Self-Regulatory Organizations; Bats EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Transaction Fees, 43598-43601 [2017-19809]

Download as PDF 43598 Federal Register / Vol. 82, No. 179 / Monday, September 18, 2017 / Notices 19(b)(3)(A) of the Act 7 and Rule 19b– 4(f)(6) thereunder.8 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 9 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 10 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay. The Exchange states that waiver of the operative delay is consistent with the protection of investors and the public interest as it will allow the Exchange to immediately remove outdated language from Chapter 19 and thereby avoid member confusion about how Flash auction allocations are performed on the Exchange. The Commission believes the waiver of the operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.11 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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 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 (https://www.sec.gov/ rules/sro.shtml); or 7 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. 9 17 CFR 240.19b–4(f)(6). 10 17 CFR 240.19b–4(f)(6)(iii). 11 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). sradovich on DSKBBY8HB2PROD with NOTICES 8 17 VerDate Sep<11>2014 16:54 Sep 15, 2017 Jkt 241001 • Send an email to rule-comments@ sec.gov. Please include File Number SR– MRX–2017–17 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–MRX–2017–17. 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 (https://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–MRX– 2017–17, and should be submitted on or before October 10, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–19806 Filed 9–15–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81600; File No. SR– BatsEDGA–2017–23] Self-Regulatory Organizations; Bats EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Transaction Fees September 13, 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 August 31, 2017, Bats EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) 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. 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 EDGA Rules 15.1(a) and (c). 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 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). 2 17 12 17 PO 00000 CFR 200.30–3(a)(12). Frm 00085 Fmt 4703 Sfmt 4703 E:\FR\FM\18SEN1.SGM 18SEN1 Federal Register / Vol. 82, No. 179 / Monday, September 18, 2017 / Notices 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 its fee schedule to: (i) Outline the fees for MidPoint Discretionary Orders (‘‘MDO’’) 6 by adopting new fee codes DA and DR as well as amending the descriptions of fee codes DM and DT; and (ii) amend the RMPT/RMPL Tiers under footnote 1. Fees for MidPoint Discretionary Orders In sum, an MDO is a limit order to buy that is displayed at and pegged to the National Best Bid (‘‘NBB’’), with discretion to execute at prices up to and including the midpoint of the National Best Bid and Offer (‘‘NBBO’’), or a limit order to sell that is displayed at and pegged to the National Best Offer (‘‘NBO’’), with discretion to execute at prices down to and including the midpoint of the NBBO.7 MDOs are designed to exercise discretion to execute to the midpoint of the NBBO and provide price improvement over the NBBO. Currently, an MDO is displayed on the EDGA Book 8 at the NBB or NBO to which it is pegged. Starting on September 15, 2017, the Exchange will permit Users 9 to elect that their MDO be non-displayed on the EDGA Book at the NBB or NBO to which it is pegged.10 Today, an MDO is subject to the standard rates for adding or removing liquidity when executed at the NBB or NBO to which it is pegged. The standard rate for adding or removing liquidity in securities priced at or above $1.00 is $0.0003 per share and free for securities priced below $1.00.11 MDOs that are 6 See Exchange Rule 11.8(e). Exchange Rule 11.8(e) for a complete description of the operation of MDOs. 8 See Exchange Rule 1.5(d). 9 See Exchange Rule 1.5(ee). 10 See Update: Bats EDGA Exchange Announces Availability of Non-Displayed Midpoint Discretionary Orders (Non-Displayed MDO) Effective September 15, 2017, available at https:// cdn.batstrading.com/resources/release_notes/2017/ Update-Bats-EDGA-Exchange-Announces-HiddenMidpoint-Discretionary-Order-Hidden-MDOFunctionality-Available-Effective-September-152017.pdf. See also Securities Exchange Act Release No. 81454 (August 22, 2017), 82 FR 40823 (August 28, 2017) (SR–BatsEDGA–2017–21) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.8, Order Types, To Permit Midpoint Discretionary Orders To Be NonDisplayed). 11 See the Standard Rates table of the Exchange’s fee schedule available at https://www.bats.com/us/ equities/membership/fee_schedule/edga/. sradovich on DSKBBY8HB2PROD with NOTICES 7 See VerDate Sep<11>2014 16:54 Sep 15, 2017 Jkt 241001 executed within their discretionary range are free in securities priced at, above, or below $1.00. MDOs that are executed within their discretionary range yield fee code DM where they add liquidity and fee code DT where they remove liquidity. The Exchange now proposes to adopt new fee codes DA and DR as well as amend the descriptions of fee codes DM and DT in order to outline the fees for MDOs. Today, a non-displayed order that adds liquidity yields fee code HA and is free for securities priced at, above, or below $1.00. A non-displayed order that removes liquidity yields fee code HR and is charged a fee of $0.0005 per share in securities priced at or above $1.00 and 0.05% of the transaction’s dollar value in securities priced below $1.00. Absent this proposed rule change, beginning on September 15, 2017, an MDO that is non-displayed on the EDGA Book would yield fee codes HA or HR when executed at its pegged price. The Exchange now proposed to adopt new fee codes DA and DR that would apply to all MDO that are executed at their pegged price, regardless of whether they are displayed or not. Fee code DA would be appended to all MDOs that add liquidity not within their discretionary range (i.e., executed at their pegged price) and fee code DR would be appended to all MDOs that remove liquidity not within their discretionary range. MDOs that yield fee code DA or DR would be charged a rate of $0.0003 per share for orders priced at or above $1.00 and no fee for orders priced below $1.00. This results in no rate change for displayed MDOs and a fee decrease from $0.0005 per share to $0.003 per share for non-displayed MDOs when both are executed at their pegged price [sic]. The Exchange also proposes to amend the descriptions of fee codes DM and DT to clarify that those fee codes apply when an MDO is executed within its discretionary range. The description of fee code DM currently states that it applies to a non-displayed order that adds liquidity using an MDO. Likewise, the description of fee code DT states that it applies to a non-displayed order that removes liquidity using an MDO. These descriptions were designed to include an MDO executed at a nondisplayed price within its discretionary range and not at its displayed pegged price. In light of the proposed fee codes DA and DR that set forth fees for MDOs executed at their pegged price, the Exchange proposed to amend the descriptions of fee codes DM and DT to make clear they apply to MDOs executed within their discretionary PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 43599 range. As such, the description of fee code DM would be amended to state that it applies when an MDO adds liquidity within its discretionary range and the description of fee code DT would be amended to state that it applies when an MDO removes liquidity within its discretionary range. The Exchange does not propose to amend the rates applicable to fee codes DM and DT. RMPT/RMPL Tiers The Exchange offers two tiers under footnote 1, the RMPT/RMPL Tiers under which a Member receives a discounted fee of either $0.0006 or $0.0008 per share for orders yielding fee code PX 12 where that Member meets certain required criteria. Fee code PX is append to orders that are routed using the RMPL routing strategy to a destination not covered by fee code PL,13 or are routed using the RMPT routing strategy, and are assessed a fee of $0.0012 per share on securities priced over $1.00, and a fee of 30% of the total dollar value on securities priced below $1.00. Under Tier 1, a Members is charged a discounted fee of $0.0008 per share for orders yielding fee code PX where they add or remove an ADV 14 greater than or equal to 2,000,000 shares using the RMPT or RMPL15 routing strategies. Under Tier 2, a Member is charged a discounted fee of $0.0006 per share for orders yielding fee code PX where that Member adds or removes an ADV greater than or equal to 4,000,000 shares using the RMPT or RMPL routing strategies. The Exchange now proposes to delete Tier 1 and to increase the fee charged under Tier 2 from $0.0006 to $0.0008 per share. The Exchange also proposes to rename Tier 2 as Tier 1. The Exchange does not propose to amend 12 See the Exchange’s fee schedule available at https://www.bats.com/us/equities/membership/fee_ schedule/edga/. 13 Fee code PL is appended to orders that are routed to Bats BZX Exchange, Inc., Bats EDGX Exchange, Inc., the New York Stock Exchange, Inc., NYSE Arca, Inc. or the Nasdaq Stock Market LLC using the RMPL routing strategy and are assessed a fee of $0.0030 per share on securities priced over $1.00, and 30% of the transaction’s dollar value for securities priced below $1.00. Id. 14 ADV is generally defined as average daily volume calculated as the number of shares added to, removed from, or routed by, the Exchange, or any combination or subset thereof, per day. Id. 15 The RMPT routing strategy operates similarly to RMPL in that under both Mid-Point Peg Orders check the System for available shares and any remaining shares are then sent to destinations on the System routing table that support midpoint eligible orders. If any shares remain unexecuted after routing, they are posted on the EDGA Book as a Mid-Point Peg Order, unless otherwise instructed by the User. While RMPL and RMPT operate in an identical manner, the trading venues that each routing strategy routes to and the order in which it routes them differ. See Exchange Rule 11.11(g)(13). E:\FR\FM\18SEN1.SGM 18SEN1 43600 Federal Register / Vol. 82, No. 179 / Monday, September 18, 2017 / Notices the remaining tier’s required criteria. Lastly, the Exchange proposes to make ministerial changes to the introduction to the RMPT/RMPL Tiers and the heading of the second column to make clear the discounted rate only applies to routed orders and not orders that remove liquidity. Implementation Date The Exchange proposes to implement these changes to its fee schedule on September 1, 2017. The remaining changes to its fee schedule applicable to non-displayed MDOs will be applicable until September 15, 2017 when that functionality becomes available. sradovich on DSKBBY8HB2PROD with NOTICES 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,16 in general, and furthers the objectives of Section 6(b)(4),17 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. Fees for MidPoint Discretionary Orders The Exchange believes that its proposal to outline the fees for MDOs represents an equitable allocation of reasonable dues, fees, and other charges among Members and other persons using its facilities in that they are designed to clearly delineate the rates applicable when an MDO is executed at its pegged price or within its discretionary range, in light of upcoming functionality that would enable a User to elect that their MDO not be displayed on the EDGA Book. As noted above, proposed new fee codes DA and DR result in no rate change for displayed MDOs and a fee decrease from $0.0005 per share to $0.003 per share for non-displayed MDOs when both are executed at their pegged price [sic]. The Exchange believes it is equitable and reasonable to charge a lower fee to MDOs than other nondisplayed orders here as MDOs add liquidity at the NBBO while offering price improvement opportunities to incoming contra-side orders that execute within its discretionary range. The amendments to the descriptions of fee codes DM and DT are also equitable and reasonable in that they clarify the application of those fee codes, thereby avoiding potential investor confusion. Lastly, the Exchange also believes that the proposed amendments are nondiscriminatory because they apply uniformly to all Members. 16 15 17 15 U.S.C. 78f. U.S.C. 78f(b)(4). VerDate Sep<11>2014 16:54 Sep 15, 2017 Jkt 241001 RMPT/RMPL Tiers The Exchange believe that the amendments to the RMPL/RMPT Tiers are also reasonable and equitable because it is designed to attract additional midpoint liquidity to the Exchange by removing a tier with lower ADV requirement, resulting in increased price improvement opportunities for orders seeking an execution at the midpoint of the NBBO on the Exchange or elsewhere. In addition, increasing the rate for the remaining tier is designed to cover the Exchange’s routing costs while continuing to provide the Exchange revenue to be used to fund the Exchange generally. This includes the cost of maintaining and improving the technology used to handle and route orders from the Exchange as well as programs that the Exchange believes help to attract additional liquidity and thus improve the depth of liquidity available on the Exchange. The Exchange notes that routing through the Exchange is voluntary. The Exchange also believes that the proposed amendments are non-discriminatory because it applies uniformly to all Members. In addition, volume-based rebates 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. (B) Self-Regulatory Organization’s Statement on Burden on Competition This proposed rule change does 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 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 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 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 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 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 18 and paragraph (f) of Rule 19b–4 thereunder.19 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. 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BatsEDGA–2017–23 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–BatsEDGA–2017–23. This file number should be included on the 18 15 19 17 E:\FR\FM\18SEN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). 18SEN1 Federal Register / Vol. 82, No. 179 / Monday, September 18, 2017 / Notices 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 (https://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– BatsEDGA–2017–23 and should be submitted on or before October 10, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–19809 Filed 9–15–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81582; File No. SR– NYSEAMER–2017–12] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 975NY and Rule 953NY sradovich on DSKBBY8HB2PROD with NOTICES September 12, 2017. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on September 1, 2017, NYSE American LLC (the ‘‘Exchange’’ or ‘‘NYSE 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 16:54 Sep 15, 2017 Jkt 241001 American’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 975NY (Nullification and Adjustment of Options Transactions including Obvious Errors) and Rule 953NY (Trading Halts and Suspensions). The proposed rule change is available on the Exchange’s Web site at www.nyse.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 self-regulatory organization 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 those 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 purpose of this filing is to amend Rule 975NY, relating to the adjustment and nullification of erroneous transactions, and Rule 953NY, regarding trading halts and suspensions. The Exchange’s proposal is based on that of Bats BZX (‘‘BATS’’), which the Commission approved on July 6, 2017, and those that the other options exchanges intend to file.4 Background The Exchange and other options exchanges adopted a harmonized rule 4 See Securities Exchange Act Release Nos. 81084 (July 6, 2017), 82 FR 32216 (July12, 2017) (‘‘BATS Approval Order’’); 80709 (May 17, 2017), 82 FR 23684 (May 23, 2017) (‘‘Notice of BATS Filing’’) (SR–BatsBZX–2017–35). See also Securities Exchange Act Release No. 81348 (August 8, 2017), 82 FR 37910 (August 14, 2017) (SR–BX–2017–038) (immediately effective filing based on BATS Approval Order). PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 43601 related to the adjustment and nullification of erroneous options transactions, including a specific provision related to coordination in connection with large-scale events involving erroneous options transactions.5 The Exchange believes that the changes the options exchanges implemented with the harmonized rule have led to increased transparency and finality with respect to the adjustment and nullification of erroneous options transactions. As part of the initial initiative, however, the Exchange and other options exchanges deferred a few specific matters for further discussion.6 Specifically, as described in the Initial Filing, the Exchange and all other options exchanges have been working to further improve the review of potentially erroneous transactions as well as their subsequent adjustment by creating an objective and universal way to determine Theoretical Price in the event a reliable NBBO is not available. Because this initiative required additional exchange and industry discussion as well as additional time for development and implementation, the Exchange and the other options exchanges determined to proceed with the Initial Filing and to undergo an effort to complete any additional improvements to the applicable rule. In this filing, the Exchange proposes to adopt procedures that will lead to a more objective and uniform way to determine Theoretical Price in the event a reliable NBBO is not available. In addition to this change, the Exchange has proposed additional minor changes to its rules. Calculation of Theoretical Price Using a Third Party Provider Under the harmonized rule, when reviewing a transaction as potentially erroneous, the Exchange needs to first determine the ‘‘Theoretical Price’’ of the option, i.e., the Exchange’s estimate of the correct market price for the option. Pursuant to Rule 975NY, if the 5 See Securities Exchange Act Release No. 74921 (May 8, 2015), 80 FR 27816 (May 14, 2015) (SR– NYSEMKT–2015–39) (the ‘‘Initial Filing’’). 6 For example, the Exchange, along with other options exchanges that offer complex orders on their options platforms, recently filed proposals related to rules for handling the adjustment and nullification of erroneous complex order transactions, which proposals were approved by the Commission or filed on an immediately effective basis. See Securities Exchange Act Release Nos. 80040 (February 14, 2017), 82 FR 11248 (February 21, 2017) (granting approval of CBOE proposal related to the nullification and adjustment of complex orders) (SR–CBOE–2016–088); 80497 (April 20, 2017), 82 FR 19290 (April 26, 2017) (notice of filing and immediate effectiveness of Exchange proposal related to the nullification and adjustment of complex orders) (SR–NYSEMKT– 2017–22). E:\FR\FM\18SEN1.SGM 18SEN1

Agencies

[Federal Register Volume 82, Number 179 (Monday, September 18, 2017)]
[Notices]
[Pages 43598-43601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19809]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81600; File No. SR-BatsEDGA-2017-23]


Self-Regulatory Organizations; Bats EDGA Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change Related 
to Transaction Fees

September 13, 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 August 31, 2017, Bats EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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 EDGA 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

[[Page 43599]]

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 its fee schedule to: (i) Outline the 
fees for MidPoint Discretionary Orders (``MDO'') \6\ by adopting new 
fee codes DA and DR as well as amending the descriptions of fee codes 
DM and DT; and (ii) amend the RMPT/RMPL Tiers under footnote 1.
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    \6\ See Exchange Rule 11.8(e).
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Fees for MidPoint Discretionary Orders
    In sum, an MDO is a limit order to buy that is displayed at and 
pegged to the National Best Bid (``NBB''), with discretion to execute 
at prices up to and including the midpoint of the National Best Bid and 
Offer (``NBBO''), or a limit order to sell that is displayed at and 
pegged to the National Best Offer (``NBO''), with discretion to execute 
at prices down to and including the midpoint of the NBBO.\7\ MDOs are 
designed to exercise discretion to execute to the midpoint of the NBBO 
and provide price improvement over the NBBO. Currently, an MDO is 
displayed on the EDGA Book \8\ at the NBB or NBO to which it is pegged. 
Starting on September 15, 2017, the Exchange will permit Users \9\ to 
elect that their MDO be non-displayed on the EDGA Book at the NBB or 
NBO to which it is pegged.\10\
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    \7\ See Exchange Rule 11.8(e) for a complete description of the 
operation of MDOs.
    \8\ See Exchange Rule 1.5(d).
    \9\ See Exchange Rule 1.5(ee).
    \10\ See Update: Bats EDGA Exchange Announces Availability of 
Non-Displayed Midpoint Discretionary Orders (Non-Displayed MDO) 
Effective September 15, 2017, available at https://cdn.batstrading.com/resources/release_notes/2017/Update-Bats-EDGA-Exchange-Announces-Hidden-Midpoint-Discretionary-Order-Hidden-MDO-Functionality-Available-Effective-September-15-2017.pdf. See also 
Securities Exchange Act Release No. 81454 (August 22, 2017), 82 FR 
40823 (August 28, 2017) (SR-BatsEDGA-2017-21) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend Rule 
11.8, Order Types, To Permit Midpoint Discretionary Orders To Be 
Non- Displayed).
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    Today, an MDO is subject to the standard rates for adding or 
removing liquidity when executed at the NBB or NBO to which it is 
pegged. The standard rate for adding or removing liquidity in 
securities priced at or above $1.00 is $0.0003 per share and free for 
securities priced below $1.00.\11\ MDOs that are executed within their 
discretionary range are free in securities priced at, above, or below 
$1.00. MDOs that are executed within their discretionary range yield 
fee code DM where they add liquidity and fee code DT where they remove 
liquidity.
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    \11\ See the Standard Rates table of the Exchange's fee schedule 
available at https://www.bats.com/us/equities/membership/fee_schedule/edga/.
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    The Exchange now proposes to adopt new fee codes DA and DR as well 
as amend the descriptions of fee codes DM and DT in order to outline 
the fees for MDOs. Today, a non-displayed order that adds liquidity 
yields fee code HA and is free for securities priced at, above, or 
below $1.00. A non-displayed order that removes liquidity yields fee 
code HR and is charged a fee of $0.0005 per share in securities priced 
at or above $1.00 and 0.05% of the transaction's dollar value in 
securities priced below $1.00. Absent this proposed rule change, 
beginning on September 15, 2017, an MDO that is non-displayed on the 
EDGA Book would yield fee codes HA or HR when executed at its pegged 
price.
    The Exchange now proposed to adopt new fee codes DA and DR that 
would apply to all MDO that are executed at their pegged price, 
regardless of whether they are displayed or not. Fee code DA would be 
appended to all MDOs that add liquidity not within their discretionary 
range (i.e., executed at their pegged price) and fee code DR would be 
appended to all MDOs that remove liquidity not within their 
discretionary range. MDOs that yield fee code DA or DR would be charged 
a rate of $0.0003 per share for orders priced at or above $1.00 and no 
fee for orders priced below $1.00. This results in no rate change for 
displayed MDOs and a fee decrease from $0.0005 per share to $0.003 per 
share for non-displayed MDOs when both are executed at their pegged 
price [sic].
    The Exchange also proposes to amend the descriptions of fee codes 
DM and DT to clarify that those fee codes apply when an MDO is executed 
within its discretionary range. The description of fee code DM 
currently states that it applies to a non-displayed order that adds 
liquidity using an MDO. Likewise, the description of fee code DT states 
that it applies to a non-displayed order that removes liquidity using 
an MDO. These descriptions were designed to include an MDO executed at 
a non-displayed price within its discretionary range and not at its 
displayed pegged price. In light of the proposed fee codes DA and DR 
that set forth fees for MDOs executed at their pegged price, the 
Exchange proposed to amend the descriptions of fee codes DM and DT to 
make clear they apply to MDOs executed within their discretionary 
range. As such, the description of fee code DM would be amended to 
state that it applies when an MDO adds liquidity within its 
discretionary range and the description of fee code DT would be amended 
to state that it applies when an MDO removes liquidity within its 
discretionary range. The Exchange does not propose to amend the rates 
applicable to fee codes DM and DT.
RMPT/RMPL Tiers
    The Exchange offers two tiers under footnote 1, the RMPT/RMPL Tiers 
under which a Member receives a discounted fee of either $0.0006 or 
$0.0008 per share for orders yielding fee code PX \12\ where that 
Member meets certain required criteria. Fee code PX is append to orders 
that are routed using the RMPL routing strategy to a destination not 
covered by fee code PL,\13\ or are routed using the RMPT routing 
strategy, and are assessed a fee of $0.0012 per share on securities 
priced over $1.00, and a fee of 30% of the total dollar value on 
securities priced below $1.00. Under Tier 1, a Members is charged a 
discounted fee of $0.0008 per share for orders yielding fee code PX 
where they add or remove an ADV \14\ greater than or equal to 2,000,000 
shares using the RMPT or RMPL\15\ routing strategies. Under Tier 2, a 
Member is charged a discounted fee of $0.0006 per share for orders 
yielding fee code PX where that Member adds or removes an ADV greater 
than or equal to 4,000,000 shares using the RMPT or RMPL routing 
strategies. The Exchange now proposes to delete Tier 1 and to increase 
the fee charged under Tier 2 from $0.0006 to $0.0008 per share. The 
Exchange also proposes to rename Tier 2 as Tier 1. The Exchange does 
not propose to amend

[[Page 43600]]

the remaining tier's required criteria. Lastly, the Exchange proposes 
to make ministerial changes to the introduction to the RMPT/RMPL Tiers 
and the heading of the second column to make clear the discounted rate 
only applies to routed orders and not orders that remove liquidity.
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    \12\ See the Exchange's fee schedule available at https://www.bats.com/us/equities/membership/fee_schedule/edga/.
    \13\ Fee code PL is appended to orders that are routed to Bats 
BZX Exchange, Inc., Bats EDGX Exchange, Inc., the New York Stock 
Exchange, Inc., NYSE Arca, Inc. or the Nasdaq Stock Market LLC using 
the RMPL routing strategy and are assessed a fee of $0.0030 per 
share on securities priced over $1.00, and 30% of the transaction's 
dollar value for securities priced below $1.00. Id.
    \14\ ADV is generally defined as average daily volume calculated 
as the number of shares added to, removed from, or routed by, the 
Exchange, or any combination or subset thereof, per day. Id.
    \15\ The RMPT routing strategy operates similarly to RMPL in 
that under both Mid-Point Peg Orders check the System for available 
shares and any remaining shares are then sent to destinations on the 
System routing table that support midpoint eligible orders. If any 
shares remain unexecuted after routing, they are posted on the EDGA 
Book as a Mid-Point Peg Order, unless otherwise instructed by the 
User. While RMPL and RMPT operate in an identical manner, the 
trading venues that each routing strategy routes to and the order in 
which it routes them differ. See Exchange Rule 11.11(g)(13).
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Implementation Date
    The Exchange proposes to implement these changes to its fee 
schedule on September 1, 2017. The remaining changes to its fee 
schedule applicable to non-displayed MDOs will be applicable until 
September 15, 2017 when that functionality becomes available.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\16\ in general, and 
furthers the objectives of Section 6(b)(4),\17\ 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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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
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Fees for MidPoint Discretionary Orders
    The Exchange believes that its proposal to outline the fees for 
MDOs represents an equitable allocation of reasonable dues, fees, and 
other charges among Members and other persons using its facilities in 
that they are designed to clearly delineate the rates applicable when 
an MDO is executed at its pegged price or within its discretionary 
range, in light of upcoming functionality that would enable a User to 
elect that their MDO not be displayed on the EDGA Book. As noted above, 
proposed new fee codes DA and DR result in no rate change for displayed 
MDOs and a fee decrease from $0.0005 per share to $0.003 per share for 
non-displayed MDOs when both are executed at their pegged price [sic]. 
The Exchange believes it is equitable and reasonable to charge a lower 
fee to MDOs than other non-displayed orders here as MDOs add liquidity 
at the NBBO while offering price improvement opportunities to incoming 
contra-side orders that execute within its discretionary range. The 
amendments to the descriptions of fee codes DM and DT are also 
equitable and reasonable in that they clarify the application of those 
fee codes, thereby avoiding potential investor confusion. Lastly, the 
Exchange also believes that the proposed amendments are non-
discriminatory because they apply uniformly to all Members.
RMPT/RMPL Tiers
    The Exchange believe that the amendments to the RMPL/RMPT Tiers are 
also reasonable and equitable because it is designed to attract 
additional midpoint liquidity to the Exchange by removing a tier with 
lower ADV requirement, resulting in increased price improvement 
opportunities for orders seeking an execution at the midpoint of the 
NBBO on the Exchange or elsewhere. In addition, increasing the rate for 
the remaining tier is designed to cover the Exchange's routing costs 
while continuing to provide the Exchange revenue to be used to fund the 
Exchange generally. This includes the cost of maintaining and improving 
the technology used to handle and route orders from the Exchange as 
well as programs that the Exchange believes help to attract additional 
liquidity and thus improve the depth of liquidity available on the 
Exchange. The Exchange notes that routing through the Exchange is 
voluntary. The Exchange also believes that the proposed amendments are 
non-discriminatory because it applies uniformly to all Members.
    In addition, volume-based rebates 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.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    This proposed rule change does 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 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 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 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 \18\ and paragraph (f) of Rule 19b-4 
thereunder.\19\ 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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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BatsEDGA-2017-23 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-BatsEDGA-2017-23. This 
file number should be included on the

[[Page 43601]]

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 
(https://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-BatsEDGA-2017-23 and should be submitted on or before 
October 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19809 Filed 9-15-17; 8:45 am]
 BILLING CODE 8011-01-P
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