Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Fees for Use of BATS Y-Exchange, Inc., 21977-21981 [2014-08825]
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Federal Register / Vol. 79, No. 75 / Friday, April 18, 2014 / Notices
the changes represent a significant
departure from previous pricing offered
by the Exchange or pricing offered by
the Exchange’s competitors.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 13 and paragraph (f) of Rule
19b–4 thereunder.14 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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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–
BYX–2014–005 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BYX–2014–005. 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
13 15
U.S.C. 78s(b)(3)(A).
14 17 CFR 240.19b–4(f).
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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–BYX–
2014–005 and should be submitted on
or before May 9, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014–08823 Filed 4–17–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71939; File No. SR–BYX–
2014–004]
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Related to Fees for Use
of BATS Y-Exchange, Inc.
April 14, 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 March 31,
2014, BATS Y-Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) 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
15 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).
21977
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange filed a proposal to
amend the fee schedule applicable to
Members 5 and non-members of the
Exchange pursuant to BYX Rules 15.1(a)
and (c). Changes to the fee schedule
pursuant to this proposal are effective
upon filing.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to modify its
fee schedule effective April 1, 2014, in
order to: (i) Modify the tiers applicable
to the Exchange’s tiered pricing
structure; (ii) modify the rebates that the
Exchange provides for orders that
remove liquidity; (iii) modify the fees
that the Exchange charges to add
liquidity; (iv) adopt separate fees
applicable to adding and removing MidPoint Peg Order 6 liquidity (‘‘Mid-Point
Peg liquidity’’); (v) eliminate a specific
fee for orders that add non-displayed
liquidity to the Exchange and are
removed by Retail Orders (as defined
below); and (vi) modify the destinations
subject to the Exchange’s ‘‘One Under/
Better’’ pricing model for Destination
Specific Orders (as defined below). In
connection with these changes, the
Exchange is also proposing to make
1 15
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5 A Member is any registered broker or dealer that
has been admitted to membership in the Exchange.
6 As defined in Exchange Rule 11.9(c)(9).
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various modifications to the format of
its fee schedule that are intended to
simplify and increase the
understandability of the fee schedule.
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Tiers and Trading Volume
The Exchange currently offers tiered
pricing structures for both adding and
removing liquidity. Under these tiered
pricing structures, Members that have
an average daily volume (‘‘ADV’’) on the
Exchange of at least 0.2% but less than
0.4% of average total consolidated
volume (‘‘TCV’’) (the ‘‘Bottom Tier
Threshold’’) are charged a fee that is
lower than the standard adding fee for
adding displayed liquidity or receive a
higher rebate than the standard removal
rebate for removing liquidity. Similarly,
Members that have an ADV on the
Exchange of at least 0.4% of average
TCV (the ‘‘Upper Tier Threshold’’) are
charged an even lower fee for adding
displayed liquidity or receive an even
higher rebate for removing liquidity.
Furthermore, Members that qualify for
either the Upper Tier Threshold or the
Bottom Tier Threshold also qualify for
an additional discount to the applicable
fee to add displayed liquidity when a
displayed order sets the national best
bid or offer (‘‘NBBO’’) upon entry (the
‘‘NBBO Setter Program’’).
With respect to its tiered pricing
structure, the Exchange is proposing to:
(i) eliminate the tiered pricing structure
for removing liquidity; (ii) eliminate the
Upper Tier and the Bottom Tier
Threshold; (iii) replace the use of the
defined term ADV for purposes of tier
calculations with a defined term of
ADAV, or average daily added volume,
as further described below; and (iv)
implement a new tier, requiring ADAV
of 0.3% of average TCV (the ‘‘0.3%
ADAV Tier’’). As noted above, the
Exchange proposes to modify the
existing defined term of ADV, used to
calculate tiers, with ADAV, which
would mean ‘‘average daily volume
calculated as the number of shares
added per day on a monthly basis.’’ In
contrast, the current defined term, ADV,
includes both added and removed
volume in the calculation. Other than
limiting volume counted to added
volume, the Exchange does not
otherwise propose to modify the way
that volume is calculated for purposes
of tiers.
Rebates To Remove Liquidity
As described above, the Exchange
currently offers a tiered pricing
structure for executions that remove
liquidity in securities priced $1.00 and
above. Currently, the Exchange provides
a rebate of $0.0003 per share to remove
liquidity for Members that reach the
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Upper Tier Threshold; a rebate of
$0.0002 per share to remove liquidity
for Members that reach the Bottom Tier
Threshold, but not the Upper Tier
Threshold; and a rebate of $0.0001 per
share to remove liquidity for Members
that do not reach the Bottom Tier
Threshold.
As described above, the Exchange
proposes to eliminate the tiers
applicable to executions that remove
liquidity from the Exchange. The
Exchange instead proposes to provide a
standard rebate of $0.0015 per share for
all orders that remove liquidity from the
Exchange, other than orders that remove
Mid-Point Peg liquidity, as described
below. The proposed change to the
remove liquidity rebate structure is
reflective of the ongoing intense level of
competition for order flow in the cash
equities markets, and specifically among
exchanges that provide rebates to
market participants accessing liquidity.
Consistent with the current fee
structure, the fee structure for
executions that remove liquidity from
the Exchange described above will not
apply to executions that remove
liquidity in securities priced under
$1.00 per share. The fee for such
executions will remain at 0.10% of the
total dollar value of the execution.
Fees To Add Liquidity
As set forth below, the Exchange
proposes to modify various fees charged
to add displayed liquidity to the
Exchange. The Exchange is not
proposing to change pricing for
securities priced under $1.00 and will
continue to offer executions free of
charge for orders that add liquidity in
securities priced under $1.00 per share.
Displayed Liquidity
As described above, the Exchange
currently maintains a tiered pricing
structure for adding displayed liquidity
in securities priced $1.00 and above that
allows Members to add liquidity at a
reduced fee if they reach certain volume
thresholds. Currently, pursuant to the
NBBO Setter Program, the Exchange
does not charge or provide a rebate to
Members that reach the Upper Tier
Threshold for orders that add liquidity
and set the NBBO, but rather provides
such executions free of charge. The
Exchange currently charges Members
that reach the Upper Tier Threshold
$0.0001 per share for orders that add
displayed liquidity but do not qualify
for NBBO Setter Program pricing.
Members that achieve the Lower Tier
Threshold but not the Upper Tier
Threshold are currently charged a
liquidity adding fee of $0.0001 per share
on orders that set the NBBO and
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$0.0002 per share for orders that do not
set the NBBO. The Exchange charges a
liquidity adding fee of $0.0003 per share
to Members that do not qualify for a
reduced fee based on their volume on
the Exchange.
As described above, the Exchange
proposes to eliminate the existing tier
structure and to implement a single tier,
the 0.3% Tier Threshold. The Exchange
proposes to increase its fees to add
displayed liquidity for all Members by
at least $0.0013 per share. Specifically,
the Exchange proposes to charge
Members that reach the 0.3% Tier
Threshold a liquidity adding fee of
$0.0013 per share on orders that set the
NBBO and to charge a liquidity adding
fee of $0.0014 per share on orders by
such Members that do not set the NBBO.
For Members that do not reach the 0.3%
Tier Threshold, the Exchange proposes
to charge a liquidity adding fee of
$0.0017 per share.
The Exchange also proposes to group
the types of fees applicable under the
fees to add displayed section as
displayed liquidity, non-displayed
liquidity and Mid-Point Peg liquidity. In
connection with this change, the
Exchange is moving, but not modifying
language regarding the $0.0030 fee that
is currently applied to displayed orders
that are subject to price sliding and
receive price improvement when
executed. This language also currently
applies to non-displayed liquidity,
which the Exchange is not proposing to
change. The Exchange is simply
proposing to separately set forth this fee
under the displayed liquidity section
and the non-displayed liquidity section.
Non-Displayed Liquidity
As noted above, the Exchange
proposes to group fees to add nondisplayed liquidity under a new subheading, ‘‘Fees to Add Other NonDisplayed Liquidity.’’ The Exchange
proposes the following changes to the
fees to add non-displayed liquidity.
The Exchange currently charges a fee
of $0.0010 per share to add nondisplayed liquidity to the Exchange. The
Exchange proposes to increase its fees to
add non-displayed liquidity to a fee of
$0.0024 per share. As described below,
the Exchange also proposes to adopt
separate fees applicable to adding MidPoint Peg liquidity, which is currently
charged in the same way as all other
non-displayed liquidity. In this
connection, the Exchange proposes to
modify current footnote 3 on the fee
schedule, to make clear that Mid-Point
Peg liquidity is not included in such
pricing. The Exchange also proposes to
correct a typographical error in footnote
3, which references the non-displayed
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liquidity ‘‘rebate’’ by instead referring to
the fee for adding non-displayed
liquidity. This change is consistent with
both current pricing and pricing as
proposed, where non-displayed
liquidity added to the Exchange is
always charged a fee. As is also
described above, the Exchange proposes
to include language regarding the
$0.0030 fee that is currently applied to
non-displayed orders that receive price
improvement when executed in the
non-displayed liquidity.
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Mid-Point Peg Liquidity
The Exchange currently does not
differentiate any fees and rebates
applicable to Mid-Point Peg liquidity.
Thus, Mid-Point Peg liquidity is
currently charged the standard fee to
add non-displayed liquidity. Similarly,
orders that interact with Mid-Point Peg
liquidity do not receive any different
fees or rebates than they otherwise
would receive.
In order to incentivize the growth of
Mid-Point Peg liquidity on the
Exchange, which liquidity can provide
substantial price improvement to all
Exchange participants, the Exchange
proposes to add specific fees and rebates
for Mid-Point Peg liquidity. The
Exchange proposes to provide a
discounted rate to add Mid-Point Peg
liquidity as compared to other nondisplayed liquidity. The Exchange
proposes to charge a standard fee of
$0.0010 per share to add Mid-Point Peg
liquidity, which is $0.0014 less per
share than to add other non-displayed
liquidity. In addition, the Exchange
proposes to charge a further discounted
fee of $0.0005 per share to add MidPoint Peg liquidity to all Members that
qualify for the 0.3% Tier Threshold.
Because of the substantial price
improvement provided by such MidPoint Peg liquidity, the Exchange
proposes to provide executions against
such liquidity free of charge but also
without providing a rebate. The
Exchange also proposes to apply such
pricing to ‘‘Retail Orders’’ (as defined
below) that remove Mid-Point Peg
liquidity. Accordingly, as proposed,
Retail Orders would receive no rebate
when removing Mid-Point Peg liquidity.
The Exchange proposes to modify the
description of pricing for Retail Orders,
including footnote 4, to make this
pricing clear.
Retail Orders That Remove NonDisplayed Liquidity
Currently, pursuant to the Retail Price
Improvement (‘‘RPI’’) program the
Exchange provides a $0.0025 rebate per
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share for any Retail Order 7 that removes
liquidity from the Exchange (except for:
(i) a Retail Order that removes displayed
liquidity and, (ii) as proposed, a Retail
Order that removes Mid-Point Peg
liquidity, which are both subject to
standard rebates and fees). The
Exchange currently charges a $0.0025
fee per share for any Retail Price
Improving Order 8 that adds liquidity to
the Exchange order book and is removed
by a Retail Order. Finally, the Exchange
currently charges a $0.0010 fee per
share for any non-displayed order that
adds liquidity to the Exchange order
book and is removed by a Retail Order.
The Exchange proposes to eliminate the
separate reference and $0.0010 fee per
share for a non-displayed order that
adds liquidity to the Exchange and is
removed by a Retail Order. Accordingly,
all such orders will be charged based on
the standard fee schedule, which, as
proposed, would be a fee of $0.0024 per
share.
Destination Specific Orders
The Exchange currently provides a
discounted fee for Destination Specific
Orders routed to certain market centers
(NYSE, NYSE Arca, and NASDAQ),
which, in each instance is $0.0001 less
per share for orders routed to such
market centers by the Exchange than
such market centers currently charge for
removing liquidity (referred to by the
Exchange as ‘‘One Under’’ pricing).
Consistent with this program, the
Exchange provides an enhanced rebate
for Destination Specific Orders routed to
EDGA Exchange that is $0.0001 more
per share than EDGA Exchange provides
for removing liquidity (referred to by the
Exchange as ‘‘One Better’’ pricing, and
collectively with One Under pricing, the
‘‘One Under/Better’’ pricing model). The
Exchange proposes to remove EDGA
Exchange from the One Under/Better
pricing model and to instead provide a
pass through of the applicable rebate
provided by EDGA Exchange.
Specifically, the Exchange proposes to
provide a rebate of $0.0002 per share for
orders routed to and executed at EDGA
Exchange as a Destination Specific
Order.
7 As defined in BYX Rule 11.24(a)(2), a ‘‘Retail
Order’’ is an agency order that originates from a
natural person and is submitted to the Exchange by
a Retail Member Organization, provided that no
change is made to the terms of the order with
respect to price or side of market and the order does
not originate from a trading algorithm or any other
computerized methodology.
8 As defined in BYX Rule 11.24(a)(3), a ‘‘Retail
Price Improvement Order’’ consists of nondisplayed interest on the Exchange that is priced
better than the Protected NBB or Protected NBO by
at least $0.001 and that is identified as such.
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21979
The Exchange also proposes to add
NASDAQ BX to the One Under/Better
pricing model. NASDAQ BX currently
provides a standard rebate of $0.0013
per share to remove liquidity. Thus, the
Exchange proposes to provide a rebate
of $0.0014 per share for orders routed to
and executed at NASDAQ BX as a
Destination Specific Order.
The Exchange imposes a charge of
$0.0030 per share for Destination
Specific Orders sent to and executed by
any market center for which it does not
have any separately identified pricing.
Based on the change described above,
the Exchange proposes to add NASDAQ
BX to the list of market centers to which
this charge does not apply. The
Exchange also proposes to eliminate
specific pricing for Destination Specific
Orders to BATS Exchange, Inc. (‘‘BZX
Exchange’’) because such pricing is
already set at a fee of $0.0030, and thus,
there is no need to separately specify
pricing for Destination Specific Orders
to BZX Exchange.
Other Structural Changes
In addition to the changes described
above, the Exchange proposes to make
various formatting and structural
changes, including: (i) restructuring the
titles for the fee sections applicable to
adding and removing liquidity; (ii) as
set forth above, separately setting forth
add liquidity fees under headings for
displayed liquidity, mid-point peg
liquidity and non-displayed liquidity;
(iii) removing from the title for the One
Under/Better program applicable to
Destination Specific orders the list of
markets to which such program applies
and instead simply stating ‘‘Specified
Markets’’; (iv) removing language
referencing liquidity added to or
removed from the ‘‘BYX Exchange order
book,’’ as such language is unnecessary
given the context in which it is used.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder that
are applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6 of the Act.9
Specifically, the Exchange believes that
the proposed rule change is consistent
with Section 6(b)(4) of the Act,10 in that
it provides for the equitable allocation
of reasonable dues, fees and other
charges among members and other
persons using any facility or system
which the Exchange operates or
controls. The Exchange notes that it
9 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
10 15
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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.
Generally, the changes to Exchange
execution fees and rebates proposed by
this filing are intended to attract order
flow to the Exchange by continuing to
offer competitive pricing while also
allowing the Exchange to continue to
offer incentives to provide aggressively
priced displayed liquidity.
With respect to the proposed changes
to the pricing structure for removing
liquidity from the Exchange, the
Exchange believes that its proposal is
reasonable because it will eliminate the
tier structure necessary to qualify for the
highest remove liquidity rebate, thus
greatly increasing the base of Members
eligible for this rebate. The Exchange
also believes that the rebates are
reasonable and equitably allocated
because the proposed changes will
significantly increase this rebate from as
compared to the current structure. The
proposed rebates are equitably allocated
and not unfairly discriminatory due to
the fact that the rebates will apply
equally to all members.
With respect to the increases to the
fees charged to add displayed liquidity,
the Exchange believes that the proposed
fees are reasonable and equitably
allocated as they are designed to attract
additional removing liquidity to the
Exchange. So, while the Exchange is
proposing to increase fees on a per share
basis, it is simultaneously providing
higher rebates to all Members for
removing liquidity. Thus, although the
change increases the fee for orders that
provide liquidity, it provides an
offsetting increase in the rebate for
orders removing liquidity. The
Exchange also believes that simplifying
the tiered pricing structure such that
there is one tier to attain will benefit
Members and will further incentivize
Members to provide tighter and deeper
liquidity. Further, although they are not
paid a credit for liquidity provision
under the pricing structure, and instead
pay a fee that will be increased, certain
Members of the Exchange nevertheless
find it advantageous to post liquidity
because the rebate paid to liquidity
takers further encourages the execution
of posted orders.
Volume-based tiers such as the
liquidity add tiers maintained by the
Exchange have been widely adopted in
the equities markets, and are equitable
and not unfairly discriminatory because
they are open to all members on an
equal basis and provide rebates that are
reasonably related to the value to an
exchange’s market quality associated
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with higher levels of market activity,
such as higher levels of liquidity
provision and introduction of higher
volumes of orders into the price and
volume discovery process. Accordingly,
the Exchange believes that the proposal
is equitably allocated and not unfairly
discriminatory because it is consistent
with the overall goals of enhancing
market quality. The Exchange believes
that any additional revenue that it may
receive based on the amendments to the
fee schedule as proposed will allow the
Exchange to devote additional capital to
its operations and to continue to offer
competitive pricing, which, in turn, will
benefit Members of the Exchange.
With respect to new pricing and tiers
for Mid-Point Peg liquidity, the
Exchange believes that they are
reasonable because they will reduce fees
for Members that use higher volumes of
Mid-Point Peg Orders to offer price
improvement. The changes are
consistent with an equitable allocation
of fees because the Exchange believes
that it is equitable to provide financial
incentives, such as both the reduced
fees for all Members for executions of
Mid-Point Peg Orders and the further
reduced fees for Members that meet the
applicable tier, to encourage Members to
submit Mid-Point Peg liquidity, which
will provide price improvement, as
opposed to other non-displayed
liquidity. The changes are not unfairly
discriminatory because the use of MidPoint Peg Orders is equally available to
all Members and because the proposed
tier is structured as a market
participation based pricing tier, under
which the level of fee reduction
increases as the Member’s relative
volume increases. As noted above, such
pricing tiers are widely in use at various
national securities exchanges and have
been accepted as consistent with the Act
because the financial benefit offered is
correlated to the member’s usage of the
market.
The Exchange also believes that not
providing a rebate for orders that
remove a Mid-Point Peg Order,
including Retail Orders, is reasonable
because the removing order will be
guaranteed to receive price
improvement when executed. The
Exchange also believes that the changes
are equitably allocated and not unfairly
discriminatory because the changes
apply equally to all orders that remove
Mid-Point Peg Orders across all
Members.
The Exchange believes that charging
the same fees for non-displayed orders,
regardless of the removing party is
reasonable because it provides a more
simple and predictable fee structure for
Members that enter non-displayed
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liquidity. While the Exchange
acknowledges that the proposed change
marks an increase in fees charged for
non-displayed liquidity that is removed
by a Retail Order, this change is
reasonable because it removes a variable
in fees charged based on a factor
entirely out of the control of the
Member entering the order. The
Exchange also believes that the changes
are equitably allocated and not unfairly
discriminatory because the changes
apply equally to all Members.
The adoption of new pricing for a
Destination Specific Order that offers
improvement of the execution rebate
offered by NASDAQ BX and the
elimination of the EDGA Destination
Specific Order from the One Under/
Better pricing model are changes
intended to attract order flow to BYX by
offering competitive rates to Exchange
Members for strategies that first check
the BYX order book before routing to
away venues. In particular, as the
Exchange’s proposed pricing model is
more competitive as compared to
NASDAQ BX than it is EDGA, the
Exchange believes that a Destination
Specific Order to NASDAQ BX is more
appropriate to be included in the One
Under/Better pricing model. Further,
the Exchange’s proposal will result in
increased rebates that will benefit
Members due to the obvious economic
benefit those Members will receive and
the potential of increased available
liquidity at the Exchange. The fee is
equitably allocated and not unfairly
discriminatory as it will be equally
applied to all Members.
Finally, the proposed changes to the
formatting and structure of the fee
schedule are designed to clarify and
simplify the fee schedule and the
Exchange believes that such changes are
fair and reasonable, and nondiscriminatory in that they are designed
to be more easily understood by
Members.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
Because the market for order execution
is extremely competitive, Members may
choose to preference other market
centers ahead of the Exchange if they
believe that they can receive better fees
or rebates elsewhere. Further, because
certain of the proposed changes are
intended to provide incentives to
Members that will result in increased
activity on the Exchange, such changes
are necessarily competitive. The
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Federal Register / Vol. 79, No. 75 / Friday, April 18, 2014 / Notices
Exchange also believes that its pricing
for removing liquidity is appropriately
`
competitive vis-a-vis the Exchange’s
competitors, with at least one such
competitor, NASDAQ BX, offering a
similar pricing model. In a competitive
environment, the Exchange must
continually adjust its fees to remain
competitive with other exchanges and
alternative liquidity sources. Because
competitors are free to modify their own
fees in response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited. Further, the modifications
described herein are a direct response to
competition, which should be viewed as
a positive signal that a competitive
market exists. If the changes are
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result. Accordingly,
the Exchange does not believe that the
proposed changes will impair the ability
of Members or competing order
execution venues to maintain their
competitive standing in the financial
markets. The Exchange believes that
continuing to incentivize the entry of
aggressively priced, displayed liquidity
fosters intra-market competition to the
benefit of all market participants that
enter orders to the Exchange. Finally,
the Exchange does not believe that any
of the changes represent a significant
departure from previous pricing offered
by the Exchange or pricing offered by
the Exchange’s competitors.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received.
mstockstill on DSK4VPTVN1PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 11 and paragraph (f) of Rule
19b–4 thereunder.12 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
11 15
12 17
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–
BYX–2014–004 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BYX–2014–004. 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–BYX–
2014–004 and should be submitted on
or before May 9, 2014.
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
VerDate Mar<15>2010
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014–08825 Filed 4–17–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71938; File No. SR–
NYSEArca–2013–144]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 1, To List and Trade
Shares of the ETSpreads HY Long
Credit Fund, the ETSpreads HY Short
Credit Fund, the ETSpreads IG Long
Credit Fund, and the ETSpreads IG
Short Credit Fund Under NYSE Arca
Equities Rule 8.600
April 14, 2014.
I. Introduction
On December 27, 2013, NYSE Arca,
Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’ or
‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade shares (‘‘Shares’’) of the
ETSpreads HY Long Credit Fund, the
ETSpreads HY Short Credit Fund, the
ETSpreads IG Long Credit Fund, and the
ETSpreads IG Short Credit Fund (each
a ‘‘Fund’’ and, collectively, ‘‘Funds’’)
under NYSE Arca Equities Rule 8.600.
The proposed rule change was
published for comment in the Federal
Register on January 15, 2014.3 On
February 26, 2014, the Commission
issued a notice of designation of a
longer period for Commission action on
the proposed rule change.4 On April 11,
2014, the Exchange filed Amendment
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 71266
(January 9, 2014), 79 FR 2705 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 71618,
79 FR 12254 (March 4, 2014). Pursuant to Section
19(b)(2) of the Act, the Commission determined that
it was appropriate to designate a longer period
within which to take action on the proposed rule
change. Accordingly, the Commission designated
April 15, 2014, as the date by which the
Commission should either approve or disapprove or
institute proceedings to determine whether to
disapprove the proposed rule change.
1 15
E:\FR\FM\18APN1.SGM
18APN1
Agencies
[Federal Register Volume 79, Number 75 (Friday, April 18, 2014)]
[Notices]
[Pages 21977-21981]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08825]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71939; File No. SR-BYX-2014-004]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Related to
Fees for Use of BATS Y-Exchange, Inc.
April 14, 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 March 31, 2014, BATS Y-Exchange, Inc. (the ``Exchange'' or
``BYX'') 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).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange filed a proposal to amend the fee schedule applicable
to Members \5\ and non-members of the Exchange pursuant to BYX 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.
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The text of the proposed rule change is available at the Exchange's
Web site at https://www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to modify its fee schedule effective April 1,
2014, in order to: (i) Modify the tiers applicable to the Exchange's
tiered pricing structure; (ii) modify the rebates that the Exchange
provides for orders that remove liquidity; (iii) modify the fees that
the Exchange charges to add liquidity; (iv) adopt separate fees
applicable to adding and removing Mid-Point Peg Order \6\ liquidity
(``Mid-Point Peg liquidity''); (v) eliminate a specific fee for orders
that add non-displayed liquidity to the Exchange and are removed by
Retail Orders (as defined below); and (vi) modify the destinations
subject to the Exchange's ``One Under/Better'' pricing model for
Destination Specific Orders (as defined below). In connection with
these changes, the Exchange is also proposing to make
[[Page 21978]]
various modifications to the format of its fee schedule that are
intended to simplify and increase the understandability of the fee
schedule.
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\6\ As defined in Exchange Rule 11.9(c)(9).
---------------------------------------------------------------------------
Tiers and Trading Volume
The Exchange currently offers tiered pricing structures for both
adding and removing liquidity. Under these tiered pricing structures,
Members that have an average daily volume (``ADV'') on the Exchange of
at least 0.2% but less than 0.4% of average total consolidated volume
(``TCV'') (the ``Bottom Tier Threshold'') are charged a fee that is
lower than the standard adding fee for adding displayed liquidity or
receive a higher rebate than the standard removal rebate for removing
liquidity. Similarly, Members that have an ADV on the Exchange of at
least 0.4% of average TCV (the ``Upper Tier Threshold'') are charged an
even lower fee for adding displayed liquidity or receive an even higher
rebate for removing liquidity. Furthermore, Members that qualify for
either the Upper Tier Threshold or the Bottom Tier Threshold also
qualify for an additional discount to the applicable fee to add
displayed liquidity when a displayed order sets the national best bid
or offer (``NBBO'') upon entry (the ``NBBO Setter Program'').
With respect to its tiered pricing structure, the Exchange is
proposing to: (i) eliminate the tiered pricing structure for removing
liquidity; (ii) eliminate the Upper Tier and the Bottom Tier Threshold;
(iii) replace the use of the defined term ADV for purposes of tier
calculations with a defined term of ADAV, or average daily added
volume, as further described below; and (iv) implement a new tier,
requiring ADAV of 0.3% of average TCV (the ``0.3% ADAV Tier''). As
noted above, the Exchange proposes to modify the existing defined term
of ADV, used to calculate tiers, with ADAV, which would mean ``average
daily volume calculated as the number of shares added per day on a
monthly basis.'' In contrast, the current defined term, ADV, includes
both added and removed volume in the calculation. Other than limiting
volume counted to added volume, the Exchange does not otherwise propose
to modify the way that volume is calculated for purposes of tiers.
Rebates To Remove Liquidity
As described above, the Exchange currently offers a tiered pricing
structure for executions that remove liquidity in securities priced
$1.00 and above. Currently, the Exchange provides a rebate of $0.0003
per share to remove liquidity for Members that reach the Upper Tier
Threshold; a rebate of $0.0002 per share to remove liquidity for
Members that reach the Bottom Tier Threshold, but not the Upper Tier
Threshold; and a rebate of $0.0001 per share to remove liquidity for
Members that do not reach the Bottom Tier Threshold.
As described above, the Exchange proposes to eliminate the tiers
applicable to executions that remove liquidity from the Exchange. The
Exchange instead proposes to provide a standard rebate of $0.0015 per
share for all orders that remove liquidity from the Exchange, other
than orders that remove Mid-Point Peg liquidity, as described below.
The proposed change to the remove liquidity rebate structure is
reflective of the ongoing intense level of competition for order flow
in the cash equities markets, and specifically among exchanges that
provide rebates to market participants accessing liquidity.
Consistent with the current fee structure, the fee structure for
executions that remove liquidity from the Exchange described above will
not apply to executions that remove liquidity in securities priced
under $1.00 per share. The fee for such executions will remain at 0.10%
of the total dollar value of the execution.
Fees To Add Liquidity
As set forth below, the Exchange proposes to modify various fees
charged to add displayed liquidity to the Exchange. The Exchange is not
proposing to change pricing for securities priced under $1.00 and will
continue to offer executions free of charge for orders that add
liquidity in securities priced under $1.00 per share.
Displayed Liquidity
As described above, the Exchange currently maintains a tiered
pricing structure for adding displayed liquidity in securities priced
$1.00 and above that allows Members to add liquidity at a reduced fee
if they reach certain volume thresholds. Currently, pursuant to the
NBBO Setter Program, the Exchange does not charge or provide a rebate
to Members that reach the Upper Tier Threshold for orders that add
liquidity and set the NBBO, but rather provides such executions free of
charge. The Exchange currently charges Members that reach the Upper
Tier Threshold $0.0001 per share for orders that add displayed
liquidity but do not qualify for NBBO Setter Program pricing. Members
that achieve the Lower Tier Threshold but not the Upper Tier Threshold
are currently charged a liquidity adding fee of $0.0001 per share on
orders that set the NBBO and $0.0002 per share for orders that do not
set the NBBO. The Exchange charges a liquidity adding fee of $0.0003
per share to Members that do not qualify for a reduced fee based on
their volume on the Exchange.
As described above, the Exchange proposes to eliminate the existing
tier structure and to implement a single tier, the 0.3% Tier Threshold.
The Exchange proposes to increase its fees to add displayed liquidity
for all Members by at least $0.0013 per share. Specifically, the
Exchange proposes to charge Members that reach the 0.3% Tier Threshold
a liquidity adding fee of $0.0013 per share on orders that set the NBBO
and to charge a liquidity adding fee of $0.0014 per share on orders by
such Members that do not set the NBBO. For Members that do not reach
the 0.3% Tier Threshold, the Exchange proposes to charge a liquidity
adding fee of $0.0017 per share.
The Exchange also proposes to group the types of fees applicable
under the fees to add displayed section as displayed liquidity, non-
displayed liquidity and Mid-Point Peg liquidity. In connection with
this change, the Exchange is moving, but not modifying language
regarding the $0.0030 fee that is currently applied to displayed orders
that are subject to price sliding and receive price improvement when
executed. This language also currently applies to non-displayed
liquidity, which the Exchange is not proposing to change. The Exchange
is simply proposing to separately set forth this fee under the
displayed liquidity section and the non-displayed liquidity section.
Non-Displayed Liquidity
As noted above, the Exchange proposes to group fees to add non-
displayed liquidity under a new sub-heading, ``Fees to Add Other Non-
Displayed Liquidity.'' The Exchange proposes the following changes to
the fees to add non-displayed liquidity.
The Exchange currently charges a fee of $0.0010 per share to add
non-displayed liquidity to the Exchange. The Exchange proposes to
increase its fees to add non-displayed liquidity to a fee of $0.0024
per share. As described below, the Exchange also proposes to adopt
separate fees applicable to adding Mid-Point Peg liquidity, which is
currently charged in the same way as all other non-displayed liquidity.
In this connection, the Exchange proposes to modify current footnote 3
on the fee schedule, to make clear that Mid-Point Peg liquidity is not
included in such pricing. The Exchange also proposes to correct a
typographical error in footnote 3, which references the non-displayed
[[Page 21979]]
liquidity ``rebate'' by instead referring to the fee for adding non-
displayed liquidity. This change is consistent with both current
pricing and pricing as proposed, where non-displayed liquidity added to
the Exchange is always charged a fee. As is also described above, the
Exchange proposes to include language regarding the $0.0030 fee that is
currently applied to non-displayed orders that receive price
improvement when executed in the non-displayed liquidity.
Mid-Point Peg Liquidity
The Exchange currently does not differentiate any fees and rebates
applicable to Mid-Point Peg liquidity. Thus, Mid-Point Peg liquidity is
currently charged the standard fee to add non-displayed liquidity.
Similarly, orders that interact with Mid-Point Peg liquidity do not
receive any different fees or rebates than they otherwise would
receive.
In order to incentivize the growth of Mid-Point Peg liquidity on
the Exchange, which liquidity can provide substantial price improvement
to all Exchange participants, the Exchange proposes to add specific
fees and rebates for Mid-Point Peg liquidity. The Exchange proposes to
provide a discounted rate to add Mid-Point Peg liquidity as compared to
other non-displayed liquidity. The Exchange proposes to charge a
standard fee of $0.0010 per share to add Mid-Point Peg liquidity, which
is $0.0014 less per share than to add other non-displayed liquidity. In
addition, the Exchange proposes to charge a further discounted fee of
$0.0005 per share to add Mid-Point Peg liquidity to all Members that
qualify for the 0.3% Tier Threshold.
Because of the substantial price improvement provided by such Mid-
Point Peg liquidity, the Exchange proposes to provide executions
against such liquidity free of charge but also without providing a
rebate. The Exchange also proposes to apply such pricing to ``Retail
Orders'' (as defined below) that remove Mid-Point Peg liquidity.
Accordingly, as proposed, Retail Orders would receive no rebate when
removing Mid-Point Peg liquidity. The Exchange proposes to modify the
description of pricing for Retail Orders, including footnote 4, to make
this pricing clear.
Retail Orders That Remove Non-Displayed Liquidity
Currently, pursuant to the Retail Price Improvement (``RPI'')
program the Exchange provides a $0.0025 rebate per share for any Retail
Order \7\ that removes liquidity from the Exchange (except for: (i) a
Retail Order that removes displayed liquidity and, (ii) as proposed, a
Retail Order that removes Mid-Point Peg liquidity, which are both
subject to standard rebates and fees). The Exchange currently charges a
$0.0025 fee per share for any Retail Price Improving Order \8\ that
adds liquidity to the Exchange order book and is removed by a Retail
Order. Finally, the Exchange currently charges a $0.0010 fee per share
for any non-displayed order that adds liquidity to the Exchange order
book and is removed by a Retail Order. The Exchange proposes to
eliminate the separate reference and $0.0010 fee per share for a non-
displayed order that adds liquidity to the Exchange and is removed by a
Retail Order. Accordingly, all such orders will be charged based on the
standard fee schedule, which, as proposed, would be a fee of $0.0024
per share.
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\7\ As defined in BYX Rule 11.24(a)(2), a ``Retail Order'' is an
agency order that originates from a natural person and is submitted
to the Exchange by a Retail Member Organization, provided that no
change is made to the terms of the order with respect to price or
side of market and the order does not originate from a trading
algorithm or any other computerized methodology.
\8\ As defined in BYX Rule 11.24(a)(3), a ``Retail Price
Improvement Order'' consists of non-displayed interest on the
Exchange that is priced better than the Protected NBB or Protected
NBO by at least $0.001 and that is identified as such.
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Destination Specific Orders
The Exchange currently provides a discounted fee for Destination
Specific Orders routed to certain market centers (NYSE, NYSE Arca, and
NASDAQ), which, in each instance is $0.0001 less per share for orders
routed to such market centers by the Exchange than such market centers
currently charge for removing liquidity (referred to by the Exchange as
``One Under'' pricing). Consistent with this program, the Exchange
provides an enhanced rebate for Destination Specific Orders routed to
EDGA Exchange that is $0.0001 more per share than EDGA Exchange
provides for removing liquidity (referred to by the Exchange as ``One
Better'' pricing, and collectively with One Under pricing, the ``One
Under/Better'' pricing model). The Exchange proposes to remove EDGA
Exchange from the One Under/Better pricing model and to instead provide
a pass through of the applicable rebate provided by EDGA Exchange.
Specifically, the Exchange proposes to provide a rebate of $0.0002 per
share for orders routed to and executed at EDGA Exchange as a
Destination Specific Order.
The Exchange also proposes to add NASDAQ BX to the One Under/Better
pricing model. NASDAQ BX currently provides a standard rebate of
$0.0013 per share to remove liquidity. Thus, the Exchange proposes to
provide a rebate of $0.0014 per share for orders routed to and executed
at NASDAQ BX as a Destination Specific Order.
The Exchange imposes a charge of $0.0030 per share for Destination
Specific Orders sent to and executed by any market center for which it
does not have any separately identified pricing. Based on the change
described above, the Exchange proposes to add NASDAQ BX to the list of
market centers to which this charge does not apply. The Exchange also
proposes to eliminate specific pricing for Destination Specific Orders
to BATS Exchange, Inc. (``BZX Exchange'') because such pricing is
already set at a fee of $0.0030, and thus, there is no need to
separately specify pricing for Destination Specific Orders to BZX
Exchange.
Other Structural Changes
In addition to the changes described above, the Exchange proposes
to make various formatting and structural changes, including: (i)
restructuring the titles for the fee sections applicable to adding and
removing liquidity; (ii) as set forth above, separately setting forth
add liquidity fees under headings for displayed liquidity, mid-point
peg liquidity and non-displayed liquidity; (iii) removing from the
title for the One Under/Better program applicable to Destination
Specific orders the list of markets to which such program applies and
instead simply stating ``Specified Markets''; (iv) removing language
referencing liquidity added to or removed from the ``BYX Exchange order
book,'' as such language is unnecessary given the context in which it
is used.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities exchange, and,
in particular, with the requirements of Section 6 of the Act.\9\
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\10\ in that it provides for
the equitable allocation of reasonable dues, fees and other charges
among members and other persons using any facility or system which the
Exchange operates or controls. The Exchange notes that it
[[Page 21980]]
operates in a highly competitive market in which market participants
can readily direct order flow to competing venues if they deem fee
levels at a particular venue to be excessive.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Generally, the changes to Exchange execution fees and rebates
proposed by this filing are intended to attract order flow to the
Exchange by continuing to offer competitive pricing while also allowing
the Exchange to continue to offer incentives to provide aggressively
priced displayed liquidity.
With respect to the proposed changes to the pricing structure for
removing liquidity from the Exchange, the Exchange believes that its
proposal is reasonable because it will eliminate the tier structure
necessary to qualify for the highest remove liquidity rebate, thus
greatly increasing the base of Members eligible for this rebate. The
Exchange also believes that the rebates are reasonable and equitably
allocated because the proposed changes will significantly increase this
rebate from as compared to the current structure. The proposed rebates
are equitably allocated and not unfairly discriminatory due to the fact
that the rebates will apply equally to all members.
With respect to the increases to the fees charged to add displayed
liquidity, the Exchange believes that the proposed fees are reasonable
and equitably allocated as they are designed to attract additional
removing liquidity to the Exchange. So, while the Exchange is proposing
to increase fees on a per share basis, it is simultaneously providing
higher rebates to all Members for removing liquidity. Thus, although
the change increases the fee for orders that provide liquidity, it
provides an offsetting increase in the rebate for orders removing
liquidity. The Exchange also believes that simplifying the tiered
pricing structure such that there is one tier to attain will benefit
Members and will further incentivize Members to provide tighter and
deeper liquidity. Further, although they are not paid a credit for
liquidity provision under the pricing structure, and instead pay a fee
that will be increased, certain Members of the Exchange nevertheless
find it advantageous to post liquidity because the rebate paid to
liquidity takers further encourages the execution of posted orders.
Volume-based tiers such as the liquidity add tiers maintained by
the Exchange have been widely adopted in the equities markets, and are
equitable and not unfairly discriminatory because they are open to all
members on an equal basis and provide rebates that are reasonably
related to the value to an exchange's market quality associated with
higher levels of market activity, such as higher levels of liquidity
provision and introduction of higher volumes of orders into the price
and volume discovery process. Accordingly, the Exchange believes that
the proposal is equitably allocated and not unfairly discriminatory
because it is consistent with the overall goals of enhancing market
quality. The Exchange believes that any additional revenue that it may
receive based on the amendments to the fee schedule as proposed will
allow the Exchange to devote additional capital to its operations and
to continue to offer competitive pricing, which, in turn, will benefit
Members of the Exchange.
With respect to new pricing and tiers for Mid-Point Peg liquidity,
the Exchange believes that they are reasonable because they will reduce
fees for Members that use higher volumes of Mid-Point Peg Orders to
offer price improvement. The changes are consistent with an equitable
allocation of fees because the Exchange believes that it is equitable
to provide financial incentives, such as both the reduced fees for all
Members for executions of Mid-Point Peg Orders and the further reduced
fees for Members that meet the applicable tier, to encourage Members to
submit Mid-Point Peg liquidity, which will provide price improvement,
as opposed to other non-displayed liquidity. The changes are not
unfairly discriminatory because the use of Mid-Point Peg Orders is
equally available to all Members and because the proposed tier is
structured as a market participation based pricing tier, under which
the level of fee reduction increases as the Member's relative volume
increases. As noted above, such pricing tiers are widely in use at
various national securities exchanges and have been accepted as
consistent with the Act because the financial benefit offered is
correlated to the member's usage of the market.
The Exchange also believes that not providing a rebate for orders
that remove a Mid-Point Peg Order, including Retail Orders, is
reasonable because the removing order will be guaranteed to receive
price improvement when executed. The Exchange also believes that the
changes are equitably allocated and not unfairly discriminatory because
the changes apply equally to all orders that remove Mid-Point Peg
Orders across all Members.
The Exchange believes that charging the same fees for non-displayed
orders, regardless of the removing party is reasonable because it
provides a more simple and predictable fee structure for Members that
enter non-displayed liquidity. While the Exchange acknowledges that the
proposed change marks an increase in fees charged for non-displayed
liquidity that is removed by a Retail Order, this change is reasonable
because it removes a variable in fees charged based on a factor
entirely out of the control of the Member entering the order. The
Exchange also believes that the changes are equitably allocated and not
unfairly discriminatory because the changes apply equally to all
Members.
The adoption of new pricing for a Destination Specific Order that
offers improvement of the execution rebate offered by NASDAQ BX and the
elimination of the EDGA Destination Specific Order from the One Under/
Better pricing model are changes intended to attract order flow to BYX
by offering competitive rates to Exchange Members for strategies that
first check the BYX order book before routing to away venues. In
particular, as the Exchange's proposed pricing model is more
competitive as compared to NASDAQ BX than it is EDGA, the Exchange
believes that a Destination Specific Order to NASDAQ BX is more
appropriate to be included in the One Under/Better pricing model.
Further, the Exchange's proposal will result in increased rebates that
will benefit Members due to the obvious economic benefit those Members
will receive and the potential of increased available liquidity at the
Exchange. The fee is equitably allocated and not unfairly
discriminatory as it will be equally applied to all Members.
Finally, the proposed changes to the formatting and structure of
the fee schedule are designed to clarify and simplify the fee schedule
and the Exchange believes that such changes are fair and reasonable,
and non-discriminatory in that they are designed to be more easily
understood by Members.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
Because the market for order execution is extremely competitive,
Members may choose to preference other market centers ahead of the
Exchange if they believe that they can receive better fees or rebates
elsewhere. Further, because certain of the proposed changes are
intended to provide incentives to Members that will result in increased
activity on the Exchange, such changes are necessarily competitive. The
[[Page 21981]]
Exchange also believes that its pricing for removing liquidity is
appropriately competitive vis-[agrave]-vis the Exchange's competitors,
with at least one such competitor, NASDAQ BX, offering a similar
pricing model. In a competitive environment, the Exchange must
continually adjust its fees to remain competitive with other exchanges
and alternative liquidity sources. Because competitors are free to
modify their own fees in response, and because market participants may
readily adjust their order routing practices, the Exchange believes
that the degree to which fee changes in this market may impose any
burden on competition is extremely limited. Further, the modifications
described herein are a direct response to competition, which should be
viewed as a positive signal that a competitive market exists. If the
changes are unattractive to market participants, it is likely that the
Exchange will lose market share as a result. Accordingly, the Exchange
does not believe that the proposed changes will impair the ability of
Members or competing order execution venues to maintain their
competitive standing in the financial markets. The Exchange believes
that continuing to incentivize the entry of aggressively priced,
displayed liquidity fosters intra-market competition to the benefit of
all market participants that enter orders to the Exchange. Finally, the
Exchange does not believe that any of the changes represent a
significant departure from previous pricing offered by the Exchange or
pricing offered by the Exchange's competitors.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \11\ and paragraph (f) of Rule 19b-4
thereunder.\12\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml ); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BYX-2014-004 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BYX-2014-004. 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-BYX-2014-004 and should be
submitted on or before May 9, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-08825 Filed 4-17-14; 8:45 am]
BILLING CODE 8011-01-P