[Federal Register Volume 81, Number 202 (Wednesday, October 19, 2016)]
[Notices]
[Pages 72131-72133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25236]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79091; File No. SR-BatsEDGX-2016-57]


Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change to Fees 
for Use of Bats EDGX Exchange, Inc. Options Platform

October 13, 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 October 6, 2016, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. 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.
---------------------------------------------------------------------------

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 \3\ and non-Members of the Exchange pursuant to EDGX Rules 
15.1(a) and (c).
---------------------------------------------------------------------------

    \3\ 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its fee schedule for its equity 
options platform (``EDGX Options'') to: (i) Add definition of OCC 
Customer Volume or OCV, to the Definitions section of the fee schedule; 
and (ii) modify the criteria for the Customer Volume, Market Maker 
Volume, and Firm Penny Pilot Cross-Asset Tiers to reflect the new 
definition of OCV; and (iii) to make a non-substantive change.
OCC Customer Volume Definition
    The Exchange proposes to add the definition of ``OCC Customer 
Volume'' or ``OCV'' to the definition section of its fee schedule. OCC 
Customer Volume or OCV will be defined as the total equity and Exchange 
Traded Fund (``ETF'') options volume that clears in the Customer \4\ 
range at the Options Clearing Corporation (``OCC'') for the month for 
which the fees apply, excluding volume on any day that the Exchange 
experiences an Exchange System Disruption \5\ and on any day with a 
scheduled early market close.
---------------------------------------------------------------------------

    \4\ As defined in the Exchange's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/edgx/.
    \5\ An ``Exchange System Disruption'' means ``any day that the 
Exchange's system experiences a disruption that lasts for more than 
60 minutes during Regular Trading Hours.'' Id.
---------------------------------------------------------------------------

Tier Qualifications Change

    The Exchange proposes to replace current tier qualifications which 
refer to Total Consolidated Volume (``TCV'') \6\ with a reference to 
OCV in the Customer Volume Tier, Market Maker Volume Tier and Firm 
Penny Pilot Cross-Asset Tier, in Footnotes 1, 2 and 4, respectively. 
Because OCV generally makes up a smaller range than the prior TCV, the 
Exchange also proposes to amend the percentage of OCV necessary to 
achieve the tier so that it is substantially identical to the 
previously required percentage of TCV. Doing so will keep each tier's 
criteria relatively unchanged from its current requirements. The rates 
for each tier are unchanged. Changes to each tier are described below.
---------------------------------------------------------------------------

    \6\ Id.
---------------------------------------------------------------------------

Customer Volume Tiers
    Customer orders that yield fee codes NC \7\ or PC \8\ and are given 
a standard rebate of $0.05 per contract. Footnote 1 of the fee schedule 
sets forth five tiers, each providing enhanced rebates, ranging from 
$0.10 to $0.25 per contract, to a Member's order that yield fee codes 
NC or PC upon satisfying monthly volume criteria based on an ADV \9\ in 
Customer orders equal to or greater than a percentage of average TCV.
---------------------------------------------------------------------------

    \7\ Fee code NC is appended to a Member's order which removes 
liquidity (Customer), Non-Penny. Id.
    \8\ Fee code PC is appended to a Member's order which removes 
liquidity (Customer) Penny Pilot. Id.
    \9\ As defined in the Exchange's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/edgx/.
---------------------------------------------------------------------------

     Tier 1 currently requires that a Member have an ADV in 
Customer orders equal to or greater than 0.15% of average TCV. As 
amended, a Member must have an ADV in Customer orders equal to or 
greater than 0.20% of average OCV.
     Tier 2 currently requires that a Member have an ADV in 
Customer orders equal to or greater than 0.30% of average TCV. As 
amended, a Member must have an ADV in Customer orders equal to or 
greater than 0.40% of average OCV.
     Tier 3 currently requires that a Member have an ADV in 
Customer orders equal to or greater than 0.50% of average TCV. As 
amended, a Member must have an ADV in Customer orders equal to or 
greater than 0.65% of average OCV.
     Tier 4 currently requires that a Member has an ADV in 
Customer orders equal to or greater than 0.80% of average TCV. As 
amended, a Member must have an ADV in Customer orders equal to or 
greater than 1.05% of average OCV.
     Tier 5 currently requires that a Member have an ADV in 
Customer orders equal to or greater than 0.05% of average TCV, and an 
ADV in Customer or Market Maker \10\ orders equal to or greater than 
0.25% of average TCV. As amended, a Member must have an ADV in Customer 
orders equal to or greater than 0.05% of average OCV, and an

[[Page 72132]]

ADV in Customer or Market Maker orders equal to or greater than 0.35% 
of average OCV.
---------------------------------------------------------------------------

    \10\ Id.
---------------------------------------------------------------------------

Market Marker Volume Tier
    Market Maker orders yield fee codes PM \11\ or NM \12\ and are 
charged a standard fee of $0.19 per contract. Footnote 2 of the fee 
schedule sets forth seven tiers, each providing a reduced fee ranging 
from $0.01 to $0.16 per contract to a Member's order that yield fee 
code PM or NM upon satisfying monthly volume criteria based on a Member 
having an ADV in Market Maker orders equal to or greater than a 
percentage of average TCV.
---------------------------------------------------------------------------

    \11\ Fee code PM is appended to a Members order which adds 
liquidity (MM), Penny Pilot. Id.
    \12\ Fee code NM is appended to a Members order which adds 
liquidity (MM), Non-Penny. Id.
---------------------------------------------------------------------------

     Tier 1 currently requires that a Member have an ADV in 
Market Maker orders equal to or greater than 0.05% of average TCV. As 
amended, a Member must have an ADV in Market Maker orders equal to or 
greater than 0.05% of average OCV.\13\
---------------------------------------------------------------------------

    \13\ The Exchange proposes to retain the 0.05% requirement as 
adjusting that number to reflect replacing TCV with OCV will result 
in a de minimmis change in the percentage.
---------------------------------------------------------------------------

     Tier 2 currently requires that a Member have an ADV in 
Market Maker orders equal to or greater than 0.10% of average TCV. The 
equivalent proposed calculation would require that a Member has an ADV 
in Market Maker orders equal to or greater than 0.15% of average OCV.
     Tier 3 Currently requires that a Member have an ADV in 
Market Maker orders equal to or greater than 0.20% of average TCV. As 
amended, a Member must have an ADV in Market Maker orders equal to or 
greater than 0.25% of average OCV.
     Tier 4 currently requires that a Member have an ADV in 
Market Maker orders equal to or greater than 0.30% of average TCV. As 
amended, a Member must have an ADV in Market Maker orders equal to or 
greater than 0.40% of average OCV.
     Tier 5 currently requires that a Member have an ADV in 
Market Maker orders equal to or greater than 0.70% of average TCV. As 
amended, a Member must have an ADV in Market Maker orders equal to or 
greater than 0.95% of average OCV.
     Tier 6 currently requires that a Member have an ADV in 
Market Maker orders equal to or greater than 1.10% of average TCV. As 
amended, a Member must have an ADV in Market Maker orders equal to or 
greater than 1.45% of average OCV.
     Tier 7 currently requires that a Member have an ADV in 
Customer orders equal to or greater than 0.05% of average TCV, and an 
ADV in Customer or Market Maker orders equal to or greater than 0.25% 
of average TCV. As amended, a Member must have an ADV in Customer 
orders equal to or greater than 0.05% of average OCV, and an ADV in 
Customer or Market Maker orders equal to or greater than 0.35% of 
average OCV.
Firm Penny Pilot Cross-Asset Tier
    Firm \14\ Penny Pilot \15\ orders yield fee code PF \16\ and are 
charged a standard fee of $0.45 per contract. Footnote 4 of the fee 
schedule sets forth a Cross-Asset Tier, providing a reduced fee of 
$0.32 per contract for Member's order that yield fee code PF where that 
Member has an ADV in Firm orders equal to or greater than 0.10% of 
average TCV and an ADAV \17\ on the Exchange's equity platform (``EDGX 
Equities'') equal to or greater than 0.12% of average TCV. As amended, 
a Member must have an ADV in Firm orders equal to or greater than 0.15% 
of average OCV, and on EDGX Equities an ADAV equal to or greater than 
0.12% of average TCV.
---------------------------------------------------------------------------

    \14\ As defined in the Exchange's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/edgx/.
    \15\ Id.
    \16\ Fee code PF is appended to a Members order which adds 
liquidity (Firm/BD/JBO), Penny Pilot.
    \17\ As defined in the Exchange's fee schedule available at 
http://www.batsoptions.com/support/fee_schedule/edgx/.
---------------------------------------------------------------------------

Non-Substantive Change
    The header of each tier described on the Fee Schedule denotes three 
columns, the first of which is labeled as ``Tier'' in Footnotes 1 and 
2, and labeled as ``Description'' in Footnote 3 and footnote 4. To 
harmonize the labeling of the tiers and promote clarity throughout the 
fee schedule the Exchange proposes to label the first columns of 
Footnotes 3 and 4, ``Tier.''
Implementation Date
    The Exchange proposes to implement the amendments to its fee 
schedule immediately.\18\
---------------------------------------------------------------------------

    \18\ The Exchange initially filed the proposed amendments to its 
fee schedule on September 30, 1016 (SR-BatsEDGX-2016-56). On October 
6, 2016, the Exchange withdrew SR-BatsEDGX-2016-56 and submitted 
this filing.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\19\ in general, and 
furthers the objectives of Section 6(b)(4),\20\ 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 Exchange believes that the proposed rates 
are equitable and non-discriminatory in that they apply uniformly to 
all Members.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f.
    \20\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The proposed fee structure remains intended to attract order flow 
to the Exchange by offering market participants a competitive pricing 
structure. The Exchange believes it is reasonable to offer and 
incrementally modify incentives intended to help to contribute to the 
growth of the Exchange. Volume-based rebates such as that described 
herein have been widely adopted by exchanges, including the Exchange, 
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 provisions and/or growth patterns; and (iii) introduction of 
higher volumes of orders into the price and volume discovery processes.
    The Exchange believes adopting a definition of OCV and utilizing 
OCV in lieu of TCV is reasonable, fair and equitable, and non-
discriminatory because the Exchange also proposed to modify the tier's 
related criteria in order to maintain substantially identical 
requirements to qualify for the tier without changing the rate provided 
for by the tiers. In addition, the amount of OCV historically tends to 
remain reasonably consistent from month to month, as opposed to TCV 
which is less consistent. OCV is also more consistent than options 
volume that clears in the Market Maker or Firm range at the OCC, as 
Market Maker and Firm volume may vary drastically from month to month 
based on market events, as opposed to Customer options volume which 
remains relatively consistent. Therefore, the Exchange believes 
utilizing OCV would result in consistent tier criteria as OCV is a 
relatively static monthly number which would enable market participants 
to better predict whether they may achieve a tier criteria each month 
and qualify for that tier's preferred pricing.
    The Exchange also believes that the use OCV provides a calculation 
that is reasonably identical to and is not a significant departure from 
previous tier qualifications conventions offered by

[[Page 72133]]

other exchanges \21\ The Exchange believes that the proposed 
definitions of OCV is reasonable, fair and equitable, and non-
discriminatory, and will provide additional transparency to Members 
regarding the calculations used to determine volume levels for purposes 
of the proposed tiered pricing model.
---------------------------------------------------------------------------

    \21\ See the NYSE MKT LLC (``NYSE MKT'') fee schedule available 
at https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf (setting forth tiers that 
provide preferred pricing to options market makers who meet certain 
criteria, including achieving a specific ``Monthly Volume as a % of 
Industry Customer Equity and Exchange Traded Fund (``ETF'') Option 
Volume''); NYSE Arca, Inc. (``NYSE ARCA'') options fee schedule 
available at https://www.nyse.com/publicdocs/nyse/markets/arca-
options/NYSE_Arca_Options_ Fee_Schedule.pdf (setting forth a Market 
Maker Incentive tier that provides preferred pricing to market 
makers who meet certain criteria, including achieving a specific 
percentage of ``Total Industry Customer equity and ETF option 
ADV''); Nasdaq Stock Market LLC (``Nasdaq'') options fee schedule 
available at http://www.nasdaqtrader.com/Micro.aspx?id=optionsPricing (setting forth tiers that provide 
preferred pricing to market makers who meet certain criteria, 
including achieving a specific percentage of ``total industry 
customer equity and ETF option ADV contracts per month''); and 
Nasdaq BX LLC (``BX'') options fee schedule available at http://www.nasdaqtrader.com/Micro.aspx?id=BXOptionsPricing (setting forth 
tiers that provide preferred pricing to market makers who meet 
certain criteria, including achieving a specific percentage of 
``total industry customer equity and ETF option ADV contracts per 
month'').
---------------------------------------------------------------------------

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. The Exchange believes that its 
proposal to amend the qualification criteria and to incorporate OCV as 
proposed would not impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because the Exchange also proposed to modify the tier's related 
criteria in order to maintain substantially identical requirements to 
qualify for each tier. Additionally, Members may opt to disfavor the 
Exchange's pricing if they believe that alternatives offer them better 
value. 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 rates would continue to apply 
uniformly to all Members. 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 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 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 \22\ and paragraph (f) of Rule 19b-4 
thereunder.\23\ 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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 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 Number SR-BatsEDGX-2016-57 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-BatsEDGX-2016-57. 
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-
BatsEDGX-2016-57, and should be submitted on or before November 9, 
2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-25236 Filed 10-18-16; 8:45 am]
 BILLING CODE 8011-01-P