[Federal Register Volume 81, Number 143 (Tuesday, July 26, 2016)]
[Notices]
[Pages 48859-48860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17582]



[[Page 48859]]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78369; File No. SR-BatsEDGX-2016-32]


Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change Related 
to Fees as They Apply to the Recently Adopted Step Up Mechanism on Its 
Equity Options Platform

July 20, 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 July 11, 2016, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 EDGX Rules 
15.1(a) and (c).
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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 modify the fee schedule applicable to the 
Exchange's options platform (``EDGX Options'') to adopt fees for its 
recently adopted Step Up Mechanism (``SUM'').\6\ SUM is a feature 
within the Exchange's System \7\ that will provide automated order 
handling in designated classes for qualifying orders that are not 
automatically executed by the System. For order handling and responses 
regarding SUM, orders that are received by SUM shall be electronically 
exposed at the NBBO immediately upon receipt. The exposure shall be for 
a period of time determined by the Exchange on a class-by-class basis, 
which period of time shall not exceed one second. All Users will be 
permitted to submit responses to the exposure message during the 
exposure period.\8\ The Exchange proposes to provide an additional 
rebate per contract for orders submitted by Users in response to a SUM 
auction, as described below.
---------------------------------------------------------------------------

    \6\ See SR-BatsEDGX-2016-29 (``Step Up Mechanism Filing''), 
available at: http://cdn.batstrading.com/resources/regulation/rule_filings/approved/2016/SR-BatsEDGX-2016-29.pdf.
    \7\ See Exchange Rule 16.1(a)(59) (defining the term System as 
the automated trading system used by EDGX Options for the trading of 
options contracts).
    \8\ See Step Up Mechanism Filing, supra note 6.
---------------------------------------------------------------------------

    In order to encourage Users to respond to SUM auctions, the 
Exchange proposes to adopt footnote 3 to the Fee Schedule, under which 
the Exchange would provide an additional rebate of $0.05 per contract 
for any order submitted in response to a SUM auction. As with all other 
fees and rebates on EDGX Options, this rebate would only apply to 
orders that are executed; and in this case, to orders that are 
specifically executed against orders exposed via SUM.
    As noted above, all Users are permitted to submit orders in 
response to a SUM auction, and thus, the Exchange proposes to append 
footnote 3 to all fee codes on the Exchange's fee schedule other than 
those specific to routing away from the Exchange and the Exchange's 
opening process. Specifically, the additional rebate per contract for 
responding to and executing against an order exposed through a SUM 
auction would apply to fee codes: NB, NC, NF, NM, NN, NO, NP, PB, PC, 
PF, PM, PN, PO and PP.
    The proposed rebate is an additional rebate per contract, and would 
therefore be applied on top of any existing fee or rebate currently 
provided for in the Exchange's fee schedule. For example, pursuant to 
fee code NB, the Exchange charges a standard fee of $0.75 per contract 
for Broker Dealer \9\ orders in Non-Penny Pilot Securities.\10\ If a 
User were to submit a Broker Dealer order in a Non-Penny Pilot Security 
in response to a SUM auction, the resulting transaction fee would be 
$0.70 per contract after applying the proposed $0.05 per contract 
rebate for SUM responses.
---------------------------------------------------------------------------

    \9\ The term ``Broker Dealer'' applies to any order for the 
account of a broker dealer, including a foreign broker dealer, that 
clears in the Customer range at the OCC.
    \10\ The term ``Non-Penny Pilot Security'' applies to those 
issues that are not Penny Pilot Securities quoted pursuant to 
Exchange Rule 21.5, Interpretation and Policy .01.
---------------------------------------------------------------------------

    The additional SUM rebate would also apply in addition to any 
tiered pricing rate otherwise achieved by a Member. For instance, 
pursuant to footnote 2 of the Exchange's fee schedule, a Member's 
Market Maker \11\ orders are eligible for reduced fees or even a rebate 
to the extent the Member reaches certain volume thresholds. The 
additional rebate per contract would apply in addition to this reduced 
fee or rebate (e.g., Tier 1, which normally yields a decreased fee of 
$0.16 per contract for qualifying Members' Market Maker orders would 
instead yield a fee of $0.11 per contract for a SUM response; Tier 5, 
which normally yields a decreased fee of $0.02 per contract for 
qualifying Members' Market Maker orders would instead yield a rebate of 
$0.03 per contract for a SUM response; and so forth).
---------------------------------------------------------------------------

    \11\ The term ``Market Maker'' applies to any transaction 
identified by a Member for clearing in the Market Maker range at the 
OCC, where such Member is registered with the Exchange as a Market 
Maker as defined in Rule 16.1(a)(37).
---------------------------------------------------------------------------

Implementation Date
    The Exchange proposes to implement the proposed changes on July 11, 
2016.
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.\12\ 
Specifically, the Exchange believes that

[[Page 48860]]

the proposed rule change is consistent with Section 6(b)(4) of the 
Act,\13\ 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 
or providers of routing services if they deem fee levels to be 
excessive.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes the proposed rebate is equitable and not 
unfairly discriminatory because it would be equally available and 
objectively applied to all Members orders submitted and executed in 
response to SUM auctions on the Exchange. The Exchange further believes 
the proposed rebate is equitable and reasonable as it is an additional 
rebate per contract designed to encourage Members to enter orders in 
response to SUM auctions on the Exchange. The Exchange further believes 
that the rebate is reasonable because the proposed additional rebate 
per contract does not represent a significant departure from pricing 
previously offered by the Exchange or other options exchanges. Lastly, 
the Exchange believes the proposed rebate is not unfairly 
discriminatory as all Members may enter orders in response to a SUM 
auction and receive the proposed rebate if their order is executed.

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

    The Exchange believes the proposed rebate would not 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 rebate represents a significant departure from 
previous pricing offered by the Exchange or pricing offered by the 
Exchange's competitors. Rather, the Exchange believes the proposal will 
enhance competition as it is a competitive proposal that seeks to 
further the growth of the Exchange by encouraging Members to enter 
orders in response to SUM auctions.

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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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 No. SR-BatsEDGX-2016-32 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 No. SR-BatsEDGX-2016-32. 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 No. SR-BatsEDGX-2016-32, and should be 
submitted on or before August 16, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-17582 Filed 7-25-16; 8:45 am]
 BILLING CODE 8011-01-P