[Federal Register Volume 82, Number 184 (Monday, September 25, 2017)]
[Notices]
[Pages 44674-44676]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20364]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81654; File No. SR-BatsBYX-2017-21]


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

September 19, 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 September 11, 2017, Bats BYX Exchange, Inc. (the ``Exchange'' 
or ``BYX'') 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 BYX 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.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
    As further described below, the Exchange proposes to amend its fee 
schedule to: (i) Modify its standard rebates to remove liquidity 
yielding fee codes BB, N and W; (ii) adopt a new tier under footnote 1, 
Add/Remove Volume Tiers; and (iii) modify the pricing applicable to 
orders that yield fee codes ZP and ZR, applicable to the Exchange's 
Retail Price Improvement (``RPI'') program, including a change to the 
description of fee code ZR.
Standard Rebates To Remove Liquidity
    The Exchange currently provides a standard rebate of $0.0010 per 
share for orders that remove liquidity from the Exchange in securities 
priced at or above $1.00. The Exchange appends fee codes W, BB and N 
for orders removing liquidity in Tape A, Tape B, and Tape C securities, 
respectively. The Exchange proposes to reduce the standard rebate 
provided for orders yielding these fee codes to a rebate of $0.0008 per 
share. In connection with this change, the Exchange proposes to modify 
the Standard Rates chart contained on the fee schedule to reflect the 
new standard rebate of $0.0008 per share to remove liquidity.
New Remove Volume Tier
    The Exchange currently offers six tiers under footnote 1 that offer 
reduced fees for displayed orders that add liquidity yielding fee codes 
B,\6\ V \7\ and Y,\8\ and an enhanced rebate for orders that remove 
liquidity yielding fee codes BB, N and W, as described above. The 
Exchange proposes to add a new tier under footnote 1, to be known as 
Tier 7, under which a Member would receive an enhanced rebate of 
$0.0016 per share on orders that yield fee codes BB, N and W, where a 
Member has: (i) A Step-Up Remove TCV (proposed to be defined as 
described below) from July 2017 equal to or greater than 0.05%; and 
(ii) a remove ADV \9\ equal to or greater than 0.20% of the TCV.\10\
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    \6\ Fee code B is appended to displayed orders that add 
liquidity to BYX (Tape B) and is assessed a fee of $0.0018 per 
share. See the Exchange's fee schedule available at http://www.bats.com/us/equities/membership/fee_schedule/byx/.
    \7\ Fee code V is appended to displayed orders that add 
liquidity to BYX (Tape A) and is assessed a fee of $0.0018 per 
share. Id.
    \8\ Fee code Y is appended to displayed orders that add 
liquidity to BYX (Tape C) and is assessed a fee of $0.0018 per 
share. Id.
    \9\ ``ADV'' means average daily volume calculated as the number 
of shares added or removed, combined, per day on a monthly basis. 
See the Exchange's fee schedule available at http://www.bats.com/us/equities/membership/fee_schedule/byx/. The Exchange notes that in 
this context, because the tier is based on ``remove ADV,'' the 
Exchange will only consider volume that removes liquidity in its 
calculation.
    \10\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply. Id.
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    In conjunction with this change, the Exchange proposes to adopt a 
definition for Step-Up Remove TCV so that this term is defined as 
``remove ADV as a percentage of TCV in the relevant baseline month 
subtracted from current remove ADV as a percentage of TCV.'' This term 
is consistent with the existing definition of Step-Up Remove ADAV.
RPI Pricing
    The Exchange maintains specific pricing applicable to its RPI 
program for executions of orders in securities priced at or above 
$1.00. Specifically, the Exchange currently applies fee code ZR and 
provides a $0.0025 rebate per share for a Retail Order \11\ that 
removes liquidity from the Exchange, except for a Retail Order that 
removes displayed liquidity or Mid-Point Peg liquidity.\12\ The 
Exchange currently applies fee code

[[Page 44675]]

ZP and charges a fee of $0.0025 per share for any Retail Price 
Improving Order \13\ that adds liquidity to the Exchange and is removed 
by a Retail Order.
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    \11\ As defined in BYX Rule 11.24(a)(2), a ``Retail Order'' is 
an agency order or riskless principal that meets the criteria of 
FINRA Rule 5320.03 that originates from a natural person and is 
submitted to the Exchange by a Retail Member organization, provided 
that no change is made to the terms of the order with respect to 
price or side of market and the order does not originate from a 
trading algorithm or any other computerized methodology.
    \12\ Pursuant to footnote 5, the standard rebate/fee for 
accessing liquidity applies to any Retail Order that removes 
displayed liquidity or Mid-Point Peg liquidity.
    \13\ As defined in BYX Rule 11.24(a)(3), a ``Retail Price 
Improvement Order'' consists of non-displayed interest on the 
Exchange that is priced better than the Protected NBB or Protected 
NBO by at least $0.001 and that is identified as such.
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    The Exchange proposes to reduce the rebate provided to a Retail 
Order that yields fee code ZR from a rebate of $0.0025 per share to a 
rebate of $0.0015 per share. The Exchange also proposes to reduce the 
fee charged for any Retail Price Improving Order that yields fee code 
ZP from a fee of $0.0025 per share to a fee of $0.0016 per share.
    In addition to these changes, the Exchange proposes to expand the 
description of fee code ZR to clarify that this fee code is applied 
when a Retail Order executes against either a Retail Price Improving 
Order or a non-displayed order yielding fee code HA. This fee structure 
has been in place for several years \14\ and footnote 5 explicitly 
defines the types of orders against which a Retail Order can execute 
that result in such order being assessed the standard fee or 
rebate.\15\ However, the Exchange believes that fee code ZR would be 
clearer if it reflected the complete universe of liquidity against 
which a Retail Order can execute and still yield such fee code. This 
clarity is achieved by adding reference to non-displayed liquidity 
yielding fee code HA to fee code ZR.
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    \14\ See Securities Exchange Act Release No. 71939 (April 14, 
2014), 79 FR 21977, 21978 (April 18, 2014) (SR-BYX-2014-004) (notice 
of filing and immediate effectiveness of effectiveness of proposal 
to modify BYX fees, including proposal to charge the standard fee to 
add non-displayed liquidity to an order that adds non-displayed 
liquidity and is removed by a Retail Order).
    \15\ See supra, note 12.
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Implementation Date
    The Exchange proposes to implement the above changes to its fee 
schedule effective immediately.\16\
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    \16\ The Exchange initially filed the proposed amendments to its 
fee schedule on September 1, 2017 (SR-BatsBYX-2017-20). On September 
11, 2017, the Exchange withdrew SR-BatsBYX-2017-20 and then 
subsequently submitted this filing (SR-BatsBYX-2017-21).
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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.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that proposed changes to fee codes BB, N, and 
W represent an equitable allocation of reasonable dues, fees, and other 
charges because the Exchange's standard rebate for removing liquidity 
continues to be higher than that provided by other exchanges. For 
example, Nasdaq BX, Inc. (``Nasdaq BX'') provides a standard rebate of 
$0.0003 per share for orders that remove liquidity.\19\ The Exchange 
further believes that the standard rebate for fee codes BB, N, and W 
remains equitably allocated and not unreasonably discriminatory because 
such rebate is provided to all Members unless they qualify for enhanced 
rebates based on other factors.
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    \19\ See the Nasdaq BX fee schedule available at http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing.
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    The Exchange believes that the proposed Tier 7 to be added to 
footnote 1 is equitably allocated and reasonable because it will reward 
a Member's growth pattern on the Exchange and such increased volume 
will allow the Exchange to continue to provide and potentially expand 
its incentive programs. The Exchange further believes that the proposed 
tier is reasonable, fair and equitable because the liquidity from the 
proposed change would benefit 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. The 
Exchange also believes the proposed rebate of $0.0016 per share for 
Tier 7 is reasonable in that it is equivalent to the top tier rebate to 
remove liquidity provided by Nasdaq BX.\20\ The proposed pricing 
structure is also not unfairly discriminatory in that it is available 
to all Members.
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    \20\ See id.
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    In addition, volume-based fees such as that proposed herein have 
been widely adopted by 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: (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) the 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 an 
unfairly discriminatory allocation of fees and rebates, because it will 
provide Members with an additional incentive to reach certain 
thresholds on the Exchange.
    The Exchange believes that its proposed adjustments to pricing 
applicable to the RPI program are reasonable, equitably allocated and 
not unreasonably discriminatory because they continue to provide an 
enhanced rebate for Retail Orders entered to the Exchange that remove 
certain liquidity and yield fee code ZR, as described above, but also 
keep such rebates consistent with the Exchange's standard and tiered 
pricing structure to remove liquidity. For the same reason, the 
Exchange believes the reduction of the rate charged to Retail Price 
Improving Orders that yield fee code ZP is reasonable, equitably 
allocated and not unreasonably discriminatory. In addition to remaining 
similar to the rebate provided for contra side orders (i.e., Retail 
Orders provided a $0.0015 rebate per share pursuant to fee code ZR), 
the proposed fee of $0.0016 per share to add liquidity with a Retail 
Price Improving Order is intended to incentivize liquidity providers to 
submit such orders as it is a reduction from the current rate as well 
as lower than the Exchange's current standard fee to add liquidity of 
$0.0018 per share. Finally, the Exchange believes that the proposed 
clarification of fee code ZR is consistent with the Act as it will help 
to avoid potential confusion and because the rebate provided continues 
to be reasonable, equitably allocated and not unreasonably 
discriminatory for the reasons described above.

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 does not believe 
that this change represents a significant departure from previous 
pricing offered by the Exchange or from pricing offered by the 
Exchange's competitors. The proposed rates would apply uniformly to all 
Members, and 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. Further, excessive fees would serve 
to impair an exchange's ability to compete for order flow and members 
rather than burdening competition. The Exchange

[[Page 44676]]

believes that its proposal would not burden intramarket competition 
because the proposed rate would apply uniformly to all Members.

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 \21\ and paragraph (f) of Rule 19b-4 
thereunder.\22\ 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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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-BatsBYX-2017-21 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-BatsBYX-2017-21. 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-BatsBYX-2017-21, and should 
be submitted on or before October 16, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20364 Filed 9-22-17; 8:45 am]
 BILLING CODE 8011-01-P