[Federal Register Volume 82, Number 200 (Wednesday, October 18, 2017)]
[Notices]
[Pages 48552-48553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22540]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81866; File No. SR-BatsBZX-2017-65]


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

October 12, 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 October 2, 2017, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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 BZX 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its fee schedule for its equity 
options platform (``BZX Options'') to adopt a new Firm,\6\ Broker 
Dealer \7\ and Joint Back Office \8\ Non-Penny Pilot \9\ Add Volume 
Tier under footnote 8.
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    \6\ ``Firm'' applies to any transaction identified by a Member 
for clearing in the Firm range at the OCC, excluding any Joint Back 
Office transaction. See the Exchange's fee schedule available at 
http://www.bats.com/us/options/membership/fee_schedule/bzx/.
    \7\ ``Broker Dealer'' applies to any order for the account of a 
broker dealer, including a foreign broker dealer, that clears in the 
Customer range at the Options Clearing Corporation (``OCC''). Id.
    \8\ ``Joint Back Office'' applies to any transaction identified 
by a Member for clearing in the Firm range at the OCC that is 
identified with an origin code as Joint Back Office. A Joint Back 
Office participant is a Member that maintains a Joint Back Office 
arrangement with a clearing broker-dealer. Id.
    \9\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01. Id. ``Non-
Penny Pilot'' refers to all other issues.
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    The Exchange currently offers three Firm, Broker Dealer and Joint 
Back Office Non-Penny Add Volume Tiers under footnote 8, which provide 
an enhanced rebate ranging from $0.33 to $0.82 per contract for 
qualifying orders that add liquidity in Non Penny Pilot Securities and 
yield fee code NF.\10\ The Exchange now proposes to add a new Tier 3 
and to re-number current Tier 3 as Tier 4.
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    \10\ Fee code NF is appended to Firm, Broker Dealer and Joint 
Back Office orders in Non-Penny Pilot Securities that add liquidity. 
Orders that yield fee code NF are provided a standard rebate of 
$0.30 per contract. Id.
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    Currently under Tier 3, to be re-numbered as Tier 4, a Member's 
orders that yield fee code NF receive an enhanced rebate of $0.82 per 
contract where the Member has an: (i) ADV \11\ greater than or equal to 
2.30% of average OCV; \12\ (ii) ADAV \13\ in Away Market Maker,\14\ 
Firm, Broker Dealer and Joint Back Office orders greater than or equal 
to 1.65% of average OCV; and (iii) ADAV in Non-Customer \15\ Non-Penny 
\16\ orders greater than or equal to 0.20% of average OCV. The Exchange 
proposes to adopt new Tier 3, which would be similar to re-numbered 
Tier 4 but would have lower criteria and a lower rebate. Specifically, 
pursuant to new Tier 3 a Member's orders that yield fee code NF would 
receive an enhanced rebate of $0.53 per contract where the Member has 
an: (i) ADV greater than or equal to 2.30% of average OCV; (ii) ADAV in 
Away Market Maker, Firm, Broker Dealer and Joint Back Office orders 
greater than or equal to 1.45% of average OCV; and (iii) ADAV in Non-
Customer Non-Penny orders greater than or equal to 0.20% of average 
OCV. Thus, the second criterion is lower, requiring an ADAV in 
applicable orders greater than or equal to 1.45% of average OCV rather 
than 1.65% of average OCV. Otherwise the criteria of Tier 3 are the 
same as Tier 4. The Exchange also notes that the proposed enhanced 
rebate of $0.53 is also the same as the enhanced rebate provided 
pursuant to Tier 2.
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    \11\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day. Id.
    \12\ ``OCV'' means the total equity and ETF options volume that 
clears in the Customer 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 and on any day with a scheduled early market close. Id.
    \13\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added per day. See the Exchange's fee schedule 
available at http://www.bats.com/us/options/membership/fee_schedule/bzx/.
    \14\ ``Away Market Maker'' applies to any transaction identified 
by a Member for clearing in the Market Maker range at the OCC, where 
such Member is not registered with the Exchange as a Market Maker, 
but is registered as a market maker on another options exchange. Id.
    \15\ ``Non-Customer'' applies to any transaction identified by a 
Member for clearing which is not in the Customer range at the OCC, 
excluding any transaction for a Broker Dealer or a ``Professional'' 
as defined in Exchange Rule 16.1. Id.
    \16\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01. Id. Non-Penny 
securities are all other securities.
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Implementation Date
    The Exchange proposes to implement the above changes to its fee 
schedule on October 2, 2017.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent

[[Page 48553]]

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 believes that the proposed modification to the 
Exchange's tiered pricing structure is reasonable, fair and equitable, 
and non-discriminatory. The Exchange operates in a highly competitive 
market in which market participants may readily send order flow to many 
competing venues if they deem fees at the Exchange to be excessive or 
incentives provided to be insufficient. The proposed 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.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
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    Volume-based pricing structures such as that maintained by the 
Exchange 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. 
In particular, the proposed change to footnote 8 is a minor change 
intended to provide an incentive similar to an existing incentive but 
that is more attainable. The proposed incentive, in turn, is intended 
to incentivize Members to send increased order flow to the Exchange in 
an effort to qualify for the enhanced rebates made available by the 
tier. This increased order flow, in turn, contributes to the growth of 
the Exchange. The Exchange also believes the rebate associated with the 
tier is reasonable as it reflects the difficulty in achieving the tier 
and is the same as that provided under a different volume tier (Tier 
2). These incentives remain reasonably related to the value to the 
Exchange's market quality associated with higher levels of market 
activity, including liquidity provision and the introduction of higher 
volumes of orders into the price and volume discovery processes. The 
proposed change to the tiered pricing structure is not unfairly 
discriminatory because it will apply equally to all Members.

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. The Exchange 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
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. 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.

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 \19\ and paragraph (f) of Rule 19b-4 
thereunder.\20\ 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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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-2017-65 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-BatsBZX-2017-65. 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-2017-65, and should 
be submitted on or before November 8, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22540 Filed 10-17-17; 8:45 am]
BILLING CODE 8011-01-P