[Federal Register Volume 81, Number 219 (Monday, November 14, 2016)]
[Notices]
[Pages 79550-79551]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27238]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79255; File No. SR-BatsBZX-2016-69]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Related to 
Fees for Use of the Exchange's Equity Options Platform

November 7, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 27, 2016, Bats BZX Exchange, Inc. (``BZX'' or the 
``Exchange'') 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 
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.
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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 \3\ and non-Members of the Exchange pursuant to BZX Rules 
15.1(a) and (c).
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    \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).
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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 modify its fee schedule applicable to the 
Exchange's equity options platform (``BZX Options'') to add a new Step-
Up Tier under footnote 3, Non-Customer Penny Pilot Take Volume Tiers.
    The Exchange appends fee code PP to Non-Customer \4\ orders in 
Penny Pilot Securities \5\ that removes liquidity. Orders that yield 
fee code PP are charged a fee of $0.50 per contract. The Exchange 
offers three tiers under footnote 3, Non-Customer Penny Pilot Take 
Volume Tiers, which offer reduced fees for Non-Customer orders that 
yield fee code PP upon achieving each tier's required criteria. Under 
Tier 1, orders that yield fee code PP will be eligible for a reduced 
fee of $044 [sic] per contract where the Member has: (i) an ADAV \6\ in 
Customer \7\ orders equal to or greater than 0.60% of average TCV; \8\ 
(ii) an ADAV in Market Maker \9\ orders equal to or greater than 0.25% 
of average TCV; and (iii) on the Exchange's equities platform, BZX 
Equities, an ADAV equal to or greater than 0.30% of average TCV. Under 
Tier 2, orders that yield fee code PP will be eligible for a reduced 
fee of $0.47 per contract where the Member has an ADAV in Customer 
orders equal to or greater than 1.00% of average TCV. Lastly, under 
Tier 3, orders that yield fee code PP will be eligible for a reduced 
fee of $0.44 per contract where the Member has an ADAV in Customer 
orders equal to or greater than 1.30% of average TCV.
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    \4\ As defined in the Exchange's fee schedule available at 
http://www.bats.com/us/options/membership/fee_schedule/bzx/
    \5\ Id.
    \6\ Id.
    \7\ Id.
    \8\ Id.
    \9\ As defined in the Exchange's fee schedule available at 
http://www.bats.com/us/options/membership/fee_schedule/bzx/.
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    The Exchange now proposes to reduce the above fees by $0.01 for 
Members that achieve certain additional volume requirements. 
Specifically, the Exchange proposes to add a Step-Up tier under 
footnote 3 such that the fee charged to a Member under fee code PP and 
the Non-Customer Penny Pilot Take Volume Tiers described above would be 
reduced by $0.01 per contract where the Member has an Options Step-Up 
Add TCV \10\ in Customer orders from September 2016 baseline equal to 
or greater than 0.30%. The criteria for the proposed Step-Up Tier under 
footnote 3 would be in addition the criteria required by the three Non-
Customer Take Volume tiers under footnote 3.
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    \10\ Id.
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Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule as of November 1, 2016.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\11\ in general, and 
furthers the objectives of Section 6(b)(4),\12\ 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. Volume-based rebates such as those currently maintained on 
the Exchange 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 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 addition of 
the Non-Customer Penny Pilot Take Volume Step-Up Tier is intended to 
incentivize Members to send additional orders to the Exchange in an 
effort to qualify for a further reduced fee for orders that yield fee 
code PP and the Non-Customer Penny Pilot Take Volume Tiers under 
footnote 3. The Exchange believes the rates remain competitive with 
those charged by other venues \13\ and, therefore, are reasonable and 
equitably allocated to Members. 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 Step-Up Tier is equitable and non-discriminatory in 
that it would apply uniformly to all Members.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
    \13\ See NYSE Arca, Inc.'s fee schedule available at https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf (dated October 1, 2016) (offering 
additional credits to under incentive programs for customer, 
professional customer, and market maker orders as well as a separate 
take fee discount qualification tier).
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    The Exchange also believes requiring the Member to have an Options 
Step-Up Add TCV in Customer orders from September 2016 baseline equal 
to or

[[Page 79551]]

greater than 0.30% is also equitable and reasonable. Such pricing 
programs reward a Member's growth pattern on the Exchange and such 
increased volume increases potential revenue to the Exchange, and will 
allow the Exchange to continue to provide and potentially expand the 
incentive programs operated by the Exchange. The Exchange believes that 
providing additional financial incentives to Members that demonstrate 
an increase over their September 2016 Options Step-Up Add TCV through 
the proposed tier offers an additional, flexible way to achieve 
financial incentives from the Exchange and encourage Members to add 
liquidity to the Exchange. The Exchange believes that this incentive is 
reasonable, fair and equitable because the liquidity from the proposed 
tier also benefits all investors by deepening the Exchange's liquidity 
pool, offering additional flexibility for all investors to enjoy cost 
savings, supporting the quality of price discovery, promoting market 
transparency and improving investor protection. These pricing programs 
are also fair and equitable in that they are available to all Members 
and will result in Members receiving either the same or an increased 
rebate than they would currently receive.

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

    The Exchange believes the proposed amendment to its fee schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange has designed the proposed amendment to its fee schedule to 
enhance its ability to compete with other exchanges. Also, the Exchange 
believes that the addition of the proposed tier contributes to rather 
than burdens competition, as such tier is intended to incentivize 
Members to increase their participation on the Exchange, which will 
increase the liquidity and market quality on the Exchange, which will 
then further enhance the Exchange's ability to compete with other 
exchanges.
    The Exchange does not believe that the proposed change will impair 
the ability of Members or competing venues to maintain their 
competitive standing in the financial markets. 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 change to the Exchange's tiered pricing 
structure burdens competition, but instead, enhances competition as it 
is intended to increase the competitiveness of the Exchange.

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-BatsBZX-2016-69 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-BatsBZX-2016-69. 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-BatsBZX-2016-69, and should 
be submitted on or before December 5, 2016.

    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. 2016-27238 Filed 11-10-16; 8:45 am]
 BILLING CODE 8011-01-P