[Federal Register Volume 81, Number 124 (Tuesday, June 28, 2016)]
[Notices]
[Pages 42013-42016]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15172]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78122; File No. SR-BatsBYX-2016-12]


Self-Regulatory Organizations; Bats BYX 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 BYX 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 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 BYX Rules 
15.1(a) and (c) (``Fee Schedule'') to: (i) Add fee codes NA and NB; 
(ii) reduce the rebate for fee codes BB, N, and W; (iii) add Add Volume 
Tier 2 under footnote 1; and (iv) add Remove Volume Tier under footnote 
1.
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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 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) reduce the rebate for fee codes BB, N, and W; 
(iii) add Add Volume Tier 2 under footnote 1; and (iv) add Remove 
Volume Tier under footnote 1.
Fee Codes NA and NB
    The Exchange previously filed a proposed rule change with the 
Commission to identify Non-Displayed Orders \6\ as such when 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 routed Non-Displayed 
Orders. Proposed fee code NA would be applied to Non-Displayed Orders 
that are routed to and add liquidity on Bats EDGX Exchange, Inc. 
(``EDGX''), Bats BZX Exchange, Inc. (``BZX''), the New York

[[Page 42014]]

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 Non-Displayed Orders that 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 11.9(c)(11).
    \7\ The Exchange notes that the Exchange also amended its rules 
to route Reserve Orders (as defined in Rule 11.9(c)(1)) as such to 
other Trading Centers. See Securities Exchange Act 77187 (February 
19, 2016), 81 FR 9556 (February 25, 2016) (SR-BYX-2016-04). Non-
Displayed Orders and Reserve Orders would be handled in accordance 
with the rules of the Trading Center to which they are routed. Id. 
This proposal does not impact the routing of Reserve Orders.
    \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/byx/. 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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Fee Codes BB, N, and W
    Fee codes BB, N, and W are appended to orders that are to receive 
the standard rebate of $0.00150 per share for removing liquidity in 
securities priced at or above $1.00.\10\ Fee code W is appended to 
order in Tape A Securities, fee code BB is appended to orders in Tape B 
securities, and fee code N is appended to orders in Tape C Securities. 
The Exchange now proposes to reduce the standard rebate provided for 
under fee codes, BB, N, and W from $00.150 per share to $0.00100 per 
share. The Exchange also proposes to amend the Fee Schedule's Standard 
Rates table to reflect the amended standard removal rate under fee 
codes BB, N, and W.
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    \10\ Order that remove liquidity in securities priced below 
$1.00 are charged 0.10% of the trades total dollar value. See the 
Exchange's Fee Schedule available at http://batstrading.com/support/fee_schedule/byx/. The Exchange does not proposes to amend the 
standard rate for securities priced below $1.00.
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Add Volume Tier 2
    Currently, the Exchange charges a standard rate of $0.0018 per 
share for orders that add liquidity. Members may be charged a reduced 
fee of $0.0014 per share under footnote 1 where they have an ADAV \11\ 
equal to or greater than 0.30% of the TCV.\12\ The Exchange proposes to 
name this existing tier under footnote 1 the ``Add Volume Tier 1'' and 
add a new tier called the ``Add Volume Tier 2''. Under the proposed Add 
Volume Tier 2, Members would be eligible to receive a reduced fee of 
$0.0013 per share where they have an ADAV equal to or greater than 
0.40% of the TCV.
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    \11\ As provided in the Fee Schedule, ``ADAV'' means average 
daily added volume calculated as the number of shares added per day.
    \12\ As provided in the Fee Schedule, ``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.
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Add Remove Volume Tier
    Currently, the Exchange does not offer an enhanced rebate for 
removing liquidity. Such orders would receive the standard rebate under 
fee codes BB, N, and W described above. The Exchange now proposes to 
provide an enhanced rebate for removing liquidity by adding the Remove 
Volume Tier under footnote 1. Under the proposed Remove Volume Tier, a 
Member's orders that yield fee codes BB, N, or W would receive a rebate 
of $0.00150 per share where the Member has an ADV equal to or greater 
than 0.05% of the TCV.
    The Exchange also proposes to append footnote 1 to fee codes BB, N, 
and W as orders that yield those fee codes would be eligible to receive 
the enhanced rebate of $0.00150 provided for by the proposed Remove 
Volume Tier. With the addition of the Remove Volume Tier, the Exchange 
proposes to amend the title of footnote 1 from ``Add Volume Tier'' to 
``Add/Remove Volume Tiers''.
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-BatsBYX-2016-11). On June 8, 2016, the Exchange 
withdrew SR-BatsBYX-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 proposed fee codes NA and 
NB 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 
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 EDGA Exchange, Inc. fee schedule available at 
http://batstrading.com/support/fee_schedule/edga/; 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 Non-
Displayed Orders to these destinations and that those Members seeking 
to post such orders to

[[Page 42015]]

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.
    The Exchange also believes that proposed changes to fee codes BB, 
N, and W represent an equitable allocation of reasonable dues, fees, 
and other charges because the Exchange's standard rebate for removing 
liquidity continues to be higher than that provided by other exchanges. 
For example, Nasdaq BX, Inc. BX provides a standard rebate of $0.0006 
per share for orders that remove liquidity.\19\
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    \19\ See the Nasdaq BX, Inc. fee schedule available at http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing.
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    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 tiers are a reasonable, fair and equitable, and not 
unfairly discriminatory allocation of fees and rebates, because they 
will provide Members with an additional incentive to reach certain 
thresholds on the Exchange.
    In particular, the Exchange believes the addition of the Add Volume 
Tier 2 and Remove Volume Tier are a reasonable means to encourage 
Members to increase their liquidity on the Exchange. The Exchange 
further believes that the proposed tiers represents an equitable 
allocation of reasonable dues, fees, and other charges because the 
thresholds necessary to achieve the tiers encourages Members to add 
liquidity to the BYX Book \20\ each month. Specifically, the Exchange 
notes that the criteria and reduced rate under Add Volume Tier 2 are 
equitable and reasonable as compared to other tiers offered by the 
Exchange. For example, under Add Volume Tier 1, Members may receive a 
reduced fee of $0.0013 per share where they have an ADAV equal to or 
greater than 0.30% of the TCV. To receive a reduced fee of $0.0014 per 
share under the proposed Add Volume Tier 2, a Member must have an ADAV 
equal to or greater than 0.40% of the TCV. Therefore, the Exchange 
believes the proposed Add Volume Tier 2 is consistent with Section 
6(b)(4) \21\ of the Act as the more stringent criteria correlates with 
the tier's reduced rate.
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    \20\ See Exchange Rule 1.5(e).
    \21\ 15 U.S.C. 78f(b)(4).
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    The Exchange also believes the proposed Remove Volume Tier's 
criteria and rate are reasonable when compare to tier provided for by 
other exchanges. For example, Nasdaq BX, Inc. BX also provides an 
enhanced rebate of $0.0015 per share but require different, but 
similar, criteria.\22\ In order to achieve the tier, Nasdaq BX, Inc. 
requires their members to remove at least 0.05% of TCV.\23\ Therefore, 
the Exchange believes the proposed Remove Volume Tier is consistent 
with Section 6(b)(4) \24\ of the Act.
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    \22\ See the Nasdaq BX, Inc. fee schedule available at http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing.
    \23\ Id.
    \24\ 15 U.S.C. 78f(b)(4).
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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 tiers and 
standard removal rates would burden competition, but instead, enhances 
competition, as they are 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 changes are generally intended to draw additional liquidity to 
the Exchange. The Exchange does not believe the proposed tiers and 
standard rates would burden intramarket competition as they would apply 
to all Members uniformly.

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 \25\ and paragraph (f) of Rule 19b-4 
thereunder.\26\ 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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    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 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-BatsBYX-2016-12 on the subject line.

[[Page 42016]]

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 BatsBYX-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-BatsBYX-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.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-15172 Filed 6-27-16; 8:45 am]
 BILLING CODE 8011-01-P