[Federal Register Volume 80, Number 12 (Tuesday, January 20, 2015)]
[Notices]
[Pages 2763-2766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00702]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74043; File No. SR-BATS-2015-01]


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.

January 13, 2015.
    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 January 2, 2015, 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 the 
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 defined as ``any registered broker or dealer 
that has been admitted to membership in the Exchange.'' See Exchange 
Rule 1.5(n).
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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

[[Page 2764]]

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 
immediately in order to: (1) Adopt pricing for Retail Orders, as 
defined below, on the Exchange, including a new Retail Order Tier; (2) 
add Membership Fees; and (3) make certain non-substantive clean-up 
changes to the fee schedule.
Retail Order Pricing
    The Exchange recently adopted rules related to the Exchange's 
Retail Order Attribution Program.\6\ Under such program, the Exchange 
allows Members to designate Retail Orders \7\ that they enter to be 
identified as being Retail Orders on the Exchange's proprietary data 
feeds. Not all Retail Orders entered by a Member will be identified as 
being a Retail Order, but rather a Retail Order will only be displayed 
on the Exchange's proprietary data feeds as a Retail Order where the 
Member designates that the order be identified as such. There are not 
currently any pricing incentives for participation in the Retail Order 
Attribution Program.
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    \6\ See Securities Exchange Act Release No. 73237 (September 26, 
2014), 79 FR 59537 (October 2, 2014) (SR-BATS-2014-043).
    \7\ As defined in Rule 11.25(a)(2), a ``Retail Order'' is an 
agency or riskless principal order that meets the criteria of FINRA 
Rule 5320.03 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. A Retail Member 
Organization or ``RMO'' is a Member (or a division thereof) that has 
been approved by the Exchange under Rule 11.25 to submit Retail 
Orders.
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    The Exchange proposes to introduce new fee codes ZA and ZR in order 
to provide pricing specific to Retail Orders executed on the Exchange. 
The Exchange notes that such proposed pricing would apply to all Retail 
Orders and that a Retail Order would not need to be attributable in 
order to receive the proposed pricing. The Exchange is proposing new 
fee code ZA to apply to Retail Orders that add liquidity to the 
Exchange. A transaction with fee code ZA is proposed to be assigned a 
rebate of $0.0032 per share. The Exchange is also proposing new fee 
code ZR to apply to Retail Orders that remove liquidity from the 
Exchange. A transaction with fee code ZR and is proposed to be assigned 
a charge of $0.0030 per share, which is the same as the standard fee 
for removing liquidity from the Exchange. Proposed fee codes ZA and ZR 
will only apply to Retail Orders that add or remove liquidity, 
respectively, in executions that occur on the Exchange. Where a Retail 
Order is routed, executes in an auction, or executes in the Opening or 
Re-Opening, the appropriate fee code will apply and proposed fee codes 
ZA and ZR will not apply.
    In addition to the proposed standard pricing for Retail Orders 
executed on the Exchange, the Exchange is also proposing to add a new 
Retail Order Tier. As proposed, the Exchange would offer a rebate of 
$0.0034 per share for adding liquidity for a Retail Order executed on 
the Exchange where the Member adds an average daily volume of Retail 
Orders (fee code ZA), that is 0.07% or more of average daily TCV.\8\
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    \8\ 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. The Exchange excludes from its calculation of TCV volume 
on any day that the Exchange experiences an Exchange System 
Disruption, on any day with a scheduled early market close and the 
Russell Reconstitution Day.
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Membership Fees
    The Exchange is also proposing to charge an Annual Membership Fee 
for Members of the Exchange of $2,500, which will support their 
Exchange membership for the calendar year. The fee will be charged per 
Member firm. Beginning in January 2015, the Exchange plans to charge an 
Annual Membership Fee which will be assessed on all Members as of a 
date determined by the Exchange in January of each year. For any month 
in which a firm is approved for membership with the Exchange after the 
January renewal period, the Annual Membership Fee will be pro-rated 
beginning on the date on which membership is approved and based on the 
number of remaining trading days in that year. The fee will be assessed 
in the month following membership approval. For example, if a firm 
applies and is accepted for membership with the Exchange on February 
15, 2015, the new Member will be assessed a pro-rated Annual Membership 
Fee for the period beginning on February 15 through the end of 2015. 
The fee will be assessed in the next month's billing cycle, which in 
this case, would be March 2015. Such fees will be non-refundable. 
However, where a Member is pending a voluntary termination of rights as 
a Member pursuant to Rule 2.8 prior to the date any Annual Membership 
Fee for a given year will be assessed (i.e., January 1, 2015) and the 
Member does not utilize the facilities of the Exchange while such 
voluntary termination of rights is pending, then the Member will not be 
obligated to pay the Annual Membership Fee. The Exchange believes this 
to be appropriate because there is ordinarily a 30 day waiting period 
before such resignation shall take effect.
Non-Substantive Changes
    Finally, the Exchange is proposing to make certain non-substantive 
clean-up changes to the fee schedule. Footnote 2 relates to Step-Up 
Tiers in which displayed orders that add liquidity to the Exchange 
receive enhanced rebates where the Member meets certain thresholds 
related to a Member's Step-Up Add TCV.\9\ Footnote 2 currently states 
that it applies to fee codes B, V, and Y, however footnote 2 does not 
currently appear in the Fee Codes and Associated Fees table next to fee 
codes V and Y (but does appear next to fee code B). As such, the 
Exchange is proposing to add footnote 2 to fee codes V and Y in the Fee 
Codes and Associated Fees table in the fee schedule. This is a non-
substantive change to the fee schedule because footnote 2 states that 
it applies to each of fee codes B, V, and Y and the Exchange is adding 
the footnote to fee codes V and Y in order to make the fee schedule as 
consistent as possible to indicate that footnote 2 should apply to 
those fee codes.
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    \9\ Step-Up Add TCV means ADAV as a percentage of TCV in January 
2014 subtracted from current ADAV as a percentage of TCV.
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    The Exchange proposes to implement the amendments to its fee 
schedule effective January 2, 2015.
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 Sections 6(b)(4) of the Act and 6(b)(5) 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

[[Page 2765]]

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) and (5).
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    The Exchange believes that the new Retail Order rebate and fee code 
associated with adding liquidity is reasonable and equitable because it 
will incentivize Members to submit orders designated as Retail Orders 
to the Exchange which will enhance liquidity in Retail Orders on the 
Exchange and further incentivize Members who wish to execute against 
Retail Orders to send additional orders to the Exchange. The Exchange 
believes that this increased liquidity would potentially stimulate 
further price competition for Retail Orders, thereby deepening the 
Exchange's liquidity pool in both non-Retail and Retail Orders, 
supporting the quality of price discovery, and promoting market 
transparency, further rendering the proposal reasonable and equitable. 
The Exchange believes that the new Retail Order rebate is non-
discriminatory because it is equally available to all Members that 
enter Retail Orders.
    The Exchange believes that the new Retail Order fee code for 
removing liquidity is reasonable, equitable, and non-discriminatory 
because, as stated above, the fees associated with a Retail Order that 
removes liquidity on the Exchange is the same as the standard fee for 
removing liquidity for a non-Retail Order. The only difference is that 
the Exchange is now providing a more specific fee code in order to make 
it easier for Members to understand their monthly invoices, which the 
Exchange again believes makes the proposed change reasonable, 
equitable, and non-discriminatory.
    The Exchange also believes that its proposed new Retail Order Tier 
and associated enhanced rebate are reasonable and equitable because the 
tiers based on added Retail Order volume is intended to reward those 
Members that and incentivize other Members to add a larger amount of 
volume in Retail Orders on the Exchange by providing an additional 
$0.0002 per share rebate for Members that have a add an average daily 
volume of Retail Orders that is 0.07% or more of average daily TCV. 
Further, the Exchange believes that the new Retail Order Tier is 
reasonable and equitable because it incentivizes and rewards Members 
for posting Retail Orders on the Exchange, which is consistent with the 
overall goal of enhancing market quality on the Exchange. The Exchange 
also believes that the proposed rebates [sic] associated with the tier 
is non-discriminatory in that it is equally available to all Members 
and, again, because it is consistent with the goal of enhancing market 
quality on the Exchange.
    Volume-based rebates and fees such as the ones proposed by and 
maintained on the Exchange, including Step-Up Tiers, the cross-asset 
step-up tier, the cross-asset tier and the Retail Order Tier proposed 
herein, have been widely adopted in the cash equities markets and are 
equitable because they are open to all Members on an equal basis and 
provide additional benefits or discounts 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/or 
growth patterns, and introduction of higher volumes of orders into the 
price and volume discovery processes. The Exchange notes that it is not 
proposing to modify any existing tiers, but rather to add a new tier 
that will provide Members with additional ways to receive higher 
rebates, meaning that under the proposal, a Member will receive either 
the same or a higher rebate than they would receive today. Accordingly, 
the Exchange believes that the proposed additions to the Exchange's 
tiered pricing structure and incentives are not unfairly discriminatory 
because they will apply uniformly to all Members and are consistent 
with the overall goals of enhancing market quality on the Exchange.
    The Exchange also believes that assessing an Annual Membership Fee 
provides an equitable allocation of reasonable dues, fees and other 
charges among its Members and other persons using its facilities. The 
Exchange makes all services and products subject to these fees 
available on a non-discriminatory basis to similarly situated 
recipients. The Exchange believes that the Annual Membership Fee is a 
reasonable and equitable method of ensuring that its fees fund a 
greater portion of the cost of regulating activity on the Exchange, and 
that even after assessing these fees, the overall cost of Exchange 
membership is reasonable as compared with the costs of membership in 
other SROs.\12\ The Exchange believes that the proposed addition of an 
Annual Membership Fee is non-discriminatory in that it applies 
uniformly to all Members.
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    \12\ See, e.g., NASDAQ Rule 7001(a) (assessing an [sic] $3,000 
annual membership fee); see also New York Stock Exchange Price List 
2015, at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf (assessing a $40,000 annual trading license fee 
for the first two licenses held by a member organization).
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    Finally, the Exchange believes that the clarifying change that adds 
the footnote 2 to fee codes V and Y in the Fee Codes and Associated 
Fees table is reasonable as it will help to avoid confusion for those 
that review the Exchange's fee schedule. The Exchange notes that the 
proposed change is not designed to amend any fee or rebate, nor alter 
the manner in which it assesses fees or calculates rebates. The 
Exchange believes that the proposed amendment is intended to make the 
fee schedule clearer and less confusing for investors and eliminate 
potential investor confusion, thereby removing impediments to and 
perfecting the mechanism of a free and open market and a national 
market system, and, in general, protecting investors and the public 
interest.

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. To 
the contrary, the Exchange believes that the proposed changes will 
allow the Exchange to compete more ably with other execution venues by 
providing more competitive prices for Retail Orders that add liquidity 
in securities traded on the Exchange, thereby making it a more 
desirable destination venue for its customers. Also, because the market 
for order execution is extremely competitive, Members may readily opt 
to disfavor the Exchange's routing services if they believe that 
alternatives offer them better value.
    The Exchange's proposed membership fees will be lower than the cost 
of membership on other exchanges,\13\ and therefore, may stimulate 
intramarket competition by attracting additional firms to become 
Members on the Exchange. In addition, membership fees are subject to 
competition from other exchanges. Accordingly, if the changes proposed 
herein are unattractive to market participants, it is likely the 
Exchange will see a decline in membership and/or trading activity as a 
result. The proposed fee change will not impact intermarket competition 
because it will apply to all Members equally. 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,

[[Page 2766]]

including Annual Membership Fees, to be unreasonable or excessive.
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    \13\ See id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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 \14\ and paragraph (f) of Rule 19b-4 
thereunder.\15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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-2015-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BATS-2015-01. 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-BATS-2015-01, and should be 
submitted on or before February 10, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00702 Filed 1-16-15; 8:45 am]
BILLING CODE 8011-01-P