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., 62804-62807 [2013-24657]
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62804
Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices
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–
NYSEMKT–2013–82 and should be
submitted on or before November 12,
2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–24684 Filed 10–21–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70664; File No. SR–BATS–
2013–054]
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.
sroberts on DSK5SPTVN1PROD with FRONT MATTER
October 11, 2013.
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
1, 2013, 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 the 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 BATS Rules
15.1(a) and (c). Changes to the fee
schedule pursuant to this proposal will
be 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 its
fee schedule applicable to use of the
Exchange effective October 1, 2013, in
order to: (1) Increase the fee to remove
liquidity from the Exchange’s order
book in all securities; (2) modify the
tiered rebate structure applicable to
adding liquidity to the Exchange’s order
book in securities priced $1.00 or above;
(3) adopt an additional rebate incentive
(subject to average daily volume
requirements) for orders that join the
national best bid or national best offer
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
5 A Member is any registered broker or dealer that
has been admitted to membership in the Exchange.
(the ‘‘NBBO’’) when the Exchange is not
already at the NBBO (‘‘NBBO Joiner’’
orders); and (4) make various formatting
changes to enhance and simplify the fee
schedule.
Increase to Fee To Remove Liquidity
From the Exchange
The Exchange currently charges
$0.0029 per share for all orders executed
on the Exchange that remove liquidity
from the Exchange in securities priced
$1.00 per share or above. The Exchange
proposes to increase this standard fee to
remove liquidity from the Exchange to
$0.0030 per share.
Consistent with the current fee to
remove liquidity, the $0.0030 charge per
share for executions that remove
liquidity from the Exchange will not
apply to executions that remove
liquidity in securities priced under
$1.00 per share. The Exchange proposes
to increase the fee for such executions
from 0.10% of the total dollar value of
the execution to 0.30% of the total
dollar value of the execution.
Modifications to Tiered Rebate
Structure for Securities Priced $1.00 or
Above
The Exchange currently operates a
tiered pricing structure through which
Members can realize higher rebates for
adding displayed liquidity. Specifically,
the Exchange provides a standard rebate
of $0.0025 per share for orders that add
displayed liquidity for Members that do
not qualify for a higher rebate based on
their volume. The Exchange then
provides a rebate of $0.0027 per share
for orders that add displayed liquidity
to the Exchange’s order book where the
Member has an average daily volume
(‘‘ADV’’), as defined below, equal to or
greater than 0.5% but less than 1.0% of
average of total consolidated volume
(‘‘TCV’’), as also defined below. Finally,
the Exchange provides a rebate of
$0.0029 per share for orders that add
displayed liquidity to the Exchange’s
order book for any Member that has an
ADV equal to or greater than 1.0% of
TCV. The Exchange proposes to expand
the number of tiers available and to
modify the rebates associated with such
tiers, as well as the rebates provided to
Members not qualifying for tiered
pricing.
For purposes of the fee schedule, the
definition of ADV is average daily
volume calculated as the number of
shares added or removed, combined, per
day on a monthly basis (excluding
routed volume).6 Rather than basing its
3 15
16 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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6 The Exchange allows affiliated entities to
aggregate their order flow for purposes of the
Exchange’s determination of ADV with respect to
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pricing structure on a static number of
shares executed by a Member each day,
the Exchange operates its tiered pricing
structure such that it is based on total
consolidated volume, or TCV, and is
thus variable based on overall volumes
in the securities industry. TCV is
defined as total consolidated volume
calculated as the volume reported by all
exchanges and trade reporting facilities
to a consolidated transaction reporting
plan for the month for which the fees
apply.7
In connection with the proposed
changes described below, the Exchange
proposes to add a definition of ‘‘ADAV’’
to the fee schedule, which term will
mean average daily volume calculated
as the number of shares added per day
on a monthly basis (excluding routed
volume). Accordingly, ADAV measures
a Member’s average daily added volume
only, and Member’s will be able to
qualify for applicable tiers with a lower
ADAV than ADV.8
Member’s ADAV is
equal to or greater
than average TCV
of:
Volume tier
sroberts on DSK5SPTVN1PROD with FRONT MATTER
Tier
Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
6
The Exchange proposes to replace the
two existing tiers with six tiers, each of
which, in turn, can be reached through
either a Member’s ADAV (added
liquidity only) or a Member’s ADV
(added and removed volume combined).
In part to fund such expansion, the
Exchange proposes to reduce its
standard rebate for Members that do not
qualify for a tiered rebate from $0.0025
per share to $0.0020 per share. Further,
the Exchange proposes to adopt the
following tiers and rebates.
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
0.10%
0.20
0.30
0.50
0.75
1.00
Member’s ADV is
equal to or greater
than average TCV
of:
Rebate per share
0.25%
0.50
0.75
1.00
1.40
1.75
($0.0025)
(0.0028)
(0.0029)
(0.0030)
(0.0031)
(0.0032)
or
or
or
or
or
or
higher, the Exchange proposes to use
this tier level as the eligibility
requirement. Accordingly, the Exchange
proposes to provide NBBO Setter and
NBBO Joiner rebates to all qualifying
orders entered by Members qualifying
for Tier 2 or higher.
Accordingly, the Exchange proposes
to offer the current standard rebate of
$0.0025 per share to all Members that
can achieve Tier 1, which is available to
Members with ADAV of 0.10% or more
of average TCV or ADV of 0.25% or
more of average TCV. Members that do
not currently qualify for any tiered
rebates today may be able to qualify
either under this tier, Tier 1, or if their
ADAV (added liquidity only) qualifies
for one of the Tiers. With respect to
Members that qualify for tiered pricing
today, with ADV of at least 0.5% of
average TCV, all such Members will
receive higher rebates than they do
under the current pricing structure. For
instance, Members qualifying for Tier 2
with between 0.5% and 0.75% of ADV
and 0.75% and 1% of ADV will receive
rebates of $0.0028 per share and $0.0029
per share (as compared to $0.0027 for
Members with between 0.5% and 1.0%
of ADV under the current rebate
structure). Members will also be able to
qualify for these two tiers at lower levels
of ADAV, namely 0.2% and 0.3%,
respectively. Further, the Exchange
proposes to offer three tiers at which a
higher rebate is available than is
currently available for reaching the
Exchange’s current highest tier.
Specifically, Members reaching Tier 4
will receive a rebate of $0.0030 per
share, Members reaching Tier 5 will
receive a rebate of $0.0031 per share and
Members reaching the highest tier, Tier
6, will receive a rebate of $0.0032 per
share.
Consistent with programs offered by
the Exchange for orders that set the
NBBO when received by the Exchange
(‘‘NBBO Setter’’ orders), the Exchange
proposes to adopt a program to attract
aggressively priced displayed liquidity
by providing an additional rebate for
orders that join the NBBO when the
Exchange is not already at the NBBO. To
the extent such an order is displayed
and executed on the Exchange, a NBBO
Joiner order will receive an additional
rebate of $0.0001 per share. This rebate
is in addition to the rebate a Member
would otherwise receive under the
tiered pricing structure, as described
above. Consistent with the current
NBBO Setter program, the Exchange
proposes to limit the ability to qualify
for NBBO Joiner rebates to Members that
have ADV equal to or greater than 0.5%
of TCV. Because the Exchange has
expanded the tiered pricing structure
such that Members can qualify for
rebates at the same level as those with
ADV equal to or greater than 0.5% of
TCV if they achieve ADAV of 0.2% or
Additional Formatting Changes
pricing tiers if such entities provide prior notice to
the Exchange. Specifically, to the extent two or
more affiliated companies maintain separate
memberships with the Exchange and can
demonstrate their affiliation by showing they
control, are controlled by, or are under common
control with each other, the Exchange permits such
Members to count overall volume of the affiliates
in calculating ADV. The Exchange verifies such
affiliation using a Member’s Form BD, which lists
control affiliates.
7 The Exchange notes that it also excludes the last
Friday of June from the calculation of ADV and
average daily TCV. The last day of June is the day
that Russell Investments reconstitutes its family of
indexes (‘‘Russell Reconstitution’’), resulting in
particularly high trading volumes, much of which
the Exchange believes derives from market
participants who are not generally as active entering
the market to rebalance their holdings in-line with
the Russell Reconstitution.
8 The Exchange proposes to calculate ADAV in
the same way that it calculates ADV, including
permitting aggregation amongst affiliated entities
and the exclusion of Russell Reconstitution day.
See supra notes 6 and 7.
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Adoption of NBBO Joiner Rebates
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In order to adopt the new tiered
pricing structure, the Exchange has
proposed to add much of the new
pricing as part of a chart format. The
Exchange proposes to convert other
portions of its ‘‘Equities Pricing’’ section
to charts, even though the substance of
such fees will not change. In this
connection, the Exchange has also
further differentiated between the
liquidity rebates for displayed liquidity,
as described above, and those for nondisplayed liquidity, which the Exchange
does not propose to substantively
modify. The Exchange notes that it
intends to further convert the remainder
of the fee schedule to a chart format in
the near future. In order to reduce text
later in the fee schedule, the Exchange
also proposes to make clear up-front
that all references on the fee schedule to
‘‘adding’’ and ‘‘removing’’ liquidity
mean adding liquidity or removing
liquidity from the Exchange’s order
book.
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sroberts on DSK5SPTVN1PROD with FRONT MATTER
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.9
Specifically, the Exchange believes that
the proposed rule change is consistent
with Section 6(b)(4) of the Act,10 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 changes to Exchange execution
fees and rebates proposed by this filing
are intended to attract order flow to the
Exchange by continuing to offer
competitive pricing while also creating
additional incentives to providing
aggressively priced displayed liquidity.
While Members that remove liquidity
from the Exchange will be paying higher
fees due to the proposal, the increased
revenue received by the Exchange will
be used to fund programs that the
Exchange believes will attract additional
liquidity and thus improve the depth of
liquidity available on the Exchange.
Accordingly, the Exchange believes that
the higher access fees for both securities
priced $1.00 and above and securities
priced below $1.00 will benefit
Members’ results in trading on the
Exchange to the extent the tiered rebate
structure maintained by the Exchange
for adding displayed liquidity, the
continued offering of the NBBO Setter
rebate, and the adoption of the NBBO
Joiner rebate incentivize liquidity
providers to provide more aggressively
priced liquidity. Thus, the Exchange
believes that the slight increases to the
fees to remove liquidity from the
Exchange are reasonable and equitably
allocated. Further, the Exchange does
not believe that the proposed increases
to the fees to remove liquidity from the
Exchange are unfairly discriminatory as
they will be uniformly applied to all
Members.
The Exchange believes that
continuing to base its tiered rebate
structure on overall TCV, rather than a
static number irrespective of overall
volume in the securities industry, is a
fair and equitable approach to pricing.
9 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
10 15
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Volume-based tiers such as the
expanded liquidity rebate tiers proposed
in this filing have been widely adopted
in the equities markets, and are
equitable and not unreasonably
discriminatory because they are open to
all members on an equal basis and
provide rebates that are reasonably
related to the value to an exchange’s
market quality associated with higher
levels of market activity, such as higher
levels of liquidity provision and
introduction of higher volumes of orders
into the price and volume discovery
process. Accordingly, the Exchange
believes that the proposal is not
unreasonably discriminatory because it
is consistent with the overall goals of
enhancing market quality.
The proposed modification to the
Exchange’s rebate structure will have
variable affects on Members of the
Exchange, dependent on the volume of
transaction activity they conduct on the
Exchange. The Exchange notes that
Members currently qualifying for tiered
rebates will receive higher rebates in all
cases. The Exchange also notes that
additional Members will be able to
qualify for tiered rebates based on a
lower threshold of ADV (i.e., Tier 1 at
ADV of 0.25% of TCV) or based on the
new classification of ADAV, which
measures added volume only but allows
Members to qualify at lower percentages
of TCV (e.g., ADAV of 0.1%, 0.2%, or
0.3% of TCV, respectively, for Tiers 1,
2, and 3). Those Members qualifying for
volume Tier 1 will not be impacted by
any decrease in rebates, but will
continue to receive the same rebates that
they do today. Despite the decrease in
rebate for all Members that do not
qualify for the lowest tier, the Exchange
believes that its proposed fee structure
is fair and equitable for the reasons
described above related to market
quality. The Exchange reiterates that the
volume tiers are open to all Members on
an equal basis, and are therefore
equitable and not unreasonably
discriminatory.
The proposed addition of the
definition of ADAV and, in turn, the
ability to qualify for volume-based
enhanced rebate based on ADAV is
reasonable as it is another method of
measuring a Member’s contribution to
the overall market quality on the
Exchange. While all order flow
contributing to the Exchange is
important, the Exchange has
consistently offered programs to
incentivize the addition of aggressively
priced displayed liquidity to the
Exchange due to the value of such
liquidity. Accordingly, the Exchange
believes that its proposed policy to
measure ADAV and permit tier
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qualification at lower levels than ADV
is fair and equitable, and not
unreasonably discriminatory.
Additionally, the Exchange believes
that the proposed NBBO Joiner rebate,
similar to rebates offered by the
Exchange under the NBBO Setter
program, will incentivize the entry on
the Exchange of more aggressive orders
that will maintain tight spreads,
benefitting both Members and public
investors. The Exchange further believes
that conditioning a Member’s ability to
receive the NBBO Joiner rebate on
reaching a volume tier of Tier 2 or
higher is consistent with the Act for the
reasons described above with respect to
volume-based tiers generally. The
Exchange notes that by proposing
qualification at Tier 2 or higher it is
maintaining the same volume
requirement to qualify for the NBBO
Setter rebate (i.e., ADV 0.5% or more of
TCV) as it previously required, though
Members may potentially also qualify
based on ADAV of 0.2%, and thus,
additional Members may qualify for
NBBO Setter rebates or the new NBBO
Joiner rebates.
Finally, the Exchange believes that
the proposed changes to further simplify
the fee schedule and to move towards a
fee schedule that is in a chart format are
fair and reasonable, and nondiscriminatory in that they are designed
to be more easily understood by
Members.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
As noted above, the changes to
Exchange execution fees and rebates
proposed by this filing are intended to
attract order flow to the Exchange by
continuing to offer competitive pricing
while also creating additional incentives
to provide aggressively priced displayed
liquidity. Thus, while the Exchange is
slightly increasing the fees to remove
liquidity from the Exchange, the
Exchange is offsetting such increase
with additional rebates designed to
enhance the liquidity available on the
Exchange. Similarly, while some
Members will recognize a decrease
rebate for liquidity added to the
Exchange, the Exchange has offered a
lower volume tier in order to maintain
the current rebate level as well as
additional ways to reach the various
volume tiers (with lower volume levels)
based on added liquidity only. The
Exchange’s proposed NBBO Joiner
rebate will benefit competition by
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Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices
rewarding Members that help the
Exchange to join other market centers at
the NBBO. Promotion of displayed
liquidity at the NBBO enhances market
quality for all market participants and
promotes competition amongst market
centers. The Exchange believes that the
proposed changes as a whole will
contribute to additional displayed
liquidity on the Exchange, which will,
in turn, benefit competition due to the
improvements to the overall market
quality 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 neither solicited
nor received written comments on the
proposed rule change.
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 11 and paragraph (f) of Rule
19b–4 thereunder.12 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:
sroberts on DSK5SPTVN1PROD with FRONT MATTER
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–2013–054 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–2013–054. 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–BATS–
2013–054 and should be submitted on
or before November 12, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–24657 Filed 10–21–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70614; File No. SR–
NASDAQ–2013–129]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Its
Schedule of Fees and Credits
Applicable to Execution and Routing of
Orders in Securities Priced at $1 or
More per Share Under Rule 7018
October 4, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 2 thereunder,
notice is hereby given that on
September 27, 2013, The NASDAQ
Stock Market LLC (‘‘NASDAQ’’ or
‘‘Exchange’’) filed with the Securities
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
11 15
U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b–4(f).
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62807
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by NASDAQ. 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 the Substance
of the Proposed Rule Change
NASDAQ is proposing amend its
schedule of fees and credits applicable
to execution and routing of orders in
securities priced at $1 or more per share
under Rule 7018. NASDAQ will
implement the proposed rule change on
October 1, 2013.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.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. 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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NASDAQ is proposing several
changes to its schedule of fees and
credits applicable to execution and
routing of orders in securities priced at
$1 or more per share under Rule 7018.
First, NASDAQ currently offers a credit
of $0.0020 per share executed for
midpoint pegged and midpoint postonly orders (‘‘midpoint orders’’) that
provide liquidity if a member provides
an average daily volume of more than 5
million shares through midpoint orders
during the month and the member’s
average daily volume of liquidity
provided through midpoint orders
during the month is at least 2 million
shares more than in April 2013.
NASDAQ is proposing to eliminate this
pricing tier for midpoint orders, because
no member has ever qualified for it.
Accordingly, NASDAQ believes that the
tier has been ineffective at encouraging
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]]>Agencies
[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62804-62807]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24657]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70664; File No. SR-BATS-2013-054]
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.
October 11, 2013.
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 1, 2013, 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.
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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 the
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 BATS Rules
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal
will be effective upon filing.
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\5\ A Member is any registered broker or dealer that has been
admitted to membership in the Exchange.
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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 its fee schedule applicable to use
of the Exchange effective October 1, 2013, in order to: (1) Increase
the fee to remove liquidity from the Exchange's order book in all
securities; (2) modify the tiered rebate structure applicable to adding
liquidity to the Exchange's order book in securities priced $1.00 or
above; (3) adopt an additional rebate incentive (subject to average
daily volume requirements) for orders that join the national best bid
or national best offer (the ``NBBO'') when the Exchange is not already
at the NBBO (``NBBO Joiner'' orders); and (4) make various formatting
changes to enhance and simplify the fee schedule.
Increase to Fee To Remove Liquidity From the Exchange
The Exchange currently charges $0.0029 per share for all orders
executed on the Exchange that remove liquidity from the Exchange in
securities priced $1.00 per share or above. The Exchange proposes to
increase this standard fee to remove liquidity from the Exchange to
$0.0030 per share.
Consistent with the current fee to remove liquidity, the $0.0030
charge per share for executions that remove liquidity from the Exchange
will not apply to executions that remove liquidity in securities priced
under $1.00 per share. The Exchange proposes to increase the fee for
such executions from 0.10% of the total dollar value of the execution
to 0.30% of the total dollar value of the execution.
Modifications to Tiered Rebate Structure for Securities Priced $1.00 or
Above
The Exchange currently operates a tiered pricing structure through
which Members can realize higher rebates for adding displayed
liquidity. Specifically, the Exchange provides a standard rebate of
$0.0025 per share for orders that add displayed liquidity for Members
that do not qualify for a higher rebate based on their volume. The
Exchange then provides a rebate of $0.0027 per share for orders that
add displayed liquidity to the Exchange's order book where the Member
has an average daily volume (``ADV''), as defined below, equal to or
greater than 0.5% but less than 1.0% of average of total consolidated
volume (``TCV''), as also defined below. Finally, the Exchange provides
a rebate of $0.0029 per share for orders that add displayed liquidity
to the Exchange's order book for any Member that has an ADV equal to or
greater than 1.0% of TCV. The Exchange proposes to expand the number of
tiers available and to modify the rebates associated with such tiers,
as well as the rebates provided to Members not qualifying for tiered
pricing.
For purposes of the fee schedule, the definition of ADV is average
daily volume calculated as the number of shares added or removed,
combined, per day on a monthly basis (excluding routed volume).\6\
Rather than basing its
[[Page 62805]]
pricing structure on a static number of shares executed by a Member
each day, the Exchange operates its tiered pricing structure such that
it is based on total consolidated volume, or TCV, and is thus variable
based on overall volumes in the securities industry. TCV is defined as
total consolidated volume calculated as the volume reported by all
exchanges and trade reporting facilities to a consolidated transaction
reporting plan for the month for which the fees apply.\7\
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\6\ The Exchange allows affiliated entities to aggregate their
order flow for purposes of the Exchange's determination of ADV with
respect to pricing tiers if such entities provide prior notice to
the Exchange. Specifically, to the extent two or more affiliated
companies maintain separate memberships with the Exchange and can
demonstrate their affiliation by showing they control, are
controlled by, or are under common control with each other, the
Exchange permits such Members to count overall volume of the
affiliates in calculating ADV. The Exchange verifies such
affiliation using a Member's Form BD, which lists control
affiliates.
\7\ The Exchange notes that it also excludes the last Friday of
June from the calculation of ADV and average daily TCV. The last day
of June is the day that Russell Investments reconstitutes its family
of indexes (``Russell Reconstitution''), resulting in particularly
high trading volumes, much of which the Exchange believes derives
from market participants who are not generally as active entering
the market to rebalance their holdings in-line with the Russell
Reconstitution.
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In connection with the proposed changes described below, the
Exchange proposes to add a definition of ``ADAV'' to the fee schedule,
which term will mean average daily volume calculated as the number of
shares added per day on a monthly basis (excluding routed volume).
Accordingly, ADAV measures a Member's average daily added volume only,
and Member's will be able to qualify for applicable tiers with a lower
ADAV than ADV.\8\
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\8\ The Exchange proposes to calculate ADAV in the same way that
it calculates ADV, including permitting aggregation amongst
affiliated entities and the exclusion of Russell Reconstitution day.
See supra notes 6 and 7.
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The Exchange proposes to replace the two existing tiers with six
tiers, each of which, in turn, can be reached through either a Member's
ADAV (added liquidity only) or a Member's ADV (added and removed volume
combined). In part to fund such expansion, the Exchange proposes to
reduce its standard rebate for Members that do not qualify for a tiered
rebate from $0.0025 per share to $0.0020 per share. Further, the
Exchange proposes to adopt the following tiers and rebates.
----------------------------------------------------------------------------------------------------------------
Member's
ADAV is
equal to Member's ADV is
or equal to or
Volume tier greater greater than Rebate per share
than average TCV of:
average
TCV of:
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Tier 1............................................. 0.10% or 0.25% ($0.0025)
Tier 2............................................. 0.20 or 0.50 (0.0028)
Tier 3............................................. 0.30 or 0.75 (0.0029)
Tier 4............................................. 0.50 or 1.00 (0.0030)
Tier 5............................................. 0.75 or 1.40 (0.0031)
Tier 6............................................. 1.00 or 1.75 (0.0032)
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Accordingly, the Exchange proposes to offer the current standard
rebate of $0.0025 per share to all Members that can achieve Tier 1,
which is available to Members with ADAV of 0.10% or more of average TCV
or ADV of 0.25% or more of average TCV. Members that do not currently
qualify for any tiered rebates today may be able to qualify either
under this tier, Tier 1, or if their ADAV (added liquidity only)
qualifies for one of the Tiers. With respect to Members that qualify
for tiered pricing today, with ADV of at least 0.5% of average TCV, all
such Members will receive higher rebates than they do under the current
pricing structure. For instance, Members qualifying for Tier 2 with
between 0.5% and 0.75% of ADV and 0.75% and 1% of ADV will receive
rebates of $0.0028 per share and $0.0029 per share (as compared to
$0.0027 for Members with between 0.5% and 1.0% of ADV under the current
rebate structure). Members will also be able to qualify for these two
tiers at lower levels of ADAV, namely 0.2% and 0.3%, respectively.
Further, the Exchange proposes to offer three tiers at which a higher
rebate is available than is currently available for reaching the
Exchange's current highest tier. Specifically, Members reaching Tier 4
will receive a rebate of $0.0030 per share, Members reaching Tier 5
will receive a rebate of $0.0031 per share and Members reaching the
highest tier, Tier 6, will receive a rebate of $0.0032 per share.
Adoption of NBBO Joiner Rebates
Consistent with programs offered by the Exchange for orders that
set the NBBO when received by the Exchange (``NBBO Setter'' orders),
the Exchange proposes to adopt a program to attract aggressively priced
displayed liquidity by providing an additional rebate for orders that
join the NBBO when the Exchange is not already at the NBBO. To the
extent such an order is displayed and executed on the Exchange, a NBBO
Joiner order will receive an additional rebate of $0.0001 per share.
This rebate is in addition to the rebate a Member would otherwise
receive under the tiered pricing structure, as described above.
Consistent with the current NBBO Setter program, the Exchange proposes
to limit the ability to qualify for NBBO Joiner rebates to Members that
have ADV equal to or greater than 0.5% of TCV. Because the Exchange has
expanded the tiered pricing structure such that Members can qualify for
rebates at the same level as those with ADV equal to or greater than
0.5% of TCV if they achieve ADAV of 0.2% or higher, the Exchange
proposes to use this tier level as the eligibility requirement.
Accordingly, the Exchange proposes to provide NBBO Setter and NBBO
Joiner rebates to all qualifying orders entered by Members qualifying
for Tier 2 or higher.
Additional Formatting Changes
In order to adopt the new tiered pricing structure, the Exchange
has proposed to add much of the new pricing as part of a chart format.
The Exchange proposes to convert other portions of its ``Equities
Pricing'' section to charts, even though the substance of such fees
will not change. In this connection, the Exchange has also further
differentiated between the liquidity rebates for displayed liquidity,
as described above, and those for non-displayed liquidity, which the
Exchange does not propose to substantively modify. The Exchange notes
that it intends to further convert the remainder of the fee schedule to
a chart format in the near future. In order to reduce text later in the
fee schedule, the Exchange also proposes to make clear up-front that
all references on the fee schedule to ``adding'' and ``removing''
liquidity mean adding liquidity or removing liquidity from the
Exchange's order book.
[[Page 62806]]
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.\9\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\10\ 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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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4).
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The changes to Exchange execution fees and rebates proposed by this
filing are intended to attract order flow to the Exchange by continuing
to offer competitive pricing while also creating additional incentives
to providing aggressively priced displayed liquidity. While Members
that remove liquidity from the Exchange will be paying higher fees due
to the proposal, the increased revenue received by the Exchange will be
used to fund programs that the Exchange believes will attract
additional liquidity and thus improve the depth of liquidity available
on the Exchange. Accordingly, the Exchange believes that the higher
access fees for both securities priced $1.00 and above and securities
priced below $1.00 will benefit Members' results in trading on the
Exchange to the extent the tiered rebate structure maintained by the
Exchange for adding displayed liquidity, the continued offering of the
NBBO Setter rebate, and the adoption of the NBBO Joiner rebate
incentivize liquidity providers to provide more aggressively priced
liquidity. Thus, the Exchange believes that the slight increases to the
fees to remove liquidity from the Exchange are reasonable and equitably
allocated. Further, the Exchange does not believe that the proposed
increases to the fees to remove liquidity from the Exchange are
unfairly discriminatory as they will be uniformly applied to all
Members.
The Exchange believes that continuing to base its tiered rebate
structure on overall TCV, rather than a static number irrespective of
overall volume in the securities industry, is a fair and equitable
approach to pricing. Volume-based tiers such as the expanded liquidity
rebate tiers proposed in this filing have been widely adopted in the
equities markets, and are equitable and not unreasonably discriminatory
because they are open to all members on an equal basis and provide
rebates that are reasonably related to the value to an exchange's
market quality associated with higher levels of market activity, such
as higher levels of liquidity provision and introduction of higher
volumes of orders into the price and volume discovery process.
Accordingly, the Exchange believes that the proposal is not
unreasonably discriminatory because it is consistent with the overall
goals of enhancing market quality.
The proposed modification to the Exchange's rebate structure will
have variable affects on Members of the Exchange, dependent on the
volume of transaction activity they conduct on the Exchange. The
Exchange notes that Members currently qualifying for tiered rebates
will receive higher rebates in all cases. The Exchange also notes that
additional Members will be able to qualify for tiered rebates based on
a lower threshold of ADV (i.e., Tier 1 at ADV of 0.25% of TCV) or based
on the new classification of ADAV, which measures added volume only but
allows Members to qualify at lower percentages of TCV (e.g., ADAV of
0.1%, 0.2%, or 0.3% of TCV, respectively, for Tiers 1, 2, and 3). Those
Members qualifying for volume Tier 1 will not be impacted by any
decrease in rebates, but will continue to receive the same rebates that
they do today. Despite the decrease in rebate for all Members that do
not qualify for the lowest tier, the Exchange believes that its
proposed fee structure is fair and equitable for the reasons described
above related to market quality. The Exchange reiterates that the
volume tiers are open to all Members on an equal basis, and are
therefore equitable and not unreasonably discriminatory.
The proposed addition of the definition of ADAV and, in turn, the
ability to qualify for volume-based enhanced rebate based on ADAV is
reasonable as it is another method of measuring a Member's contribution
to the overall market quality on the Exchange. While all order flow
contributing to the Exchange is important, the Exchange has
consistently offered programs to incentivize the addition of
aggressively priced displayed liquidity to the Exchange due to the
value of such liquidity. Accordingly, the Exchange believes that its
proposed policy to measure ADAV and permit tier qualification at lower
levels than ADV is fair and equitable, and not unreasonably
discriminatory.
Additionally, the Exchange believes that the proposed NBBO Joiner
rebate, similar to rebates offered by the Exchange under the NBBO
Setter program, will incentivize the entry on the Exchange of more
aggressive orders that will maintain tight spreads, benefitting both
Members and public investors. The Exchange further believes that
conditioning a Member's ability to receive the NBBO Joiner rebate on
reaching a volume tier of Tier 2 or higher is consistent with the Act
for the reasons described above with respect to volume-based tiers
generally. The Exchange notes that by proposing qualification at Tier 2
or higher it is maintaining the same volume requirement to qualify for
the NBBO Setter rebate (i.e., ADV 0.5% or more of TCV) as it previously
required, though Members may potentially also qualify based on ADAV of
0.2%, and thus, additional Members may qualify for NBBO Setter rebates
or the new NBBO Joiner rebates.
Finally, the Exchange believes that the proposed changes to further
simplify the fee schedule and to move towards a fee schedule that is in
a chart format are fair and reasonable, and non-discriminatory in that
they are designed to be more easily understood by Members.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. As
noted above, the changes to Exchange execution fees and rebates
proposed by this filing are intended to attract order flow to the
Exchange by continuing to offer competitive pricing while also creating
additional incentives to provide aggressively priced displayed
liquidity. Thus, while the Exchange is slightly increasing the fees to
remove liquidity from the Exchange, the Exchange is offsetting such
increase with additional rebates designed to enhance the liquidity
available on the Exchange. Similarly, while some Members will recognize
a decrease rebate for liquidity added to the Exchange, the Exchange has
offered a lower volume tier in order to maintain the current rebate
level as well as additional ways to reach the various volume tiers
(with lower volume levels) based on added liquidity only. The
Exchange's proposed NBBO Joiner rebate will benefit competition by
[[Page 62807]]
rewarding Members that help the Exchange to join other market centers
at the NBBO. Promotion of displayed liquidity at the NBBO enhances
market quality for all market participants and promotes competition
amongst market centers. The Exchange believes that the proposed changes
as a whole will contribute to additional displayed liquidity on the
Exchange, which will, in turn, benefit competition due to the
improvements to the overall market quality 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 neither solicited nor received written comments on
the proposed rule change.
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 \11\ and paragraph (f) of Rule 19b-4
thereunder.\12\ 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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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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-BATS-2013-054 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-2013-054. 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-BATS-2013-054 and should be
submitted on or before November 12, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24657 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P
