[Federal Register Volume 82, Number 33 (Tuesday, February 21, 2017)]
[Notices]
[Pages 11275-11277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03299]



[[Page 11275]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80034; File No. SR-BatsEDGX-2017-09]


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

February 14, 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 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.
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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 EDGX Rules 
15.1(a) and (c).
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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) Increase 
the standard rate to remove liquidity to $0.0030 per share; (ii) 
increase the rate for orders that yield fee codes EA or ER; (iii) add a 
definition for the term ``Step-Up Add TCV; and (iii) add a new Step-Up 
Tier under footnote 1.
Standard Removal Rate
    Currently, fee codes 6,\6\ BB,\7\ N,\8\ PR,\9\ W \10\ and ZR \11\ 
of the Exchange's fee schedule set for the standard rate of $0.0029 
charged per share to orders that remove liquidity from the Exchange in 
securities priced equal to or greater than $1.00. The Exchange now 
proposes to increase the standard rate for orders in securities priced 
equal to or greater than $1.00 that remove liquidity from the Exchange 
to $0.0030 per share.\12\ Therefore, the Exchange proposes to increase 
the rate under fee codes 6, BB, N, PR, W and ZR from $0.0029 to $0.0030 
per share. The Exchange also proposes to update the Standard Rates 
table accordingly to reflect new standard rate.\13\
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    \6\ As described in the Exchange's fee schedule, orders that 
remove liquidity from the Exchange during the pre and post market 
yield fee code 6 and are charged the standard removal rate of 
$0.0029 per share.
    \7\ As described in the Exchange's fee schedule, orders that 
remove liquidity from the Exchange in Tape B securities yield fee 
code BB and are charged the standard removal rate of $0.0029 per 
share.
    \8\ As described in the Exchange's fee schedule, orders that 
remove liquidity from the Exchange in Tape C securities yield fee 
code N and are charged the standard removal rate of $0.0029 per 
share.
    \9\ As described in the Exchange's fee schedule, orders that 
remove liquidity from the Exchange utilizing the ROUQ routing 
strategy yield fee code PR and are charged the standard removal rate 
of $0.0029 per share. The ROUQ routing strategy is described in 
Exchange Rule 11.11(b)(3)(D).
    \10\ As described in the Exchange's fee schedule, orders that 
remove liquidity from the Exchange in Tape A securities yield fee 
code W and are charged the standard removal rate of $0.0029 per 
share.
    \11\ As described in the Exchange's fee schedule, Retail Orders 
that remove liquidity from the Exchange yield fee code ZR and are 
charged the standard removal rate of $0.0029 per share. Retail 
Orders are defined in Exchange Rule 11.21(a)(2).
    \12\ The Exchange does not proposes to amend the standard 
removal rate for orders in securities priced below $1.00.
    \13\ The Exchange also proposes to add fee code PR to the 
Standard Fee Code row of the Standard Rates Table because, as 
described above, fee code PR sets forth a standard rate for removing 
liquidity from the Exchange.
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Fee Codes EA or ER
    An Internalized Trade is a trade where the two orders inadvertently 
match against each other and share the same Market Participant 
Identifier (``MPID''). Fee code EA is appended to side of an 
Internalized Trade that adds liquidity, while fee code ER is appended 
to the side of an Internalized Trade that removes liquidity. Orders 
that yield fee codes EA or ER are charged a fee of $0.00045 per share 
in securities priced at or above $1.00 and 0.15% of the dollar value of 
the trade in securities priced below $1.00. The Exchange now proposes 
to increase the fee for orders that yield fee codes EA or ER in 
securities priced at or above $1.00 to $0.00050 per share.\14\
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    \14\ The Exchange does not proposes [sic] to amend the rate for 
orders in securities priced below $1.00 that yield fee codes EA or 
ER.
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Step-Up Add Volume Tier
    The Exchange proposes to add a definition for the term ``Step-Up 
Add TCV and add a new Step-Up Tier under footnote 1.
    First, the Exchange proposes to define the term ``Step-Up Add TCV'' 
as ``ADAV \15\ as a percentage of TCV \16\ in the relevant baseline 
month subtracted from current ADAV as a percentage of TCV.''
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    \15\ As defined in the Exchange's fee schedule.
    \16\ As defined in the Exchange's fee schedule.
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    Second, the Exchange proposes to add a new tier under footnote 1 of 
the fee schedule to be known as ``Step-Up Tier 1'' [sic]. By way of 
background, the Exchange determines the liquidity adding rebate that it 
will provide to Members using the Exchange's tiered pricing structure. 
Under such pricing structure, a Member will receive a rebate of 
anywhere between $0.0025 and $0.0033 per share executed, depending on 
the volume tier for which such Member qualifies under footnote 1 of the 
fee schedule. Under the proposed Step-Up Tier, a Member would receive a 
rebate of $0.0032 per share for orders that add liquidity where that 
Member adds an ADV \17\ equal to or greater than 0.40% of the TCV and 
has a Step-Up Add TCV from January 2017 equal to or greater than 0.10%.
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    \17\ As defined in the Exchange's fee schedule.
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Implementation Date
    The Exchange proposes to implement the above changes to its fee 
schedule on February 1, 2017.

[[Page 11276]]

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.\18\ 
Specifically, the Exchange believes that the proposed rule change 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. 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 levels to be 
excessive. The Exchange also believes that each of the proposed 
amendments are non-discriminatory because each will apply uniformly to 
all Members.
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    \18\ 15 U.S.C. 78f.
    \19\ 15 U.S.C. 78f(b)(4).
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Standard Removal Rate
    The Exchange believes that its proposal to increase the standard 
fee charged for orders that remove liquidity from the Exchange is 
reasonable and equitable because it will allow the Exchange to utilize 
the additional revenue to offset providing volume based enhanced 
rebates for removing liquidity as proposed herein. In addition, the 
Exchange notes that the proposed standard removal rate is consistent 
with Rule 610(c)(1) of Regulation NMS \20\ and is equal to the standard 
remove rate charged by other exchange to remove liquidity in securities 
priced at or above $1.00.\21\
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    \20\ 17 CFR 242. 610(c)(1).
    \21\ See Nasdaq Stock Market LLC's fee schedule available at 
http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2, NYSE 
Arca fee schedule available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf, and the Bats BZX 
Exchange, Inc.'s (``BZX'') fee schedule available at http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
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Fee Codes EA or ER
    The Exchange believes that its proposal to increase the fees 
charged for Internalized Orders is reasonable and equitable because the 
charge for Members inadvertently matching with themselves will continue 
to be no more favorable than the Exchange's maker/taker spread enabling 
the Exchange to continue to discourage potential wash sales.\22\ In 
addition, like as stated above for the increase to the standard removal 
rate, the proposed increase will allow the Exchange to utilize the 
additional revenue to offset providing volume based enhanced rebates 
for removing liquidity as proposed herein.
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    \22\ The Exchange will continue to ensure that the fees 
applicable to Internalized Trades are no more favorable than the 
Exchange's prevailing maker/taker spread.
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Step-Up Add Volume Tier
    The Exchange believes that its proposed definition of Step-Up Add 
TCV and the new Step-Up Tier provide for the equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities. 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 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.
    In particular, the Exchange believes the definition of Step-Up Add 
TCV is equitable and reasonable as it is identical to the same defined 
term on BZX.\23\ Volume-based rebates such as that proposed 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 
provision and/or growth patterns; and (iii) introduction of higher 
volumes of orders into the price and volume discovery processes. The 
Exchange believes that the proposed tier is a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and 
rebates because it will continue to provide Members with an incentive 
to reach certain thresholds on the Exchange.
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    \23\ See the BZX fee schedule available at http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
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    In particular, the Exchange believes the proposed Step-Up Tier is a 
reasonable means to encourage Members to increase their liquidity on 
the Exchange. The Exchange further believes that the proposed Step-Up 
Tier represents an equitable allocation of reasonable dues, fees, and 
other charges because the thresholds necessary to achieve the tier 
encourages Members to add increased liquidity to the EDGX Book \24\ 
each month. The increased liquidity 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. Such pricing programs thereby 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. Specifically, the Exchange believes the level of the enhanced 
rebate provided by the tier reasonably reflects the criteria necessary 
to achieve the tier. For example, a Member would receive a rebate of 
$0.0032 per share where they not only add an ADV equal to or greater 
than 0.40% of the TCV, but also has a Step-Up Add TCV from January 2017 
equal to or greater than 0.10%.
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    \24\ See Exchange Rule 1.5(d).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed amendments 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 amendments to its fee schedule 
in order to enhance its ability to compete with other exchanges. 
Rather, the proposal as a whole is a competitive proposal that is 
seeking further the growth of the Exchange. The Exchange has structured 
the proposed fees and rebates to attract certain additional volume in 
both Customer and certain Non-Customer orders, however, the Exchange 
believes that its pricing for all capacities is competitive with that 
offered by other options exchanges. 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 will impair the ability of Members or competing venues 
to maintain their competitive standing in the financial markets. In 
particular, the Exchange believes that the proposed tiers contribute 
to, rather than burden competition, as such changes are broadly 
intended to incentivize participants 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. Likewise, the proposed changes to the 
standard removal rates and rates for Internalized Trades should not 
have any burden on competition on competition [sic] as they are in line 
with that

[[Page 11277]]

charged by other exchanger or is designed to continue to discourage 
potential wash sales.

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 \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-BatsEDGX-2017-09 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-2017-09. 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-BatsEDGX-2017-09, and should 
be submitted on or before March 14, 2017.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03299 Filed 2-17-17; 8:45 am]
 BILLING CODE 8011-01-P