Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc., 3643-3649 [2014-01104]
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Federal Register / Vol. 79, No. 14 / Wednesday, January 22, 2014 / Notices
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[FR Doc. 2014–01137 Filed 1–21–14; 8:45 am]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Related to Fees for Use
of BATS Exchange, Inc.
[Release No. 34–71303; File No. SR–BATS–
2014–001]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
January 15, 2014.
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold a Closed Meeting
on Thursday, January 23, 2014 at 2:00
p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or her designee, has
certified that, in her opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matter at the Closed Meeting.
Commissioner Gallagher, as duty
officer, voted to consider the items
listed for the Closed Meeting in a closed
session.
The subject matter of the Closed
Meeting will be:
emcdonald on DSK67QTVN1PROD with NOTICES
institution and settlement of injunctive
actions;
institution and settlement of
administrative proceedings;
an adjudicatory matter; and
other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact the Office of the Secretary at
(202) 551–5400.
Dated: January 16, 2014.
Elizabeth M. Murphy,
Secretary.
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 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, at the
Commission’s Public Reference Room,
and at the Commission’s Web site at
https://www.sec.gov.
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
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 A Member is any registered broker or dealer that
has been admitted to membership in the Exchange.
2 17
BILLING CODE 8011–01–P
16:00 Jan 21, 2014
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
1 15
[FR Doc. 2014–01257 Filed 1–17–14; 11:15 am]
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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 January 2,
2014, 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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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 immediately, in order
to: (i) Modify the rebates provided by
the Exchange for Customer 6 orders that
add liquidity to the Exchange’s options
platform (‘‘BATS Options’’) in options
classes subject to the penny pilot
program as described below (‘‘Penny
Pilot Securities’’);7 (ii) modify the fees
charged by the Exchange for Customer
orders that remove liquidity from BATS
Options in Penny Pilot Securities; (iii)
modify the rebates provided by the
Exchange for Professional,8 Firm, and
Market Maker 9 orders that add liquidity
to BATS Options in Penny Pilot
Securities; (iv) modify the fees charged
by the Exchange for Professional, Firm,
and Market Maker orders that remove
liquidity from BATS Options in Penny
Pilot Securities; (v) modify the rebates
provided by the Exchange for Customer
orders that add liquidity to BATS
Options in non-Penny Pilot Securities;
(vi) modify the fees charged by the
Exchange for Customer orders that
remove liquidity from BATS Options in
non-Penny Pilot Securities; (vii) modify
the rebates provided by the Exchange
for Professional, Firm, and Market
Maker orders that add liquidity to BATS
Options in non-Penny Pilot Securities;
(viii) modify the fees charged by the
Exchange for Professional, Firm, and
Market Maker orders that remove
6 As defined on the Exchange’s fee schedule, a
‘‘Customer’’ order is any transaction identified by
a Member for clearing in the Customer range at the
Options Clearing Corporation (‘‘OCC’’), except for
those designated as ‘‘Professional’’.
7 The Exchange currently charges different fees
and provides different rebates depending on
whether an options class is an options class that
qualifies as a Penny Pilot Security pursuant to
Exchange Rule 21.5, Interpretation and Policy .01
or is a non-penny options class.
8 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).
9 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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liquidity from BATS Options in nonPenny Pilot Securities; (ix) modify the
tier thresholds and adjust the rebates
provided by the Exchange under the
BATS Options NBBO Setter Program;10
(x) modify the tier thresholds and adjust
the rebates provided by the Exchange
under the Quoting Incentive Program
(‘‘QIP’’).11 In conjunction with
proposals (i) through (iv) and (ix) listed
above, the Exchange is proposing to
eliminate the ‘‘Grow with Us’’ rebates
and fees and the definitions and
footnotes associated therewith.12 In
addition to these changes, the Exchange
proposes to make several minor changes
to the fee schedule to achieve additional
consistency.
(i) Customer Rebates for Adding
Liquidity in Penny Pilot Securities
emcdonald on DSK67QTVN1PROD with NOTICES
The Exchange currently provides
rebates for Customer orders that add
liquidity to the BATS Options order
book in Penny Pilot Securities pursuant
to a tiered pricing structure, as
described below. The Exchange
proposes to modify this tiered pricing
structure and the rebates associated
therewith as well as eliminate the
rebates associated with the Grow with
Us pricing program.
The Exchange currently offers the
following rebates per contract for a
Customer order that adds liquidity in
Penny Pilot Securities to the BATS
Options order book: (i) $0.30 where the
Member does not qualify for any
additional rebates as described below;
(ii) $0.31 where the Member has an
ADV 13 less than 0.25% of average
TCV 14 and also shows a minimum of 10
basis points TCV improvement over
their previous High Water Mark; 15 (iii)
10 The NBBO Setter Program is a program that
provides additional rebates for executions resulting
from orders that add liquidity that set either the
national best bid (‘‘NBB’’) or national best offer
(‘‘NBO’’).
11 The QIP is a program designed to enhance
market quality by incentivizing market Makers to
participate on BATS Options by providing
supplemental rebates for executed orders that add
liquidity where the Market Maker has an average
daily trading volume that exceeds certain
thresholds.
12 The ‘‘Grow with Us’’ pricing constitutes
enhanced rebates and fees for Members that
increase their trading activity on BATS Options.
13 As defined on the Exchange’s fee schedule,
ADV is average daily volume calculated as the
number of contracts added or removed, combined,
per day on a monthly basis. The fee schedule also
provides that routed contracts are not included in
ADV calculation.
14 As defined on the Exchange’s fee schedule,
TCV is total consolidated volume calculated as the
volume reported by all exchanges to the
consolidated transaction reporting plan for the
month for which the fees apply.
15 As defined on the Exchange’s fee schedule,
High Water Mark is the greater of a Member’s Q4
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$0.43 where the Member has an ADV
equal to or greater than 0.25% of
average TCV but less than 0.75% of
average TCV; (iv) $0.44 where the
Member has an ADV equal to or greater
than 0.25% of average TCV but less than
0.75% of average TCV and also shows
a minimum of 10 basis points TCV
improvement over their previous High
Water Mark; (v) $0.46 where the
Member has an ADV equal to or greater
than 0.75% of average TCV but less than
1.25% of average TCV; (vi) $0.47 where
the Member has an ADV equal to or
greater than 0.75% of average TCV but
less than 1.25% of average TCV and also
shows a minimum of 10 basis points
TCV improvement over their previous
High Water Mark; and (vii) $0.47 where
the Member has an ADV equal to or
greater than 1.25% of average TCV.
The Exchange is proposing to adjust
the thresholds required to meet the tiers
for higher rebates, to simplify the rebate
structure by eliminating one tier, to
eliminate the Grow with Us rebates, and
to increase the rebates associated with
each tier such that all Members will
receive higher rebates than under the
current rebate structure. Specifically,
the Exchange is proposing to increase
the minimum ADV as a percentage of
average TCV necessary to qualify for an
increased rebate from 0.25% to 0.30%.
The Exchange is also proposing to
eliminate the third rebate tier for
Members that have an ADV as a
percentage of average TCV between
0.25% to 0.75%. The Exchange is
proposing to reduce the threshold of
ADV as a percentage of average TCV at
which Members will receive the highest
rebate from 1.25% to 1.00%. Further,
the Exchange is proposing to amend the
rebates per contract for Customer orders
that add liquidity to the BATS Options
order book in Penny Pilot Securities as
follows: (i) To increase the rebate from
$0.30 to $0.45 where the Member does
not qualify for a higher rebate based on
the Member’s ADV; (ii) to provide a
rebate of $0.48 where the Member has
an ADV equal to or greater than 0.30%
of average TCV but less than 1.00% of
average TCV; and (iii) to provide a
rebate of $0.50 where the Member has
an ADV equal to or greater than 1.00%
of average TCV.
(ii) Customer Fees for Removing
Liquidity in Penny Pilot Securities
The Exchange currently charges fees
for Customer orders that remove
liquidity from the BATS Options order
book in Penny Pilot Securities pursuant
to a tiered pricing structure, as
2011 TCV or a Member’s highest monthly TCV on
BATS Options thereafter.
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described below. The Exchange
proposes to modify this tiered pricing
structure and the fees associated
therewith as well as eliminate the fees
associated with the Grow with Us
pricing program.
The Exchange currently charges the
following fees per contract for a
Customer order that adds liquidity in
Penny Pilot Securities to the BATS
Options order book: (i) $0.45 for an
order that does not qualify for a lower
fee; (ii) $0.44 where a Member has an
ADV less than 0.25% of average TCV
and also shows a minimum of 10 basis
points TCV improvement over their
previous High Water Mark; (iii) $0.44
where a Member has an ADV equal to
or greater than 0.25% of average TCV
but less than 0.75% of average TCV; (iv)
$0.43 where a Member has an ADV
equal to or greater than 0.25% of
average TCV but less than 0.75% of
average TCV and also shows a minimum
of 10 basis points TCV improvement
over their previous High Water Mark; (v)
$0.43 where a Member has an ADV
equal to or greater than 0.75% of
average TCV but less than 1.25% of
average TCV; (vi) $0.42 where a Member
has an ADV equal to or greater than
0.75% of average TCV but less than
1.25% of average TCV and also shows
a minimum of 10 basis points TCV
improvement over their previous High
Water Mark; and (vii) $0.42 where a
Member has an ADV equal to or greater
than 1.25% of average TCV.
The Exchange proposes to eliminate
volume tiers, to eliminate the Grow with
Us fees, and to modify the fees charged
for Customer orders that remove
liquidity from the BATS Options order
book in Penny Pilot Securities.
Specifically, the Exchange is proposing
to charge $0.47 per contract for all
Customer orders that remove liquidity
from the BATS Options order book.
(iii) Non-Customer Rebates for Adding
Liquidity in Penny Pilot Securities
The Exchange currently provides a
rebate of $0.25 per contract for
Professional, Firm, and Market Maker
orders that add liquidity to the BATS
Options order book in Penny Pilot
Securities and are removed by a
Customer order. The Exchange currently
provides a rebate of $0.35 per contract
for Professional, Firm, and Market
Maker orders that add liquidity to the
BATS Options order book in Penny
Pilot Securities and are removed by a
Professional, Firm, or Market Maker
order.
In order to further incentivize
liquidity on BATS Options, the
Exchange proposes to eliminate the
distinction in pricing based on the
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(vi) Customer Fees for Removing
Liquidity in Non-Penny Pilot Securities
(iv) Non-Customer Fees for Removing
Liquidity in Penny Pilot Securities
The Exchange currently charges a fee
of $0.47 per contract for Professional,
Firm, and Market Maker orders that
remove liquidity from BATS Options in
Penny Pilot Securities where the
Member does not qualify for a lower
charge based on TCV improvement. The
Exchange currently charges a fee of
$0.46 per contract for Professional,
Firm, and Market Maker orders that
remove liquidity from BATS Options in
Penny Pilot Securities where the
Member shows a minimum of 10 basis
points of TCV improvement over their
previous High Water Mark.
For Professional, Firm, and Market
Maker orders that remove liquidity from
BATS Options in Penny Pilot Securities,
the Exchange is proposing to adjust fees,
to eliminate the Grow with Us
incentive, and to offer a lower fee for
Members that have an ADV equal to or
greater than 1.00% of average TCV.
Specifically, the Exchange is
proposing to increase its fees for
Professional, Firm, and Market Maker
orders that remove liquidity from BATS
Options in Penny Pilot Securities where
the Member does not qualify for a lower
fee from $0.47 per contract to $0.48 per
contract. The Exchange also proposes to
eliminate fees for Professional, Firm,
and Market Maker orders that remove
liquidity from BATS Options in Penny
Pilot Securities where the Member
qualifies for Grow with Us pricing based
on TCV improvement. Finally, the
Exchange is proposing to charge $0.47
per contract for a Professional, Firm, or
Market Maker order that removes
liquidity from the BATS Options order
book where the Member has an ADV
equal to or greater than 1.00% of
average TCV.
emcdonald on DSK67QTVN1PROD with NOTICES
capacity of the order that removes the
order and to increase the rebate for
Professional, Firm, and Market Maker
orders that add liquidity to the BATS
Options order book. Specifically, the
Exchange is proposing to offer a $0.40
rebate per contract for all Professional,
Firm, or Market Maker orders that add
liquidity to the BATS Options order
book regardless of the capacity of the
order that removes such liquidity.
(vii) Non-Customer Rebates for Adding
Liquidity in Non-Penny Pilot Securities
(v) Customer Rebates for Adding
Liquidity in non-Penny Pilot Securities
The Exchange currently offers a $0.80
rebate per contract for Customer orders
that add liquidity in non-Penny Pilot
Securities. The Exchange is proposing to
increase the rebate for Customer orders
that add liquidity in non-Penny Pilot
Securities from $0.80 to $0.85 per
contract.
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16:00 Jan 21, 2014
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The Exchange currently charges $0.75
per contract for Customer orders that
remove liquidity in non-Penny Pilot
Securities. The Exchange is proposing to
increase the fee for Customer orders that
remove liquidity in non-Penny Pilot
Securities from $0.75 to $0.80 per
contract.
The Exchange currently offers a $0.60
rebate per contract for Professional,
Firm, or Market Maker orders that add
liquidity in Non-Penny Pilot Securities.
The Exchange is proposing to increase
the rebate for Professional, Firm, and
Market Maker orders that add liquidity
in non-Penny Pilot Securities from
$0.60 to $0.65 per contract.
(viii) Non-Customer Fees for Removing
Liquidity in non-Penny Pilot Securities
The Exchange currently charges $0.84
per contract for Professional, Firm, and
Market Maker orders that remove
liquidity in non-Penny Pilot Securities.
The Exchange is proposing to increase
the fee for Professional, Firm, and
Market Maker orders that remove
liquidity in non-Penny Pilot Securities
from $0.84 to $0.89 per contract.
(ix) NBBO Setter Program Rebates
The Exchange’s NBBO Setter Program
is a program intended to incentivize
aggressive quoting on BATS Options by
providing an additional rebate upon
execution for all orders that add
liquidity that set either the NBB or NBO
(the ‘‘NBBO Setter Rebate’’),16 subject to
certain volume requirements. Orders
that qualify for the NBBO Setter Rebate
receive the following rebates: $0.03
additional rebate per contract rebate for
executions of Professional, Firm and
Market Maker orders that qualify for the
NBBO Setter Rebate by Members with
an ADV equal to or greater than 0.25%
of average TCV but less than 0.75% of
average TCV; $0.06 additional rebate per
contract for qualifying executions of
Professional, Firm or Market Maker
orders by Members with an ADV equal
to or greater than 0.75% of average TCV
but less than 1.25% of average TCV; and
an additional $0.10 per contract for
qualifying executions of Professional,
Firm and Market Maker orders by
16 An order that is entered at the most aggressive
price both on the BATS Options book and
according to then current OPRA data will be
determined to have set the NBB or NBO for
purposes of the NBBO Setter Rebate without regard
to whether a more aggressive order is entered prior
to the original order being executed.
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Members with an ADV equal to or
greater than 1.25% of average TCV.
The Exchange also applies its Grow
with Us pricing program to the lower
two tiers of the NBBO Setter Rebate.
Accordingly, any Member that qualifies
for the lower NBBO Setter Program tier
applicable to Members with an ADV
equal to or greater than 0.25% of
average TCV but not the 0.75% of
average TCV tier that achieves at least
a 10 basis point increase over its
previous High Water Mark is provided
a NBBO Setter Rebate of $0.05 per
contract for qualifying executions.
Similarly, any Member that qualifies for
the middle NBBO Setter tier applicable
to Members with an ADV equal to or
greater than 0.75% of average TCV but
less than 1.25% of average TCV that
achieves at least a 10 basis point
increase over its previous High Water
Mark is provided a NBBO Setter Rebate
of $0.08 per contract for qualifying
executions. The highest NBBO Setter
Program tier applicable to Members
with an ADV equal to or greater than
1.25% of average TCV is not subject to
the Grow with Us pricing program.
The Exchange proposes to simplify
the NBBO Setter Program by eliminating
the middle volume tier and ceasing to
apply the Grow with Us pricing program
to the NBBO Setter Program, thus
leaving only two separate rebates for
qualifying transactions. Further, the
Exchange is proposing to adjust the
thresholds required to qualify for both
the bottom and top tier and to lower the
rebates provided for each tier.
Specifically, the Exchange proposes to
increase the lower threshold to qualify
for the lowest tier of the NBBO Setter
Program from an ADV of 0.25% of
average TCV to an ADV of 0.30% of
average TCV. Further, the Exchange is
proposing to raise the upper threshold
for the lower tier from an ADV of 0.75%
of average TCV to an ADV of 1.00% of
average TCV. The Exchange is also
proposing to decrease the threshold at
which Members will qualify for the top
tier of the NBBO Setter Program from an
ADV of 1.25% of average TCV to 1.00%
of average TCV. As noted above, the
Exchange is thus eliminating any
middle tier applicable to the NBBO
Setter Program.
The Exchange proposes to provide a
NBBO Setter Rebate of $0.02 per
contract for qualifying executions of
Professional, Firm, and Market Maker
orders by any Member that qualifies for
the lower tier applicable to Members
with an ADV equal to or greater than
0.30% of average TCV but less than
1.00% of average TCV. The Exchange
also proposes to provide a NBBO Setter
Rebate of $0.04 per contract for
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qualifying executions of Professional,
Firm, and Market Maker orders by any
Member that qualifies for the higher tier
applicable to Members with an ADV
equal to or greater than 1.00% of
average TCV. The changes proposed
above, including the proposed rebates
and elimination of Grow with Us
incentives, represent a decrease of
potential NBBO Setter Rebates that can
be achieved by Members.
(x) QIP Rebates
The Exchange is proposing to modify
the tier thresholds and adjust the rebates
provided under the QIP. Currently, the
Exchange offers an additional rebate per
contract for an order that adds liquidity
to the BATS Options order book in
options classes in which a Member is
Market Maker registered on BATS
Options pursuant to Rule 22.2 as
follows:
ADV of BATS options registered market maker
ADV
ADV
ADV
ADV
less than 0.25% TCV ......................................................................................................................................
equal to or greater than 0.25% but less than 0.75% TCV .............................................................................
equal to or greater than 0.75% but less than 1.25% TCV .............................................................................
equal to or greater than 1.25% TCV ..............................................................................................................
The Exchange proposes to eliminate
the lowest tier of QIP such that a
Member must at least achieve an ADV
of 0.30% of average TCV in order to
qualify for an additional rebate. The
Exchange also proposes to increase the
lower threshold to qualify for the lowest
QIP tier from an ADV of 0.25% of
average TCV to an ADV of 0.30% of
average TCV and to increase the upper
threshold from 0.75% to 1.00%. The
Exchange is also proposing to lower the
threshold for the upper QIP tier from an
ADV of 1.25% of average TCV to an
ADV of 1.00% of average TCV. In
conjunction with these proposed
threshold adjustments, the Exchange is
also proposing to eliminate the middle
tier that currently covers a Member with
an ADV as a percentage of TCV equal to
or greater than 0.75%, but less than
1.25%. The Exchange is also proposing
to remove Customer orders from
participation in the QIP. Finally, the
Exchange is proposing to modify the
QIP by providing qualifying
Professional, Firm, and Market Maker
orders with QIP rebates, as follows:
emcdonald on DSK67QTVN1PROD with NOTICES
Customer
Grow with Us pricing incentives, the
Exchange proposes to eliminate the
definition of High Water Mark, which is
only applicable to Grow with Us
pricing, and to reserve for future use
footnote 4 of the fee schedule, which
references Grow with Us pricing.
Finally, in the section regarding
Customer rebates for added liquidity in
Penny Pilot Securities the Exchange
proposes to make changes to ensure
consistent capitalization and references
to Member ADV and to change one
reference of adding liquidity ‘‘from’’ the
Exchange to adding liquidity ‘‘to’’ the
Exchange.
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.17
Specifically, the Exchange believes that
the proposed rule change is consistent
with Section 6(b)(4) of the Act,18 in that
it provides for the equitable allocation
Professional/
of reasonable dues, fees and other
ADV of BATS options
firm/market
charges among members and other
registered market maker
maker
persons using any facility or system
which the Exchange operates or
ADV equal to or greater
controls. The Exchange notes that it
than 0.30% but less
than 1.00% TCV ...........
$0.02 operates in a highly competitive market
ADV equal to or greater
in which market participants can
than 1.00% TCV ...........
0.04 readily direct order flow to competing
venues if they deem fee levels at a
The changes proposed above,
particular venue to be excessive.
including the proposed rebates and
Volume-based rebates and fees such
elimination of QIP incentives for
as the ones maintained by BATS
Customer orders, represent a decrease of Options, and as amended by this
potential additional QIP rebates that can proposal, have been widely adopted in
be achieved by Members.
the cash equities markets, and are
equitable because they are open to all
Additional Changes
Members on an equal basis and provide
In addition to the proposals set forth
additional benefits or discounts that are
above, the Exchange proposes various
17 15 U.S.C. 78f.
minor additional changes. In
18 15 U.S.C. 78f(b)(4).
conjunction with the elimination of
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16:00 Jan 21, 2014
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0.01
0.03
0.03
0.03
Professional/
firm/market
maker
0.05
0.05
0.06
0.08
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/or growth patterns, and
introduction of higher volumes of orders
into the price and volume discovery
processes. Accordingly, the Exchange
believes that the proposed changes to
the Exchange’s tiered pricing structure
and incentives are not unfairly
discriminatory because they are
consistent with the overall goals of
enhancing market quality. Similarly, the
Exchange believes that continuing to
base its tiered fee structure on overall
TCV, rather than a static number of
contracts irrespective of overall volume
in the options industry, is a fair and
equitable approach to pricing. The
Exchange notes that while certain
thresholds to meet Exchange tiers are
increasing (i.e., from ADV of 0.25% of
average TCV to ADV of 0.30% of
average TCV, and for those qualifying
for an intermediate tier based on ADV
and/or applicable Grow with Us
incentives) the Exchange has increased
its base rebates and has also reduced the
level of ADV needed to qualify for the
top tier from 1.25% of average TCV to
1% of average TCV.
As explained above, while the
Exchange is maintaining a tiered pricing
structure with respect to certain fees
and rebates, the Exchange is also
proposing to eliminate considerable
variability with respect to its pricing
structure. The Exchange believes that
this simplification will benefit Members
by providing more predictable fees and
rebates when trading on the Exchange.
Despite the increases in fees for all
orders that remove liquidity (Customer,
Professional, Firm and Market Maker
orders) in both Penny Pilot Securities
and non-Penny Pilot Securities, the
Exchange believes that its proposed fee
structure is reasonable as the Exchange’s
fees remain generally equivalent to
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standard fees charged by other markets
with similar fee structures, such as the
NASDAQ Options Market (‘‘NOM’’) and
NYSE Arca, Inc. (‘‘ARCA’’). The
increase in fees is also reasonable
because the Exchange has also proposed
to increase the rebates provided to add
liquidity. Similarly, the Exchange
believes that the increases are fair and
equitable because, in addition to
increased rebates generally, the
Exchange will continue to offer
incentives to receive reduced fees and
enhanced rebates that provide all
Members with several different ways to
offset the increase in fees. As noted
above, the Exchange believes that such
volume-based tiers are fair and equitable
and not unreasonably discriminatory
because they are consistent with the
overall goals of enhancing market
quality. The proposed increases to
rebates are reasonable in that they will
further incentivize Members to add
liquidity to BATS Options and will help
to offset proposed increases in fees.
Additional information regarding each
of the proposed changes is set forth
below.
The Exchange’s proposed changes to
the rebates provided for Customer
orders that add liquidity to the BATS
Options order book in Penny Pilot
Securities are reasonable and equitably
allocated because they represent an
increase in rebates for all Customer
orders submitted to the Exchange and
simplify the Exchange’s rebate structure
for such orders. Most significantly, the
lowest possible rebate for any Customer
order would be increased by $0.15 per
contract. The proposed changes,
including modifications to the
Exchange’s tiered rebate structure, are
fair and equitable and not unreasonably
discriminatory for the reasons described
above with respect to volume-based
rebates and fees.
The Exchange’s proposed changes
with respect to the fees charged for
Customer orders that remove liquidity
from the BATS Options order book in
Penny Pilot Securities are reasonable
and equitably allocated because they
will significantly simplify the pricing
structure for executions of Customer
orders on the Exchange. Further, the
proposed fees are reasonable because
they represent only a modest increase to
fees that can be offset with the
substantial increase to rebates for such
orders, as described above. The
Exchange further believes that its fees
for Customer orders are reasonable
because they are generally equivalent to
standard fees charged by other markets
with similar fee structures, such as
NYSE Arca and NOM. The Exchange
believes that the proposed fees are
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equitably allocated and not
unreasonably discriminatory because
they are as low or lower than the fee to
remove liquidity charged to all other
participants on the Exchange and
because the fee applies equally to all
Customer orders.
The Exchange’s proposal to modify
the rebate provided to non-Customers
that add liquidity to the Exchange in
Penny Pilot Securities is reasonable and
equitably allocated because it will
simplify and increase the rebate
provided to all Professional, Firm, or
Market Maker orders that add liquidity
to the BATS Options order book
regardless of the capacity of the order
that removes such liquidity. As such,
and because all Professional, Firm, and
Market Maker orders will receive the
same rebate (subject to additional
incentives, including the NBBO Setter
Program and QIP), the Exchange
believes that the proposal is not
unreasonably discriminatory.
The Exchange’s proposal to increase
its fees for Professional, Firm, and
Market Maker orders that remove
liquidity from BATS Options in Penny
Pilot Securities where the Member does
not qualify for a lower fee is reasonable
because it represents only a modest
increase to fees that can be offset with
the increase to rebates for such orders,
as described above. The Exchange
further believes that its fees for
Professional, Firm, and Market Maker
orders in Penny Pilot Securities are
reasonable because they are generally
equivalent to standard fees charged by
other markets with similar fee
structures, such as NYSE Arca and
NOM. The Exchange’s offering of a
reduced fee for Professional, Firm, and
Market Maker orders for Members that
meet a volume threshold is fair and
equitable and not unreasonably
discriminatory for the reasons described
above with respect to volume-based
rebates and fees.
The proposed increase in rebate for
Customer orders that add liquidity in
non-Penny Pilot Securities is reasonable
and equitably allocated because it is the
highest rebate provided by the
Exchange, which the Exchange believes
will further incent the addition of
Customer orders in non-Penny Pilot
Securities to the Exchange’s order book.
The proposed change is not
unreasonably discriminatory in that it
will apply equally to all Customer
orders.
The proposed increase to the fee for
Customer orders that remove liquidity
in non-Penny Pilot Securities is
reasonable and equitably allocated
because it represents only a modest
increase to the existing fee and remains
PO 00000
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3647
generally equivalent to standard fees
charged by other markets with similar
fee structures, such as NYSE Arca and
NOM. The proposal is not unreasonably
discriminatory because it will apply
equally to all Customer orders. As
described above, the fee increase is
proposed along with a corresponding
increase to the rebate, which should
offset some or all of the increased cost
to Customer orders.
The Exchange’s proposed increase to
the rebate for Professional, Firm, and
Market Maker orders that add liquidity
in non-Penny Pilot Securities is
reasonable and equitably allocated
because it will incent the addition of
Professional, Firm, and Market Maker
orders in non-Penny Pilot Securities to
the Exchange’s order book. The
proposed change is not unreasonably
discriminatory in that it will apply
equally to all Professional, Firm, and
Market Maker orders.
The Exchange’s proposed increase to
the fee to remove liquidity for
Professional, Firm, and Market Maker
orders that remove liquidity in nonPenny Pilot Securities is reasonable and
equitably allocated because it represents
only a modest increase to the existing
fee and remains generally equivalent to
standard fees charged by other markets
with similar fee structures, such as
NYSE Arca and NOM. While
Professional, Firm and Market Maker
orders will be assessed comparably
higher transaction fees than those
assessed to other Customer orders, as
proposed, the Exchange does not believe
that this pricing is unreasonably
discriminatory because the securities
markets generally, and the Exchange in
particular, have historically aimed to
improve markets for investors and
develop various features within the
market structure for customer benefit.
The Exchange also notes that
Professional, Firm and Market Maker
orders qualify for additional rebates
under the Exchange’s NBBO Setter
Program, which is not applicable to
Customer orders. As noted elsewhere,
the fee increase is proposed along with
a corresponding increase to the rebate,
which should offset some or all of the
increased cost to Customer orders.
The Exchange’s proposed changes to
the NBBO Setter Program, including a
general reduction to the rebates
available through the program, are
reasonable and equitably allocated in
that they are coupled with increases to
the standard rebate to add liquidity. The
proposed rebate structure will reduce
the variability and complexity of rebates
for Professional, Firm and Market Maker
orders added to the Exchange’s order
book. The applicability of the NBBO
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Federal Register / Vol. 79, No. 14 / Wednesday, January 22, 2014 / Notices
Setter Program to Members achieving
certain volume thresholds is fair and
equitable and not unreasonably
discriminatory for the reasons described
above with respect to volume-based
rebates and fees. Further, the Exchange
notes that it has reduced the ADV
threshold that a Member needs to reach
in order to qualify for the higher tier.
The Exchange also notes that continued
exclusion of Customer orders from
NBBO Setter rebates is reasonable, fair
and equitable, and not unreasonably
discriminatory given the higher base
and tiered rebates already provided to
Customer orders. Despite the fact that
Customer orders are not eligible for
NBBO Setter Rebates, the proposed
modifications to NBBO Setter Rebates
are fair and equitable and not
unreasonably discriminatory because in
most circumstances, Customer orders
that do not set the NBBO are eligible for
even higher rebates than certain
Professional, Firm, and Market Maker
orders that did set the NBBO and
receive a NBBO Setter Rebate.
Similarly, the Exchange’s removal of
Customer orders from the QIP is
reasonable, fair and equitable, and not
unreasonably discriminatory due to the
higher base and tiered rebates already
provided to Customer orders. The
applicability of the QIP to Members
achieving certain volume thresholds is
fair and equitable and not unreasonably
discriminatory for the reasons described
above with respect to volume-based
rebates and fees. The Exchange also
notes that although registration as a
market maker is required to qualify for
QIP, such registration is available to all
Members on an equal basis. With
respect to the reduced rebates available
through QIP, the Exchange reiterates
that such reduction is reasonable and
equitably allocated due to a higher base
rebate that will be applicable to all
Members. Not only will the higher base
rebate help Members to offset any
reduction to QIP rebates but the lower
QIP rebates paid by the Exchange will
allow the Exchange to fund such higher
based rebates.
The elimination of the Grow with Us
incentive from the Exchange’s tiered
pricing structure is also reasonable,
equitably allocated and not unfairly
discriminatory because it will
significantly simplify the Exchange’s fee
schedule and has been coupled with
various increases to standard rebates
that will help to reduce the variability
of rebates provided by the Exchange.
Further, elimination of the Grow with
Us incentive will allow the Exchange to
allocate resources devoted to the
program to other pricing programs.
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Finally, the Exchange believes that
the various formatting and ministerial
changes are reasonable as they will help
to avoid confusion for those that review
the Exchange’s fee schedule.
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. With respect
to the changes to fees and rebates for
executions on the Exchange that are set
forth in this proposal, the Exchange
does not believe that any such changes
burden competition, but instead,
enhance competition, as they are
intended to increase the
competitiveness of and draw additional
volume to the Exchange’s platform. As
stated above, 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 set by the
Exchange to be excessive. The proposed
changes are generally intended to
simplify the Exchange’s fee structure
while enhancing the base rebates for
liquidity added to the Exchange, which
is intended to draw additional liquidity
to the Exchange. Thus, the proposal is
a competitive proposal that is intended
to add additional liquidity to the
Exchange, which will, in turn, benefit
the Exchange and all Exchange
participants.
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 19 and paragraph (f) of Rule
19b–4 thereunder.20 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
19 15
20 17
PO 00000
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–2014–001 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–2014–001. 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–
2014–001, and should be submitted on
or before February 12, 2014.
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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Federal Register / Vol. 79, No. 14 / Wednesday, January 22, 2014 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–01104 Filed 1–21–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71312; File No. SR–BOX–
2014–01]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
the Fee Schedule To Establish Fees for
Complex Order Price Improvement
Period (‘‘COPIP’’) Transactions
January 15, 2014.
Pursuant to Section 19(b)(1) under the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on January 9,
2014, BOX Options Exchange LLC (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposed rule change
pursuant to Section 19(b)(3)(A)(ii) of the
Act,3 and Rule 19b–4(f)(2) thereunder,4
which renders the proposal effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
emcdonald on DSK67QTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to amend the Fee Schedule to establish
fees for Complex Order Price
Improvement Period (‘‘COPIP’’)
transactions on the BOX Market LLC
(‘‘BOX’’) options facility. The text of the
proposed rule change is available from
the principal office of the Exchange, at
the Commission’s Public Reference
Room and also on the Exchange’s
Internet Web site at https://
boxexchange.com.
21 17
CFR 200.30–3(a)(12).
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).
1 15
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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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule for trading on BOX to
establish fees for COPIP 5 transactions.
The Exchange recently amended its
rules to permit Complex Orders 6 to be
submitted to a price improvement
period auction mechanism similar to the
existing Price Improvement Period
(‘‘PIP’’) mechanism for single option
series on BOX.7 The Exchange believes
the COPIP will result in more efficient
transactions, reduced execution risk to
BOX Options Participants, and greater
opportunities for price improvement.
The Exchange is submitting this filing to
describe the fees that are applicable to
COPIP transactions.
Generally, the Exchange proposes to
treat COPIP transactions in the same
manner as PIP transactions within the
BOX Fee Schedule. While standard
Complex Order transactions are subject
to the fees and credits set forth in
Section III (Complex Order Transaction
Fees) of the Fee Schedule, COPIP
transactions will instead be subject to
Sections I (Exchange Fees) and II
(Liquidity Fees and Credits).
First, the Exchange proposes to add
language throughout Section I
(Exchange Fees) to state that Auction
Transactions fees will now include
those transactions executed through the
5 As defined in Rule 7245, the term ‘‘COPIP’’
means Complex Order Price Improvement Period.
6 As defined in Rule 7240(a)(5), the term
‘‘Complex Order’’ means any order involving the
simultaneous purchase and/or sale of two or more
different options series in the same underlying
security, for the same account, in a ratio that is
equal to or greater than one-to-three (.333) and less
than or equal to three-to-one (3.00) and for the
purpose of executing a particular investment
strategy.
7 See Securities Release No. 71148 (December 19,
2013), 78 FR 78437 (December 26, 2013) (Order
Approving SR–BOX–2013–43).
PO 00000
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3649
COPIP and that all COPIP transactions
will be charged per contract per leg. The
Exchange currently assesses Exchange
Fees based on transaction type and
account type with distinct fees for
Auction Transactions (transactions
executed through the BOX Price
Improvement Period, Solicitation, and
Facilitation auction mechanisms), and
non-Auction Transactions (transactions
executed on the BOX Book).
Specifically, for Public Customers the
Exchange proposes to assess a $0.00 per
contract fee for COPIP Orders 8 and a
$0.15 per contract fee for Improvement
Orders 9 in the COPIP. For Professional
Customers and Broker Dealers, the
Exchange proposes to assess a $0.37 per
contract fee for both COPIP Orders and
Improvement Orders in the COPIP.
The remaining types of Exchange Fees
are based upon a Participant’s monthly
average daily volume (‘‘ADV’’) in
Auction Transactions and Non-Auction
Transactions. The Exchange proposes
that Exchange Fees for Initiating
Participants, regardless of account type,
who submit a Primary Improvement
Order 10 in the COPIP will be based
upon a Participants’ monthly average
daily volume (‘‘ADV’’) in all Auction
Transactions as calculated at the end of
each month and detailed in Section I.A.
For Market Makers, the Exchange
proposes to assess a per contract, tiered,
execution fee on COPIP Orders and
Improvement Orders in the COPIP
under Section I.B that is based on their
monthly ADV in all transactions
executed on BOX, as calculated at the
end of each month.
Second, the Exchange proposes to
treat COPIP transactions in the same
manner as PIP transactions for liquidity
fees and credits, which are applied in
addition to any applicable exchange fees
as described in Section I of the Fee
Schedule. Specifically, the Exchange
proposes that COPIP Orders (i.e., the
agency orders opposite the Primary
Improvement Order) receive a
‘‘removal’’ credit and Improvement
Orders in the COPIP be charged an
‘‘add’’ fee.
Specifically, the Exchange proposes
that COPIP transactions in classes where
the minimum price variation of $0.01
(i.e., Penny Pilot classes where the trade
price is less than $3.00 and all series in
8 As defined in Rule 7245, the term ‘‘COPIP
Order’’ means a Complex Order designated for the
COPIP.
9 As defined in Rule 7245, the term
‘‘Improvement Order’’ means a competing Complex
Order submitted to BOX by an Order Flow Provider
or Market Maker during a COPIP.
10 As defined in Rule 7245, the term ‘‘Primary
Improvement Order’’ means the matching contra
order equal to the full size of the corresponding
COPIP Order.
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]]>Agencies
[Federal Register Volume 79, Number 14 (Wednesday, January 22, 2014)]
[Notices]
[Pages 3643-3649]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01104]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71303; File No. SR-BATS-2014-001]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Related to
Fees for Use of BATS Exchange, Inc.
January 15, 2014.
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 January 2, 2014, 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 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
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, at the Commission's Public Reference Room, and at the
Commission's Web site at https://www.sec.gov.
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 immediately, in order to: (i) Modify the
rebates provided by the Exchange for Customer \6\ orders that add
liquidity to the Exchange's options platform (``BATS Options'') in
options classes subject to the penny pilot program as described below
(``Penny Pilot Securities'');\7\ (ii) modify the fees charged by the
Exchange for Customer orders that remove liquidity from BATS Options in
Penny Pilot Securities; (iii) modify the rebates provided by the
Exchange for Professional,\8\ Firm, and Market Maker \9\ orders that
add liquidity to BATS Options in Penny Pilot Securities; (iv) modify
the fees charged by the Exchange for Professional, Firm, and Market
Maker orders that remove liquidity from BATS Options in Penny Pilot
Securities; (v) modify the rebates provided by the Exchange for
Customer orders that add liquidity to BATS Options in non-Penny Pilot
Securities; (vi) modify the fees charged by the Exchange for Customer
orders that remove liquidity from BATS Options in non-Penny Pilot
Securities; (vii) modify the rebates provided by the Exchange for
Professional, Firm, and Market Maker orders that add liquidity to BATS
Options in non-Penny Pilot Securities; (viii) modify the fees charged
by the Exchange for Professional, Firm, and Market Maker orders that
remove
[[Page 3644]]
liquidity from BATS Options in non-Penny Pilot Securities; (ix) modify
the tier thresholds and adjust the rebates provided by the Exchange
under the BATS Options NBBO Setter Program;\10\ (x) modify the tier
thresholds and adjust the rebates provided by the Exchange under the
Quoting Incentive Program (``QIP'').\11\ In conjunction with proposals
(i) through (iv) and (ix) listed above, the Exchange is proposing to
eliminate the ``Grow with Us'' rebates and fees and the definitions and
footnotes associated therewith.\12\ In addition to these changes, the
Exchange proposes to make several minor changes to the fee schedule to
achieve additional consistency.
---------------------------------------------------------------------------
\6\ As defined on the Exchange's fee schedule, a ``Customer''
order is any transaction identified by a Member for clearing in the
Customer range at the Options Clearing Corporation (``OCC''), except
for those designated as ``Professional''.
\7\ The Exchange currently charges different fees and provides
different rebates depending on whether an options class is an
options class that qualifies as a Penny Pilot Security pursuant to
Exchange Rule 21.5, Interpretation and Policy .01 or is a non-penny
options class.
\8\ 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).
\9\ 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'').
\10\ The NBBO Setter Program is a program that provides
additional rebates for executions resulting from orders that add
liquidity that set either the national best bid (``NBB'') or
national best offer (``NBO'').
\11\ The QIP is a program designed to enhance market quality by
incentivizing market Makers to participate on BATS Options by
providing supplemental rebates for executed orders that add
liquidity where the Market Maker has an average daily trading volume
that exceeds certain thresholds.
\12\ The ``Grow with Us'' pricing constitutes enhanced rebates
and fees for Members that increase their trading activity on BATS
Options.
---------------------------------------------------------------------------
(i) Customer Rebates for Adding Liquidity in Penny Pilot Securities
The Exchange currently provides rebates for Customer orders that
add liquidity to the BATS Options order book in Penny Pilot Securities
pursuant to a tiered pricing structure, as described below. The
Exchange proposes to modify this tiered pricing structure and the
rebates associated therewith as well as eliminate the rebates
associated with the Grow with Us pricing program.
The Exchange currently offers the following rebates per contract
for a Customer order that adds liquidity in Penny Pilot Securities to
the BATS Options order book: (i) $0.30 where the Member does not
qualify for any additional rebates as described below; (ii) $0.31 where
the Member has an ADV \13\ less than 0.25% of average TCV \14\ and also
shows a minimum of 10 basis points TCV improvement over their previous
High Water Mark; \15\ (iii) $0.43 where the Member has an ADV equal to
or greater than 0.25% of average TCV but less than 0.75% of average
TCV; (iv) $0.44 where the Member has an ADV equal to or greater than
0.25% of average TCV but less than 0.75% of average TCV and also shows
a minimum of 10 basis points TCV improvement over their previous High
Water Mark; (v) $0.46 where the Member has an ADV equal to or greater
than 0.75% of average TCV but less than 1.25% of average TCV; (vi)
$0.47 where the Member has an ADV equal to or greater than 0.75% of
average TCV but less than 1.25% of average TCV and also shows a minimum
of 10 basis points TCV improvement over their previous High Water Mark;
and (vii) $0.47 where the Member has an ADV equal to or greater than
1.25% of average TCV.
---------------------------------------------------------------------------
\13\ As defined on the Exchange's fee schedule, ADV is average
daily volume calculated as the number of contracts added or removed,
combined, per day on a monthly basis. The fee schedule also provides
that routed contracts are not included in ADV calculation.
\14\ As defined on the Exchange's fee schedule, TCV is total
consolidated volume calculated as the volume reported by all
exchanges to the consolidated transaction reporting plan for the
month for which the fees apply.
\15\ As defined on the Exchange's fee schedule, High Water Mark
is the greater of a Member's Q4 2011 TCV or a Member's highest
monthly TCV on BATS Options thereafter.
---------------------------------------------------------------------------
The Exchange is proposing to adjust the thresholds required to meet
the tiers for higher rebates, to simplify the rebate structure by
eliminating one tier, to eliminate the Grow with Us rebates, and to
increase the rebates associated with each tier such that all Members
will receive higher rebates than under the current rebate structure.
Specifically, the Exchange is proposing to increase the minimum ADV as
a percentage of average TCV necessary to qualify for an increased
rebate from 0.25% to 0.30%. The Exchange is also proposing to eliminate
the third rebate tier for Members that have an ADV as a percentage of
average TCV between 0.25% to 0.75%. The Exchange is proposing to reduce
the threshold of ADV as a percentage of average TCV at which Members
will receive the highest rebate from 1.25% to 1.00%. Further, the
Exchange is proposing to amend the rebates per contract for Customer
orders that add liquidity to the BATS Options order book in Penny Pilot
Securities as follows: (i) To increase the rebate from $0.30 to $0.45
where the Member does not qualify for a higher rebate based on the
Member's ADV; (ii) to provide a rebate of $0.48 where the Member has an
ADV equal to or greater than 0.30% of average TCV but less than 1.00%
of average TCV; and (iii) to provide a rebate of $0.50 where the Member
has an ADV equal to or greater than 1.00% of average TCV.
(ii) Customer Fees for Removing Liquidity in Penny Pilot Securities
The Exchange currently charges fees for Customer orders that remove
liquidity from the BATS Options order book in Penny Pilot Securities
pursuant to a tiered pricing structure, as described below. The
Exchange proposes to modify this tiered pricing structure and the fees
associated therewith as well as eliminate the fees associated with the
Grow with Us pricing program.
The Exchange currently charges the following fees per contract for
a Customer order that adds liquidity in Penny Pilot Securities to the
BATS Options order book: (i) $0.45 for an order that does not qualify
for a lower fee; (ii) $0.44 where a Member has an ADV less than 0.25%
of average TCV and also shows a minimum of 10 basis points TCV
improvement over their previous High Water Mark; (iii) $0.44 where a
Member has an ADV equal to or greater than 0.25% of average TCV but
less than 0.75% of average TCV; (iv) $0.43 where a Member has an ADV
equal to or greater than 0.25% of average TCV but less than 0.75% of
average TCV and also shows a minimum of 10 basis points TCV improvement
over their previous High Water Mark; (v) $0.43 where a Member has an
ADV equal to or greater than 0.75% of average TCV but less than 1.25%
of average TCV; (vi) $0.42 where a Member has an ADV equal to or
greater than 0.75% of average TCV but less than 1.25% of average TCV
and also shows a minimum of 10 basis points TCV improvement over their
previous High Water Mark; and (vii) $0.42 where a Member has an ADV
equal to or greater than 1.25% of average TCV.
The Exchange proposes to eliminate volume tiers, to eliminate the
Grow with Us fees, and to modify the fees charged for Customer orders
that remove liquidity from the BATS Options order book in Penny Pilot
Securities. Specifically, the Exchange is proposing to charge $0.47 per
contract for all Customer orders that remove liquidity from the BATS
Options order book.
(iii) Non-Customer Rebates for Adding Liquidity in Penny Pilot
Securities
The Exchange currently provides a rebate of $0.25 per contract for
Professional, Firm, and Market Maker orders that add liquidity to the
BATS Options order book in Penny Pilot Securities and are removed by a
Customer order. The Exchange currently provides a rebate of $0.35 per
contract for Professional, Firm, and Market Maker orders that add
liquidity to the BATS Options order book in Penny Pilot Securities and
are removed by a Professional, Firm, or Market Maker order.
In order to further incentivize liquidity on BATS Options, the
Exchange proposes to eliminate the distinction in pricing based on the
[[Page 3645]]
capacity of the order that removes the order and to increase the rebate
for Professional, Firm, and Market Maker orders that add liquidity to
the BATS Options order book. Specifically, the Exchange is proposing to
offer a $0.40 rebate per contract for all Professional, Firm, or Market
Maker orders that add liquidity to the BATS Options order book
regardless of the capacity of the order that removes such liquidity.
(iv) Non-Customer Fees for Removing Liquidity in Penny Pilot Securities
The Exchange currently charges a fee of $0.47 per contract for
Professional, Firm, and Market Maker orders that remove liquidity from
BATS Options in Penny Pilot Securities where the Member does not
qualify for a lower charge based on TCV improvement. The Exchange
currently charges a fee of $0.46 per contract for Professional, Firm,
and Market Maker orders that remove liquidity from BATS Options in
Penny Pilot Securities where the Member shows a minimum of 10 basis
points of TCV improvement over their previous High Water Mark.
For Professional, Firm, and Market Maker orders that remove
liquidity from BATS Options in Penny Pilot Securities, the Exchange is
proposing to adjust fees, to eliminate the Grow with Us incentive, and
to offer a lower fee for Members that have an ADV equal to or greater
than 1.00% of average TCV.
Specifically, the Exchange is proposing to increase its fees for
Professional, Firm, and Market Maker orders that remove liquidity from
BATS Options in Penny Pilot Securities where the Member does not
qualify for a lower fee from $0.47 per contract to $0.48 per contract.
The Exchange also proposes to eliminate fees for Professional, Firm,
and Market Maker orders that remove liquidity from BATS Options in
Penny Pilot Securities where the Member qualifies for Grow with Us
pricing based on TCV improvement. Finally, the Exchange is proposing to
charge $0.47 per contract for a Professional, Firm, or Market Maker
order that removes liquidity from the BATS Options order book where the
Member has an ADV equal to or greater than 1.00% of average TCV.
(v) Customer Rebates for Adding Liquidity in non-Penny Pilot Securities
The Exchange currently offers a $0.80 rebate per contract for
Customer orders that add liquidity in non-Penny Pilot Securities. The
Exchange is proposing to increase the rebate for Customer orders that
add liquidity in non-Penny Pilot Securities from $0.80 to $0.85 per
contract.
(vi) Customer Fees for Removing Liquidity in Non-Penny Pilot Securities
The Exchange currently charges $0.75 per contract for Customer
orders that remove liquidity in non-Penny Pilot Securities. The
Exchange is proposing to increase the fee for Customer orders that
remove liquidity in non-Penny Pilot Securities from $0.75 to $0.80 per
contract.
(vii) Non-Customer Rebates for Adding Liquidity in Non-Penny Pilot
Securities
The Exchange currently offers a $0.60 rebate per contract for
Professional, Firm, or Market Maker orders that add liquidity in Non-
Penny Pilot Securities. The Exchange is proposing to increase the
rebate for Professional, Firm, and Market Maker orders that add
liquidity in non-Penny Pilot Securities from $0.60 to $0.65 per
contract.
(viii) Non-Customer Fees for Removing Liquidity in non-Penny Pilot
Securities
The Exchange currently charges $0.84 per contract for Professional,
Firm, and Market Maker orders that remove liquidity in non-Penny Pilot
Securities. The Exchange is proposing to increase the fee for
Professional, Firm, and Market Maker orders that remove liquidity in
non-Penny Pilot Securities from $0.84 to $0.89 per contract.
(ix) NBBO Setter Program Rebates
The Exchange's NBBO Setter Program is a program intended to
incentivize aggressive quoting on BATS Options by providing an
additional rebate upon execution for all orders that add liquidity that
set either the NBB or NBO (the ``NBBO Setter Rebate''),\16\ subject to
certain volume requirements. Orders that qualify for the NBBO Setter
Rebate receive the following rebates: $0.03 additional rebate per
contract rebate for executions of Professional, Firm and Market Maker
orders that qualify for the NBBO Setter Rebate by Members with an ADV
equal to or greater than 0.25% of average TCV but less than 0.75% of
average TCV; $0.06 additional rebate per contract for qualifying
executions of Professional, Firm or Market Maker orders by Members with
an ADV equal to or greater than 0.75% of average TCV but less than
1.25% of average TCV; and an additional $0.10 per contract for
qualifying executions of Professional, Firm and Market Maker orders by
Members with an ADV equal to or greater than 1.25% of average TCV.
---------------------------------------------------------------------------
\16\ An order that is entered at the most aggressive price both
on the BATS Options book and according to then current OPRA data
will be determined to have set the NBB or NBO for purposes of the
NBBO Setter Rebate without regard to whether a more aggressive order
is entered prior to the original order being executed.
---------------------------------------------------------------------------
The Exchange also applies its Grow with Us pricing program to the
lower two tiers of the NBBO Setter Rebate. Accordingly, any Member that
qualifies for the lower NBBO Setter Program tier applicable to Members
with an ADV equal to or greater than 0.25% of average TCV but not the
0.75% of average TCV tier that achieves at least a 10 basis point
increase over its previous High Water Mark is provided a NBBO Setter
Rebate of $0.05 per contract for qualifying executions. Similarly, any
Member that qualifies for the middle NBBO Setter tier applicable to
Members with an ADV equal to or greater than 0.75% of average TCV but
less than 1.25% of average TCV that achieves at least a 10 basis point
increase over its previous High Water Mark is provided a NBBO Setter
Rebate of $0.08 per contract for qualifying executions. The highest
NBBO Setter Program tier applicable to Members with an ADV equal to or
greater than 1.25% of average TCV is not subject to the Grow with Us
pricing program.
The Exchange proposes to simplify the NBBO Setter Program by
eliminating the middle volume tier and ceasing to apply the Grow with
Us pricing program to the NBBO Setter Program, thus leaving only two
separate rebates for qualifying transactions. Further, the Exchange is
proposing to adjust the thresholds required to qualify for both the
bottom and top tier and to lower the rebates provided for each tier.
Specifically, the Exchange proposes to increase the lower threshold
to qualify for the lowest tier of the NBBO Setter Program from an ADV
of 0.25% of average TCV to an ADV of 0.30% of average TCV. Further, the
Exchange is proposing to raise the upper threshold for the lower tier
from an ADV of 0.75% of average TCV to an ADV of 1.00% of average TCV.
The Exchange is also proposing to decrease the threshold at which
Members will qualify for the top tier of the NBBO Setter Program from
an ADV of 1.25% of average TCV to 1.00% of average TCV. As noted above,
the Exchange is thus eliminating any middle tier applicable to the NBBO
Setter Program.
The Exchange proposes to provide a NBBO Setter Rebate of $0.02 per
contract for qualifying executions of Professional, Firm, and Market
Maker orders by any Member that qualifies for the lower tier applicable
to Members with an ADV equal to or greater than 0.30% of average TCV
but less than 1.00% of average TCV. The Exchange also proposes to
provide a NBBO Setter Rebate of $0.04 per contract for
[[Page 3646]]
qualifying executions of Professional, Firm, and Market Maker orders by
any Member that qualifies for the higher tier applicable to Members
with an ADV equal to or greater than 1.00% of average TCV. The changes
proposed above, including the proposed rebates and elimination of Grow
with Us incentives, represent a decrease of potential NBBO Setter
Rebates that can be achieved by Members.
(x) QIP Rebates
The Exchange is proposing to modify the tier thresholds and adjust
the rebates provided under the QIP. Currently, the Exchange offers an
additional rebate per contract for an order that adds liquidity to the
BATS Options order book in options classes in which a Member is Market
Maker registered on BATS Options pursuant to Rule 22.2 as follows:
------------------------------------------------------------------------
Professional/
ADV of BATS options registered market Customer firm/market
maker maker
------------------------------------------------------------------------
ADV less than 0.25% TCV.................. 0.01 0.05
ADV equal to or greater than 0.25% but 0.03 0.05
less than 0.75% TCV.....................
ADV equal to or greater than 0.75% but 0.03 0.06
less than 1.25% TCV.....................
ADV equal to or greater than 1.25% TCV... 0.03 0.08
------------------------------------------------------------------------
The Exchange proposes to eliminate the lowest tier of QIP such that
a Member must at least achieve an ADV of 0.30% of average TCV in order
to qualify for an additional rebate. The Exchange also proposes to
increase the lower threshold to qualify for the lowest QIP tier from an
ADV of 0.25% of average TCV to an ADV of 0.30% of average TCV and to
increase the upper threshold from 0.75% to 1.00%. The Exchange is also
proposing to lower the threshold for the upper QIP tier from an ADV of
1.25% of average TCV to an ADV of 1.00% of average TCV. In conjunction
with these proposed threshold adjustments, the Exchange is also
proposing to eliminate the middle tier that currently covers a Member
with an ADV as a percentage of TCV equal to or greater than 0.75%, but
less than 1.25%. The Exchange is also proposing to remove Customer
orders from participation in the QIP. Finally, the Exchange is
proposing to modify the QIP by providing qualifying Professional, Firm,
and Market Maker orders with QIP rebates, as follows:
------------------------------------------------------------------------
Professional/
ADV of BATS options registered market maker firm/market
maker
------------------------------------------------------------------------
ADV equal to or greater than 0.30% but less than 1.00% $0.02
TCV..................................................
ADV equal to or greater than 1.00% TCV................ 0.04
------------------------------------------------------------------------
The changes proposed above, including the proposed rebates and
elimination of QIP incentives for Customer orders, represent a decrease
of potential additional QIP rebates that can be achieved by Members.
Additional Changes
In addition to the proposals set forth above, the Exchange proposes
various minor additional changes. In conjunction with the elimination
of Grow with Us pricing incentives, the Exchange proposes to eliminate
the definition of High Water Mark, which is only applicable to Grow
with Us pricing, and to reserve for future use footnote 4 of the fee
schedule, which references Grow with Us pricing. Finally, in the
section regarding Customer rebates for added liquidity in Penny Pilot
Securities the Exchange proposes to make changes to ensure consistent
capitalization and references to Member ADV and to change one reference
of adding liquidity ``from'' the Exchange to adding liquidity ``to''
the Exchange.
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.\17\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\18\ 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.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f.
\18\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Volume-based rebates and fees such as the ones maintained by BATS
Options, and as amended by this proposal, have been widely adopted in
the cash equities markets, 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 the value to an exchange's
market quality associated with higher levels of market activity, such
as higher levels of liquidity provision and/or growth patterns, and
introduction of higher volumes of orders into the price and volume
discovery processes. Accordingly, the Exchange believes that the
proposed changes to the Exchange's tiered pricing structure and
incentives are not unfairly discriminatory because they are consistent
with the overall goals of enhancing market quality. Similarly, the
Exchange believes that continuing to base its tiered fee structure on
overall TCV, rather than a static number of contracts irrespective of
overall volume in the options industry, is a fair and equitable
approach to pricing. The Exchange notes that while certain thresholds
to meet Exchange tiers are increasing (i.e., from ADV of 0.25% of
average TCV to ADV of 0.30% of average TCV, and for those qualifying
for an intermediate tier based on ADV and/or applicable Grow with Us
incentives) the Exchange has increased its base rebates and has also
reduced the level of ADV needed to qualify for the top tier from 1.25%
of average TCV to 1% of average TCV.
As explained above, while the Exchange is maintaining a tiered
pricing structure with respect to certain fees and rebates, the
Exchange is also proposing to eliminate considerable variability with
respect to its pricing structure. The Exchange believes that this
simplification will benefit Members by providing more predictable fees
and rebates when trading on the Exchange.
Despite the increases in fees for all orders that remove liquidity
(Customer, Professional, Firm and Market Maker orders) in both Penny
Pilot Securities and non-Penny Pilot Securities, the Exchange believes
that its proposed fee structure is reasonable as the Exchange's fees
remain generally equivalent to
[[Page 3647]]
standard fees charged by other markets with similar fee structures,
such as the NASDAQ Options Market (``NOM'') and NYSE Arca, Inc.
(``ARCA''). The increase in fees is also reasonable because the
Exchange has also proposed to increase the rebates provided to add
liquidity. Similarly, the Exchange believes that the increases are fair
and equitable because, in addition to increased rebates generally, the
Exchange will continue to offer incentives to receive reduced fees and
enhanced rebates that provide all Members with several different ways
to offset the increase in fees. As noted above, the Exchange believes
that such volume-based tiers are fair and equitable and not
unreasonably discriminatory because they are consistent with the
overall goals of enhancing market quality. The proposed increases to
rebates are reasonable in that they will further incentivize Members to
add liquidity to BATS Options and will help to offset proposed
increases in fees. Additional information regarding each of the
proposed changes is set forth below.
The Exchange's proposed changes to the rebates provided for
Customer orders that add liquidity to the BATS Options order book in
Penny Pilot Securities are reasonable and equitably allocated because
they represent an increase in rebates for all Customer orders submitted
to the Exchange and simplify the Exchange's rebate structure for such
orders. Most significantly, the lowest possible rebate for any Customer
order would be increased by $0.15 per contract. The proposed changes,
including modifications to the Exchange's tiered rebate structure, are
fair and equitable and not unreasonably discriminatory for the reasons
described above with respect to volume-based rebates and fees.
The Exchange's proposed changes with respect to the fees charged
for Customer orders that remove liquidity from the BATS Options order
book in Penny Pilot Securities are reasonable and equitably allocated
because they will significantly simplify the pricing structure for
executions of Customer orders on the Exchange. Further, the proposed
fees are reasonable because they represent only a modest increase to
fees that can be offset with the substantial increase to rebates for
such orders, as described above. The Exchange further believes that its
fees for Customer orders are reasonable because they are generally
equivalent to standard fees charged by other markets with similar fee
structures, such as NYSE Arca and NOM. The Exchange believes that the
proposed fees are equitably allocated and not unreasonably
discriminatory because they are as low or lower than the fee to remove
liquidity charged to all other participants on the Exchange and because
the fee applies equally to all Customer orders.
The Exchange's proposal to modify the rebate provided to non-
Customers that add liquidity to the Exchange in Penny Pilot Securities
is reasonable and equitably allocated because it will simplify and
increase the rebate provided to all Professional, Firm, or Market Maker
orders that add liquidity to the BATS Options order book regardless of
the capacity of the order that removes such liquidity. As such, and
because all Professional, Firm, and Market Maker orders will receive
the same rebate (subject to additional incentives, including the NBBO
Setter Program and QIP), the Exchange believes that the proposal is not
unreasonably discriminatory.
The Exchange's proposal to increase its fees for Professional,
Firm, and Market Maker orders that remove liquidity from BATS Options
in Penny Pilot Securities where the Member does not qualify for a lower
fee is reasonable because it represents only a modest increase to fees
that can be offset with the increase to rebates for such orders, as
described above. The Exchange further believes that its fees for
Professional, Firm, and Market Maker orders in Penny Pilot Securities
are reasonable because they are generally equivalent to standard fees
charged by other markets with similar fee structures, such as NYSE Arca
and NOM. The Exchange's offering of a reduced fee for Professional,
Firm, and Market Maker orders for Members that meet a volume threshold
is fair and equitable and not unreasonably discriminatory for the
reasons described above with respect to volume-based rebates and fees.
The proposed increase in rebate for Customer orders that add
liquidity in non-Penny Pilot Securities is reasonable and equitably
allocated because it is the highest rebate provided by the Exchange,
which the Exchange believes will further incent the addition of
Customer orders in non-Penny Pilot Securities to the Exchange's order
book. The proposed change is not unreasonably discriminatory in that it
will apply equally to all Customer orders.
The proposed increase to the fee for Customer orders that remove
liquidity in non-Penny Pilot Securities is reasonable and equitably
allocated because it represents only a modest increase to the existing
fee and remains generally equivalent to standard fees charged by other
markets with similar fee structures, such as NYSE Arca and NOM. The
proposal is not unreasonably discriminatory because it will apply
equally to all Customer orders. As described above, the fee increase is
proposed along with a corresponding increase to the rebate, which
should offset some or all of the increased cost to Customer orders.
The Exchange's proposed increase to the rebate for Professional,
Firm, and Market Maker orders that add liquidity in non-Penny Pilot
Securities is reasonable and equitably allocated because it will incent
the addition of Professional, Firm, and Market Maker orders in non-
Penny Pilot Securities to the Exchange's order book. The proposed
change is not unreasonably discriminatory in that it will apply equally
to all Professional, Firm, and Market Maker orders.
The Exchange's proposed increase to the fee to remove liquidity for
Professional, Firm, and Market Maker orders that remove liquidity in
non-Penny Pilot Securities is reasonable and equitably allocated
because it represents only a modest increase to the existing fee and
remains generally equivalent to standard fees charged by other markets
with similar fee structures, such as NYSE Arca and NOM. While
Professional, Firm and Market Maker orders will be assessed comparably
higher transaction fees than those assessed to other Customer orders,
as proposed, the Exchange does not believe that this pricing is
unreasonably discriminatory because the securities markets generally,
and the Exchange in particular, have historically aimed to improve
markets for investors and develop various features within the market
structure for customer benefit. The Exchange also notes that
Professional, Firm and Market Maker orders qualify for additional
rebates under the Exchange's NBBO Setter Program, which is not
applicable to Customer orders. As noted elsewhere, the fee increase is
proposed along with a corresponding increase to the rebate, which
should offset some or all of the increased cost to Customer orders.
The Exchange's proposed changes to the NBBO Setter Program,
including a general reduction to the rebates available through the
program, are reasonable and equitably allocated in that they are
coupled with increases to the standard rebate to add liquidity. The
proposed rebate structure will reduce the variability and complexity of
rebates for Professional, Firm and Market Maker orders added to the
Exchange's order book. The applicability of the NBBO
[[Page 3648]]
Setter Program to Members achieving certain volume thresholds is fair
and equitable and not unreasonably discriminatory for the reasons
described above with respect to volume-based rebates and fees. Further,
the Exchange notes that it has reduced the ADV threshold that a Member
needs to reach in order to qualify for the higher tier. The Exchange
also notes that continued exclusion of Customer orders from NBBO Setter
rebates is reasonable, fair and equitable, and not unreasonably
discriminatory given the higher base and tiered rebates already
provided to Customer orders. Despite the fact that Customer orders are
not eligible for NBBO Setter Rebates, the proposed modifications to
NBBO Setter Rebates are fair and equitable and not unreasonably
discriminatory because in most circumstances, Customer orders that do
not set the NBBO are eligible for even higher rebates than certain
Professional, Firm, and Market Maker orders that did set the NBBO and
receive a NBBO Setter Rebate.
Similarly, the Exchange's removal of Customer orders from the QIP
is reasonable, fair and equitable, and not unreasonably discriminatory
due to the higher base and tiered rebates already provided to Customer
orders. The applicability of the QIP to Members achieving certain
volume thresholds is fair and equitable and not unreasonably
discriminatory for the reasons described above with respect to volume-
based rebates and fees. The Exchange also notes that although
registration as a market maker is required to qualify for QIP, such
registration is available to all Members on an equal basis. With
respect to the reduced rebates available through QIP, the Exchange
reiterates that such reduction is reasonable and equitably allocated
due to a higher base rebate that will be applicable to all Members. Not
only will the higher base rebate help Members to offset any reduction
to QIP rebates but the lower QIP rebates paid by the Exchange will
allow the Exchange to fund such higher based rebates.
The elimination of the Grow with Us incentive from the Exchange's
tiered pricing structure is also reasonable, equitably allocated and
not unfairly discriminatory because it will significantly simplify the
Exchange's fee schedule and has been coupled with various increases to
standard rebates that will help to reduce the variability of rebates
provided by the Exchange. Further, elimination of the Grow with Us
incentive will allow the Exchange to allocate resources devoted to the
program to other pricing programs.
Finally, the Exchange believes that the various formatting and
ministerial changes are reasonable as they will help to avoid confusion
for those that review the Exchange's fee schedule.
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. With respect to the changes to
fees and rebates for executions on the Exchange that are set forth in
this proposal, the Exchange does not believe that any such changes
burden competition, but instead, enhance competition, as they are
intended to increase the competitiveness of and draw additional volume
to the Exchange's platform. As stated above, 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 set by the Exchange to be excessive. The proposed changes are
generally intended to simplify the Exchange's fee structure while
enhancing the base rebates for liquidity added to the Exchange, which
is intended to draw additional liquidity to the Exchange. Thus, the
proposal is a competitive proposal that is intended to add additional
liquidity to the Exchange, which will, in turn, benefit the Exchange
and all Exchange participants.
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 \19\ and paragraph (f) of Rule 19b-4
thereunder.\20\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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-2014-001 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-2014-001. 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-2014-001, and should be
submitted on or before February 12, 2014.
[[Page 3649]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01104 Filed 1-21-14; 8:45 am]
BILLING CODE 8011-01-P
