Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc., 59425-59427 [2012-23765]
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Federal Register / Vol. 77, No. 188 / Thursday, September 27, 2012 / Notices
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regulating, clearing, settling, and
processing information with respect to,
and facilitating transactions in
securities; to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system; and, in general, to protect
investors and the public interest.
As the Commission noted when it
approved the Exchange’s proposal
relating to the formation of the
Company, while the Company does not
carry out any regulatory functions, all of
its activities must be consistent with the
Act.10 The Company’s LLC Agreement
and Members Agreement must be
reasonably designed to enable the
Company to operate in a manner that is
consistent with the principle that the
Company is not solely a commercial
enterprise, but rather an integral part of
an SRO that is registered pursuant to the
Act and therefore subject to obligations
imposed by the Act.11 In addition,
under Section 4.9 of the LLC
Agreement, because the transactions
described in the proposal result in
NYSE Market, a ‘‘Permitted Transferee’’
of NYSE MKT,12 together with NYSE
MKT, owning more than 19.9% of
outstanding Common Interests, the
transfer and corresponding amendment
to the Member’s Schedule are subject to
receipt of Commission approval
pursuant to the rule filing process under
Section 19(b) of the Exchange Act.
The Commission notes that the
addition of NYSE Market as a Member
of the Company, and the proposed
amendments to the Members’ Schedule
to reflect the changes in ownership
interest percentages as a result of the
three transactions described above, do
not significantly alter the governance
structure of the Company. The result of
the three transactions is to increase the
equity ownership interest in the
Company of NYSE MKT, together with
its affiliate NYSE Market, from 47.20%
of the Company to 57.76% of the
Company and add NYSE Market as a
Member of the Company. The
Commission notes that, NYSE Market,
as a new Member of the Company, is
subject to, and bound by, all provisions
of the LLC Agreement and Members
Agreement. The Commission notes
further that the provisions in the LLC
Agreement and Members Agreement
that are designed to preserve the
independence of the Exchange’s
regulatory functions and its ability to
fulfill the Exchange’s regulatory
10 See
supra note 6, 76 FR at 38439.
id.
12 ‘‘Permitted Transferee’’ is defined in Sections
1.1 and 11.4(a) of the LLC Agreement.
11 See
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oversight obligations are unaffected by
the proposed rule change.
For the reasons discussed above, the
Commission finds that the proposed
rule change is consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–NYSEMKT–
2012–23) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–23763 Filed 9–26–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67905; File No. SR–BATS–
2012–038]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Related to Fees for Use
of BATS Exchange, Inc.
September 21, 2012.
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 10, 2012, BATS Exchange,
Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) 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 proposes to amend the
fee schedule applicable to Members 5
13 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
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).
5 A Member is any registered broker or dealer that
has been admitted to membership in the Exchange.
14 17
PO 00000
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59425
and non-members of the Exchange
pursuant to BATS Rules 15.1(a) and (c).
Changes to the fee schedule pursuant to
this proposal are effective upon filing.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to modify the
‘‘Options Pricing’’ section of its fee
schedule effective September 10, 2012,
in order to modify pricing related to
executions that occur on the NASDAQ
Options Market (‘‘NOM’’). NOM
implemented certain pricing changes
effective September 4, 2012,6 including:
(i) Modification of the fee charged to
participants classified by NOM as
professionals, customers and market
makers to remove liquidity in penny
pilot options, and (ii) the adoption of
specific fees for NOM ‘‘Specified
Symbols,’’ as described below. In order
to maintain routing fees that
approximate the routing costs to NOM,
the Exchange proposes to modify
pricing for Professional,7 Firm, and
Market Maker 8 orders routed to NOM in
non-Specified Symbols and to adopt
pricing for orders routed to NOM in
6 See Nasdaq Options Trader Alert #2012–54,
NOM and PHLX Update Pricing, Effective
September 4, 2012 (August 31, 2012) (the ‘‘NOM
Notice’’).
7 The term ‘‘Professional’’ is defined in Exchange
Rule 16.1 to mean any person or entity that (A) is
not a broker or dealer in securities, and (B) places
more than 390 orders in listed options per day on
average during a calendar month for its own
beneficial account(s).
8 As defined on the Exchange’s fee schedule, the
terms ‘‘Firm’’ and ‘‘Market Maker’’ apply to any
transaction identified by a member for clearing in
the Firm or Market Maker range, respectively, at the
Options Clearing Corporation (‘‘OCC’’).
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Federal Register / Vol. 77, No. 188 / Thursday, September 27, 2012 / Notices
Specified Symbols. In addition to these
changes, the Exchange also proposes
renumbering a footnote associated with
Physical Connection Charges from 8 to
9.
The Exchange currently charges
certain flat rates for routing to other
options exchanges that have been
placed into three groups based on the
approximate cost of routing to such
venues. The grouping of away options
exchanges is based on the cost of
transaction fees assessed by each venue
as well as costs to the Exchange for
routing (i.e., clearing fees, connectivity
and other infrastructure costs,
membership fees, etc.) (collectively,
‘‘Routing Costs’’). For routing to options
exchanges in the Exchange’s highest
price grouping, the Exchange currently
assesses fees of $0.50 per contract for
Customer orders and $0.55 per contract
for orders on behalf of all other
participants. With the recent change by
NOM to charge non-Customer
executions a rate of $0.47 per contract
for penny pilot options, the Exchange
believes NOM no longer fits in this
category. This is due, in part, to the fact
that NOM charges $0.50 per contract for
non-Customer orders in non-penny pilot
options, and the Exchange incurs
various Routing Costs in addition to this
fee. Accordingly, the Exchange proposes
to adopt a new category for NOM under
which it will charge a fee of $0.57 per
contract for Professional, Firm, or
Market Maker orders routed to and
executed at NOM in options other than
Specified Symbols, which are described
in further detail below. This fee will
help the Exchange to recoup clearing
and transaction charges incurred by the
Exchange, as well as other Routing
Costs, in connection with routing to
NOM.
NOM also recently implemented
specific fees for options on specified
securities that the Exchange proposes to
identify as ‘‘NOM Specified Symbols.’’ 9
Such NOM Specified Symbols, as
announced by NOM, will originally
include options on Facebook (‘‘FB’’),
Google (‘‘GOOG’’) and Groupon
(‘‘GRPN’’). As announced by NOM, the
fee to remove liquidity in NOM
Specified Symbols is $0.79 per contract
for NOM customer and NOM market
maker orders and $0.85 per contract for
all other participant capacities. As noted
above, the Exchange generally imposes
routing fees that approximate the fee to
remove liquidity from other options
exchanges as well as associated Routing
Costs. Accordingly, the Exchange
proposes to charge $0.90 for Customer
orders and $0.95 for Professional, Firm,
or Market Maker orders routed to and
executed at NOM in Specified Symbols.
In addition, the Exchange currently
charges a flat fee of $0.60 per contract
for any Directed ISO routed to any
options exchange. In order to cover the
cost of removing liquidity in Specified
Symbols at NOM, including Routing
Costs, the Exchange proposes to charge
$0.95 per contract for Directed ISOs to
NOM in NOM Specified Symbols.
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.10
Specifically, the Exchange believes that
the proposed rule change is consistent
with Section 6(b)(4) of the Act,11 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 at a
particular venue to be excessive.
The Exchange believes that the
proposed modifications to routing fees
applicable for orders routed to and
executed at NOM is fair, equitable and
reasonable because the fees are an
approximation of the cost to the
Exchange for routing orders to NOM.
The Exchange believes that its flat fee
structure for orders routed to various
venues is a fair and equitable approach
to pricing, as it provides certainty with
respect to execution fees at groups of
away options exchanges. Each
destination market’s transaction charge
varies and there is a standard clearing
charge for each transaction incurred by
the Exchange along with other
administrative and technical costs that
are incurred by the Exchange. Under its
flat fee structure, taking all costs to the
Exchange into account, the Exchange
may operate at a slight gain or a slight
loss for orders routed to and executed at
NOM. As a general matter, the Exchange
believes that the proposed fees will
allow it to recoup and cover its costs of
providing routing services to NOM.
Specifically, the Exchange believes that
the proposed routing fees will enable
the Exchange to recover the remove fees
assessed for the Exchange’s routing to
NOM, plus other Routing Costs
10 15
9 See
NOM Notice, supra note 4 [sic].
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11 15
PO 00000
U.S.C. 78f.
U.S.C. 78f(b)(4).
Frm 00055
Fmt 4703
Sfmt 4703
associated with the execution of orders
that have been routed to NOM. The
Exchange also believes that its increase
to fees for Directed ISO’s to NOM in
Specified Symbols to $0.95 per contract
(from the current charge of $0.60 per
contract for all other Directed ISO’s) is
fair, equitable and reasonable because
the fees are also an approximation of the
cost to the Exchange for routing orders
to NOM in Specified Symbols. The
Exchange also believes that the
proposed fee structure for orders routed
to and executed at NOM, including
Directed ISOs in Specified Symbols, is
not unreasonably discriminatory, again,
because it is based on and intended to
approximate the cost of routing to NOM.
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. To the
contrary, the change to routing fees will
assist the Exchange in recouping costs
for routing orders to NOM on behalf of
its participants, and absent such change,
the Exchange would be subsidizing
routing to NOM by Exchange
participants. The Exchange also notes
that Users may choose to mark their
orders as ineligible for routing to avoid
incurring routing fees.12
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A)(ii) of
the Act13 and Rule 19b–4(f)(2)
thereunder,14 the Exchange has
designated this proposal as establishing
or changing a due, fee, or other charge
applicable to the Exchange’s Members
and non-members, which renders the
proposed rule change effective upon
filing.
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
12 See BATS Rule 21.1(d)(8) (describing ‘‘BATS
Only’’ orders for BATS Options) and BATS Rule
21.9(a)(1) (describing the BATS Options routing
process, which requires orders to be designated as
available for routing).
13 15 U.S.C. 78s(b)(3)(A)(ii).
14 17 CFR 240.19b–4(f)(2).
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Federal Register / Vol. 77, No. 188 / Thursday, September 27, 2012 / Notices
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
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:
[FR Doc. 2012–23765 Filed 9–26–12; 8:45 am]
Electronic Comments
[Release No. 34–67908; File No. SR–MSRB–
2012–06]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–BATS–2012–038 on the
subject line.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Order Granting Approval of a
Proposed Rule Change To Amend Rule
G–34 on CUSIP Numbers, New Issue,
and Market Information Requirements
erowe on DSK2VPTVN1PROD with
Paper Comments
September 21, 2012.
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–BATS–2012–038. 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
a.m. and 3 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–BATS–
2012–038 and should be submitted on
or before October 18, 2012.
I. Introduction
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On June 28, 2012, the Municipal
Securities Rulemaking Board (‘‘MSRB’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change consisting of
amendments to Rule G–34 on CUSIP
numbers, new issue, and market
information requirements. The proposed
rule change was published for comment
in the Federal Register on July 10,
2012.3 The Commission received three
comment letters regarding the proposed
rule change.4 On August 23, 2012, the
MSRB granted an extension of time for
the Commission to act on the filing until
September 14, 2012. On September 11,
2012, the MSRB granted a second
extension of time until September 21,
2012. On September 17, 2012, the MSRB
submitted a response to the comment
letters.5 This order grants approval of
the proposed rule change.
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 67344
(July 3, 2012), 77 FR 40668 (‘‘Notice’’).
4 See Letter to Elizabeth M. Murphy, Secretary,
Commission, from Susan Gaffney, Director, Federal
Liaison Center, Government Finance Officers
Association, dated August 7, 2012 (‘‘GFOA Letter’’);
and Web comments from Arthur Sinkler, dated July
8, 2012 (‘‘Sinkler Letter’’); and Shelly Frank, dated
July 10, 2012 (‘‘Frank Letter’’). The comments
received by the Commission are available at
https://www.sec.gov/comments/sr-msrb-2012–06/
msrb201206.shtml.
5 See Letter to Elizabeth M. Murphy, Secretary,
Commission, from Karen Du Brul, Associate
General Counsel, MSRB, dated September 17, 2002
(‘‘MSRB’s Response’’).
1 15
PO 00000
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59427
II. Description of the Proposed Rule
Change
The MSRB proposes to add new
subsection (iv) to Rule G–34(a) to
prohibit any broker, dealer, or
municipal securities dealer from using
the term ‘‘not reoffered’’ or other
comparable term or designation (e.g.,
‘‘NRO’’) without also including the
applicable price or yield information
about the securities in any of its written
communications, electronic or
otherwise, sent by it or on its behalf
from and after the time of initial award
of a new issue of municipal securities.6
For purposes of MSRB Rule G–34(a)(iv),
the ‘‘time of initial award’’ means the
earlier of (A) the ‘‘Time of Formal
Award’’ as defined in MSRB Rule G–
34(a)(ii)(C)(1)(a),7 or (B) if applicable,
the time at which the issuer initially
accepts the terms of a new issue of
municipal securities subject to
subsequent formal award. The
prohibition would not apply to
communications occurring prior to the
time of initial award of a new issue of
municipal securities.8 According to the
MSRB, the proposed rule change will
prohibit certain communications that
hinder price and market transparency,
as well as facilitate new issue price
discovery.9
MSRB Rules G–32 and G–34 set forth
the reporting requirements for new
issues of municipal securities. MSRB
Rule G–32 requires underwriters to
submit to the MSRB’s Electronic
Municipal Market Access (‘‘EMMA®’’)
system certain information about the
new issue, including the initial offering
price or yield of all maturities, on or
prior to the date of first execution.10
This information becomes available to
the public on the EMMA Web site and
to information vendors and other market
participants through subscription
services immediately upon submission
6 See
Proposed MSRB Rule G–34(a)(iv).
Rule G–34(a)(ii)(C)(1)(a) defines ‘‘Time of
Formal Award’’ as ‘‘for competitive issues, the later
of the time the issuer announces the award or the
time the issuer notifies the underwriter of the
award, and for negotiated issues, the later of the
time the contract to purchase the securities from the
issuer is executed or the time the issuer notifies the
underwriter of its execution.’’
8 See Notice, supra note 3, at 40668. The MSRB
also proposes to delete existing subsection (e)(iii) of
MSRB Rule G–34, which includes provisions for
compliance by dealers with certain registration and
testing requirements previously applicable with
respect to the start-up phase in 2008 of the New
Issue Information Dissemination System (‘‘NIIDS’’)
operated by the Depository Trust and Clearing
Corporation (‘‘DTCC’’). The MSRB believes this
amendment will streamline Rule G–34 by
eliminating language from the Rule that no longer
has any effect. See id. at 40669.
9 See id. at 40669.
10 See MSRB Rule G–32(b)(vi)(C)(1)(a).
7 MSRB
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]]>Agencies
[Federal Register Volume 77, Number 188 (Thursday, September 27, 2012)]
[Notices]
[Pages 59425-59427]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-23765]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67905; File No. SR-BATS-2012-038]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Related to
Fees for Use of BATS Exchange, Inc.
September 21, 2012.
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 10, 2012, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the fee schedule applicable to
Members \5\ and non-members of the Exchange pursuant to BATS Rules
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal
are effective upon filing.
---------------------------------------------------------------------------
\5\ A Member is any registered broker or dealer that has been
admitted to membership in the Exchange.
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Exchange's
Web site at https://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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to modify the ``Options Pricing'' section of
its fee schedule effective September 10, 2012, in order to modify
pricing related to executions that occur on the NASDAQ Options Market
(``NOM''). NOM implemented certain pricing changes effective September
4, 2012,\6\ including: (i) Modification of the fee charged to
participants classified by NOM as professionals, customers and market
makers to remove liquidity in penny pilot options, and (ii) the
adoption of specific fees for NOM ``Specified Symbols,'' as described
below. In order to maintain routing fees that approximate the routing
costs to NOM, the Exchange proposes to modify pricing for
Professional,\7\ Firm, and Market Maker \8\ orders routed to NOM in
non-Specified Symbols and to adopt pricing for orders routed to NOM in
[[Page 59426]]
Specified Symbols. In addition to these changes, the Exchange also
proposes renumbering a footnote associated with Physical Connection
Charges from 8 to 9.
---------------------------------------------------------------------------
\6\ See Nasdaq Options Trader Alert 2012-54, NOM and
PHLX Update Pricing, Effective September 4, 2012 (August 31, 2012)
(the ``NOM Notice'').
\7\ The term ``Professional'' is defined in Exchange Rule 16.1
to mean any person or entity that (A) is not a broker or dealer in
securities, and (B) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s).
\8\ As defined on the Exchange's fee schedule, the terms
``Firm'' and ``Market Maker'' apply to any transaction identified by
a member for clearing in the Firm or Market Maker range,
respectively, at the Options Clearing Corporation (``OCC'').
---------------------------------------------------------------------------
The Exchange currently charges certain flat rates for routing to
other options exchanges that have been placed into three groups based
on the approximate cost of routing to such venues. The grouping of away
options exchanges is based on the cost of transaction fees assessed by
each venue as well as costs to the Exchange for routing (i.e., clearing
fees, connectivity and other infrastructure costs, membership fees,
etc.) (collectively, ``Routing Costs''). For routing to options
exchanges in the Exchange's highest price grouping, the Exchange
currently assesses fees of $0.50 per contract for Customer orders and
$0.55 per contract for orders on behalf of all other participants. With
the recent change by NOM to charge non-Customer executions a rate of
$0.47 per contract for penny pilot options, the Exchange believes NOM
no longer fits in this category. This is due, in part, to the fact that
NOM charges $0.50 per contract for non-Customer orders in non-penny
pilot options, and the Exchange incurs various Routing Costs in
addition to this fee. Accordingly, the Exchange proposes to adopt a new
category for NOM under which it will charge a fee of $0.57 per contract
for Professional, Firm, or Market Maker orders routed to and executed
at NOM in options other than Specified Symbols, which are described in
further detail below. This fee will help the Exchange to recoup
clearing and transaction charges incurred by the Exchange, as well as
other Routing Costs, in connection with routing to NOM.
NOM also recently implemented specific fees for options on
specified securities that the Exchange proposes to identify as ``NOM
Specified Symbols.'' \9\ Such NOM Specified Symbols, as announced by
NOM, will originally include options on Facebook (``FB''), Google
(``GOOG'') and Groupon (``GRPN''). As announced by NOM, the fee to
remove liquidity in NOM Specified Symbols is $0.79 per contract for NOM
customer and NOM market maker orders and $0.85 per contract for all
other participant capacities. As noted above, the Exchange generally
imposes routing fees that approximate the fee to remove liquidity from
other options exchanges as well as associated Routing Costs.
Accordingly, the Exchange proposes to charge $0.90 for Customer orders
and $0.95 for Professional, Firm, or Market Maker orders routed to and
executed at NOM in Specified Symbols. In addition, the Exchange
currently charges a flat fee of $0.60 per contract for any Directed ISO
routed to any options exchange. In order to cover the cost of removing
liquidity in Specified Symbols at NOM, including Routing Costs, the
Exchange proposes to charge $0.95 per contract for Directed ISOs to NOM
in NOM Specified Symbols.
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\9\ See NOM Notice, supra note 4 [sic].
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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.\10\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\11\ 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 at a
particular venue to be excessive.
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\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed modifications to routing
fees applicable for orders routed to and executed at NOM is fair,
equitable and reasonable because the fees are an approximation of the
cost to the Exchange for routing orders to NOM. The Exchange believes
that its flat fee structure for orders routed to various venues is a
fair and equitable approach to pricing, as it provides certainty with
respect to execution fees at groups of away options exchanges. Each
destination market's transaction charge varies and there is a standard
clearing charge for each transaction incurred by the Exchange along
with other administrative and technical costs that are incurred by the
Exchange. Under its flat fee structure, taking all costs to the
Exchange into account, the Exchange may operate at a slight gain or a
slight loss for orders routed to and executed at NOM. As a general
matter, the Exchange believes that the proposed fees will allow it to
recoup and cover its costs of providing routing services to NOM.
Specifically, the Exchange believes that the proposed routing fees will
enable the Exchange to recover the remove fees assessed for the
Exchange's routing to NOM, plus other Routing Costs associated with the
execution of orders that have been routed to NOM. The Exchange also
believes that its increase to fees for Directed ISO's to NOM in
Specified Symbols to $0.95 per contract (from the current charge of
$0.60 per contract for all other Directed ISO's) is fair, equitable and
reasonable because the fees are also an approximation of the cost to
the Exchange for routing orders to NOM in Specified Symbols. The
Exchange also believes that the proposed fee structure for orders
routed to and executed at NOM, including Directed ISOs in Specified
Symbols, is not unreasonably discriminatory, again, because it is based
on and intended to approximate the cost of routing to NOM.
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. To the contrary, the change to
routing fees will assist the Exchange in recouping costs for routing
orders to NOM on behalf of its participants, and absent such change,
the Exchange would be subsidizing routing to NOM by Exchange
participants. The Exchange also notes that Users may choose to mark
their orders as ineligible for routing to avoid incurring routing
fees.\12\
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\12\ See BATS Rule 21.1(d)(8) (describing ``BATS Only'' orders
for BATS Options) and BATS Rule 21.9(a)(1) (describing the BATS
Options routing process, which requires orders to be designated as
available for routing).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A)(ii) of the Act\13\ and Rule 19b-
4(f)(2) thereunder,\14\ the Exchange has designated this proposal as
establishing or changing a due, fee, or other charge applicable to the
Exchange's Members and non-members, which renders the proposed rule
change effective upon filing.
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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
\14\ 17 CFR 240.19b-4(f)(2).
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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
[[Page 59427]]
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-BATS-2012-038 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BATS-2012-038. 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
a.m. and 3 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-BATS-2012-038 and should be
submitted on or before October 18, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-23765 Filed 9-26-12; 8:45 am]
BILLING CODE 8011-01-P
