[Federal Register Volume 82, Number 31 (Thursday, February 16, 2017)]
[Notices]
[Pages 10922-10924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03102]



[[Page 10922]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80012; File No. SR-BatsBZX-2017-12]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related To 
Fees as They Relate to the Equities Options Platform

February 10, 2017.
    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 February 1, 2017, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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 
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 BZX Rules 
15.1(a) and (c) applicable to its equity options platform (``BZX 
Options'').
---------------------------------------------------------------------------

    \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.bats.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 the BZX Options fee schedule to: (i) 
Modify the definitions of fee codes RQ and RR to include routing to 
MIAX Pearl LLC (``MIAX PEARL'') and to increase the fee for fee code 
RR; (ii) reduce the required criteria for the Market Maker Non-Penny 
Pilot Add Volume Tier 3 under footnote 7; and (iii) remove all fees for 
Mini Options.
Modifications to Fee Codes RQ and RR To Include Routing to MIAX PEARL
    The Exchange's current approach to routing fees is to set forth in 
a simple manner certain sub-categories of fees that approximate the 
cost of routing to other options exchanges based on the cost of 
transaction fees assessed by each venue as well as costs to the 
Exchange for routing (i.e., clearing fees, connectivity and other 
infrastructure costs, membership fees, etc.) (collectively, ``Routing 
Costs''). The Exchange then monitors the fees charged as compared to 
the costs of its routing services and adjusts its routing fees and/or 
sub-categories to ensure that the Exchange's fees do indeed result in a 
rough approximation of overall Routing Costs, and are not significantly 
higher or lower in any area.
    First, the Exchange proposes to modify the description of fee codes 
RQ and RR in connection with the upcoming launch of MIAX PEARL. 
Currently, fee code RR is appended to Customer \6\ orders in non-Penny 
Pilot securities that are routed to ARCA, C2, ISE, ISE Gemini or NOM 
and assessed a fee of $1.00 per contract. Additionally, fee code RQ is 
appended to Customer orders in Penny Pilot securities that are routed 
to ARCA, C2, ISE, ISE Gemini or NOM and assessed a fee of $0.70 per 
contract. The Exchange proposes to modify the definitions of fee codes 
RR and RQ to include MIAX Pearl.
---------------------------------------------------------------------------

    \6\ As defined in the Exchange's fee schedule available at 
http://www.bats.com/us/options/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    Second, the Exchange proposes to increase the fee for fee code RR 
from $1.00 per contract to $1.10 per contract to account for the cost 
of routing to MIAX Pearl. The Exchange does not propose to amend the 
fee for fee code RQ. The Exchange anticipates that the proposed fee 
structure will approximate the cost of routing orders to MIAX Pearl. 
The Exchange is proposing the charges set forth above to maintain a 
simple and fair fee schedule with respect to routing fees that 
approximate the total cost of routing, including Routing Costs.
Market Maker Non-Penny Pilot Add Volume Tier 3
    The Exchange determines the liquidity adding rebate that it will 
offer Members using a tiered pricing structure. Currently, the Exchange 
offers rebates ranging from $0.45 and $0.65 per share for Market Maker 
\7\ orders that add volume in non-Penny Pilot securities under three 
tiers described in footnote 7 of the fee schedule. To receive Tier 3's 
rebate of $0.65 per share, a Member must have: (i) An ADAV \8\ in 
Market Maker non-Penny Pilot Securities equal to or greater than 0.20% 
of average OCV; \9\ and (ii) an ADAV in Non-Customer orders equal to or 
greater than 3.00% of average OCV. The Exchange now proposes to reduce 
the first prong of Tier 3's required criteria to require that a Member 
have an ADAV in Market Maker Non-Penny Pilot orders of at least 0.10% 
of average OCV, rather than 0.20% of average OCV. The Exchange does not 
proposed to amend the second prong of Tier 3's required criteria or the 
rebate associated with the tier.
---------------------------------------------------------------------------

    \7\ Id.
    \8\ Id.
    \9\ Id.
---------------------------------------------------------------------------

Elimination of References to Mini Options
    Mini Options \10\ on SPDR S&P 500 (``SPY''), Apple Inc. (``AAPL''), 
SPDR Gold Trust (``GLD''), Alphabet Inc. (``GOOGL''), and Amazon.com 
Inc. (``AMZN'') listed and traded on BZX Options expired in January 
2017 and no other series of Mini Options currently trade nor will any 
new series of Mini Options be trading on BZX Options. As a result, the 
Exchange proposes to delete all fees for Mini Options from its fee 
schedule by deleting fee codes DM,\11\

[[Page 10923]]

MA,\12\ MR,\13\ ZC,\14\ and ZF \15\ from the Fee Codes and Associate 
Fees table and updating the Standard Rates table to reflect the removal 
of these fee codes.
---------------------------------------------------------------------------

    \10\ After an option class on a stock, Exchange-Traded Fund 
Share, Trust Issued Receipt, Exchange Traded Note, and other Index 
Linked Security with a 100 share deliverable has been approved for 
listing and trading on the Exchange, series of option contracts with 
a 10 share deliverable on that stock, Exchange-Traded Fund Share, 
Trust Issued Receipt, Exchange Traded Note, and other Index Linked 
Security may be listed for all expirations opened for trading on the 
Exchange. See Exchange Rule.19.6. Interpretations and Policies .07
    \11\ Fee code DM is appended to an order executed at a Member's 
directed destinations when bypassing the Bats Options order book, 
executed in Mini Options Securities, and is assessed a fee of $0.15 
per contract.
    \12\ Fee code MA is appended to a Member's order which adds 
liquidity in Mini Options Securities, and is not assessed a fee.
    \13\ Fee code MR is appended to a Member's order which removes 
liquidity in Mini Options Securities, and is not assessed a fee.
    \14\ Fee code ZC is appended to a Member's routed Customer order 
in Mini Options Securities, and is assessed a fee of $0.12.
    \15\ Fee code ZF is appended to a Member's routed Non-Customer 
order in Mini Options Securities, and is assessed a fee of $0.12.
---------------------------------------------------------------------------

Implementation Date
    The Exchange proposes to implement the proposed rule change on 
February 1, 2017.\16\
---------------------------------------------------------------------------

    \16\ The Exchange notes that the date of its fee schedule was 
previously amended to state February 1, 2017 in SR-BatsBZX-2017-02 
(filed January 30, 2017).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\17\ in general, and 
furthers the objectives of Section 6(b)(4),\18\ 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 change reflects a competitive 
pricing structure designed to incentivize market participants to direct 
their order flow to the Exchange. The Exchange believes that the 
proposed tier is equitable and non-discriminatory in that it would 
apply uniformly to all Members. The Exchange believes the rates remain 
competitive with those charged by other venues and, therefore, are 
reasonable and equitably allocated to Members.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

Modifications to Fee Codes RQ and RR To Include Routing to MIAX PEARL
    As explained above, the Exchange generally attempts to approximate 
the cost of routing to other options exchanges, including other 
applicable costs to the Exchange for routing. The Exchange believes its 
proposed fees are equitable and reasonable by taking into account 
Routing Costs based on the rates charged by MIAX PEARL. The Exchange 
believes that a pricing model based on approximate Routing Costs is a 
reasonable, fair and equitable approach to pricing. Specifically, the 
Exchange believes that its proposal to adopt routing fees to MIAX PEARL 
is fair, equitable and reasonable because the fees are generally an 
approximation of the anticipated cost to the Exchange for routing 
orders to MIAX PEARL. The Exchange notes that routing through the 
Exchange is voluntary. The Exchange also believes that the proposed fee 
structure for orders routed to and executed at MIAX PEARL is fair and 
equitable and not unreasonably discriminatory in that it applies 
equally to all Members.
Market Maker Non-Penny Pilot Add Volume Tier 3
    The Exchange believes that the proposed rule change to modify the 
required criteria of the Market Maker Non-Penny Pilot Add Volume Tier 3 
is consistent with Section 6(b)(4) of the Act,\19\ 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. 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. Decreasing the criteria is intended to incentivize 
additional Members to send orders to the Exchange in an effort to 
qualify for the enhanced rebate made available by the tier.
---------------------------------------------------------------------------

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

Elimination of References to Mini Options
    The Exchange believes it is equitable, reasonable, and not unfairly 
discriminatory to delete fees for Mini Options from its fee schedule 
because the Mini Options listed and traded on BZX Options expired in 
January 2017 and no other series of Mini Options currently trade nor 
will any new series of Mini Options be trading on BZX Options. The 
Exchange believes that the proposed changes will make the fee schedule 
clearer and eliminate potential investor confusion, thereby removing 
impediments to and perfecting the mechanism of a free and open market 
and a national market system, and in general, protecting investors and 
the public interest.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes the 
proposed routing fee will not impose an undue burden on competition 
because the Exchange will uniformly assess the routing fee on all 
Members. The Exchange does not believe that the proposed changes 
represent a significant departure from routing fees 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 or if they view the proposed fee as excessive. Accordingly, 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. 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. Further, excessive fees 
for participation would serve to impair an exchange's ability to 
compete for order flow and members rather than burdening competition. 
Lastly, the Exchange believes removing fees for Mini Options from its 
fee schedule will not have impact on competition as it is simply 
designed to eliminate potential investor confusion by eliminating fees 
for products no longer available on 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 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 \20\ and paragraph (f) of Rule 19b-4 
thereunder.\21\ At any time within

[[Page 10924]]

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

    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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-BatsBZX-2017-12 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-2017-12. 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-BatsBZX-2017-12 and should 
be submitted on or before March 9, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03102 Filed 2-15-17; 8:45 am]
BILLING CODE 8011-01-P