[Federal Register Volume 81, Number 124 (Tuesday, June 28, 2016)]
[Notices]
[Pages 42027-42030]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15171]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78121; File No. SR-BatsEDGA-2016-12]


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

June 22, 2016.
    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 8, 2016, Bats EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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 EDGA Rules 
15.1(a) and (c) (``Fee Schedule'') to: (i) Add fee codes NA and NB; 
(ii) add new Volume Tier 3; and (iii) delete the MidPoint Discretionary 
Order Add Volume Tier.
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    \5\ The term ``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 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

[[Page 42028]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule to: (i) Add fee 
codes NA and NB; (ii) add new Volume Tier 3; and (iii) delete the 
MidPoint Discretionary Order Add Volume Tier.
Fee Codes NA and NB
    The Exchange previously filed a proposed rule change with the 
Commission to include a Non-Displayed \6\ instruction on orders routed 
to an away Trading Center.\7\ The Exchange intends to implement this 
functionality on June 1, 2016.\8\ Because other Trading Centers 
typically provide different rebates or fees with respect to non-
displayed liquidity the Exchange proposes to amend its Fee Schedule to 
add fee codes NA and NB, which would apply to orders routed with a Non-
Displayed instruction. Proposed fee code NA would be applied to orders 
that include a Non-Displayed instruction that are routed to and add 
liquidity on Bats EDGX Exchange, Inc. (``EDGX''), Bats BZX Exchange, 
Inc. (``BZX''), the New York Stock Exchange, Inc. (``NYSE''), NYSE 
Arca, Inc. (``NYSE Arca''), NYSE MKT LLC (``NYSE MKT''), or the Nasdaq 
Stock Market LLC (``Nasdaq'').\9\ Orders that yield fee code NA would 
not be charged a fee nor receive a rebate in both securities priced at 
or above $1.00 or below $1.00. Proposed fee code NB would be applied to 
orders that include a Non-Displayed instruction and are routed to and 
add liquidity on any exchange not listed in proposed fee code NA. 
Orders that yield fee code NB would be charged a fee of $0.0030 per 
share in securities priced at or above $1.00 and 0.30% of the trade's 
total dollar value in securities priced below $1.00.
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    \6\ See Exchange Rule 11.6(e)(2).
    \7\ The Exchange notes that the Exchange also amended its rules 
to route orders with a Reserve Quantity (as defined in Rule 11.6(m)) 
as such to other Trading Centers. See Securities Exchange Act 77189 
(February 19, 2016), 81 FR 9571 (February 25, 2016) (SR-EDGX-2016-
08). Orders to be routed with a Non-Displayed instruction or a 
Reserve Quantity would be handled in accordance with the rules of 
the Trading Center to which they are routed. Id. This proposal does 
not impact orders routed with a Reserve Quantity.
    \8\ See Bats Announces Support for Hidden Post-to-Away Routed 
Orders, available at http://cdn.batstrading.com/resources/release_notes/2016/Bats-Announces-Support-for-Hidden-Post-to-Away-Routed-Orders.pdf.
    \9\ Today, all orders that are routed to post to an away market 
are routed for display on such market and receive the following 
rates: (i) Rebate of $0.0015 per share for orders routed to the 
NYSE; (ii) rebate of $0.0021 per share for Tapes A and C securities 
and a rebate of $0.0022 per share for Tape B securities for orders 
routed to NYSE Arca; (iii) rebate of $0.0015 per share for orders 
routed to NYSE MKT; (iv) rebate of $0.0015 per share for orders 
routed to Nasdaq; and (v) a rebate of $0.0020 per share for orders 
routed to EDGX or BZX. See the Exchange's Fee Schedule available at 
http://batstrading.com/support/fee_schedule/edgx/. These rates 
generally represent a pass through of the rate that Bats Trading, 
Inc. (``Bats Trading''), the Exchange's affiliated routing broker-
dealer, is provided for adding displayed liquidity at NYSE, NYSE 
Arca, NYSE MKT, Nasdaq, EDGX, or BZX when it does not qualify for a 
volume tiered reduced fee or enhanced rebate.
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Proposed Volume Tier 3
    The Exchange determines the liquidity adding reduced fee that it 
will charge Members using a tiered pricing structure. Currently, the 
Exchange charges reduced fee of $0.0003 per share under two Volume 
Tiers described in footnote 4 of the Fee Schedule. To receive Volume 
Tier 1's reduced fee, a Member must add an ADV \10\ of at least 1% of 
the TCV,\11\ including orders with a Non-Displayed instruction that add 
liquidity. To receive Volume Tier 2's reduced fee, a Members must add 
an ADV of at least 0.25% of the TCV, including orders with a Non-
Displayed instruction that add liquidity; and removes an ADV of at 
least 0.25% of the TCV. The Exchange now propose to add Volume Tier 3 
under which a Member would be charged a reduced fee of $0.0003 per 
share where that Member adds an ADV of at least 0.15% of TCV, including 
non-displayed orders that add liquidity; and has an ``added liquidity'' 
as a percentage of ``added plus removed liquidity'' of at least 85%.
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    \10\ As defined in the Exchange's Fee Schedule.
    \11\ Id.
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Deletion of MidPoint Discretionary Order Add Volume Tier
    The Exchange currently offers the MidPoint Discretionary Order Add 
Volume Tier under which a Member is charged a reduced fee of $0.0003 
per share where they add an ADV of at least 0.15% of the TCV including 
non-displayed orders that add liquidity; and add or remove an ADV of at 
least 500,000 shares yielding fee codes DM or DT.\12\ The Exchange now 
proposes to delete the MidPoint Discretionary Order Add Volume Tier. 
The Exchange notes that Members that previously qualified for the 
MidPoint Discretionary Order Add Volume Tier may achieve the same 
reduced fee by satisfying what the Exchange believes to be 
substantially similar criteria as the proposed Volume Tier 3 discussed 
above, or the existing tiers under footnote 4 of the Fee Schedule.
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    \12\ Fee code DM is appended to MidPoint Discretionary Orders 
with a Non-Displayed instruction that add liquidity. Id. Fee code DT 
is appended to MidPoint Discretionary Orders with a Non-Displayed 
instruction that remove liquidity. Id.
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Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule effective immediately.\13\
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    \13\ The Exchange initially filed the proposed fee change on May 
31, 2016 (SR-BatsEDGA-2016-11). On June 8, 2016, the Exchange 
withdrew SR-BatsEDGA-2016-11 and submitted this filing.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\14\ in general, and 
furthers the objectives of Section 6(b)(4),\15\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. The Exchange also 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. The proposed rule changes reflect a competitive 
pricing structure designed to incent market participants to direct 
their order flow to the Exchange. The Exchange believes that the 
proposed fee codes are equitable and non-discriminatory in they would 
apply uniformly to all Members. The Exchange believes the rates remains 
competitive with those charged by other venues and, therefore, 
reasonable and equitably allocated to Members.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange believes that the proposed fee codes 
represent an equitable allocation of reasonable dues, fees, and other 
charges. The proposed fees are similar to and based on the fees and 
rebates assessed or provided to Bats Trading when routing to away 
Trading Centers. For instance, like proposed fee code NA, the NYSE, 
NYSE Arca, and Nasdaq charge no fee nor provide a rebate for non-
displayed orders that add liquidity.\16\ In addition, the exchanges

[[Page 42029]]

that would be covered by proposed fee code NB charge a fee of up to 
$0.0030 per share to add liquidity.\17\ In addition, the proposed rate 
for fee code NB is equal to or greater than similar routing fees 
charged by other exchanges. For example, the NYSE, NYSE MKT, Nasdaq, 
and BZX charge a fee of $0.0030 per share and NYSE Arca charges a fee 
of $0.0035 per share regardless of which destination the order is 
routed.\18\
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    \16\ See the NYSE fee schedule available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf (dated 
May 23, 2016); the NYSE Arca fee schedule available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf (dated May 23, 2016); and the Nasdaq 
fee schedule available at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. The Exchange notes that NYSE MKT, 
EDGX, and BZX provide a rebate of $0.0016, $0.0015, and $0.0017 per 
share respectively for non-displayed orders that add liquidity. See 
the NYSE MKT fee schedule available at https://www.nyse.com/publicdocs/nyse/markets/nyse-mkt/NYSE_MKT_Equities_Price_List.pdf 
(dated May 23, 2016); the EDGX fee schedule available at http://batstrading.com/support/fee_schedule/edgx/; and the BZX fee schedule 
available at http://batstrading.com/support/fee_schedule/bzx/.
    \17\ See the Bats BYX Exchange Inc. fee schedule available at 
http://batstrading.com/support/fee_schedule/byx/; and the Nasdaq BX, 
Inc. fee schedule available at http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing. The Exchange notes that it currently does 
not provide for routing orders to post on the Chicago Stock 
Exchange, Inc. or the National Stock Exchange, Inc.
    \18\ See supra note 16. Nasdaq charges a fee of $0.0035 per 
share for routed orders that are directed to another market. See the 
Nasdaq fee schedule at id.
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    The Exchange notes that routing through Bats Trading is voluntary. 
The Exchange is providing a service to allow Members to post orders 
with a Non-Displayed instruction to these destinations and that those 
Members seeking to post such orders to away destinations may connect to 
those destinations directly and be charged the fee or provided the 
rebate from that destination. Therefore, the Exchange believes the 
rates for proposed fee codes NA and NB are equitable and reasonable 
because they are related to the rates provided by the away exchange and 
reasonably account for the routing service provided for by the 
Exchange. Lastly, the Exchange believes that the proposed amendments 
are non-discriminatory because it applies uniformly to all Members and 
that the proposed rates are directly related to rates provided by the 
destinations to which the orders may be routed.
    In addition, volume-based rebates such as that proposed herein have 
been widely adopted by equities and options exchanges 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: (i) 
The value to an exchange's market quality; (ii) associated higher 
levels of market activity, such as higher levels of liquidity provision 
and/or growth patterns; and (iii) the introduction of higher volumes of 
orders into the price and volume discovery processes. The Exchange 
believes that the proposed tier is a reasonable, fair and equitable, 
and not an unfairly discriminatory allocation of fees and rebates, 
because it will provide Members with an additional incentive to reach 
certain thresholds on the Exchange.
    In particular, the Exchange believes the addition of the Volume 
Tier 3 is a reasonable means to encourage Members to increase their 
liquidity on the Exchange. The Exchange further believes that the 
proposed tier represents an equitable allocation of reasonable dues, 
fees, and other charges because the thresholds necessary to achieve the 
tier encourages Members to add liquidity to the EDGA Book \19\ each 
month. The Exchange also notes that the criteria and reduced rate under 
Volume Tier 3 is equitable and reasonable as compared to other tiers 
offered by the Exchange. For example, under the Volume Tier 1, Members 
may receive a reduced fee of $0.0003 per share where they add an ADV of 
at least 1% of the TCV, including orders with a Non-Displayed 
instruction that add liquidity. To receive the same reduced fee under 
Volume Tier 2, a Member must add an ADV of at least 0.25% of the TCV, 
including orders with a Non-Displayed instruction that add liquidity; 
and removes an ADV of at least 0.25% of the TCV. Under the proposed 
Volume Tier 3, while the Member must satisfy a lower ADV as a 
percentage of TCV threshold, the Member must have an ``added 
liquidity'' as a percentage of ``added plus removed liquidity'' of at 
least 85%, which the Exchange believes is a reasonable standard by 
which to award the reduced rate in relation to current Volume Tiers 1 
and 2. Therefore, the Exchange believes the proposed Volume Tier 3 is 
consistent with Section 6(b)(4) \20\ of the Act as the more stringent 
criteria correlates with the tier's reduced rate.
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    \19\ See Exchange Rule 1.5(d).
    \20\ 15 U.S.C. 78f(b)(4).
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    Lastly, the Exchange believe removing the MidPoint Discretionary 
Order Add Volume Tier is also equitable, reasonable and not unfairly 
discriminatory because Members that previously qualified for the 
MidPoint Discretionary Order Add Volume Tier may achieve the same 
reduced fee my satisfying what the Exchange believes to be 
substantially similar criteria as the proposed Volume Tier 3 discussed 
above, or the existing tiers under footnote 4 of the Fee Schedule.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe its proposed amendment to its Fee 
Schedule would impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed changes represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. For example, routing through Bats Trading is 
voluntary and Members seeking to post such orders to away destinations 
may connect to those destinations directly and be charged the fee or 
provide the rebate from that destination. Accordingly, the Exchange 
does not believe that the proposed changes will impair the ability of 
Members or competing venues to maintain their competitive standing in 
the financial markets. The Exchange believes that its proposal would 
not burden intramarket competition because the proposed rate would 
apply uniformly to all Members.
    The Exchange does not believe that the proposed new tier would 
burden competition, but instead, enhances competition, as it is 
intended to increase the competitiveness of and draw additional volume 
to the Exchange. 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 they deem fee structures to be 
unreasonable or excessive. The proposed change is generally intended to 
enhance the reduced fees for liquidity added to the Exchange, which is 
intended to draw additional liquidity to the Exchange. The Exchange 
does not believe the proposed tier would burden intramarket competition 
as it would apply to all Members uniformly.
    Lastly, the Exchange does not believe removing the MidPoint 
Discretionary Order Add Volume Tier would burden competition because 
Members that previously qualified for the MidPoint Discretionary Order 
Add Volume Tier may achieve the same reduced fee my satisfying what the 
Exchange believes to be substantially similar criteria as the proposed 
Volume Tier 3 discussed above, or the existing tiers under footnote 4 
of the Fee Schedule.

[[Page 42030]]

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 unsolicited 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 \21\ and paragraph (f) of Rule 19b-4 
thereunder.\22\ 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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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-BatsEDGA-2016-12 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-BatsEDGA-2016-12. 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-BatsEDGA-2016-12, and should 
be submitted on or before July 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-15171 Filed 6-27-16; 8:45 am]
 BILLING CODE 8011-01-P