[Federal Register Volume 79, Number 136 (Wednesday, July 16, 2014)]
[Notices]
[Pages 41618-41620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-16664]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72589; File No. SR-BATS-2014-025]


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

July 10, 2014.
    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 1, 2014, 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 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

[[Page 41619]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to modify its fee schedule applicable to use 
of the Exchange in order to modify the way that, for purposes of tiered 
pricing on the Exchange's equities trading platform (``BATS 
Equities''), the Exchange calculates ADV, ADAV, and average daily TCV 
(as such terms are defined below). Similarly, the Exchange proposes to 
modify the way that, for purposes of tiered pricing applicable to use 
of the Exchange's equity options trading platform (``BATS Options''), 
the Exchange calculates ADV and TCV.
    Currently, with respect to BATS Equities, the Exchange determines 
the liquidity adding rebate that it will provide to Members based on 
the Exchange's tiered pricing structure by excluding from the 
calculation of ADV,\6\ ADAV,\7\ and average daily TCV \8\ any day that 
an Exchange System Disruption \9\ occurs as well as the last Friday in 
June (the ``Russell Reconstitution Day'').
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    \6\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``ADV'' means average daily volume calculated as 
the number of shares added or removed, combined, per day on a 
monthly basis.
    \7\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``ADAV'' means average daily volume calculated as 
the number of shares added per day on a monthly basis.
    \8\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``TCV'' means total consolidated volume calculated 
as the volume reported by all exchanges and trade reporting 
facilities to a consolidated transaction reporting plan for the 
month for which the fees apply.
    \9\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``Exchange Systems Disruption'' means any day that 
the Exchange's system experiences a disruption that lasts for more 
than 60 minutes during regular trading hours.
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    The Exchange excludes these days from the calculation of ADAV, ADV 
and TCV in order to avoid penalizing Members that might otherwise 
qualify for certain tiered pricing but that, because of special 
circumstances on a particular day, did not participate on the Exchange 
to the extent that they might have otherwise participated. Similarly, 
the Exchange believes that scheduled early market closes, which 
typically are the day before or after a holiday, may preclude some 
Members from submitting orders to the Exchange at the same level as 
they might otherwise. The Exchange notes that it is not proposing to 
modify any of the existing rebates or the percentage thresholds at 
which a Member may qualify for certain rebates pursuant to the tiered 
pricing structure. Rather, as mentioned above, the Exchange is 
proposing to modify its fee schedule to exclude trading activity 
occurring on any day with a scheduled early market close from the 
calculation of ADAV, ADV and TCV.
    The Exchange also currently applies a tiered pricing structure to 
BATS Options, determining the fees charged for removing liquidity and 
rebates provided for adding liquidity based on ADV,\10\ ADAV,\11\ and 
average daily TCV,\12\ all of which exclude any day that an Exchange 
System Disruption \13\ occurs. The Exchange proposes to modify the 
definitions of ADAV, ADV and TCV for BATS Options in order to exclude 
days with a scheduled early market close in a manner consistent with 
the proposed exclusion for BATS Equities described above. As is true 
for BATS Equities, the Exchange believes that scheduled early market 
closes, which typically are the day before or after a holiday, may 
preclude some Members from submitting orders to the Exchange at the 
same level as they might otherwise. The Exchange notes that it is not 
proposing to modify any of the existing rebates or fees or the 
percentage thresholds at which a Member may qualify for certain rebates 
or fees pursuant to the tiered pricing structure. Rather, as mentioned 
above, the Exchange is proposing to modify its fee schedule to exclude 
trading activity occurring on any day with a scheduled early market 
close from the calculation of ADAV, ADV and TCV.
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    \10\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``ADV'' means average daily volume calculated as 
the number of shares added or removed, combined, per day on a 
monthly basis.
    \11\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``ADAV'' means average daily volume calculated as 
the number of shares added per day on a monthly basis.
    \12\ As provided in the fee schedule, for purposes of BATS 
Equities pricing, ``TCV'' means total consolidated volume calculated 
as the volume reported by all exchanges and trade reporting 
facilities to a consolidated transaction reporting plan for the 
month for which the fees apply.
    \13\ As provided in the fee schedule, for purposes of BATS 
Options pricing, ``Exchange Systems Disruption'' means any day that 
the Exchange's system experiences a disruption that lasts for more 
than 60 minutes during regular trading hours.
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    The Exchange believes that eliminating days with a scheduled early 
market close from the definition of ADV, ADAV and TCV for BATS Equities 
and for BATS Options will provide Members with increased certainty as 
to their monthly cost for trades executed on 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.\14\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\15\ 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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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
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    With respect to the proposed changes to the calculation of tiered 
pricing for adding liquidity to BATS Equities and for both removing 
liquidity from and adding liquidity to BATS Options, the Exchange 
believes that its proposal is reasonable because, as explained above, 
it will help provide Members with a greater level of certainty as to 
their level of rebates and costs for trading in any month where there 
is a scheduled early market close. The Exchange is not proposing to 
amend the thresholds a Member must achieve to become eligible for, or 
the dollar value associated with, the tiered rebates or fees. 
Eliminating the inclusion of any day with a scheduled early market 
close would, in many cases, be excluding a day that would otherwise 
lower a Member's ADV and/or ADAV as a percentage of average daily TCV. 
Thus, the proposed change will make the majority of Members more likely 
to meet the minimum or higher tier thresholds, incentivizing Members to 
increase their participation on the Exchange in order to meet the next 
highest tier. In addition, the Exchange believes that the proposed 
changes to its fee schedule are equitably allocated among Exchange 
constituents and not unfairly discriminatory as the methodology for 
calculating ADV, ADAV and TCV will apply equally to all Members of BATS 
Equities and equally to all Members of BATS Options.
    Volume-based tiers such as the liquidity adding tiers maintained by 
the Exchange have been widely adopted, and are equitable and not 
unfairly

[[Page 41620]]

discriminatory because they are open to all members on an equal basis 
and provide higher rebates or lower fees 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. Further, 
the Exchange believes that a tiered pricing model not significantly 
altered by a day of atypical trading behavior which allows Members to 
predictably calculate what their costs associated with trading activity 
on the Exchange will be is reasonable, fair and equitable and not 
unreasonably discriminatory as it is uniform in application amongst 
Members and should enable such participants to operate their business 
without concern of unpredictable and potentially significant changes in 
expenses.

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. The 
proposed change will help to promote intramarket competition by 
avoiding a penalty to Members for days when overall trading activity 
might be significantly lower than a typical trading day. As stated 
above, the Exchange notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if the deem fee structures to be unreasonable or 
excessive.

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 \16\ and paragraph (f) of Rule 19b-4 
thereunder.\17\ 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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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-BATS-2014-025 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-BATS-2014-025. 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 the 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-BATS-2014-025 and should be 
submitted on or before August 6, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-16664 Filed 7-15-14; 8:45 am]
BILLING CODE 8011-01-P