than 
.5% of total consolidated volume (``TCV'') (the ``Bottom Tier 
Threshold'') are charged a fee that is lower than the standard adding 
fee for adding liquidity or, where a Member has met the Liquidity Add 
Requirement, receive a higher rebate than the standard removal rebate 
for removing liquidity. Similarly, Members that have an ADV on the 
Exchange of at least .5% of TCV (the ``Upper Tier Threshold'') are 
charged an even lower fee for adding liquidity or, where a Member has 
met the Liquidity Add Requirement, receive an even higher rebate for 
removing liquidity.
    The Exchange is proposing to: (i) Eliminate the Liquidity Add 
Requirement to receive a rebate for removing liquidity; (ii) lower the 
Upper Tier Threshold from .5% to .4% of ADV as a percentage of TCV; and 
(iii) lower the Bottom Tier Threshold from .25% to .2% of ADV as a 
percentage of TCV.
Rebates To Remove Liquidity
    As described above, the Exchange currently offers a tiered pricing 
structure for executions that remove liquidity. Currently, the Exchange 
provides a rebate of $0.0007 per share to remove liquidity for Members 
that reach the Upper Tier Threshold and meet the Liquidity Add 
Requirement; a rebate of $0.0006 per share to remove liquidity for 
Members that reach the Bottom Tier Threshold, but not the Upper Tier 
Threshold, and meet the Liquidity Add Requirement; and a rebate of 
$0.0005 per share to remove liquidity for Members that do not reach the 
Bottom Tier Threshold, but do meet the Liquidity Add Requirement. For 
Members that do not reach the Bottom Tier Threshold and do not meet the 
Liquidity Add Requirement, the Exchange does not currently provide 
rebate. The Exchange does not, however, charge such Members, but 
rather, provides such executions free of charge.
    As described above, the Exchange proposes to eliminate the 
requirement that a Member meet the Liquidity Add Requirement in order 
to receive a rebate to remove liquidity, which will mean that all 
Members will receive a rebate for executions that remove liquidity from 
the Exchange. The Exchange also proposes to decrease by $0.0004 per 
share the rebates provided to all Members that qualify for a liquidity 
removal tier. Specifically, the Exchange proposes to provide a rebate 
of $0.0003 per share to remove liquidity for Members that reach or 
exceed the Upper Tier Threshold; a rebate of $0.0002 per share to 
remove liquidity for Members that reach the Lower Tier Threshold but 
not the Upper Tier Threshold; and a rebate of $0.0001 per share to 
remove liquidity for Members that do not reach the Lower Tier 
Threshold.
    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.

[[Page 50464]]

Fees To Add Liquidity
    As described above, 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 
if they reach certain volume thresholds. The tiered pricing structure 
allows Members that qualify for reduced fees to add liquidity at a 
further reduced fee to the extent that such liquidity sets the national 
best bid or offer (the ``NBBO Setter Program''). Currently, the 
Exchange charges Members that reach the Upper Tier Threshold a 
liquidity adding fee of $0.00045 per share on orders that set the NBBO 
and $0.0005 per share on orders that do not set the NBBO. The Exchange 
charges Members that reach the Lower Tier Threshold but not the Upper 
Tier Threshold a liquidity adding fee of $0.00055 per share on orders 
that set the NBBO and $0.0006 per share for orders that do not set the 
NBBO. The Exchange charges a liquidity adding fee of $0.0007 per share 
to Members that do not qualify for a reduced fee based on their volume 
on the Exchange.
    The Exchange proposes to decrease its fees to add displayed 
liquidity for all Members by at least $0.0004 per share. Specifically, 
the Exchange proposes to offer Members that reach the Upper Tier 
Threshold free executions on orders that set the NBBO and charge a 
liquidity adding fee of $0.0001 per share on orders that do not set the 
NBBO; for Members that reach the Lower Tier Threshold, the Exchange 
proposes to charge a liquidity adding fee of $0.0001 per share on 
orders that set the NBBO and $0.0002 per share for orders that do not 
set the NBBO; and for Members that do not reach the Lower Tier 
Threshold, the Exchange proposes to charge Members a liquidity adding 
fee of $0.0003 per share.
    The Exchange is not proposing to change pricing for securities 
priced under $1.00 and will continue to offer executions free of charge 
for orders that add liquidity in securities priced under $1.00 per 
share.
    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 tiered pricing 
structures for executions that add and remove liquidity includes both a 
Member's liquidity adding and removing activity.
Typographical Order [sic]
    The Exchange proposes to modify a reference on the fee schedule to 
`any Retail Price Improving Order order' under the Retail Price 
Improvement Program Pricing heading where the Exchange describes the 
charge per share for a Retail Price Improving Order that adds liquidity 
to the BYX Exchange order book that is removed by a Retail Order. 
Specifically, the Exchange proposes to delete the second ``order'' in 
the phrase ``any Retail Price Improving Order order''.
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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    Generally, 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 provide aggressively 
priced displayed liquidity.
    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 lower the 
thresholds to receive rebates and reduced fees, creating a larger pool 
of Members that will be eligible for rebates (the removal of the 
Liquidity Add Requirement means that all orders that access liquidity 
on the Exchange in securities priced $1.00 or above will receive at 
least a $0.0001 per share rebate) and decreased fees. By greatly 
increasing the base of Members eligible for and lowering the thresholds 
to receive increased rebates and reduced fees, the Exchange is 
incentivizing all Members to participate in the growth of the Exchange. 
In addition, as proposed the Upper Tier Threshold and Lower Tier 
Threshold will be more attainable, and thus will provide additional 
incentive to Members that do not reach one or both of the thresholds to 
increase their participation on the Exchange in order to receive higher 
rebates or reduced fees. Volume-based tiers such as the liquidity 
removal tiers maintained 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 decreases to the rebates offered to remove 
liquidity, the Exchange believes that the proposed rebates are 
reasonable as such rebates are still comparable to other market centers 
that provide rebates for removing liquidity and represent only a slight 
decrease from the current rebate levels. In addition, the Exchange 
believes that the proposed rebates are reasonable because, upon 
elimination of the Liquidity Add Requirement, the Exchange will pay a 
rebate to all Members for every order that removes liquidity. Further, 
the Exchange is making increased rebates available to more Members by 
lowering the tier thresholds. So, while the Exchange is proposing to 
reduce rebates on a per share basis, it is simultaneously providing 
rebates to all Members for removing liquidity, increasing the number of 
Members that will receive increased rebates, and making it easier for 
Members to receive increased rebates for removing liquidity.
    With respect to the decreases to the fees charged to add displayed 
liquidity, the Exchange believes that the proposed fees are reasonable 
as they will act to attract liquidity to the Exchange. The Exchange 
believes that increasing the reduction in fees from $0.00005 to $0.0001 
per share added for orders that set the NBBO and at least reach the 
Lower Tier Threshold (which will make transactions free on orders that 
set the NBBO for Members that reach the Upper Tier Threshold) will 
further incentivize Members to provide tighter and deeper liquidity. As 
noted above, volume-based tiers such as the liquidity removal tiers 
maintained by the Exchange have been

[[Page 50465]]

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. The 
Exchange believes that any additional revenue that it may receive based 
on the amendment to the fee schedule as 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.

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. 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 \8\ and paragraph (f) of Rule 19b-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 240.19b-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-2013-025 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 Number SR-BYX-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 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-2013-025 and should be 
submitted on or before September 9, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-20065 Filed 8-16-13; 8:45 am]
BILLING CODE 8011-01-P